Naked With Cash is an ongoing series at Consumerism Commentary in which readers share their households’ finances with other readers. These participants benefit from the accountability that comes from tracking their finances publicly and the feedback of the four expert Certified Financial Planners (CFPs).
This year, we have four participants who will share their financial reports, exposing the results of their financial choices. Each participant is paired with one of our Certified Financial Planners. The experts will provide insight and guidance that will help our participants take their finances to the next level by the end of 2014. Learn about this year’s participants and experts.
Betsey works as a government analyst, and lives with two roommates to keep costs down. She is saving aggressively for retirement so that she can retire comfortably and start a business brewing craft beers. (Read her update from last month.)
After reading Betsey’s comments, you can see video commentary from Sara Stanich, CFP. Sara Stanich appears courtesy of Stanich Group and Cultivating Wealth. This month, Betsey will share information about her short-term financial goals.
Betsey’s Net Worth Statement
Betsey’s Income Statement
Comments and analysis from Betsey S
I finally received a missing tax refund and cashed in a large credit card reward this month, so my “other” income is high.
A couple answers from last month’s post. My 401(k) contribution is at 10%, so that’s already beyond the maximum match of 5%. I haven’t been working with a personal trainer, but I did sign up for a gym and a number of road races later this year. Expenses in this category tend to fluctuate for me based on how many classes I attend.
I graduated college with a BA in a humanities discipline. I was aiming to go on to a PhD in that field, but changed my mind some time in my senior year of college, well beyond the time to switch majors. I don’t regret the experience of studying something I loved, but I misjudged how quickly my career interests would change. I’d absolutely advise any of my children to pick up marketable, transferable skills that can earn a living, even if it’s not their top choice or dream career.
I had parental support but also worked part-time during college, and full-time during the summers. I was very fortunate to finish grad school without any student debt from a combination of scholarships and working several jobs. Some of my classmates maxed out available student loans and took expensive vacations, but I was living with roommates and working three jobs on top of my course load. It wasn’t fun at the time, but I’m very glad I took this approach. In fact, one job led me directly to my first fellowship after grad school. I’m not frugal in every area of my life, but my time living as a grad student definitely makes me appreciate the money I spend (and save) now.
Feedback from Sara Stanich, CFP
As of the time of publishing, Sara has not provided feedback.
Feedback from Luke Landes
Thanks for addressing the questions from last month! A commenter brought up a good point. In the government’s Thrift Savings Plan, expense ratios are low. That part is covered.
The standard rationale for forgoing the Roth options today is that one thinks one’s marginal tax rate will be lower in retirement, when one may be drawing upon investments from a retirement account. Even educated guesses about one’s future situation, not to mention changes to the tax code, forty years into the future. And Betsey’s after-tax income is at least $50,000 based on what I can gather from the income reports. I can see a reason for concern that income in retirement will be lower, making it a better deal to pay the tax bill on retirement accounts in the future. But it’s not a particularly optimistic approach.
I like the idea of diversifying tax situations — half in Roth accounts and half in traditional accounts. This way you hedge your bets on future tax rates. Reducing taxable income is probably the wrong priority at the moment, though, and I’d continue to invest in a Roth IRA to the max while contributing as much as possible, the remainder, into the TSP.
It sounds like you had a smart approach to your finances as an undergraduate and graduate. In school, there is a lot of pressure to decide on a future career path before the age of 18. There’s a lot of pressure to get into a school that is good for that particular career path. But people often aren’t ready to make those kinds of decisions until they’re older. And even if they are ready, people often change their minds, discover new and exciting paths for life, or just learn more about the world as an adult. Getting an education that not only prepares you for a career but prepares you with what you need to succeed in any career is essential during college. And it sounds like that’s the experience you had.
Thanks for making it through half the year with Naked With Cash. I’m looking forward to reading more and watching your progression through the remainder of the year!
Updated June 22, 2016 and originally published July 31, 2014. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.