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.
Brian and his wife have two young children, and recently dropped to a single income when Brian’s wife started staying home. They have student loans and a mortgage, and usually pay their credit card balances off each month, so their debt level is modest. Brian and his family want to help their children pay for college, as well as build up a healthy retirement nest egg. (Read Brian’s update from last month.) This month’s theme is changes in income, a subject that Brian and his family are well-acquainted with.
Brian’s Net Worth Statement
Brian’s Income Statement
Comments and analysis from Brian
This month is about change in income which is what our family has been experiencing the past few months. There is always the fear of income reduction, and our family has been through it two times since we have had kids. However, the field I am in is still in high demand, and I found another job within a month both times. Could this change? Yes, but I am confident I wouldn’t be out of work for too long. Plus my current job is the most stable job I have had in a few years.
This past year we experienced going from two incomes to one. This has been hard for us. If the debt was not there we would be in a good position, but over the last few months we have not had much expendable income to further pay down debt. I will get a raise in June, and this will go to debt reduction.
Lifestyle inflation is always a threat in today’s culture. We have made great strides in spending money on things we can afford, and trying to find areas to reduce spending. I think it is really important to evaluate the cost per enjoyment. I would love to have cable and be able to watch more sports games, but spending more than $50 each month just does not seem worth it.
April was a OK month. We missed our goal of being in the black, but a lot of outside distractions cause me to not watch the money as closely. In Groceries, we overspent by $50 due to small extra trips. Also, the Home Maintenance and Gifts categories were higher due to parties and yard work that needed to be done. I also did not get to looking into Insurance savings like I wanted to.
Feedback from Jeff Rose, CFP
Jeff Rose provides insight into debt, and the importance of paying off high-interest loans. He also points out that, even though Brian might not be able to earn more, there are work from home opportunities that his wife might be able to accomplish.
Feedback from Luke Landes
How is the new approach to saving money on groceries going? I noticed your expenses increased in this category over the last month, and there could be many reasons for that. I don’t want to assume you haven’t moved forward with the plans you mentioned to cut back your expenses, but it’s hard to ignore the cash flow issue you’ve had since February. Jeff addressed some opportunities for earning more income outside your day job.
You’re paying off your debt, which you’re including as an expense, and that’s going to contribute to the reported negative cash flow. Debt payment is really a transfer, not an expense. In my income and expense reports, I only would count interest paid as an expense, but either way is fine; it’s just important to know what you’re looking at. Your income and expense report is therefore more of a cash flow report, which can be just as informative, if not, more informative, than an income report.
Where you may run into problems from a reporting standpoint, however, is if you are paying your expenses with your credit card, then also counting the credit card payoff as an expense. If that’s the case, you’re double-counting your expenses. The cash flow report would also not be complete if it doesn’t include transfers to investment accounts.
Because your net worth has seen a net increase over the past couple of months, and for the year overall, the negative cash flow isn’t that much of a problem, but it’s something to watch. I still think that at this point, you want to look for more opportunities to put more of your income into savings each month.