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Naked With Cash: Brian, December 2013

This article was written by in Naked With Cash. 10 comments.


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).

For more information, read this introduction.

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 is a 30-year-old engineer. He has a wife and two young children. He works as a software engineer, and his wife stays at home. One of their biggest recent adjustments as a family was dropping to a single-income after having a dual-income for so long. Brian’s goals for the next year include an effort to keep paying down his remaining consumer debt and really start to save.

After reading Brian’s comments, you can see video commentary from Jeff Rose, CFP. Jeff Rose appears courtesy of Good Financial Cents and Life Insurance By Jeff.

Brian’s Net Worth Statement

Brian’s Income Statement

Comments and analysis from Brian

Through the process of updating my spreadsheets for this journey, it was nice to take some time and reflect on the past year. The first joy was the birth of our second child, which really changed our finances. The second great thing this past year was paying off the last car, although we are talking about getting a used van this upcoming year.

2013 started off well, allowing us to pay off the last vehicle, but we did not do a good job preparing for the last few months, as we went to a single income. We had car, furnace and water heater issues in the last three months of the year, so the beginning of 2014 will be focused on gaining control and adjusting to our new spending power. Lucky for us, when we bought our house we got the $8,000 tax credit, which gave us a nice start to our emergency fund. However, the challenges of 2013 nearly wiped that out, so I plan to really try to save this year.

December seemed like a pretty normal month. The main challenge for December and November was to try to tone down Christmas spending. I wanted to pay for all of Christmas just using credit card rewards, and we were really close to that goal (most of the other income was rewards). Late in month the water heater started to have issues, but it is under a parts warranty so this should not be a big expense for the new year.

We didn’t see many successes, except for keeping Christmas spending down. The main financial decisions we made this month was to discuss the new year and what goals we wanted to accomplish. Like I said above, our first goal is to save and build up the emergency fund again. The next goal is to start looking at replacing a vehicle. Since we are a family of four now, the Jeep we have has very little room, especially with my wife in front of the rear facing seat. We do not need a van, but it will allow us to get around town much easier.

I look forward to this series; I really hope putting it all out there changes my financial picture. I hope to learn and grow my knowledge to lead my family and better teach my children so they do not make the same mistakes I have made.

Feedback from Jeff Rose, CFP

Jeff Rose offers his insights on dropping to one income, ideas for earning from home and concerns about the emergency fund. Jeff also takes a look at the number of credit cards Brian has, and voices his concerns about that situation — even though Brian doesn’t usually carry a balance.

Feedback from Luke Landes

First, congratulations on the addition to your family!

In the video, Jeff did a great job of addressing some of the same questions I have. One thing jumps out at me right away when I look at your income statement — which in your case is more like a cash flow statement. If you didn’t have those debt obligations, you wouldn’t have been in the red in October, November, and practically December. But that mortgage that takes up the bulk of your debt service won’t be going away any time soon, so that’s understandable.

Although you did increase your net worth by 18 percent over the last year leading up into Naked With Cash, it’s this cash flow that I see causing a problem for you. If life goes smoothly, you’ll get by. I’m sure I don’t need to tell you that with a baby, life is unlikely to go smoothly all the time. Your savings may not “save” you when you need it, and I’d hate to see you turn to a 401(k) loan.

You’re not in much danger. You have marketable skills, you have good credit from what I can tell, and you even have some home equity that you could tap into in an emergency situation. As you stated in your introduction, your goals this year are to save more money and pay down debt (and despite your credit card balances, as I understand it, you pay them in full every month). How do you plan about reaching those goals? Do you foresee a reduction in expenses?

Why did the value of the Elantra go up in the past month? What’s your method of assigning values to your vehicles?

It would be interesting to hear more about your long-term goals, as well. What do you and Sarah want to do with your lives as you progress through your career? What are you passionate about? What kind of life do you want to live?

Updated January 31, 2014 and originally published January 29, 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.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar John

The net worth row in the net worth statement seems wrong, seems like you are summing assets and liabilities. Example $286k assets, $154k liability should be $132k net worth not $441k!

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avatar Luke Landes ♦127,485 (Platinum)

Good catch! I fixed the formulas and we’re good to go.

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avatar John

You’re welcome! Too bad for Brian though, his net worth took a hit :)

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avatar MP

DId their 401k go way down from last year or was there a withdrawal?

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avatar Luke Landes ♦127,485 (Platinum)

The report I’ve posted is a summarized version of what Brian submitted, and his was account by account, with more detail. The 401(k) that saw a decrease from $39,435 to zero between December 2012 and October 2013 was his wife’s 401(k), and as the balance went down, her IRA went from zero to $45,894.

My assumption is that when his wife left her job last year (remember they moved from two income to one), she rolled over the 401(k) into an IRA. Brian would be the one to answer the question definitively.

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avatar Brian

Yes, I did rollover my wife’s 401K to an IRA when she left her job

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avatar Brian

Addressing Comments:

First thanks for the feedback, always pays off to get outside opinions and ideas to improve your situation.

Deficit
The deficit in Oct and Nov was bad and I know that. Those were the first two months going to one income and I as the leader did not plan for the change as I should have. In those months I did have some unplanned expenses with Car breaking down, hospital bills, one time baby expenses, and being so busy to not manage the expenses as i should

Number of cards
With the number of credit cards, I have been thinking about closing some. But at least half of them are not even in my wallet and are kept for maintaining credit history for me and my wife.

Funding retirement account, Life Insurance
Right now I am only funding my 401K. I am only funding up to the company match. I also have life insurance provided by my employer for the whole family. Not sure of the specific numbers off hand , but I could look up if needed

Dec Extra Income
475 was cashing out credit crd rewards to help pay off Christmas and the rest was money from family for Christmas. My wife was a teacher. She is defiantly wanting to try to bring in side income in the future, but with a newborn really is not doable right now. I would be open looking to generate side income myself this year.

Savings
As I said in my intro, this is my main goal this year. This has been a weak area in my finances, and I really want to improve that.

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avatar Brian

In doing this months update, i notice the elantra value was wrong, it should have been 5870.

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avatar Ivan Widjaya

I see how things here are quite hard. But this is a situation that’s quite familiar to a lot of people. I guess, there is no choice but to resort to other sources of income.

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avatar Donna Freedman ♦80 (Newbie)

I paid for nearly all of my Christmas with reward card points as well. It’s important to me to be able to give gifts each year, and this lets me give without worrying as much about money.
Once your wife is back on her feet (and congratulations on your new miracle), could she look into a little part-time tutoring in the home or with a company like Sylvan Learning Centers? This could be done in the evenings when you’re home with the children.

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