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 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.
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.