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 children. They are a one-income family since Brian’s wife stays home. They pay off their credit cards each month, so their only debts are student loans and a mortgage. This month, the focus is on estate planning. (Read Brian’s update from last month.)
Brian’s Net Worth Statement
Brian’s Income Statement
Comments and analysis from Brian
This month is about estate planning. We do have wills for each of us. I’m not sure if we need anything else. Our wills are pretty simple, and mainly handle what happens to the kids.
On the income statement front, one of our cars needed some maintenance done (tires, belts, and other items) which will eat into our savings. Hopefully, the work will make the car last another five to seven years. Everything else was a pretty normal month.
On the net worth statement, the housing market still continues to fluctuate. I have been watching similar properties in my area, and hope to see a better value.
Feedback from Jeff Rose, CFP
This month Jeff talks the basics of estate planning. There are some things that everyone should have, including health care proxy, will, and life insurance. Jeff also reminds Brian (and everyone) to check their beneficiaries on a regular basis.
Feedback from Luke Landes
Thanks for providing your latest update, Brian.
Readers shouldn’t be concerned about Brian’s income statement showing a negative cash flow for September. The statement includes a transfer to debt as an expense, so the end result is a positive net income, not negative.
That being said, after receiving an inheritance in August, Brian’s net worth was down this month. The calendar is arbitrary. We choose to divide a year into twelve months, but life doesn’t always happen in twelve even periods. The world doesn’t conform to months naturally — unless they are lunar months, and still, events that take place in the world don’t rely on such a set schedule. But the changing of the calendar provides a convenient time to check in on our finances, and that’s why we have monthly updates.
The point is that sometimes you have to look beyond the last 31, 31, 29, or 28 days to get a good grasp of a financial situation. While a dip in net worth for one month could be troublesome, there could be a number of explanations and it might not be indicative of a greater trend. Brian’s net worth is up 60% for the year, and that’s a great accomplishment.
I’ve noticed something in my own spending. The balances in my general spending accounts are often low. And I feel stressed about money. I have two options: work for money more often, which would mean dedicating less time to planning my future businesses and more time writing on Consumerism Commentary or coaching or consulting, or start withdrawing money from my investments, a nice nest egg that resulted from the sale of my business. I’d rather not do either, so I put myself under a little bit of financial pressure.
But every once in a while, I’ll move some funds around and shore up my spending accounts. And suddenly the stress disappears. But knowing I have something of a cash cushion, and without that stress, I tend to spend more freely. Someone who acquires a sudden inheritance might be in the same situation. There’s a good reason to allow yourself a little bit of stress in your finances. Sometimes you just don’t want to get too comfortable. You may make poorer decisions. (But stress can also induce bad choices.)
Good job on completing the needed maintenance on your car. The more you take care of a vehicle, one of life’s largest expenses, the easier building wealth for the future will be. Financial writers often focus a lot on cutting the small expenses, like expensive coffee drinks, like making frugal purchasing choices on a day-to-day basis. There’s nothing wrong with that, but it sometimes misses the much better opportunities to reach financial independence: managing the largest purchases as intelligently as possible.
Updated June 23, 2016 and originally published October 29, 2014.