In Naked With Cash, seven anonymous Consumerism Commentary readers publicly track and analyze their finances on a monthly basis. For almost a decade, I tracked my own finances on Consumerism Commentary; now I’m sharing the benefits of public accountability with the participants. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.
Calvin is in his early 40s, earning an annual salary of $120,000 plus bonus as an IT project manager in New Jersey. He recently finalized a divorce and has a teenage child. Read his bio here. Calvin is on Team Sara, with Certified Financial Planner Sara Stanich.
The net worth report below and following commentary refer to the last full month, July 2013. Last month’s report analyzed Calvin’s progress during the month of July. Continue reading this article to see Calvin’s latest net worth report for the month of August, including his own analysis.
Calvin’s thoughts are followed by Sara’s feedback and advice as well as thoughts from budgeting expert Jacob Wade from iHeartBudgets.
Calvin’s analysis and comments
August was a bit out of the ordinary from a financial point of view. I had to pay for camp for my daughter, and we went on a small vacation for a few days that added expenses to my normal monthly budget.
There is still also the issue of timing of when I take the snap shot of my bank account this month. All the cash for my rent and alimony has already been taken out of the bank and is not included. However, when I do my summary at the end of most other months, that money is included and inflates my cash position.
Last month there was some discussion about the money I withdrew with regard to my stock options and LTI. That money was put into the bank and is used to cover my monthly short fall; it has to last me until next March since I don’t have any ability to access any more funds this year. A lot of people have asked why I don’t use my assets to pay down my debts. The short answer is that most of my assets are not available for withdrawal, since they are tied to a maturation scheme that only allows me a certain amount of access each year.
Also, some of the value is in stock options which I could cash in at this point for a small amount of cash, but I think they have the potential to grow more in the next year or two. I am trying to give them the chance to grow so that I might be able to use them to knock out a debt or knock one down a bit.
My spending for the past few months has not been as disciplined as in previous months, and I am taking steps towards getting that back under control. Budgeting for me is like dieting in that it requires constant vigilance and will power.
In the past few days I have received a few medical bills that I was not aware of: My ex-wife had them and was not forwarding them to me. Once I make a few calls and try to arrange payment plans I will include them on my balance sheet — and it will add another couple thousand to my debt next month.
My intention is to get myself fully into positive net worth by March of next year. That is also my goal for having a fully balanced monthly budget without a running deficit.
Feedback from Sara Stanich, CFP
Calvin, are you going backwards? Why?
You cashed in some stock, yet I don’t see a corresponding increase in your cash or a decrease in your debts. Where is it?
You set a new goal of a balanced monthly budget by next March, yet you were already there in May. Why go back?
The reports here focus on net worth, but I think you need to focus on cash flow. Do you have a system for tracking and reviewing your spending monthly?
You’ve made tough choices regarding your home and car, and you are almost there!
The remaining adjustments are likely to be things like planning to eat at home more often (which can save hundreds per month). Sure it’s less convenient (I know it can feel like dieting), but it can become a habit like anything else. You can do it. Don’t settle for less.
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Feedback from Jacob Wade
The budget is worth it. If it requires extraordinary will power to stick to it, then you need some motivation. It’s OK to fail because no budget is ever perfect, but finding out what motivates you may help it have more sticking power. The best way I know how to find out what motivates me is to sit down and write out my priorities in order from most to least important.
From there, you can see in plain black and white what is important to you, and what isn’t. Then you can review your monthly spending, and write the name of the priority next to each line item. Anything you spend on that isn’t one of your priorities, write the word “Crap” next to it. Then it’s literally as simple as cutting the crap from your spending. Boom!
I know this month feels like a downer, and throwing a few thousand in medical bills on top of the pile could be the straw that breaks the camel’s back. But you are positioning yourself in a great place to really tackle all these debts and boost your net worth significantly after. Just need to take it one step at a time. Find your motivation, set some goals, and keep focused on those things. You got this!
Feedback from Luke Landes
Last month, your updates included a large withdrawal from your stock options without a corresponding increase in your reported bank account. You’ve said the withdrawal was put in the bank and used to cover your cash flow shortfall. If in previous months your cash balance was overstated, this might make sense, but without consistent net worth reports, it’s hard to tell what’s going on. If your bills are all due once a month, I suggest reporting your numbers as they are at the end of the month after all the bills have been paid. If there are any bills you weren’t able to pay that need to be paid still, you might want to add a liabilities category for overdue bills.
This would help readers get an understanding of your financial position each month. The effectiveness of a net worth report relies on consistent reporting. If you report your numbers before you pay bills one month and after you pay bills another month, it’s impossible to track progress. It might be helpful to note the amounts of some of your regular expenses like rent an alimony; the more details you provide, the more sympathetic and understanding the financial experts and readers will be.
You may want to keep a cash flow statement for your own purposes for a better picture of your opportunities for advancing your financial progress.
It’s great to have the goal to get into the territory of positive net worth by March of next year. Look towards not only crossing that bridge but staying on the sunny side permanently. Good luck with the stock options. I hope they pay off. Keep in mind it’s easy for employees to feel bullish about their own companies. I saw this when I worked at a company in the financial industry as the recession hit financial companies hard. The internal corporate message had always been, “The rest of the industry behaved badly. We didn’t, so we’ll be fine.”
Although the company avoided both scandal (for the most part) and bailouts, the stock price never recovered to where it was prior to the recession. It still hasn’t. There is a bias built in when you own stock of the company you work for. Watch out for that.