As featured in The Wall Street Journal, Money Magazine, and more!
     

Calvin December 2012 Net Worth

This article was written by in Naked With Cash. 14 comments.


Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. 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 a salary of $120,000 plus bonus as an IT project manager in New Jersey. He has just recently finalized a divorce and has a teenage child. Read his bio here. Calvin is on Team Sara, with Certified Financial Planner Sara Stanich.

Keep reading to see his net worth report, which includes progress over the past year, with detail from the past several months, as of December 2012. Following Calvin’s own self-analysis, Sara Stanich will offer thoughts from her perspective, and budgeting expert Jacob Wade from iHeartBudgets will also provide insight.

Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.

My expenses for December were higher then normal due to Christmas shopping and other holiday-related expenses. I sold some items on eBay to help bridge the income gap, raising about $2,300. I don’t have a perfectly clear picture on my monthly expenses. They have been changing recently. Until October I was living with my girlfriend, and with her contribution to the living expense I was just about making ends meet. Since she moved out I have been scrambling to make ends meet each month.

My child’s medical condition has also resulted in several hospitalizations and many trips to the emergency room in the past four months. I have also been paying off the last of my legal bills from the divorce. In January I will pay off my last $600 bill and will, for the first time in more than two years, not be incurring new legal expenses each month.

I have been using the You Need a Budget software, but I am not sure that I am completely doing it correctly. With all the recent upheavals in my life I feel like there is a huge dust cloud around what my true expenses are. I am hoping that through the process of sharing my numbers publicly and the assistance from the financial planners, I can begin to get a clear picture on things and develop a true workable budget for myself that actually balances.

In order to bridge my income gap between now and March when I receive my annual bonus on am counting on several strategies. First, I have a cushion from my eBay sales in December, and I have a few more items that I am planning on selling in January. I also think that my company’s change from a monthly pay period to a bi-weekly pay period will give me a cash cushion for the next month or two. Lastly, my credit union is making small loans available to employees — $2,000 at 6% for two years — to help smooth the adjustment.

I am planning on taking one of the loans in case I need extra cash cushioning. Given the fact that I am not currently making ends meet and do not have any emergency funds set aside, I have extreme financial anxiety, an almost constant fear of running out of money and not being able to meet my obligations. I have been living on this edge since my separation almost three years ago. I know it will eventually get better as my income rises and my debts get slowly paid off, but in the meantime it is an incredibly stressful way to live.

In January, I may need a new phone; my iPhone has a cracked screen. In December I purchased a replacement screen for $30 and it is my intention to try and fix the screen on the one that I have. I am due for an upgrade discount and have thought about selling my phone once I fix it, and using the proceeds for a new phone, but I am also thinking of holding off for a few more months and potentially switching carriers if it will save me money. My cell plan includes me and my child who each have an iPhone 4. The plan including shared data costs about $150 a month through AT&T using my corporate discount.

I also have to get adjusted to my new pay frequency and make sure that all my automatic debits and direct deposits are adjusted accordingly. Other than that I don’t foresee any outstanding expenses or unexpected sources of income on the horizon this month. I would like to reach out to the two outstanding hospitals and see if I can make payment arrangements with them.

Cash in banks. This amount is basically the current balance of my checking account which I keep at my company’s credit union. It usually has a large end-of-month balance because I was getting paid monthly a few days before the end of each month. The balance is false because I immediately have to pay rent, alimony, and child support at the beginning of each month. For January the pay period change will result in a one-time increase in cash flow of roughly half of my monthly pay check. The net effect is that my monthly income will go down slightly since there will be two months with three checks. I am not sure of all the impacts of this change to my budget yet.

I don’t currently make ends meet on my regular monthly salary and I have been using my annual bonus and withdrawals from my 401(k) to keep me afloat each month. My best guess is that I am currently from $700 to $1,000 short each month, and this shortage amount will now increase because of the change in my pay schedule as well as the increase in withholding taxes. I usually keep any extra cash I have in my credit union savings account to draw upon each month, so when I get my annual bonus in March I will store that money in my savings account and draw it down as needed. I also have a checking account at TD Bank and a savings and checking at ING Direct. They usually do not have any residual balances in them.

401(k). I keep most of my 401(k) balance in a Blended Retirement Target Fund which is geared towards people planning to retire around 2055. I keep mine in a more aggressive fund than my age would dictate because I think that stocks should outperform over the next few years, and I hope to capture some of that growth.

LTI and RSU. These are restricted stock units and stock options that I have been awarded by my company over the past several years. I have sold some options to help bridge my income gap since the divorce. The first batch of Restricted Stock Units will become vested in May. These are stock units that I fully own and can sell for cash minus any outstanding taxes. After my bonus, this is my next source of income to bridge my income gap this year.

I also have several stock option grants that are vested, but they are not in the money. I am hoping to not use any options this year and hope that if my company stock does particularly well I may be able to exercise some options and pay off some outstanding debts which would help close my income gap. In the report above, for the months prior to December 2012, I used the current value of my RSU and LTI account since I could not access historical numbers.

2011 Honda. This is my only vehicle, bought last November. I am hoping to drive it for more than 200,000 miles. I used the Kelley Blue Book price appraiser tool for a good condition private sale in order to obtain the value. For the months prior to December 2012, I used the current value of the vehicle since I could not access historical numbers.

American Express Gold Card. Balance: $6,373. This is the only credit card that is in my name and active. I use it to auto-pay cable, auto insurance, and cell phone. I also carry a balance of roughly $6,300 on it at a rate of 15.24%. I would like to pay this card off first since it is both the smallest balance and the largest interest rate. This debt was mostly accumulated through the process of divorce paying living expenses etc. I try very hard not put anything additional on this in a normal month.

Chase Visa. Balance: $8,285. This is residual debt leftover from my marriage that I am responsible for paying down. The interest rate is 6%. The account is closed and I am in a structured payoff plan with Chase. My payment is about $375 a month and the card should be paid off in less than two years.

Bank of America Visa. Balance: $23,398. This is residual debt leftover from my marriage that I am responsible for paying down. The interest rate is 6.24%. The account is closed and, I have special interest rate from BofA. My payment currently is about $350 a month and my goal is to pay this card off in the next three to four years.

Auto Loan. My auto loan is through Honda Finance and has four years remaining at an interest rate of 1.9%.

401(k) loans. These are loans that are paid back into my 401(k) account at a rate of about 6% through automatic payroll withdrawals. There are two separate loans. One has a monthly payment of $291 and the other a monthly payment of $434. I think they have about four and a half and three and a half years left on them respectively.

Medical bills. I have outstanding medical bills with three hospitals for my child. I have made an agreement with one hospital to pay a balance of about $1,000 off at $40 a month. I am avoiding calling the other two hospitals to make a similar arrangement. Technically my ex-wife is responsible for almost half (43%) of this debt but I don’t hold any hope of seeing that money.

IRS tax liability. This is tax I owed from 2011 for making a large cash withdrawal from my 401(k). I pay the IRS $200 a month.

Divorce settlement liability. This is a portion of my 401(k) that my ex-wife is entitled to. So far she hasn’t put through the paperwork to make the transfer but eventually I know it will happen so I keep track of it so I am not shocked when it happens.

Feedback from Sara

Calvin, you have a cash flow emergency. Your best guess is that you are spending $700-1000 more than you take home each month. You need to cut $1000 from your monthly expenses ASAP. Getting cash flow positive on a monthly basis will free up your bonus and RSU for debt payoff and a cash cushion.

That will do a lot to help ease your financial anxiety in 2013.

Of course, that is easier said than done. I have a limited view of your expenses, but a $100 in a few places can really add up. Can you save on food and eating out? Drop cable? Can you investigate trading in the car for something much less expensive, with low or no payment? Can you move to a less expensive place? These are drastic moves, but I would do it. It is great that you have been making some extra cash on eBay, but you will keep spiraling unless you address expenses.

You are overextended. Don’t take a $2,000 loan from the credit union. Don’t upgrade your phone. Stop paying your utilities on your AmEx card that you are trying to pay off. Move the auto-pay to a debit or bank account instead, which will also force you to maintain a cushion there.

You can turn things around this year. Your last payment for legal expenses incurred in the divorce will be paid in January. That’s good news. You are in a deep hole, but there is hope of getting out.

Feedback from Jacob

Calvin, thanks so much for sharing your financial life in detail with us all. First, I just want to say that you are holding up extremely well considering the whirlwind you have experienced over the past 3 years. And I have the utmost respect for you caring for your child.

My advice upon checking out your financial situation is that there are a lot of moving parts. And it sounds like you are using a reputable budgeting program. But what I like to do every now and then when I re-evaluated a budget is just make a long list of all of your monthly expenses in Excel or on paper, and categorize your spending. That means to go over your last two months or so of bank and credit card statements, and put every transaction in a category such as food, auto, housing, etc. This is the absolute best way to get a clear picture on where all of your money is going so that none of it slips through the cracks. Once you do that, you can re-forecast your budget plan for the upcoming month based on where your money is actually going.

All the best, and I look forward to the next year of tracking your finances.

This communication is intended only for the person or entity to which it is addressed. Any taking of any action in reliance upon, this information by persons or entities other than the intended recipient is not recommended. Any information provided is for informational purposes only and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. Raymond James and Sara Stanich, CFP, are not affiliated with and do not endorse, authorize or sponsor any third party websites, their respective sponsors, or user comments found on this or other sites.

Updated April 17, 2013 and originally published January 17, 2013. 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.

Email Email Print Print
avatar
Points: ♦127,485
Rank: Platinum
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 .

{ 14 comments… read them below or add one }

avatar Joe

Oh man, you are in trouble financially, but you don’t need me to tell you that. I think you need to take a day or two off to evaluate your life. See if you can reduce all unecesary ex. Sorry to hear about your child.

Reply to this comment

avatar lucas

great article. how much time does it take to track the numbers

Reply to this comment

avatar Anne & Matt

Your October-December balance sheet has been on an improving trend in terms of both assets and debt reduction. So that’s good!

When my husband’s former company went from monthly to bi-weekly paychecks, I didn’t like the transition. But, you’ll have two months out of the year where you get 3 paychecks instead of two. Find out which ones those are, and plan to use those “extra” checks to improve your situation. For us, the extra checks are March and August this year. It’s only extra because while your monthly expenses are the same, your monthly income is greater in those months.

If you got paid monthly, you wouldn’t have an “extra” pay month, but you’d have some months that were leaner because you might have more weeks of groceries and gas, for instance.

I agree with Sara — get your bills off the autopay for your credit card since you are not paying it off in full. It’s going to be harder to make headway on the card when you are adding additional purchases and accruing more interest.

Overall, you’re in a crappy situation but I think you are already well on your way to getting out of the pit. You have debt repayment plans in place and you are addressing the issues.

I think over the coming months, we’ll see good things from you.

Make some short-term sacrifices now with the phones and other reduce able expenses and you’ll expedite that.

Reply to this comment

avatar Joshua Cooper

Calvin, you must draw a line in the sand and stop using debt going forward. You cannot borrow your way out of debt. Taking out small loans to “bridge the gap” only intensifies your debt problem. You have over $7,000 in the bank – that should be plenty of cushion?

YNAB is a great tool if you use it properly. They offer video tutorials and online training sessions. Sign up for one… or two!

Are you able to cash out the $50,000 in investments penalty free? That money could be used to pay off 1/3 of your debt, freeing up additional monthly cashflow for you.

Also, just curious…. why is the 2011 Honda not have any value under assets? Is it wrecked or something?

Reply to this comment

avatar Luke Landes ♦127,485 (Platinum)

That looks like it’s my fault as the editor. I updated the report with the correct numbers for the investments and the 2011 Honda Civic.

Reply to this comment

avatar Josh

At the moment, you’re paying a lot of interest to credit card companies. If you have a good enough credit score, you might think about applying for a new card with a 0% introductory rate. Usually, those are good for 12-18 months. You could transfer your highest interest rate debt to one or more 0% cards and pay off the balances as quickly as possible. The only catch is you must be able to qualify for the card in the first place.

Reply to this comment

avatar Andre Waldron

It seems like you’ve been improving steadily in terms of net worth from Oct 2012 to December 2012.

Reply to this comment

avatar Joshua Cooper

The real problem here is expenses. Making $120,000 per year, his monthly net pay should be around $8500 or $9000. By my calculations, the article lists about $2500 in monthly debt payments. This would leave him with $6000+ per month to live off of – this does not even factor in the bonus. Where is it all going? There should be absolutely no reason to be using credit cards and taking out loans.

He must get control of his budget and reduce expenses.

Reply to this comment

avatar jmed

$120,000 per year is around 6k a month, not 8.5-9k. 120/12 months = 10k GROSS (pre-tax, pre-401k, pre-health insurance). You think taxes are 10-15% (required to net 8.5-9k)?

Your overall point remains, though. An outline of his expenditures is necessary to make sense of what’s going on and how to fix it.

Reply to this comment

avatar Andre Waldron

I would definitely attempt to apply for a new credit card with a 0% APR introductory rate for the next year and a half to two years. This would definitely expedite the steady gain in net worth that you have managed. As far as the cell phone, I would go for MetroPCS. It’s much more affordable than AT&T and you’re not tied to a contract. This would also increase your net worth.

Once your net worth is in the black again, I strongly suggest you work on creating an emergency fund. Ideally, you would want to have enough in the emergency fund that you can live off in case you were laid off or you were out of work for eight months. This would help to curb the anxiety. Good luck to you!

Reply to this comment

avatar Paula Pant

Calvin, can you sell the 2011 Honda for an older-model car? It seems that the car is worth $20K and you owe $18K on it. If you sold it, you’d get rid of $18K in debt. Then whatever money you’re paying each month toward your car loan could get redirected to your credit card balance.

Meanwhile, you can use the remaining $2K to buy an older car in cash. You should be able to pick up a 1998 – 2000 model Toyota or Honda with $2K, especially if you know how to drive a manual transmission (which tends to be cheaper and has less ongoing maintenance).

Reply to this comment

avatar Joshua Cooper

Consolidating CC’s will not solve his problem.

The real problem here isn’t credit card APR’s or income, it is expenses. Making $120,000 per month, Calvin should be netting roughly $8500 – $9000 per month. The debts he has listed equate to about $2500 per month, leaving about $6000 per month for normal living expenses.

Where is it all going? There should be absolutely no reason a person can’t live off $6000 per month, unless he is a rockstar or politician. There should be absolutely no reason to use CC’s or take out loans. And these calculations don’t even take the bonus into consideration!!!

Calvin needs to get on top of YNAB and analyze his budget, cutting expenses wherever possible.

If he could live off $4000 per month and pay $

Reply to this comment

avatar Calvin

One piece of the puzzle that you are missing is my Alimony and Child Support obligations. My take home is about $7200 a month and from that $3200 goes straight to my ex wife. Then I make about $1700 in debt payments and live on whats left. Although my financial situation right now doesn’t reflect it, I live very close to the bone there really isn’t much fat to cut.

I agree completely with you though about not consolidating the debt or borrowing anymore money. When I say I use my Amex, I now pay it off every month and put in a little towards the existing debt.

Some people have offered good suggestions about trying to find lower transportation expenses, I am going to look into that tomorrow.

Reply to this comment

avatar qixx ♦1,890 (Half-Dollar)

If you do look at stepping down on the cell phone front here is what i did recently. I picked up a pre-paid cell phone. One of those cheap thing you can find near checkout or customer service in many stores. You can find ones with data for under $50 a month around here. 2 phones would drop the cost to $100 from the $150 you currently pay. If you are willing to drop the data plan portion you can go much lower. I’ve spent less than $20 on minutes in the last month. That includes calling people for Christmas. It was also a surprise to me just how few minutes i actually use. My estimates were 4-5x too high.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: