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, November 2013. Last month’s report analyzed Calvin’s progress during the month of November. This is Calvin’s final report as part of Naked With Cash. Calvin’s thoughts are followed by Sara’s feedback and advice.
Calvin’s analysis and comments
December was another pretty solid month for me. I was able to keep my spending in check and I had saved some money for the holidays, so overall Christmas was not the financial disaster it normally is. My income remained the same and there was a small dip in my net worth, but after the huge jump last month I was kind of expecting it to fall back a little. The decrease, I think, was mainly from spending down the savings that I was holding onto.
To address Luke’s question from last month: The surprise in 2011 tax obligation came as a surprise to me as well. The government just sent me a love letter saying that upon further review of my 2011 taxes they have determined that I owe an additional $900 because I did not claim my state refund from the prior year. So now I have to pay that additional $900, most likely from proceeds from my 2013 taxes.
In general I would say that I am really pleased with the progress I made this year while participating in the Naked With Cash series. The difficult thing for me is that I can’t look back on any particular feedback or piece of advice and say “yeah that was really helpful” or “why didn’t I think of that?” I think that it was like the productivity studies in the 50s they found out that if they did a study and turned the lights up employees were more productive, then they did a study and turned the lights down and employees were more productive. The result was that employees who know they are being watched are more productive. That I think was the case with Naked With Cash. Knowing that on some level I was accountable may have helped me to make better decisions throughout the year.
I feel like I am in a much stronger position then I was at this time last year. When I started Naked with Cash, I felt like I was largely powerless over much of my financial situation. What I learned, though, was that by making small changes one by one I was able to improve my overall financial situation considerably.
I am grateful to have been given this opportunity.
Feedback from Sara Stanich, CFP
The progress you made this year has been impressive. Some of the changes you made may feel small now, but I bet they were tough choices at the time.
You are in a much stronger position financially than you were just a year ago. That increased stability means that financial “surprises” (like the tax bill, for example) can be handled much more easily. That’s a good feeling.
I’m so glad that this was a good experience for you, Calvin. And I am grateful for the opportunity to be a part of this experience as well. Best wishes for 2014!
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.
Feedback from Luke Landes
When I look at your bottom line, I see a nice increase in your financial stability over the past year in the form of your net worth. That being said, overall, I still have concerns. While you’ve made some good progress this year, the amount of debt you have is still very concerning to me. You have very current debt — meaning you have obligations due immediately — while the bulk of your assets are long-term — your retirement and company stock accounts. While your assets in total outweigh your liabilities, there’s not much balance here.
You crossed the zero line, from negative net worth to positive, earlier than you planned. That’s a great accomplishment, and I commend you for getting there and, so far, staying in positive territory. That’s one milestone to pass, but now you need a solid plan for eliminating your debt.
If you’re paying $200 a month on your credit card bill, if your interest rate is 8% or higher, and if you charge nothing else to your credit card, you will never pay off your debt because your payments won’t cover more than the accumulated interest. If the interest rate is 7% and your payment is $200 a month, it will take 531 months to pay off the bill. That’s 44 years and three months. It would be great to see the progress you’ve made on your retirement account and the savings you’ve made on your car (although you are now underwater on this loan) and apply the same kind of progress to your debt over the course of the next year.
Perhaps Naked With Cash should have been more of a wake-up call for your debt situation, recognizing the difficulty of dealing with a divorce. Among those I’ve known who have been through a divorce that involves a settlement, the financial issues associated with the settlement have been a struggle. I completely understand that dealing with this isn’t as simple as saving money here and there to make up the difference. Nevertheless, at some point, there has to be a turning point. Maybe you will see that with the move to positive net worth, but I think you’re going to have to seriously address the debt situation for the benefit of your future self and your family. You have a healthy salary. If you’re grossing $10,000 a month, your cash flow should cover your debt obligations and then some, although I haven’t seen any details about your cash flow, so I don’t know how much your alimony payments are, for example.
Good luck in 2014. Check in once in a while, especially as you manage to pay down your debt.