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 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, June 2013. Last month’s report analyzed Calvin’s progress during the month of May. Continue reading this article to see Calvin’s latest net worth report including his own analysis. These are followed by Sara’s feedback and advice as well as thoughts from budgeting expert Jacob Wade from iHeartBudgets.
Analysis from Calvin
This month it looks like my net worth swung a little into the negative territory. I think most of that swing is just due to the timing of when I took the snapshot. Normally I am looking at my bank accounts at the beginning of the month before my rent and alimony checks get cashed, but this month I was a bit later and the checks had already been cashed. There is much less money in the bank.
My reserve fund is dwindling and I am going to need to take money from my LTI account to replenish the funds I use to make up my monthly short fall. The short fall is much much smaller now which is a very good thing and should ultimately make the funds last longer, but the summer months have some expenses that are not budgeted for and so also take a bite from those accounts.
In July we are going on vacation for a week and there are also some expenses for my daughter’s camp. I expect my expenses in July to be larger than normal and so it may effect my net worth negatively.
I was reminded this week of something that is incredibly important for me to remember. My brother told me (again) that the time when it is most important to manage your money is when you have some because when you are broke it’s easy not to spend. I know that seems like an obvious thing to most people but it gets at the root of my struggles with finances.
When I have extra money it is really hard for me to make myself believe that I can’t afford things, whereas when the money is not around it’s much easier for me to know that.
Maybe its the way that I frame those decisions in my mind, maybe it’s not about whether or not I can afford something, but more about whether or not I should spend my money in that way. Right now is when I need to be extremely careful about my spending and honestly I haven’t been in the past month or two. I think that I did such a good job lowering my monthly expenses that I now feel like it’s not as important for me to be so careful with my spending. So I want to focus on that this month, making sure that I plan to and stick to a spending plan or budget.
Feedback from Sara Stanich, CFP
You have done a really good job lowering your expenses, which has hopefully taken off a lot of the pressure off you. I know that was not easy, and you should really feel good about that.
But it sounds like you lost focus a little bit?
Lowering your monthly expenses as you have does mean you can relax a little bit. But trust me; you will feel a weight lifted when you can knock off some of those other debts. The short term pain should result in a long term gain in your financial confidence.
The worst of your cash flow emergency is behind you. Now sounds like a good time to build a much more specific plan to pay off your debt. How much goes to each debt each month? Which is the top priority and when will it be paid in full? When will all your debts be paid in full? If you haven’t mapped this out already, you need to get started.
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Feedback from Jacob Wade
Calvin, I’m glad you are thinking more and more about what to do with your money. You have started to turn the corner and are taking charge of your finances, I like that. And what your brother said is very true. You especially need to be cognizant of where your money is to be spent when you have money in the bank. But what I really think you need is a goal. And you can’t set goals without defining your priorities.
You may need to dig a bit deeper, and maybe go on some long walks to really think about the big picture. Once you can write out a list of your priorities, you can then cut the crap out of your spending. What I mean by that is you can remove the spending on things that don’t land in one of your priority buckets. Then you can set some goals, and reverse engineer them to set hard dates for when you want to achieve them. Many of them may be just “pay down the car loan,” or “take a 5,000 chunk out of the credit cards by May,” but they will put you in play with a target to aim at.
I know you’ve cut your expenses down, but it’s never the recurring expenses that kill you. It’s the discretionary spending and unplanned for expenses that drain your bank account like a leaky faucet. Trust me, I would know. Take it from someone who spent $600 a month on mall food, and blew through $100,000 before I turned 21. But once you have real, tangible goals in place, it’s so much easier to say no, and to really take charge and get after your goals with zealousness! I know it’s been a bumpy ride. But I know you have it in you to make some big things happen with little money. You have more power over you finances than you may think, and I suggest you start wielding that power this coming month.
Updated June 22, 2016 and originally published July 30, 2013.