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.
Jake and Allie are animal lovers who enjoy their pets and have no plans for children. Both are committed to early retirement. While they plan to live entirely off their nest egg, Jake and Allie are both interested in owning side businesses. The couple enjoys travel and make it a priority to take trips throughout the year, using part of their combined $140,000 income to enjoy life now. (Read their update from last month.)
After reading Jake and Allie’s comments, you can watch a Google Hangout they participated in with Financial Planner Neal Frankle. Neal Frankle appears courtesy of Wealth Pilgrim and MCMHA.org. This month’s Naked With Cash focus is on planning for income disruptions.
Jake and Allie’s Net Worth Statement
Jake and Allie’s Income Statement
Comments and analysis from Jake and Allie
It’s hard to believe that we are half way through the year. We were excited to start talking with our CFP about our plan for the future, and to learn if all of our hard work was really paying off. We wanted to know if we were going to have enough money when we retire. We’re happy to see that what we’ve been doing should be enough for us if things keep going in the same direction. Our plan assumes no income from work when we retire, so if I keep up with my photography and Jake keeps doing some consulting jobs here and there, we should have some additional money to add, which can only improve our situation.
This was an interesting month for us in the finance area:
Jake had a side project that he started in February and finished up at the end of May, so he received his payment check and deposited it in June.
There were lots of dividends on investments this month and almost all of it was re-invested.
Insurance for the second half of the year was due on three vehicles, amounting to $933 for six months. Our homeowners insurance premium was also due, coming to $1,442 for 12 months.
We had some improvement work done on our house, which is something we’ve been wanting to do and something that will increase the value of our home at resale time. This cost us $2,500 for materials and installation.
We also paid for our July vacation travel, lodging, and city pass tickets ahead of time. Allie did a great job finding some good deals on flying and lodging. We originally planned to drive, but the flight deals were actually better than fuel, parking, and other costs.
We knew we had most of these expenses coming up, but it’s still not fun when you’re paying out so much in one month. July will be very similar to June because we will have a couple extra house expenses that go along with last month’s work, and we will be taking our summer vacation at the end of the month.
We actually spent 115% of our take home pay, which brought our yearly average up to 62.56%. That number caught me off guard when Jake gave it to me, but he reminded me that my take home is a lot smaller than before because I’m putting every possible dollar into my 401(k). That made it a little easier to take.
Our house value increased on Zillow by another $14,000, which seems extremely odd because it normally goes up and down a few thousand dollars, but not really changing too much in the long run. It has increased by $30,000 since January, which is a lot for the area where we live (housing is cheap here). We’re hoping this is an indicator that it will be on the higher end when we’re ready to sell in a couple years. We won’t get too excited though because anything can happen.
This month the topic is college savings. Given the cost of a college education these days, we are happy to not have that expense. Saving for college is a lot different than when Jake and I went to college. I’m proud of the fact that I was able to put myself through college with very little student loan debt when I graduated, but these days one year of college can be more than what I paid for my entire education.
A couple of the questions from the topic e-mail this month:
Do you think college is still the way to go?
If you had asked me this question a few years ago, I would have said, “Absolutely.” These days I’m not so sure. I say that for a number of reasons. I’ve witnessed parents sending their kids off to college when the kids may not necessarily want to go. When I went to school, that was a couple thousand dollars if the students changed their minds or flunked out. These days you’re talking a lot of money for a student that’s unsure. I’ve also witnessed parents spending many thousands of dollars on their kids to get a college degree only to see them happily working as an administrative assistant or working retail. (Not that there’s anything wrong with that, but why go to school to be a psychologist and work selling cell phones at a Verizon store with no intention of using your degree?)
So, is college the way to go? I think it depends on the student and what their true aspirations are. It’s a lot of money to spend if you’re not going to follow your field at some point. I’m not sure what my life would be without college, but for me it was a difference of working to put myself through college so that I could be independent vs. a lot of kids I see that allow their parents to pay for it only to decide they don’t want to finish or decide that they don’t want to be a doctor or accountant or whatever they studied.
Hangout with Neal Frankle, CFP
Neal continues to help Jake and Allie develop their long-term financial plan, including major life milestones. A brief discussion of college is made, but probably isn’t a future concern for Jake and Allie, even though they have their own thoughts on their own college experiences.
Feedback from Luke Landes
I like the idea of keeping up with the work you’re doing outside of your day jobs, even if it doesn’t add a lot to your net worth. Pursuing something like photography can be very rewarding, even if you don’t earn a lot of money from it. I share this interest and passion with Allie, and now that I have more “free time,” it’s something I can explore — in fact, I can without any pressure of needing it to generate an income.
Your financial situation is in a good place. You have no problem covering the occasional expenses that don’t show up monthly, like annual and semiannual insurance premiums. Expenses like those can throw some households for a loop, but you’ve got everything under control, so kudos. Although your expenses exceeded your take-home pay, you have a significant cushion, and over the course of the year, it’s not a concern.
Times have certainly changed regarding paying for college. A generation ago (and more), it was possible for a student to put his or herself through college while working on the side. But tuition has grown at a rate such that working one’s way through college is only reasonable for those attending less expensive schools, like community colleges. That isn’t to say it’s impossible, but it’s much more difficult. And frankly, I still think during college, a student’s job is to learn and attend courses. Given the financial realities, it’s harder to make that argument these days.
I’m looking forward to next month’s update! Congratulations on getting through half the year with excellent financial results!
Updated June 22, 2016 and originally published July 28, 2014. 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.