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 recently added a new furry friend to the family. They don’t want children, and are committed to retiring early, when Allie is 50. Both hope to own side businesses during retirement; Allie with photography and Jake with a kennel. They enjoy 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 see 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
May was kind of boring month as far as reporting goes. We didn’t really have any extra income (well, none that hit in May). I did have a side job, but the check didn’t get deposited until June 1st so it will show up next month.
The biggest change on the balance sheet was the massive jump for our home’s value, which we get off of Zillow. It went up by $18,000, but that’s just a number and will change again. I’m just glad to see prices going back up around here.
As far as expenses this month, there were a few out of the ordinary expenses:
- $175 for entertainment, tickets for a concert we are going to in September.
- $100 for home improvement, prep for some much larger home improvement next month.
- $357 for pets, most of which was medication that Allie accidentally purchased earlier than we needed it.
- $196 for vacation — early purchase of tickets and city passes for our summer vacation while they were on sale.
There was no power bill this month because it didn’t get paid until June 1st.
We did manage to not spend more than 50% of our take home pay for the third straight month, which is a goal of ours. It puts us at 52.54% for the first five months of the year.
This month we are supposed to talk about one of my (Jake’s) favorite topics — retirement planning!
When I first started working I made mistakes. I didn’t contribute, and then when I started, I didn’t contribute enough. Fortunately, we have been able to catch up and feel like we are in a better place after the past five to seven years. We are maxing out our 401(k) and maxing out our Roth IRA account. We met this year with an advisor from our investment house and came away not really knowing where we were, mainly because he kept asking how much we spent on things and would spend on things in retirement, which we weren’t prepared to answer for either time period because we weren’t sure what to expect from the meeting (and still wouldn’t have had any clue about future spending even if we knew he would ask those questions). We just didn’t know, so we weren’t able to truly determine how well we were doing. The Naked With Cash project has really helped us to understand how much we are spending and enables us to have a better overall picture of our finances. We still don’t know what we will spend later, but it’s providing a true photo of the present.
Not surprising, these were the exact same questions Neal asked us in the beginning. But now we can answer them! The monthly meetings with Neal have been more valuable than the meeting we had with the brokerage/retirement company. Neal has asked more in-depth questions, has taken the time to really get to know us, and he makes us think about what we’re doing and what our future goals are. It has been a great experience so far!
Our investments (401(k), Roth, and Brokerage) are all in funds/stocks/bonds. I manage these and make sure to rebalance them as needed when the markets change. The investment house we use has some nice tools to do this. It alerts me if the bond allocation goes above what I have set. I also was able to run some “what-if” scenarios and learned that I should have been rebalancing over the past few years.
We also did the exact opposite of what a lot of people did when the market crashed a few years ago. Instead of getting out of the market like many of those around us, we actually increased our investments. Yes, it’s hard to see numbers go from $100,000 to $70,000 (or lower), but I knew the market would come back and when it did, we were in even better shape.
Our overall goal is to retire in the next few years, hopefully when I’m about 52-54 (in five to seven years), and we are doing things that will we hope will allow us to do this.
We were asked what was our biggest challenge in getting started. That’s easy: fear. I remember buying my first stock. I bought it, and it immediately went down. In a few weeks it was back to even and then stayed there for a while. Fortunately, it stayed there for a while until I wasn’t paying attention to it daily, then one day an alert went off at the brokerage account telling me it had gone above a predetermined number I set. I sold it. From there on out, I just kept going. Our philosophy is to invest in companies that are solid and that we use.
My biggest piece of advice to anyone is simple. Put as much as you can (at least to the employer match amount) into any retirement plan you have available. It will never start to grow until you begin adding to it– and the earlier the better. Contact your HR department; they will help and, if you still have questions, contact the brokerage house (Fidelity, Prudential, Scudder, whoever is doing your 401(k)); they have people that will help you for free!
Well, that’s all for this month! Thanks so much to the Naked With Cash group for selecting us this year. We feel very lucky to be involved in this project!
Hangout with Neal Frankle, CFP
Neal offers the second part of a two-part analysis of Jake and Allie’s financial plan. He emphasizes planning as a couple, and helps them figure out where to go from here, in order to create the future Jake and Allie want.
Feedback from Luke Landes
I’m glad to hear you’re seeing a benefit from looking at and reporting on your finances each month, and from speaking with Neal.
While I’m generally skeptical of free advice from investment companies, from what I’ve seen, the advice you can get from 401(k) brokers can be fine. They’re not trying to sell callers on expensive investments and have no financial incentive to push investors in one direction or another. I felt the same way when discussing my financial situation, goals, and strategies with a CFP, a service offered free from Vanguard for investors with that brokerage.
When I worked for a large corporation, my 401(k) was managed by Prudential. I also took advantage of the company’s free 401(k) advisement and, although I was a novice at the time, just getting started with my investments, I was happy with the discussion, and felt it helped me understand my retirement investments. However, looking at how I was investing at the time, I may have been making this unnecessarily complicated. Rather than choosing the low-cost index fund, I created a balanced portfolio between index funds tracking large-cap growth stocks, large-cap value stocks, mid-cap stocks, small-cap stocks, real estate investments, and international stocks.
I’m looking forward to reading more of your financial updates!
Updated June 22, 2016 and originally published June 25, 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.