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. Jake and Allie are both interested in owning side businesses, even though they plan to use their nest egg for living expenses. The couple enjoys travel and make it a priority to take trips throughout the year. They believe that it makes sense to use 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 estate planning.
Jake and Allie’s Net Worth Statement
Jake and Allie’s Income Statement
Comments and analysis from Jake and Allie
September was a pretty uneventful month. Most of our expenses were typical. There were a couple odd expenses: a concert, Dropbox renewals, and two flights for a weekend anniversary trip with friends who were married the same weekend. We used miles for one of the tickets, so the overall cost was pretty cheap.
Our dividends were extremely high this month. We both received substantial dividends from one fund this month. This money was reinvested.
At present, we have our 401(k) accounts set up to go into trust funds for Allie’s niece and nephew should anything happen to both of us. We are also working on a plan to make arrangements for our pets to go to good homes with money for their care if anything should happen to us. This isn’t something either of us like to think about, but it would be nothing short of irresponsible not to do so.
That’s it for September.
Hangout with Neal Frankle, CFP
Neal keeps tabs on Jake and Allie’s financial plan, let them ask him a few questions, and talks estate planning.
Feedback from Luke Landes
September was one month where it paid off having a good portion of your assets in cash. The broad stock market performed poorly in September, and that’s the only reason Jake and Allie’s net worth dipped more than one percent in September.
Nevertheless, throughout the month, the couple (I assume) continued investing in the stock market through automated investments into 401(k) accounts and possibly the IRAs. That should pay off in the long-term because it follows a tried-and-true approach to investing during a market downturn. It’s hard — well, practically impossible, and no one has been able to do this repeatedly — to identify the market highs and lows in real time. Keeping your wits about you and investing in an asset type while everyone else is scared of it enables you to take advantage of the “average” returns promised by that asset type.
While Jake and Allie might have had odd expenses in September, they’re certainly set up to handle those expenses well. The significant cash cushion provides a buffer, but income is not a problem. Only in one month this year did the couple’s expenses exceed take-home pay, but those year-to-date numbers are fantastic. $62,555 of income not invested, $39,302 in expenses. That is some significant headroom — and that means Jake and Allie can handle “odd expenses” without depleting savings. This is a great financial position.
Neal offered some great comments, so watch the video above. “The most important part of [looking at your finances] is you, what you want to achieve, and what’s important to you.” Numbers aren’t completely meaningless, but they need context. What is the purpose of building wealth? It’s more than just a scorecard. It’s more than just watching the bar graphs get taller. Jake and Allie have goals they want to achieve as they prepare for retirement (ending work). They have identified the things in life that are important to them. The couple has noted some risks that could have a negative impact on their finances and their lifestyle.
I encourage everyone to think about their lives in these terms. This is a personal finance blog, so the focus is on the financial part of one’s life, but the financial part is just one piece of life. And many of the readers here are squarely in the United States “middle class.” Most of us aren’t concerned with barely making rent and mortgage payments. We’re not in danger of not having food for a week. These are huge problems in the United States, but at least according to feedback from regular readers, this isn’t a personal concern for the audience here. Because of this, we have more flexibility than perhaps the American average. And due to that flexibility, we have the luxury to think about lifetime goals.
It’s good to remember that planning for the future in broad terms is a luxury.
Jake mentioned in the video that tracking his finances this year for Naked With Cash has opened his eyes to how much they spend in certain categories. Until you start tracking your finances closely, this is something that’s impossible to know. You absolutely cannot be confident in your ability to have a secure financial future without tracking your income and expenses, at least for an extended period of time.
Thanks for the update, and I’m looking forward to next month’s financial reports.
Updated June 22, 2016 and originally published October 29, 2014.