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JW January 2013 Net Worth

This article was written by in Naked With Cash. 14 comments.


Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis, and February is “insurance month.” I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

JW is thirty-one years old and a father of one with another one on the way within a month. He works in retail and is underemployed, and his wife and son are on state medical plans, and their income is supplemented by SNAP (food stamps). Read his bio for more information about his family’s situation.

His goal is to be able to provide for his family while still tithing 10% of his income to his church. JW is on Team Neal, with Certified Financial Planner Neal Frankle. For JW’s progress throughout 2012, read his previous update. Today’s financial report describes his progress throughout January 2013, with comparisons from the two months leading up.

Neal Frankle, CFP appears courtesy of Wealth Pilgrim and Wealth Resources Group.

JW’s comments and analysis

Our baby born on Jan 29.

Taxes have been filed. Our refund of $4,100 is coming in February. First we will tithe on that amount. Plans for the remaining are to use some for more car repairs, new baby supplies and furniture, and to pay off a chunk of the student loan. The remainder will offset reduced pay due to time off for the baby.

The biggest expense over January was taking my car in for repair. The ABS light has been on, and I knew the driver’s side front wheel needed a new ABS harness. I had been to multiple shops over the past year without any diagnosing why this light was coming on. After someone suggested a different shop, I took the car in on a free day.

After we paid off the car loan we increased our automatic transfer for car repair by $200 to $265 per month. This money is now earmarked for repairs or our next car. With the money already set aside, the $735 repair bill was covered. We do still have $300 to $500 more in repairs that are waiting for more savings to cover.

This month we started paying $150 toward my wife’s student loan. The minimum payment is $65. We increased the amount after paying off our car loan. $150 is a comfortable amount we decided on during our annual family planning conference. It is not a stretch goal. As we have extra savings build up we do make additional payments. The Income-Based Repayment (IBR) for my loan is $0 until we recertify. We must recertify by March 31, and we plan to do so this month since we have already filed taxes.

Underemployment. I had two interviews for other positions within my company. I have not had any interviews outside of my current company. With the new baby and taking time off, neither position is the right fit for my family at this time. I will continue to seek promotion opportunities within my company and outside positions allowing me a return to IT Help Desk or Java Programming.

Credit cards. The credit card balances represent various recurring bills and other spending. All of the cards are setup to automatically pay the full balance prior to the due date.

Retirement. The balance shown is an old number from my wife’s account through a previous job. Her account is under a plan through one company but is managed by another. We have been having trouble getting the online access setup through either company. Each says the problem is with the other company.

I am registered for my 401(k). We currently do not contribute to this account. We have been waiting until after the baby is born to decide how much or if now is the right time to contribute. The other option would be to pay off the student loans first. We have to decide how comfortable we are with the student loan debt. In the past we have chosen to pay down debt over contribute here. The student loan is the first time the debt interest rate will be lower than an expected 6% return.

Insurance. Both my wife and I have life insurance, with a premium of $27 per month. Our belongings are covered under the homeowner policy where we stay, cost paid by family. We have confirmed that our belongings are covered in this arrangement. We track our home inventory through ITrackMine.com.

We have car insurance through the same place as my wife’s life policy and the homeowner policy. We are looking at decreasing the car insurance levels once we have enough saved to replace the car, with a cost of $80 per month. We currently have no heath insurance for myself. My wife is covered under state pregnancy for two months after our daughter was born. Both children are covered under state children coverage. I do not purchase extended warranties.

I strongly view insurance as a gamble against myself. In discussion, the “What if…?” always comes up.

  • “But you’d be devastated financially is something were to happen.” The average use of insurance is less than the cost of insurance and I’d rather self-insure. So when something happens i’ll have enough to cover the bill. Odds are that nothing will actually happen. I’ll then have this savings for use elsewhere. It might hurt, but not to the point of financial ruin.
  • “What about peace of mind?” I don’t stress over these things. Some might, not me.
  • “What about protection?” Eating right and exercising defensive driving are protection. Insurance does not protect. It is part of the clean-up crew. Sometimes a clean-up crew
    is a good thing to have handy. But to me it is not a need.

Feedback from Neal

I understand how you feel. The last thing you need right now is an extra expense. However, I must say that life insurance is a basic foundation of financial responsibility. In my mind, everyone owes it to their family to take a hard look at their own mortality. If you read my story, you’ll know why I feel this way.

There is no way of knowing how long you are going to live. If your family depends on you financially, I don’t see how you can ignore this. I have seen a number of families destroyed because the major bread earner died prematurely. I urge you with all earnestness to first calculate how much life insurance you need and then look into obtaining inexpensive term life insurance. I think you’ll find that it costs much less than you imagine.

With all due respect, the same argument applies towards health insurance. An unexpected illness could potentially devastate your family from a financial perspective. These are just the facts of life and not subject to opinion.

I strongly suggest that you do whatever it takes to obtain health and life insurance for your family.

Updated July 5, 2013 and originally published February 28, 2013. 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.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 14 comments… read them below or add one }

avatar Julie Johnston

What, exactly, are you self-insuring with, JW? Your net worth is negative. $1300 in cash would have barely covered the last round of lab tests I had without insurance. If you had money in the bank to cover a catastrophic illness and extended period of unemployment (which would not be covered by unemployment insurance since you would be unable to work), I could understand your attitude. But… you don’t.

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avatar Anne & Matt

@Neal — he already said he AND his wife have life insurance. It’s just, JW doesn’t have health insurance, and his wife won’t have health in 2 months.

@JW: Congratulations on your baby! What an exciting time for your family.

I have a question: Do you normally tithe on your gross, or on your net? If you do it based on your gross, then the tithe for the tax return had already been paid.

Is your life insurance term or whole?

I know you mentioned wanting to pay off a chunk of the student loan with part of your refund, but perhaps you could also save $1-2k for emergencies? It could go a long way, and it might be better than putting that at the loan at this point.

Not sure of your state of residence, or if you have car insurance dings, but $80/month for one car with that value sounds quite a bit high. Hopefully you can find a better rate (but I know sometimes there’s only so much you can do). That’s higher than I’m paying for 2 cars.

I’m frustrated with what you had to say about health insurance.

I think if you just said you simply couldn’t afford the premiums right now, rather than saying you planned to self-insure (without a way to actually do that), it would be one thing. It would be understandable.

But I agree with Julie — you aren’t in a position to self-insure. I think only billionaires are actually wealthy enough to self-insure for health. Sorry :/

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avatar qixx ♦1,895 (Half-Dollar)

We tithe on net income. This was a decision we made when we got married. My wife would tithe on gross and i’d tithe on net.

We also decided to pay off debt before building up savings. Emergency fund or otherwise. We consider the risk minimal enough.

Some more info that has affected our decisions on health insurance. Odds of financial ruin due to medical costs are 8 in 1000. Odds of spending more in insurance premiums than the insurance covers is around 90%. Odds of financial ruin due to medical costs while having insurance coverage 7.2 in 1000. (These stats come from a 2009 New York Times article). By my calculations this means 8 in 10,000 people who would have been financially ruined were saved by having medical insurance. This makes my odds 625 times better playing $5000 bets on the pass line for a new persons first throw at the craps table in Vegas than having insurance to prevent financial ruin.

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avatar qixx ♦1,895 (Half-Dollar)

First off sorry for not being more clear. The statement on or insurance coverage got swallowed up in my views on insurance. For the record my wife does not share my views. I’d prefer to self-insure. We do not try to do this as her feeling differ and that is something i’m willing to cede to her wishes on..

Life Insurance: Both my wife and i have life insurance. She has both a term and a whole life policy. My wife has Multiple Sclerosis. When she first got the policy MS was considered high risk and she could only get a policy split whole life and term $250,000 each ($500,000 total). MS is no longer considered high risk since more is known about it medically. We should probably look into a straight term policy for her. I have a policy through work that is $55,000. Double my last year’s pay. This is covered 100% by work.

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avatar qixx ♦1,895 (Half-Dollar)

Car Insurance: Our car policy is higher than the state required minimums. It is the level that is required by my work for using a personal vehicle for any driving on the job. The premiums in Washington State are a lot higher than other places i lived. Moving from Oregon my premium almost doubled for the same coverage through the same company. We do shop our car insurance around about once a year (before our annual review with the insurance company) but have stayed with the same company for many years.

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avatar qixx ♦1,895 (Half-Dollar)

Health Insurance: On the health insurance front my wife’s prescription for Rebif (MS drug) would be $4000 per month out-of-pocket. This is covered 100% by a grant from the manufacturer when she does not have insurance coverage. With coverage the grant will cover up to half. The available policy through work will cover a max of $9000. Total known out-of-pocket costs would include 4 quarterly doctor’s visits to her neurologist ($130 each) or $520.

With work’s best insurance policy after adding in the cost of the premium, the quarterly doctor visit and co-pays (12 @ $50 each) the total out of pocket would be $21,502. This is assuming they would cover the Rebif the first year. The policy does not cover pre-existing conditions for the 1st year. So we’d have the whole $24,520 bill the first year. Plus the cost of premiums ($5,382).

The new Insurance laws prevent turning her down for coverage based on a pre-existing condition but to my understanding don’t stop this practice of not covering costs associated with a pre-existing condition for a set period of time. She would have insurance after all even if it pays out nothing.

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avatar Anne & Matt

Aw man. JW, I am so sorry that your wife has MS, and that you have these insane bills to contend with.

$21k in a year just blows my mind. You would be able to deduct a substantial amount on your taxes, but it would only go so far.

Have you looked into joining Samaritan Ministries? It’s like health insurance, but different. A bunch of Christians pool together and pay their monthly premium to a family in need. When they need to file a claim, families send them the money. I think it’s $355/month for a 2-parent home. Look into it, anyway. I don’t know what they do about preexisting conditions. I don’t participate, but I would consider it if we didn’t have other options.

You’re in a tough spot with regard to the health insurance issue. If it were me, I don’t know what I’d do. If I’m understanding you correctly, it sounds like it really is cheaper to go without (with only the MS to consider at least) if that drug company will pay for the meds. What a messed up system.

P.S., see what you can do about getting more term on yourself. If you’re in good health, you could get a few hundred thousand dollars in coverage for a decent price (My old $400k policy was only $190/year). It’s worth at least getting quotes. You’d need to consult with someone who actually knows what they’re talking about, but at least in my mind it makes more sense to me to have more coverage on you, the breadwinner, than on your wife (though it’s worth having her insured as well).

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avatar Steve P

I personally would focus on keeping your insurance up to date and knocking down the loans. That is peace of mind. Second, continue to build your emergency fund and then whatever is “left” towards a 401k. The reason why I say your retirement plan as last is because there was not a mention of a match… Keep strong!!

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avatar qixx ♦1,895 (Half-Dollar)

My company will match 4%. Would that change your views on order of priority?

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avatar DM

Did you ask your priest/minister if you should be tithing?

You now have two kids, your wife has a serious disease, you are on food stamps, you live paycheck to paycheck, you have no health insurance. You are very far from being self sufficient. In my opinion, charities exist to help, not take money away from people in a situation like yours.

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avatar qixx ♦1,895 (Half-Dollar)

I feel that the reason we are not crushed by financial concerns or stresses is because we pay tithing. In talking with my pastor his comments are that tithing is a commandment for everyone. I believe the blessings we receive are better than the money so there is not even a thought of reducing or stopping this contribution. One thought might be consider this amount a financial insurance plan. It prevents us from ending up in financial ruin.

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avatar DM

That is interesting. Thanks for the response.

I’m pretty sure this sounds cynical to you. As an outsider, tithing sounds like nothing more than the church manipulating its members. I would feel much better about it if the tithing rule were something like 10% of your income above the poverty line or something like that.

Would you mind volunteering approximately how much you tithe annually?

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avatar qixx ♦1,895 (Half-Dollar)

You may not be that far off. Many of the churches out there don’t really do anything for their patrons. Tithing to a church that does not provide at least spiritual or emotional benefits might not be far off from manipulation. Last year tithing was $2575. This equals 10.02% of income ($21,553 for my job + $4,134 tax return = $25,687).

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avatar Anne & Matt

We also tithe. It isn’t coming from the church, it’s coming from the Bible. Jesus had lots to say about money. He shared a story about an impoverished widow, who gave the last coin she had. Her reward was greater than the wealthy guy who gave a small percentage. It was because she gave out of faith and love of the Lord, not because she was expecting something in return.

We tithe cheerfully, knowing that the Lord doesn’t need our money to do His work, but that we are still a part of it and I consider it a privilege. When we were digging out of debt it was much harder, but it helped us to see that we were still provided for. And, it helped us not be so money focused.

Now, our income has grown to beyond our expectations and we want to give more.

for families truly struggling, the church does need to step up and help. It is part of loving your neighbor.my congregation has a mercy ministry offering that goes to members who are struggling. I love that that fund exists.

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