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. The participants and experts are discussing tax issues among their commentaries this month. 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 summary from earlier this year. Today’s financial report describes his progress throughout March 2013, with comparisons from the two months leading up.
Keep reading for JW’s March update. JW’s own analysis and comments are followed by feedback from Neal Frankle and budgeting expert Jacob Wade, founder of iHeartBudgets.
JW’s comments and analysis
Income. Income was down some still from time off for our new baby. This should be up next month.
Piano. We set aside $275 for the tuning the piano. There were some sticky keys that needed to be fixed as well. The final cost was $220. A complete full-day servicing of the piano would be about $1,000. That is a future expense for further down the road. With piano lessons, my wife is contributing approx $500 gross to our monthly budget, with average expenses of around $100 per month during the school year. We expect about $350 during the summer months.
Food budget. We adjusted the food budget during the month. Family came into town to meet their new niece. We knew that the family was coming to visit but did not plan accordingly at the start of the month. We increased the dining out portion of our food budget by $100. We shaved down many other categories ($5 here, $10 there, etc.) to account for this increase. This moved the food budget from $250 to $350 for the month.
Underemployment. In effort to increase my marketability within my company I have completed our company leadership training courses. This is usually only pursued by those already in management positions. The biggest area I need to focus on is my networking skills. I tend to be tentative and reserved when networking, and I struggle to focus on ways to help others instead of just focusing on what I’d like to gain out of potential meetings. I am unsure of where and how to focus my efforts to improve.
Job search. I have two openings within my company that I was aware of and have been preparing for. They are manager positions at two different newly-opening stores. To prepare for these interviews I researched the hiring manager and general manager I expected to be in each interview. Next I compiled a list of expected interview questions and compiled similar but tailored answers for each question depending on the location. One of the two contacted me and I now have a pending interview.
On March 20 a third store posted a similar position. I know my wife would prefer living near this third store. This posting was not expected. I have applied and have had my general manager reach out to the hiring manager in the other store to provide a reference for me. This position usually remains open for two weeks before any contact is made to plan interviews. I am currently waiting to see if I get an interview.
I have been contacted for an interview on half of these positions. This leads me to believe my resume and application are well tailored for this position. I’m working to improve my interview skills and techniques.
Outside my company I had only one viable job lead. This is a position I applied for three years ago. At that time I was not doing my homework on the position or interview personnel. After that interview I discovered I knew multiple people who knew the hiring manager — including my wife. I am following the same preparation process for this interview as I have for the positions within my company. The position is still open and interviews are not yet scheduled.
Credit cards. The balance listed above includes purchases that are being reimbursed. $150 in doctor bills will be reimbursed through my Health Savings Account (HSA). $100 in concert tickets were reimbursed through a pre-paid Visa gift card (counted as cash in budget) and $120 for a family purchase that was reimbursed in cash.
401(k). My wife still has not gotten setup for online account access for her old 401(k).
Taxes. We filed our federal tax return the day that the IRS started taking returns. Each year I begin to prepare our taxes in December once I have the final pay-stubs for the year. Once the new year begins I only need to wait for tax forms to arrive to ensure they match the numbers I have already entered.
At our family planning conference each October or November we plan how we will use tax returns of various amounts. We usually use about half of our return for a week long family vacation. Around 25% goes towards debt payments. The remaining 25% goes to different spending depending on the year based on family goals and plans.
Feedback from Neal Frankle, CFP
Thanks for a comprehensive update and congratulations on the baby once again!
On the income, you expected this drop and you’ve made provisions to make it up. No worries. I like that you are clear on your priorities.
Piano. My only questions:
- If you invested the full $1000 to fix the piano now would it help increase revenue?
- Are you budgeting for that extra repair cost? If so, when will you have it? You might want to set up an auto deposit into a bank account like Ally Bank to achieve this goal. I would take a certain amount out of the income your wife generates from lessons and have that money set aside for this expense.
This is a business expense and you are thinking about it correctly. That’s extremely positive in my book.
Spending. On budgeting, I like the way you handled this unforeseen increase in food costs. This is great because it demonstrates responsibility. Keep it up man.
Career.Great action on taking those training courses to advance in your career. I also get the difficulty of networking. I think that a fantastic resource for you would be Toastmasters. It is just about free and a great way to enhance your self confidence in speaking and meeting others.
On the job, you have taken action in doing the research that very few people do so I’m basically more and more blown away by your determination. One idea would be to compile a list of questions you have for the boss. I went through a hiring process for my firm recently and was appalled that nobody asked me about my goals and what problems I need to overcome as a business owner. The candidates just kept trying to sell me on them (to solve their problem) rather than try to understand my problem and how they could help fix it.
Taxes. You are on top of it sir. I don’t really have any suggestions on this point. It sounds like you are in control and on top of your tax situation.
I would close with the one suggestion that you clarify your goals. You’ve had a lot going on and nobody in their right mind would say that you aren’t doing your best. As I said, I am in awe of what you are doing and how hard you are working. I just want to hear from you what you’d like to accomplish over the next 12 months and then hear a plan (daily/weekly/monthly) on how you plan on achieving that goal.
Feedback from Jacob Wade
Great to hear about the progress on the job search front. I think the one thing that will solidify these opportunities is a confidence in the interviews. It’s awesome that you are rehearsing for potential questions and have researched a bit. Just make sure you don’t default to pre-written or rehearsed answers, because they might throw some curveball questions and that could throw you off. Just be you, be confident, and let them know why you’re the best man for the job.
On the tax return side, what amount do you usually get back? I only ask because, depending on the amount, using half of it for a vacation based on your current financial situation might not be the best use of that money. You have an income problem at the moment, and vacations should not be a priority. I understand that getting away is important for stress levels and emotionally can really recharge you, but doing something like camping at the local state park or visiting family where you don’t have to pay for a place to stay or eat might be your best options instead of spending your return money on it. Something to think about.
Your net worth didn’t move much, but it also didn’t go down, so you’re still maintaining, which is good. Things are tight now, but a boost in employment can change that. The great part is that you are now used to a tight budget and frugal lifestyle (I can relate, we don’t make a lot either), so you can continue that trend with increased income, knock out your debt and really start to see your net worth grow!