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.
Laura and Leon, together, earn more than $125,000 a year. Their main focus right now is paying off student loans, and they want to have that done in order to be better ready to start a family. Laura and Leon hope that they can focus better on their finances, and learn to manage their money more effectively. (Read last month’s update.)
After reading Laura and Leon’s comments, you can read commentary from Roger Wohlner, CFP. Roger Wohlner appears courtesy of The Chicago Financial Planner. This month, there is a focus on emergency preparedness.
Laura and Leon’s Net Worth Statement
Laura and Leon’s Income Statement
Comments and analysis from Laura
This July, we attended a really great family reunion vacation. My dad was born into a large family, so I have lots of aunts, uncles, and cousins and we’re all very close. Over the years we’ve spread out across the country, so every other summer we get together just to spend time with each other. On this occasion, we rented two country houses on a farming resort and cooked our own meals. Offsite activities included wine tasting, visiting the beach and tide pools, watching wild elephant seals, visiting historic houses, and so on. Back at the house, we would stay up late into the night playing cards, board games, Nerf, Mafia, around-the-world Ping-Pong, and whatever else struck our fancy. It was an amazing time all day, every day.
The cost for Leon and me for a full week vacation including boarding, food, and activities was $889. Add in the plane costs at $728 each, airport parking fees of $40, costs for a pet sitter of $100, our total for the whole trip was about $2,485. Is that good? Bad? I’m not really sure, but I can definitely tell you it was worth it to hang out with my cousins and siblings all week. The next reunion will be in two years, so we’re already planning our vacation time and savings accordingly.
Financially we got a bit of a tailwind this month from a third paycheck and a commission bonus raising our post-tax income from the usual $8,387 to $12,709. Most of this will either go toward additional loan payments or as Roth IRA contributions. I was hoping we would a nice big jump in our net worth, but since the market took a dip right at the end of the month, our improvement is only about middle of the road.
So what do we do to prepare for an emergency? I think it’s fair to say we really don’t do anything. We have plenty of money in our checking accounts but we almost never keep cash on hand or stashed in the house. We only keep a few days’ worth of food around at any given time and I’m pretty sure I couldn’t find a working flashlight without making a mess.
The greatest natural disaster threat in our area comes from tornados and I have seen firsthand how devastating they can be. Why am I not more prepared then? Because I have also seen the overwhelming community response to help those who were affected. Neighbors will do everything they can to help each other and if it’s severe enough, the state and federal governments do a really good job at assisting with short term emergency supplies.
Perhaps this means I’m relying on others too much but I honestly feel that people will really pull together to get through the worst of it. Beyond that, like I said, I have plenty of money in my checking account and am willing and able to write a check for large unexpected expenses on short notice. Ultimately I just feel confident that as long as we come out the other side alive, everything will be okay in the long run and some cans of food or dollar bills now won’t make a difference either way.
Feedback from Roger Wohlner, CFP
It sounds like you are taking reasonable precautions against an emergency. It is generally advisable to have three to six months worth of emergency cash on hand in case of a job loss or other calamity. Basic stuff like having flash lights and other basic emergency supplies also make sense of course. As far as anything else it would depend upon your unique circumstances. For example, more precautions might be needed if you live in an area that floods on a regular basis.
Feedback from Luke Landes
I think Laura has provided an answer to a question a lot of people have: Why do people continue to live in areas more susceptible to natural disasters?
There are many reasons people will live in a frequent hurricane path, a flood zone, near a fault with frequent earthquakes, in a town near a volcano, or Tornado Alley. Maybe the benefits of living in a location outweigh the risks, and insurance and community support help mitigate that risk. Maybe, in some cases, a lack of mobility (the result of a low income) prevent people from seeking better permanent living conditions. But the ties to a community can be strong enough to overcome the sense of danger. And one can’t live a life concerned about natural disasters — but one can prepare.
With a six-figure annual income, Laura and Leon have some financial flexibility, and certainly are managing their money well with a healthy net income each month. The extra income in July provided a nice net worth boost. In terms of emergency preparedness, one potential for improvement is a basic emergency fund. Laura and Leon are doing fine fine — between their checking accounts and Roth IRA, they can access assets easily. They could even sell non-retirement investments if necessary. Although Laura’s community has shown its willingness to help out in the case of a disaster, tornadoes aren’t the only potential financial dangers.
And even if one is part of a community like this, one might find it difficult to accept too much financial assistance when you do have over $100,000 in assets and a bright future.
Laura sums up their approach by describing their attitude, and it’s a good one. If you come out of an experience alive, you’re doing fine. And I think that’s good enough for a lot of people. I do want to see people not just get by, but excel. That’s just something for readers to keep in mind. After a natural disaster, the best possible case is returning to the same condition of life prior to the disaster. Yes, you will be thankful for just being alive, but if you can do more, you might as well.
Updated September 2, 2014 and originally published August 27, 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.