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.
The combined household income for Laura and Leon is more than $125,000 a year. They want to tackle their student debt, the result of advanced degrees, since their undergrad was paid for by their families. They want to start a family soon. Laura and Leon have not been paying attention to their finances, and are trying to get out of their complacency. The idea is to actively take steps to improve finances. (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 changes to income.
Laura and Leon’s Net Worth Statement
Laura and Leon’s Income Statement
Comments and analysis from Laura
I finally got around to tweaking our income/expenses spreadsheet. Now “Salary and Benefits” includes gross pay, “Taxes” includes our payroll withholdings, and our health insurance premiums in reflected in the “Healthcare” section. I like this method much better. This gives me a much more complete picture of exactly how much money we’re bringing in and where it’s going. The only real downside is that now I have to put a little more analysis into how much I need for three months of expenses in our emergency fund. But that’s a fairly small issue.
June was a fairly quiet month financially. We’ve pretty much settled into our patterns of paying this, and watching that, but we really won’t be doing anymore tweaking until open benefits rolls around toward the end of the year. The only thing I’ve been really watching out for is that creeping notion in the back of my skull that says, “You need a tablet. Think of all the fun games and easy reading you can do.” To quiet that voice, I instead splurged on a handful of computer games during Valve’s Summer Steam Sale (look it up, it’s amazing), and now I have a backlog of quality to last me many, many months.
Now on to our topic of interest: college planning.
We come from families that have always placed a high value on education. From the time we were very young it was always just assumed that we would go to college because that’s simply what you did. As it turned out, going to college was the right choice for each of us. While it may be a cliché, college really was a place where we grew as people and intellectuals. We had really special experiences that we’ve never been able to duplicate before or since and met some really great people.
My engineering degree has allowed me the opportunity to work in a position with a good salary and work-life balance almost immediately after graduating and then support us while Leon continued with his education full time to earn his law degree. I honestly can’t imagine that we would be doing as well today if we had never gone to college.
We were both completely supported financially through undergrad. We never had to take out loans, take on part-time jobs, or were limited in the classes and activities we wanted to participate in. We were very lucky, and it’s only lately that we truly appreciate just how lucky we continue to be. If we had to take out loans for undergrad, we would probably still be trying to pay them off today over six years later. But I don’t think I would have regretted it.
I believe that paying for our college education was pretty much the single most important gift our families every provided for us. It put us in a position where we had all the tools to pursue anything without the weight of debt holding us back. Everything we’ve earned (and wasted) since then has been on us.
If we have any children later, I would absolutely want to pass on this gift to them. Starting the first month of their life, I expect we will start saving as much as we could (without overly sacrificing our own retirement) in the best available 529 plan. Over the years, I’d watch that money closely and work with my child on managing expectations while encouraging them to earn and contribute themselves if they have higher ambitions than we can provide. If they have different plans for their lives, whether it’s trade school, entrepreneurship, or artistic pursuits, I’d encourage that as well and let them have the savings as seed money even if with the extra penalty. College is one way to go, but it certainly isn’t the only option.
Feedback from Roger Wohlner, CFP
I couldn’t agree more regarding your thoughts on paying for college. Education is the greatest gift that you can give to your kids, and we have done our best to get the kids through undergrad with little or no debt. Our oldest was fortunate to have received a full tuition academic ride to an expensive private school which helped. This is an investment in your children’s future and that’s priceless. That said, they should be expected to work and contribute a reasonable amount as well.
While college is not for everyone, studies have shown that those with a college degree earn more over their working lives. As we saw during the financial meltdown, the unemployment rates for college grads were lower than for those without a degree.
Feedback from Luke Landes
The changes you make to your income sheet are good. This is how I tracked my own income as well, with gross income, deductions for tax payments, 401(k) employer match, and health premium subsidies all as separate lines. It’s more work, but it provides a better accounting for income. For some people, it may be overkill, but for those who really want to track their finances accurately, it’s great.
Your finances are cruising along, according to your net worth statement. If you need extra motivation to avoid purchasing a tablet, you can look to the recent news that tablet sales have stalled. Perhaps consumers are doing just fine with smartphones, and many of these smartphone consumers tend to upgrade those devices every two years. That might not leave room for tablets. On the other hand, I still use my Google Nexus 10, which I’ve had for several years now. It doesn’t feel obsolete like a phone purchased at the same time would feel.
I feel the same way about my experience as an undergraduate, though in some ways, I could have done more to meet the goal of personal growth. I did pursue a degree that I ended up not using in my day-to-day life, but it has nevertheless enhanced my identity. I did have loans to repay when I graduated, however, and someone looking at the financial return on investment of my college career would not be impressed. That said, I have earned more through my business than I would have earned after a lifetime of teaching music, so you could argue the ROI was excellent.
Thanks for making it through half the year in Naked With Cash. I’m looking forward to following your successes in the second half of the year.