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Personal Balance Sheet, January 2011 ($578,043, +7.0%)

This article was written by in Monthly Update. 19 comments.


January 2011, the first full month of life without a salary, was my first opportunity to take a look at what I can do while working for only myself. The last two weeks of December were officially post-employment, but with the holidays, my routine wasn’t normal until after the new year.

I’ve discovered a few things:

  • Not having to worry about what a boss wants me to do allows me to focus my energy on things that are important to me, and it’s more of a relief than I thought it would be. I expected to have less stress and be able to focus more, but I have a renewed energy that I haven’t had for a long time.
  • I’m saving a lot of money by not going to the company’s cafeteria for lunch every day, but my heating costs are increasing, thanks partly to a cold and snowy January and thanks to being home during the day.
  • Having an area of my apartment set aside for working is good, but I don’t mind the mobility I have my working on a laptop. This coming month, I’ll be spending more time at my girlfriend’s apartment, and I appreciate my new location independence.
  • I still need to hire a cleaning service.

In the next few days, I’ll write more about the changes in my expenses due to the lack of a commute and more time spent at home. In terms of income, the month was successful, with a 33% increase over December’s income. Part of this increase is due to cyclical forces in the industry, but I believe having more time to spend on my own projects has contributed as well.

I mentioned a few days ago that I could be a millionaire just by interpreting my net worth slightly differently. I’ll continue producing these reports every month without taking into account the estimated value of my business, and focus only on my cash, investments, and debt.

Here’s the latest report followed by some commentary.

1. Cash in banks. A friend and reader asked me recently about the best place for his business’s cash. For most of my cash, like him, I’ve had a business account at ING Direct. That’s earning only 0.95% APY at the moment. While it’s still better than most brick-and-mortar savings accounts, it may not be the best option out there. I’ll spend some time researching better options.

The savings accounts I keep are generally designated for emergency savings or a big purchase, such as a house. Leaving my job, I made sure I had cash available for the unlikely even things didn’t work out and I’d need to look for something new. I could being too conservative here, so my plan for this year is to answer some of these questions.

2. Investments and retirement. I still have not completed the paperwork for my Individual 401(k) at Vanguard, but I hope to finish this by the end of the week. It will be important for me to decide what to do with my existing 401(k). I could roll over the investments into an IRA or leave the account with my former company. The mix of investments has performed well, better than the S&P 500, but that’s no indication of how it will perform in the future. Traditional financial-planner advice says I’ll be better off in the long run investing my retirement funds in a broad equity index.

As a continuation of last year, I’ve started off 2011 by investing $1,750 each month automatically into my SEP IRA. My goal for the year is to invest ten percent of my income towards retirement, so I still have more to go before reaching that mark. This may require a manual investment each month after I determine my income.

3. Accounts receivable. Accounts receivable is the line that represents the invoices I’ve sent to clients and advertisers that are still outstanding. When this number increases, it might mean more business or it might mean that companies are taking more time to pay me. Despite a larger income in January, my accounts receivable amount decreased.

The decrease is mainly due to getting payments faster, thanks to direct deposit.

4. 2004 Honda Civic. At 128,000 miles, my car is still running well. There are a few problems that require my attention. I need to replace the battery in the keyless remote, and some of the rubber protecting the bottom of the driver’s side door has fallen off. This is the most trouble I’ve had with the car since I purchased it new in June 2004. Is it crazy to buy a car new rather than used? Not if you hold onto it for a long time and drive it into the ground. Even though Hondas hold their value well, resale value is not an issue for me.

Ever often I use edmunds.com to determine an estimated value of my car for my net worth report, but for now, I’m just decreasing the value by $100 every month.

5. Accounts payable. I use credit cards for almost all of my spending, and that contributes to the accounts payable line. Those who submit invoices to me that I haven’t paid by the end of the month are included here as well. The credit card balances are all paid before they are due in order to avoid any interest charges.

Although I nearly doubled my net worth over the past year, that is a less likely target for the next year. How are your finances coming along so far this year?

Published or updated February 1, 2011. 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, also known as Flexo, 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 him and follow Luke Landes on Twitter. View all articles by .

{ 19 comments… read them below or add one }

avatar Financial Uproar

Congrats on the continued growth of your net worth Flexo!

However, I’d say having half of your net worth in cash is way too conservative. I hold only 5% of my portfolio in cash. Of course, it’s a personal decision.

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avatar skylog ♦368 (Nickel)

i would agree, but as you stated, it is a personal decision. perhaps it is an increased safety net due to his move to independence.

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avatar Luke Landes ♦127,455 (Platinum)

I started out keeping cash to save towards the down payment on a house, but since I haven’t decided to buy one yet, the accounts just continue to grow.

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avatar Car Negotiation Coach

Flexo, it’s always interesting to peer into other’s finances, so thanks for sharing.

Your comment about it being a relief after starting life without a salary really rings true for me as well. 10 years ago I went to work in the start-up world, salary-less….and I was so surprised at how empowering it was and the relief. Not what you’d expect, but the lifestyle is very addicting.

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avatar Mike

As always Flexo, thanks for the transparency into your finances. I probably wouldn’t be holding that much cash (as stated above as well) however that has to be a great feeling especially as a safety net!

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avatar krantcents

Although our goals are different, I envy the freedom of your choice. I expect to watch and learn from you.

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avatar Matt

My finances for the year are actually coming along pretty well though I am taking a slower approach by ensuring I know where I stand first. Assuming the markets don’t tank or we don’t get another housing implosion I’m currently looking to increase my net worth between 25-40%. Looks like you’re on track to another good year!

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avatar eric ♦1,549 (Half-Dollar)

It’s going well. I’m still saving for the things I want and no emergencies have popped up thankfully.

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avatar Bobka ♦13 (Newbie)

Congratulations on your financial progress and new freedom. When I left my employer several years ago, I did some research on whether to leave my retirement funds in their 401(k) or to move the funds to an IRA.. Since my former employer was using a high fee firm as 401(k) custodian, I felt that I could get a better return over time on my investments by moving to an IRA at a low fee mutual fund company (Vanguard). That has worked well for me. Also, at the time, IRA early withdrawal penalty rules were less strict than those for 401(k) accounts. If still true, an IRA might give you added flexibility to deal with unanticipated financial emergencies.

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avatar 4hendricks ♦248 (Cent)

Congrats on how well you are doing. Always roll over to an IRA less fees and more control.
Good for you that you are automating your retirement savings. Pay yourself first.

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avatar tbork84 ♦1,867 (Half-Dollar)

Glad to see that everything is going well. I have to thank you because you inspired me to keep track of my net worth in excel. I think I actually used your example as a basis for mine. Very happy to see that you had a great January.

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avatar TakeitEZ ♦549 (Dime)

Great work on your finances! Seeing your increasing financial prosperity is very inspirational.

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avatar Diane

I also have my own business, and I would mention a few differences…
While cash is king, I don’t have that much, and think it’s a bit too conservative. I keep +/-2 years worth of expenses and that’s it. It’s been more than enough to keep me floated over vey slow times the past two years.
Receivables shouldn’t count as an asset. You will certainly need to pay taxes on that, which will reduce it significantly. It should also be part of a separate business account, where it counts as retained earnings not cash-in-hand. The retained assets of the business have some value, but you also have business expenses, taxes, etc that fall on the other side of the balance sheet.

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avatar Will @ HackingTheBank.com ♦258 (Nickel)

Your net worth updates continue to motivate me, haha. I finally just reached positive net worth territory this month and it feels absolutely AMAZING. Still have $30k in debt to pay, but I’m definitely getting there. Creating balance sheets every month is great motivation. I highly suggest it for anyone who isn’t already doing it.

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avatar Luke Landes ♦127,455 (Platinum)

Congratulations, Will!

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avatar Tony

Congrats Flexo. I was going toe to toe with you until June 2010. Then I decided to invest a large chunk of my portfolio (20%) on a penny stock company. So far the performance of the stock has been horrible and has brought my overall portfolio down 5% just in January. I learned my lesson.

I agree with some of the comments that you have an excesive amount of cash. 1-2 Years of expenses should be enough for you to feel safe. Have you considered individual corporate bonds as a safe bucket? My fixed income bucket did very well in 2010 (22%) and gives me an average 8% in interest. You have the safety of knowing that you’ll get your principal back if you hold to maturity (Bond Funds can’t promise this).

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avatar Khaleef @ KNS Financial

Congratulations, on your new freedom! I’m glad that you were so prepared for it and your balance sheets demonstrates that fact! Do you have a target for your cash, or are you just going to keep growing that account until you decide to buy a house?

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avatar Steve the Money Guy

Just found your blog. Great idea to do monthly reports on your finances – and to post them here for others to see! I almost agree with the comment about having too much cash on hand. Almost, because as risky as cash seems in this destroy-the-dollar environment, I don’t honestly know where I would feel safe investing. Keep up the good work.

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avatar Andrei C.

Unfortunately for us, your success story is no longer relevant for us (yes, the blog will contain quality articles in the future). I’m just talking about your particular path – similar to getting rich by creating a blog about getting rich, or becoming successful by writing a book about becoming successful.

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