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. Read this introduction to learn more about the series.
SteveDH is retired, and he and his wife have two grown kids. By the time he retired in 2008, he had reached his retirement asset goal of $500,000. His goal now is to ensure his savings last as long as he does. Read his bio to learn more about SteveDH. SteveDH is on Team Roger, with Certified Financial Planner Roger Wohlner.
This is Insurance Month at Naked With Cash, so each participant has been encouraged to share details about their coverage, and the experts will provide their perspectives on the topic.
Keep reading to see his net worth report, updated for January 2013. Last month’s report showed progress throughout 2012. Following the analysis from SteveDH, Roger Wohlner will offer his own thoughts and guidance from his planning perspective. Jacob Wade, a budgeting expert who publishes from iHeartBudgets, will also provide commentary.
Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.
Analysis from SteveDH
January proved to be eventful even though the holiday let-down and cold weather tempered our day-to-day spending. Some of our reduced spending could also be attributed to eating up (or eating down?) our food supply as we prepare for February travel. Unfortunately a garage door broke and trying to find a replacement to match the other door proved costly. I wound up putting $553 (50%) down for new door, opener and associated installation. Oh, the joys of owning a home. Additionally $850 of cash migrated to the Pre-Paid Expenses account as we continued paying for a
cruise which will occur in late June.
Overall we spent 62% of our fixed income –- 53% of our total income in January. The cash flow for the month would have added $3,032 to our overall net worth with unrealized gains adding another
$2,526. Over half of that was offset on the balance sheet as the local Tax Assessor lowered the value of both our car and truck.
On the investment side, after a very thorough year-end assessment, I changed my allocations, shifting 10% from cash to equities. In our IRA accounts we now have 50% Bonds, 30% Equities and 20% cash. This falls within my risk tolerance and will hopefully improve returns. Much to my long-time CFP/broker’s chagrin I enlisted an outside opinion through another “house.”
Although I enjoyed the experience (their analysis products are quite different) the recommendations from the other company completely turned me off. Her allocation “tweaking” which mirrored my
50/30/20 allocation decision involved wholesale changes to the funds I’m invested in, generating unnecessary sales charges. It reminded me of the old saying: “I was born at night, lady, but not last night.”
We were asked to discuss insurance this month and we carry homeowners, automobile, and healthcare insurance. That’s it, except for an occasional expense (see below). We feel that, being retired, life insurance is unnecessary in that we are not intent on protecting earning capability, and all but one pension has some survivor’s benefits. My health insurance is through Medicare since I’m 65 but my wife won’t be 65 until — sorry not allowed. “Later.” So she is covered by my Military Retiree plan which is less than a quarter of the cost for my Medicare.
Looking forward: February
February will not be as mundane as we leave on a road trip early in the month with a planned return around the 25th. This travel time includes a fairly expensive 7 day cruise to warm (hopefully sunny) Caribbean destinations. Although the majority of the cruise was paid for in 2012, a charge of $6,260 will go against our Pre-Paid Expenses asset account which will be reflected in our net worth.
Motels, gas, dining-out and all the associated travel expense will add up fast and be charged against non-recurring expenses. Maybe I should call it Non-Budgeted or Retirement Activities
rather than non-recurring since it seems to occur pretty darn often.
The February cruise is insured through a third party for the full amount of the fare, unlike the cruise company’s insurance where the pay-back decreases depending on how close you are to the sailing date. This way even if I trip over my luggage on the dock and miss the cruise I get the insured amount back. Once I pay for the June cruise we’ll insure it the same way. At our ages, and having a 92 year-old mother living with us six months out of the year, paying in advance is risky, so insurance becomes a necessary evil.
Just for the record: We will be celebrating our 44th wedding anniversary while cruising. See you next month…
Feedback from Roger
From what you described, you carry the appropriate types of insurance coverage. I would concur that that in your situation there is no need for life insurance.
Your experience with the firm that provided a second opinion on your portfolio sadly sounds all too familiar. In the interest of full disclosure I am a fee-only advisor. I am not the least bit surprised that this second firm provided “advice” that would have included a fair amount of sales charges. That is one of the main problems with receiving financial advice from someone who earns a fair amount of their compensation from generating commissions from the sale of financial products. You can never be sure if the advice is truly in your best interest or theirs.
Other than that it sounds like you continue to do a great job of keeping spending in check while enjoying life, a perfect retirement lifestyle in my opinion.
Feedback from Jacob
Steve, I like your style! Straight up, you’ve got a great system in place, so I don’t know if I can even offer any advice. You’re using what I like to call savings buckets, that is, saving in advance for upcoming expenses. That’s a great idea to ensure that the money’s there when the expense arises. And your issue was just a minor inconvenience because you’ve got an emergency fund in place to cover nonsense like uncooperative garage doors!
I guess my only question would be what are your savings goals? It seems that you have a decent nest egg, pension income and social security. Do you want to continue to build your net worth more, or just maintain your current status? Do you want to travel more? Once you have your clear goals set, you can then look at your monthly expenses and see if there’s any spending that you want to re-direct toward those goals.
But like I said, keep doing your thing. And congratulations on 44 years of marriage. That is an amazing milestone!