As featured in The Wall Street Journal, Money Magazine, and more!

Anne and Matt, August 2013 Net Worth

This article was written by in Naked With Cash. 2 comments.

In the series Naked With Cash, seven Consumerism Commentary readers share their financial progress on a monthly basis. They are joined by Certified Financial Planners who provide feedback on their journey. Read this introduction to learn more about the series.

Anne and Matt are twenty-seven years old, living in the Midwest, with two children. Read their bio here for background about their financial situation. Anne and Matt are on Team Neal, with Certified Financial Planner Neal Frankle. Review their July update for last month’s progress.

Their goals are to strike a balance between putting aside money for the future and enjoying the present and to save enough for retirement. Keep reading to see their net worth report, comments about the report and their progress, and thoughts from Neal Frankle. Following Neal’s thoughts, budgeting expert Jacob Wade from iHeartBudgets offers commentary.

Neal Frankle, CFP appears courtesy of Wealth Pilgrim and Wealth Resources Group.

Anne’s comments and analysis

August was a nice month. The rest of the money for our home improvements was spent. In all, we have spent about $17,000 on house repairs and improvements for the year. Sounds crazy, I know, but some projects were necessary to prevent small issues from becoming big problems, and others were for aesthetic, enjoyment and more for resale consideration.

I don’t think that we increased our house value by that amount, but I do expect it has gone up somewhat since we purchased. Our neighborhood has been selling really well. A quite comparable house down the street from me recently listed at $209,000 and sold in two weeks. I’m waiting to see what the actual sale price was.

Either way, we’re happy with our house and want to stay put.

We got the good news that Matt’s boss is finally getting around to starting that SIMPLE IRA. There’s a meeting about it later in September and he will enroll at that time. We have until the tax filing deadline to make contributions for 2013, but I would like to hit this thing hard and get it maxed out by the end of December or perhaps January. We can contribute $12,000 to it, but since it’s pre-tax dollars, it won’t be nearly that much out of his paychecks.

With that move, I don’t expect our cash to grow by much, if at all, during that time. That’s fine.

When I met with a CPA in August, he reviewed our financials and said we were doing all we could do from a tax perspective. That was reassuring, but also kind of a bummer to see just how much our tax liability has increased with Matt’s pay boost. We’re likely losing the child tax credit this year, for one thing. Oh well.

Feedback from Neal Frankle, CFP

Sounds like you made some href=””>wise decisions about the house repairs. Since you are planning on staying put it was good to do those repairs and improvements. In the past, I fixed up our house but waited until right before we moved. Dumb. I spent that money too late. Had I fixed the problems earlier, I could have enjoyed them myself! Anyway, I think you did the right thing.

I agree that throwing all you can at the SIMPLE IRA is smart. And I concur that it’s just not important if the other cash accounts grow that much during that time.

Glad you checked out your situation with a CPA. Taxes certainly are a huge bummer and there are fewer and fewer work-arounds. This is especially the case for employees. That is one reason why so many people want to open their own shop and be in business for themselves. Those situations open up more tax savings opportunities.

Feedback from Jacob Wade

Home improvements are definitely costly, but from a strictly equity standpoint, it sounds like you will get much more back than what you put in. And way to get Matt’s boss on board and rocking the SIMPLE IRA. I totally understand the frustration of the tax burden increasing, as I prepare tax returns on the side and have seen it quite a bit. Just remember, tax deductions are a bad investment! Your increased income is going to be much more than your increased tax burden. Definitely reason to celebrate!

Keep on rockin’ it, and set some big goals for the future, as yours is looking so bright, I might need shades!

Feedback from Luke Landes

When putting money into improving your home, there’s a lot of pressure to look at the expenditures as investments. There even seem to be several reality television series based on the assumption that renovations increase the potential sales price of your home. They may, but not always to the extent of the full expense. This chart from Zillow might offer you a basic idea of what to expect in terms of return on your investment.

But if you’re making these improvements because you wish to enjoy them yourself, and having the money to spend is not an issue, it takes the pressure off the need to recoup your investment. There are other factors at play, too; if you’re the only house on the block without some particular feature, you probably won’t getting the best deal when you sell. Because you do want to stay put in your house, presumably for the long term, fluctuations in “value” in the short-term don’t matter that much. You have a good idea for estimating the value by looking at comparable sales, but the time you can nail down the actual value of a real asset is when someone offers to buy it.

Investing $12,000 in the SIMPLE IRA by December or January is very aggressive. I like it. But consider the consequences to your cash flow by moving that quickly. That’s a reduction of $3,000 to $4,000 pre-tax each month for three or four months. If you’ve been netting that much surplus each month, then you’re in the clear, but if not, you might need to use savings to cover the reduced cash flow. If you can swing it, do it, because that will allow you to focus squarely on your 2014 SIMPLE IRA when January 1 rolls around.

I’m looking forward to reading your next update!

Published or updated September 23, 2013.

Email Email Print Print
About the author

Luke Landes 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 Luke Landes and follow him on Twitter. View all articles by .

{ 2 comments… read them below or add one }

avatar 1 Anonymous

After speaking with the SIMPLE IRA custodian person guy, he told me that we have until the last paycheck of December to make our own contributions. It’s the employer who has until the tax filing deadline to make the match. Great. There will be 6 paychecks to get this done.

We’re still thinking we can max it out in time, but now we’re taking extra measures to make sure it doesn’t hurt our cash flow.

I paused our Roth IRA contributions for now. We *do* have until our tax filing deadline to finish that out for the year, so if we need to finish that off in early 2014, that can buy us some time. We still have around $3k total to go for that. I’m funneling that money into a savings account, to be used either for the IRAs or to help cover our expenses if we need that.

The SIMPLE IRA contributions will immediately reduce Matt’s taxable income on each paystub, so instead of reducing it by a full $2k with each check, it will “only” be around a $1500 reduction I think. That helps.

And if it doesn’t look like it’ll work out, we can back off.

Reply to this comment

avatar 2 Luke Landes

Sounds like a good plan. It’s a shame you don’t get until the tax deadline for your own contributions.

Reply to this comment

Leave a Comment

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.