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.
Brian and his wife have two children. They are a one-income family since Brian’s wife stays home. They pay off their credit cards each month, so their only debts are student loans and a mortgage. This month, the focus is on emergency preparedness. (Read Brian’s update from last month.)
Brian’s Net Worth Statement
Brian’s Income Statement
Comments and analysis from Brian
This month is about health insurance. My company’s plan is pretty good, although the employee portion of the payment went up big time last year. We used to be on my wife’s plan, which was cheap and really good. She was a teacher and although most will say my company has a great plan, it is not as good as we used to have. I am always really glad to have insurance for when both of our kids were born. I could not believe how much it fully cost to bring a life into this world. We also have a HSA through my employer, we put a few hundred dollars in there each year, mainly to cover costs we occur every year for items like glasses, lenses, and co-pays.
I would say August ended up being the most stress-free month financially of the year so far. It was perfect storm for our family with the extra paycheck month, raise, and the inheritance. I am proud to say this month we are debt-free except for the house. The inheritance we received was a blessing beyond measure. We spent a few weeks planning and anallyzing how to best use the money. The first priority was giving back. I was so happy to give money to some big causes within our church. Our second priority was to pay off the school loan, and the furnace loan. After those two loans were paid off, we put the money in a savings account and are working a wish list of projects and goals for the money.
In other places in our balance sheet, the home value on Zillow has taken a turn upward. We are starting to think about moving in the next three to five years, as we are starting to outgrow our house and we are thinking of having a third child. The more equity we can get in our house, the more it will make the cost of moving more favorable.
Our home and auto maintenance costs were high due to some much needed repairs around our home. The extra paycheck mainly went to fund these projects. Also, expenses on kids and gifts were high due to needing clothes for the fall and a birthday. We have been fortunate to have received a lot of clothes from friends and family, but as our kids get older it looks like clothes spending will continue to rise.
The budget we have been using this year is now really out of sync with our current financials. I want to take time this month and rework it and strengthen the amount we are saving.
Feedback from Jeff Rose, CFP
Jeff talks giving, debt, and windfalls with Brian. He also offers thoughts on how to best manage a Health Savings Account.
Feedback from Luke Landes
First of all, congratulations on paying off $18,000 of debt! I can imagine that it feels great to be able to eliminate such a heavy debt load in such a short period of time.
Now, I appreciate Brian’s being up-front about the idea that he had more than a little assistance in making that happen. This is not the typical motivational “get out of debt” story. Let’s face it — an inheritance is something beyond one’s control, and that concept is antithetical to the idea that one is fully in control of their own financial situation at any particular time (so why don’t all you poor people just work harder!). Yet, the fact that Brian made good decisions about the use of the inheritance can be a great example for readers.
Most people will not receive an inheritance during their lives. This is an opportunity that is rare. I’m also glad to read that Brian also plans to use some of the inheritance to fulfill some items on his wish list. Now that his debt is paid off — the only line item is a credit card account that is paid in full every month — it’s certainly worth enjoying a portion of a windfall rather than putting every cent to best use (paying off debt and investing for the long-term).
Brian’s August is an interesting example of a topic I mentioned earlier in Jake’s latest report. Here, Brian’s Zillow house value estimate increased by about $3,000. During that same time, Brian also put $1,250 into home repairs according to his income and expense report. If you have an investment account, all of your fees are deducted from your account’s value. Every time you trade, your account value shrinks, unless you have free trades. Home maintenance (and so many other house-related expenses) are like fees, if you compare a home and its value to any other asset on your balance sheet.
But unlike other asset types, we don’t subtract all the expenses you pay for a house from the house’s asset value. Should we? Probably not. Until a house is sold, the “value” is an undefined number. That’s unlike investments, which if you’re dealing with the stock market, are valued every minute of every day. And a buyer who negotiates for your house will not care about how much money you put in. But without some kind of acknowledgment of household expenses, those expenses that one wouldn’t pay if one were renting, for example, it’s difficult to see exactly how much it costs to own a home over the time period you live there.
Public school teachers often have above-average health insurance plans, thanks for the most part to teachers’ unions that fight for good benefits. I wouldn’t say marry a teacher for the health insurance, but I have a feeling some people might have already taken that approach to decision-making.
Thanks for sharing your latest reports and analysis for Naked With Cash!
Updated October 8, 2014 and originally published September 29, 2014.