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Naked With Cash: Brian, May 2014

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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).

For more information, read this introduction.

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 young children, and recently dropped to a single income when Brian’s wife started staying home. They have student loans and a mortgage, and usually pay their credit card balances off each month, so their debt level is modest. Brian and his family want to help their children pay for college, as well as build up a healthy retirement nest egg. (Read Brian’s update from last month.) This month’s theme is changes in income, a subject that Brian and his family are well-acquainted with.

After reading Brian’s comments, you can see video commentary from Jeff Rose, CFP. Jeff Rose appears courtesy of Good Financial Cents and Life Insurance By Jeff.

Brian’s Net Worth Statement

Brian’s Income Statement

Comments and analysis from Brian

This month is about retirement. Our primary retirement savings is through our 401(k). I always make sure to at least put in enough to get the max company match.

Since my wife left her job to stay at home, I really have not factored in the changes I need to make to our retirement goals. Also, I have not figured out how much I need, which is something I really need to do. My initial assumptions are I am not putting in enough (better think about that).

Our retirement goals are mainly to keep our current level of living for 30 years. Some of the challenges in getting started with this would be to know what expenses you will have 20 or more years from now. What would prices of common commodities be in the future? And with the economy going up and down, can you even count on getting around 7% gain year over year like I see a lot of people assume? So my goal really is to save as much as I can and grow what I have to the best of my ability. Right now I am subscribed to Sound Mind Investing, which does a lot of the investment research for me and I have seen pretty good gains in my 401(k), much better than the market average.

Feedback from Jeff Rose, CFP

Jeff Rose takes a look at Brian’s retirement situation, and considers ways that Brian can do even better for himself, although he’s off to a good start by maxing out the 401(k) match through his company.

Feedback from Luke Landes

I noticed your grocery spending was up again this month. Keep an eye on this. You mentioned this category as an opportunity for savings and expressed a plan was in the works, but I haven’t heard anything since. I can confidently ignore the loss on the bottom line of your income statement because you are including “debt payments” as an expense. That is an important category for cash flow, because it shows how much cash you have available for spending, but it’s really just a transfer between accounts. You have a net profit — your income is greater than your expenses.

It’s fantastic that you’re taking full advantage of your company’s 401(k) matching. Keep that up.

You can’t accurately predict the expenses you’ll have in twenty years, but that’s fine. You don’t need to. You can make your choices today based on your best understanding of the future.

Published or updated June 25, 2014.

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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 .

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avatar 1 Anonymous

Your retirement plan should be a “living” document, updated regularly. Incremental changes in your expense estimating should provide better and better data as time marches on. If maintained, the plan will accurately predict day-to-day expenses and compensate for changes in earnings (both earned income and investment income) over time. Although I don’t disagree with Jeff about saving a lot early you should also consider where you’ll be as time marches on. Prior to retirement you should be : a. at or near your peak earnings. b. saving like crazy because you realize it’s just around the corner. c. empty nester’s – little ones have moved on so many expenses have dropped and d. Spending less on accumulating “stuff”.
In other words, don’t get discouraged now because someone says you’ll need $$$$ to retire and that seems impossible. The passage of time will prove they’re often far too pessimistic.

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