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.
Calvin is in his early 40s, earning a salary of $120,000 plus bonus as an IT project manager in New Jersey. He has recently finalized a divorce and has a teenage child. Read his bio here. Calvin is on Team Sara, with Certified Financial Planner Sara Stanich.
The net worth report below and following commentary refer to the last full month, April 2013. Last month’s report analyzed Calvin’s progress during the month of March. Continue reading this article to see the net worth report and Calvin’s own analysis, which are followed by Sara’s feedback and advice as well as thoughts from budgeting expert Jacob Wade from iHeartBudgets.
Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.
Analysis from Calvin
April was a good month for me. I received my state tax rebate, which was just over $5,000. I added that to my savings account as my emergency fund or monthly shortage make-up fund.
My net worth also had a pretty big swing because my 401(k) and Restricted Stock Units had a great month in the stock market. I also made a lot more progress in my quest to lower my expenses and get my budget to balance. The effects of the steps that I have been taking to lower my expenses were felt this month as well. Maybe it was just psychological but I definitely felt like I had more breathing room in April.
I was able to find an apartment for myself which will end up saving me almost $400 a month compared to my current apartment. This exceeded my goal of saving $300 a month in rent. My old apartment rent was $1,570 a month. My new rent is $1,295 a month, but includes gas and electric which was adding another $100 a month. So I am saving well over $300 a month. I move in on May 15 which worked out almost perfectly because I have to be out of my current apartment on May 26.
I also have hired moving assistants through U-Haul. When I rented a truck it gave me the option of hiring helpers for $20 per helper per hour. After talking with the company it made sense to hire two helpers for four hours. Neither my brothers, in their fifties and sixties, nor myself, with my recent back surgery, will need to move the heavy furniture. My plan is to have all my boxes and stuff packed up and in my current garage so loading them will be really fast with all of the help. Then, the helpers will load the heavy furniture like couches, dressers, tables etc. All together I think my move will cost less then $500 including renting the truck, hiring the helpers, feeding the crew, and tipping the helpers.
This month I also had to go back to divorce mediation over some outstanding issues. I used the opportunity to negotiate a reduction in my monthly obligations, saving me just over $125 a month, My pay raise kicked in this month, adding about $75 a pay check or $150 a month to my take home pay.
Starting in June I believe that I have a budget that balances if I factor in my two three-check months and distribute that money across the entire year. My goal is to keep looking for ways to reduce my expenses to the point where I can balance my budget using two checks a month and use the extra checks to pay my annual expenses like insurance etc. as someone suggested after my last post.
I am also thinking about cashing in some of my Restricted Stock Units this year and using the proceeds to pay off a credit card which has a balance of about $8,000. This would eliminate a monthly payment of almost $375, really heling my monthly cash flow. If I did that my intention would be to start contributing to my 401(k) again, just enough to get the employer match of 4% if I contribute 6%.
I may hold off on doing that until I get my next bonus next March just because I view the Restricted Stocks as an additional part of my emergency fund in case I need to incur legal charges or some other unforeseen expense. I would love to hear from Sara what she thinks of using the stock units to pay down my debt.
Feedback from Sara Stanich, CFP
Calvin, it sounds like the changes you have been making are really paying off. Your budget is balanced -– a big improvement in just a few months! This is really a turning point for you and will give you the breathing room to do things like pay off your debts, save for the future and actually relax a bit when it comes to your money. Whew!
You asked if I think you should cash in some restricted stock units to pay down credit card debt. This is something you should strongly consider. A move such as this should will improve your monthly cash flow significantly and reduce the risk associated with investing in a single stock which is also your employer.
Be sure to consult with the appropriate professional and ask lots of questions regarding any tax implications of that restricted stock transaction, and withhold tax accordingly. I don’t know all the details of your situation but don’t want you to have any surprises come tax time next year.
This communication is intended only for the person or entity to which it is addressed. Any taking of any action in reliance upon, this information by persons or entities other than the intended recipient is not recommended. Any information provided is for informational purposes only and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. Raymond James and Sara Stanich, CFP, are not affiliated with and do not endorse, authorize or sponsor any third party websites, their respective sponsors, or user comments found on this or other sites.
Feedback from Jacob Wade
Calvin, very well done this past month. It’s amazing to see your progress in just the past few months. Having a balanced budget has got to be a major relief, and I’m pretty excited to see where you go from here. Now, as things start to fall in place, I would start thinking of the infrequent expenses that may crop up to try to attack your budget. Things like Christmas, car maintenance, birthdays, and other occasions should be saved up ahead of time in savings buckets so when the time comes, the cash is in place, and it doesn’t make a dent in your monthly budget. Definitely first focus on getting the budget to balance, but I think it’s good to start thinking ahead about these things.
I’ll leave it to the CFP to advise on the stock transaction, but if I were you, I’d do it. It would really free up your cash flow and allow you to start tackling your debt. I would advise looking at tackling the IRS debt first, because most likely there are penalties and interest piling up at a faster rate than any of the others. Then, if you don’t have a priority order to the rest of them, you can tackle them , smallest to largest, using the debt snowball method.
Again, very well done so far, and I look forward to next month’s update.
Updated June 22, 2016 and originally published May 30, 2013.
{ 5 comments… read them below or add one }
Wow, good work, Calvin! 74% increase from last month? I’d say you had a good April!
This is amazing! You are rocking it! To me, it does make sense to get rid of the credit cards asap. The monthly cash flow, plus all that interest…yeah. Get rid of it.
Also, makes total sense to hire some help in moving. You’re already going to be $400/month ahead of where you were, and frankly moving sucks. Whatever you can do to make it physically smoother, cool.
Owning 20k in company stock would make me way nervous. Put another way, if your company were to offer you either $20k cash or $20k in stock, would you pick the stock? Sure it can grow…but it can also tank incredibly fast, and you really have more pressing places for that money to work for you.
I see you are hesitant about cashing in your RSUs. These could very well could be worth nothing when it comes the time that you would prefer to cash them in. Also, you have more of a cash EF now than you’ve had the previous couple of months should anything happen. I think you should cash in all of the RSUs – pay down your credit card debt, and maybe even some of those other bills (medical or IRS). Either pay down the largest interest bills (to save cash in the long run) OR pay down the smallest bills first so that you stay mentally motivated. Best wishes to you – you’re doing great!
Another option is to pay off as many as you can completely pay off. After the $8000 for the one card you should still have $8000-$12000 depending on tax liability. This could pay off IRS & medical or maybe pay the car loan. To me paying off the car loan felt better than paying off other debt.