In Naked With Cash, seven anonymous Consumerism Commentary readers publicly track and analyze their finances on a monthly basis. For almost a decade, I tracked my own finances on Consumerism Commentary; now I’m sharing the benefits of public accountability with the participants. 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 an annual salary of $120,000 plus bonus as an IT project manager in New Jersey. He 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, October 2013. Last month’s report analyzed Calvin’s progress during the month of September. Continue reading this article to see Calvin’s latest net worth report for the month of October, including his own analysis.
Calvin’s thoughts are followed by Sara’s feedback and advice.
Calvin’s analysis and comments
This month went pretty well for me financially. My expenses were normal and my income was slightly increased due to a combination of factors. One thing that kicked in was that I topped out on my Social Security tax payments. There was extra money in my paycheck since I am no longer paying that tax until the beginning of the new year. I also increased my state withholding allowances so that my state takes less money out of each of my paychecks. I did this because I am anticipating another large refund from the state this year ($5,000+). If I can access some of that money without waiting until the end of the year I would like to do that.
I think that I made a couple good decisions with the extra money. First, I diverted $200 a paycheck into a savings account that I will use for holiday gifts. My daughter’s birthday is December 21, so between her birthday and Christmas it is a pretty large expense for me. Last year I was able to stay on budget for gifts for her and I plan to do the same this year. It gives me some peace of mind though to know that the money will be there. I also like the idea that I am not going to allow myself to mentally “adjust” to extra income in my check and then be disappointed in January when it disappears again.
The other thing that I did with some of the extra income that was freed up was that I restarted my 401(k) contributions with a 3% deduction. My hope is that when I get my annual increase in April I will be able to up my contribution to 6% and get the full match from my employer. My insurance company finally began to process some of my outstanding claims and I am basically caught up with my medical outlays for now. Hopefully they will stay caught up and the net expense for me each month now should be $0 through at least the end of the year.
The last two months I meant to write about budgeting because the topic was raised by several people. Earlier this year I began using You Need a Budget (YNAB) to track my expenses and income. I started out with enthusiasm and took a few of the basic training classes, but ultimately I never got off the ground with the system. However, I still monitor my spending by watching my checking account balance and not the category balances. Basically, I am using YNAB as an alternate version of Quicken to download my bank statements and balance my bank accounts. My intention is to revisit the training materials available and rededicate myself to getting up to speed with really sticking to a budget.
I have written before that I have a monthly shortfall of several hundred dollars, and that I continually use lump sums to make up each month throughout the year. The situation as it stands right now is that my monthly take home is about $7,050 a month. Off of the top of that I subtract my alimony, child support and residual marriage debt, which all together total $3,965 a month. So I live off of just over $3,000 a month which pays for my rent, my car, my groceries, my child-related expenses, medical expenses, utilities, and other expenses. The good news in all of that is I have learned the hard way how to live way below my means. I also haven’t had to borrow any money in more than three years, which means that slowly (but surely) I have been digging out of the hole.
I have also had the misfortune the past two years of maxing out my out-of-pocket medical expenses, which were $5,000 in 2012 and $7,500 in 2013. I am hoping that next year will not be another year of constant medical expenses because my insurance policy at work has raised the out of pocket maximum to $14,000 per family. This past year has seen amazing progress in trimming my expenses further and further each month to try and get my budget to balance. In March of 2014 I should receive my annual bonus for this year and am planning on applying a vary large percentage of it towards outstanding debt. By doing that I think I can free up more than $500 a month of cash flow which should allow me to begin to see black at the end of each month.
Feedback from Sara Stanich, CFP
Great month, Calvin!
A few of your comments really stood out for me. Transferring money from each paycheck to savings and to your 401(k) is a huge step. This means that you are getting in the habit of saving — a pretty important habit to have!
I tried out YNAB after a client raved about it, and I think it is a good fit for you. I found that it is more forward looking that other budget software alternatives. Instead of just tracking what happened in the past, it can help make sure you are on track for next month. It takes time to familiarize yourself with the tool and get in the habit of using it.
Cash flow is really important for you, so I recommend scheduling time in your calendar to work with it, especially for the next few months. You need to get in there at least once a month to make sure your transactions are being coded properly and see where you stand. A shorter amount of time once a week is even better.
I totally agree that you have made amazing progress this year. You made the lifestyle changes that needed to happen to reset your spending and get back on track financially. A lot of people avoid those hard choices. Congrats on that and keep up the good work.
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 Luke Landes
Congratulations on all the progress you’ve made this year, particularly despite the medical setbacks. Between investment returns and new investments, you’ve added almost $18,000 to your retirement funds since the beginning of the year, so far, and that has to feel good.
The fact that yo’re paying almost $4,000 a month to support a past relationship should be a signal to readers. Relationships that end can be expensive — although the financial pain surely outweighs the emotional pain of remaining in a relationship that’s not working. It’s impossible to know for sure how a relationship might end at the moment it begins, so this is just a life experience that one has to deal with. Now, your salary may be high enough to deal with $48,000 a year you will just never see, at least for a period of time, but that kind of legacy debt could be devastating to others.
It’s going to be great to see you finish the year with a growing net worth in positive territory.
Updated June 22, 2016 and originally published November 26, 2013.