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.
Jake and Allie are 47 and 42, respectively. They have no children, but they do have pets. The two make a combined $140,000 a year and hope to retire early when they are 55 and 50. They love to travel, and plan to move to the mountains upon retirement. Allie is interested in starting a photography business and Jake wants to start his own business as well. (Read their update from last month.)
Jake and Allie’s Net Worth Statement
Jake and Allie’s Income Statement
Comments and analysis from Jake and Allie
It’s hard to believe that January is over already. We are finding it very interesting to keep track of every dollar we spend to accurately spreadsheet our spending. Something I think everyone reading this can take away: small expenditures add up.
For this month, we specifically chose to track our vending machine expenses at work. We don’t use the machines a lot, and we still spent $43. That’s a trip to the grocery store or three meals at our favorite Mexican restaurant. Over a year, that’s $559. That’s something to think about when you’re trying to reach a goal of retiring early — or just trying to save a little money.
General expenses: Some of our expenses are a little higher than usual for January. We took a little weekend trip after New Year’s since we didn’t travel at Christmas (other than a one-day trip for riverboat gambling). That trip involved some dining, activities, shopping (accounts for higher clothing expense), and a few hours at the casino. No, there isn’t a pattern there. We don’t gamble a lot; we usually just gamble on vacation, depending on where we vacation.
Airfare expense: The airfare expense is for a flight to board our cruise. We paid for the cruise last year. Happy 19th-20th anniversary to us! (Our cruise falls between the two.) Allie spent some time watching the flights to get the best deal. There are not a lot of deals when flying over a holiday weekend, but waiting until within 30 days lowered our cost about $150. A holiday weekend also made it useless to try to use our airline miles.
Fuel expenses: These are a little higher with the weekend trip and a business trip that Allie took and tied to a side visit to her parents. Instead of taking the company car, she chose to use her own vehicle, pay for the fuel, and collect the mileage for private car use for the business portion of the trip. That will show as an income entry next in February.
Taxes: Housing property tax falls in January, so that’s an additional expense for January.
Pet fees: $180 of this was for lodging the pets during our weekend trip.
An added expense that Allie didn’t have before was for three prescriptions, none of which are generics, so they cost a little more. All are allergy-related, and she enjoys pointing out that moving from the South would alleviate both the allergies and the prescription costs.
In January, we spent 53% of our take home pay. This is higher than we want to make a habit of, but it does include the yearly housing property taxes and airfare. If you subtract those from the total, that brings our percentage down to 35% of our take home pay. Again, it’s interesting (and enlightening) to track these numbers.
Allie spent almost every day working this month (unfortunately for no extra income, since she’s salaried), so she has not made any progress starting her photography business.
Answer to question from last month: Allie was originally planning to pay off the SUV auto loan after a few months. The interest rate was dropped to almost nothing in exchange for extending the electronics warranty, so we decided to purchase the warranty. Given a recent electronics incident with the car Allie had before, we felt this to be a good idea. With the almost non-existent interest rate, Allie decided to keep the auto loan since it’s not really costing her anything. It also helps her credit score since its solely in her name.
February brings the cruise that we are excited about. It’s paid for, so our only expenses there will be for transportation, parking, tips, and anything extra (food upgrades, drinks, gambling, excursion at destination). There may also be a few clothing purchases for the trip. Beyond that, we expect the latter part of February to begin a more normal view of our spending.
We were asked to speak about tax preparation. We decided a while ago that we would rather get money back (and, yes, I know I’m giving the government an interest free loan), so we have extra money taken out of our check for both state and federal taxes. This hopefully covers any profits there maybe from stock sales. We won’t have all of our tax documents until the middle of February, and we normally don’t file taxes until some time in March.
Hangout with Neal Frankle, CFP
Neal Frankle helps Jake and Allie tackle their tax planning, and they talk about more effective financial planning in a short period of time. They also look into some of the revelations Jake and Allie have had after spending a little more time conscientiously tracking their spending.
Feedback from Luke Landes
Demanding day jobs, like Allie’s this month, can certainly get in the way of making progress towards entrepreneurial dreams. I can understand how progress towards personal projects can be slow. The day job, providing your steady income, is the urgent need, even if following your desire to start the photography business (and the animal boarding business) is more important from a life fulfillment perspective.
By the time this article will be posted, you’ll have most likely returned from your cruise. I hope it was enjoyable! You’re certainly in a financial place where you can enjoy travel and non-habitual gambling.
You’re not concerned about giving the government a tax-free loan through the process of paying so much income tax through withholding throughout the year that you get a check when you file your taxes. And that’s fine. If your spending was cutting close to your income, I’d be more concerned about keeping more of your money in your pocket and optimizing your withholding. Your cash flow doesn’t need the fine tuning. The choice regarding the auto loan seems to be the right decision for you, too.
Updated June 22, 2016 and originally published February 25, 2014.