Tuesday, January 26, 2010

Audit Agony - Part 2

We spent another 8 hours on Saturday preparing our records for the upcoming audit. We also met with our CPA yesterday, happily he was pleased with our preparation and we probably only have another 1/2 of prep time left. Overall, we've probably spent 30 hours responding to the first request for documents and preparing for our audit appointment and responding to the second request for documents.

Audit is scheduled in two weeks.

We have vowed to keep our records better organized going forward and I am working on organizing our 2009 records in preparation for filing 2009 tax return. We won't turn our attention to 2009 taxes until we get the audit behind us.

Wednesday, January 20, 2010

One Done, Five To Go

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000 [Completed!]

Total - $57,700

(1) - $600 (1%)
(2) - $500 (5%)
(3) - $100 (8%)
(4) - $100 (2%)
(5) - $200 (2%)
(6) - $3000 (100%)

Total - $4,500 (7%)

Three weeks into the new year and we've got one goal completed. Clearly, I am desperate for a new couch. We are 1% ahead on our savings goal. Whoo-hoo!

In order to reach our goal of saving $57,500 in 2010, we have got to save $1100 a week. $1100 a week seems like a lot of money, it is a lot of money, but half of that is $630/week in 401k money. 401k money is less painful because the bulk of it is pre-income tax (we do put some of our 401k monies into a Roth 401ks [after-tax]). 401k money is also less painful because we never see that money, we never take possession or control of it, rather it is deducted from our pay-check before we get paid so the temptation to spend it is reduced.

Our prepayment on our mortgage is set up for auto-payment so I can pretty much forget that one and know that it will be completed. The emergency fund auto-transfer is set up as $200 per paycheck for a total of $4800 for the year. The baby fund auto-transfer is set up as $100 per paycheck for a total of $2400 for the year. In order to meet these two goals we will need to increase the auto-transfer or throw extra* money at these two goals during the year.

We do not have an auto-transfer for the IRA, normally I fund our IRAs by throwing extra money at the IRA as early in the year as possible. We also normally use the bulk of our tax refund to fund our IRAs.

*Salary - 401k contributions - auto-transfer savings - recurring bills - allowance = "extra money."

Tuesday, January 19, 2010

Audit Agony

We spent many hours this weekend working on getting ready for our IRS audit.

Thursday, January 14, 2010

2010 Savings Goals

I have set up our auto payment for the extra $100 in principal prepayment for our mortgage. I have scheduled the auto payment for the second half of the month which is when we also do our auto savings for our home and real estate investment escrow accounts.

Wednesday, January 13, 2010

Final 2009 Numbers

(1) Max out 401ks - $33,000
(2) Max out 2009 IRAs - $10,000
(3) House project and furniture - $6,000
(4) Add to baby fund - $5,000
(5) Add to emergency fund - $10,000
Total - $64,000

(1) $32,689 (99%)
(2) $10,000 (100%)
(3) $2,323 (47%)
(4) $1,515 (30%) ($6,515 in our ING baby account)
(5) $3,141 (29%) ($25,022 in our ING e/r account)
Total - $50,168 (78%)

Final 2009 numbers, the good news: maxed out our IRAs, I maxed out my 401K, Mr. Sam just about maxed out his 401K, $25,000 in our emergency fund, $50,000 total saved.

Tuesday, January 12, 2010

How Much is Too Much - Emergency Fund

As Mr. Sam and I work on our 2010 spending plan and fine tune our 2010 savings goal, the issue of the emergency fund has come up (again).

We have $25,000 in our emergency fund which is kept in both our ING savings account and an ING CD ladder. We also have about $13,000 in other targeted savings and sinking funds (i.e. escrow accounts for each property we own, our baby fund, our house/furniture fund, our travel/vacation fund, our holiday fund, etc.) at ING for a total of about $38,000 in cash savings.

This weekend we were discussing our savings goal for 2010 and Mr. Sam originally objected to adding more to our emergency fund, as he sees it we have almost $40,000 in cash and we should be putting more money into the market. $40,000 in cash does seem like a lot, but first off we can't count the $13,000 since that money is (1) already allocated to certain expenses or (2) already allocated to certain goals. And $25,000 in emergency savings, in mind, is not nearly enough when you factor in the real estate investment we own and that we are responsible for the mortgage, taxes and insurance regardless of whether or not the properties are all rented up.

Now, it is true, that luckily we have never been in a position that all of our rentals were vacant at the same time, but the idea of an emergency fund is to be prepared for the unexpected. Once, I had explained all of this to Mr. Sam he agreed that we need to continue to add to the emergency fund.

Monday, January 11, 2010

Card vs. Card vs. Card

I have been following along with this New York Times series on the costs and rewards of using debit and credit.

The latest installment has been whether it is ethical to use credit cards with rewards programs when those rewards are subsidized by other consumers, generally less well off, who don't use credit or can't use credit (because they are not eligible). You can figure out how much your card cost by going to true cost of credit.

We don't use credit cards, but we do use our debit cards with signature (which is more expensive for the retailer) for just about all our day to day purchases.

Retailers, over the years, have figured out that people who use plastic spend more money and buy more stuff, so more and more retailers accept credit cards. It also costs a pretty penny for retailers to process cash, i.e. theft, counting, banking, etc. so the idea that cash costs less for retailers may not be true.

But I think the question that the NYT poses, should poorer consumers subsidize richer consumers rewards is a very interesting one. Problem could be solved if more retailers offered a cash discount to those who use cash.

Tuesday, January 5, 2010

Tentative 2010 Goals

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund (carry over from 2009) - $3500
(5) Add to emergency fund (carry over from 2009) - $7000
(6) House/Furniture fund (carry over from 2009) - $3000

Total $57,700

We are setting the bar a little lower this year, since we fell short last year and since I'm still working with a 7% pay cut in 2010. We have yet to finish our 2010 spending plan so our savings goals may be adjusted after we complete same.

Monday, January 4, 2010

Glass Half Full?

Good news to start of 2010.

The 10% pay cut that my company imposed on all employees back in July 2009, has been reduced, at least for me, to a 7% pay cut as of January 15th pay check. I can't really call this a pay raise since I'm just getting back 3% of my salary, but I'll take it and add it back into the salary column as we work on our 2010 spending plan.

Friday, January 1, 2010

New Year, New You, New Plan

Happy New Year!!

Since it is that time of year, let's talk New Year's resolutions. Do you make them? Do you keep them?

I'm more of a goal gal, goals are easier for me to track, and easier to restart if I fall off the wagon. So, we are working on our financial goals which I will post soon. I also want to keep better records and keep my records better organized - since our IRS audit is coming up soon, this one is top of the list. We also want to have a 2010 baby and so we'll continue to add to our baby fund and we'll also work on health/fitness and probably visit some doctors early this year.

Being debt free is a super awesome goal. We resolved to get debt free in late December 2006 and started working our plan on January 1, 2007, we were debt free as of January 15, 2008. And we've been debt free, except for our mortgage (and our investment property mortgages and small business expenses we like to put on our 0% Home Depot credit card), ever since. It is wonderful not to have credit card bills, car payments, student loan payments, etc. and not having to service debt frees up money for savings and investments.

What are your plans for 2010?