10 Year Reviw - Part I (The Beginning)

Mr. Sam and I will be celebrating 10 years of marriage this fall.  As a result, I'm starting to think about what we've accomplished, together, in those 10 years.

We started our financial journey together, before we got married, but January 2007 was the beginning of our effort to pay down our unsecured debt and implement a debt free life.  The journey was mostly inspired by the fact that I wanted and needed a new car, but did not want a car payment.  It was the summer of 2006 and my car, then a 1999, had hit expensive repair time.  I had made some repairs to it and it was calling for more repairs and I was fed up.  So, I was doing some internet research and I came across a Dave Ramsey article about car payments.  I read some more on Dave's web site and I later checked out one of his books from my local library and read The Total Money Makeover.  I read some other books as well like The Millionaire Next Door and others.

We were in the middle of getting ready for our wedding, so I did not have time to implement the plan.  Instead, over the December holidays of 2006 (after the wedding and honeymoon), I reread TMM and we started working the plan.  We began with Dave's baby steps which we also modified a bit as we moved forward (side note, my husband is a lapsed Catholic and I'm not religious, while Dave's books and message can be a bit preachy we just ignored those parts).

We began 2007 with a financial reckoning.   First, we combined our assets and our combined net worth was $807,539.  We were holding real estate valued at $1.27 million dollars (that changed dramatically the next year).  Our retirement savings was at $216,184.  We had the $1000 emergency fund already covered (TMM baby step one).

Second, we had a lot of debt.  We had $679,520 in mortgage debt, our primary home, three rental properties and a piece of land.  And, we had $50,946 in unsecured debt, $27,000 for Mr. Sam's student loans (MBA) and the rest credit card debt.  So, we began 2007 with TMM baby step two, pay off all debts but the mortgage.  We had added up all our debt, we had a chart showing interest rates, minimum payments and totals.  I took over paying all the bills (prior to marriage I paid our joint bills and my bills, but Mr. Sam handled his own bills).  So, we began working the debt snowball.

More on debt later, I also want to look at where we are, 10 years later, with careers, education, family life, savings, real estate, car habits, etc.

A Windfall is Coming

As you can tell from the title of this post, clearly I'm a Game of Thrones fan.

So, I received news that I'm getting a bonus this year.  This bonus was unexpected for a couple of reasons.  First, I was on maternity leave for more than three months.  Second, I did not believe I was eligible for this type of bonus.

So money is coming our way and it is a decent size chunk of cash.  Of course, after Uncle Sam takes his bite and after the deduction for my 401k, the number shrinks.  But, I won't complain one bit.

My tentative plan for the money is as follows (final plan depends a bit on the amount).  First, 50% will go to our baby debt (which presently is $5421 at 0%).  Second, 25% will go towards our upcoming summer vacation (so, into our travel savings fund).  Third, 15% will go towards our 2015 IRA savings account.  And, finally, 10% is for me to do what I want with (spa, clothes, dinner out, or some other kind of treat).

How do you spend bonus money?

2014 - Final Savings Numbers

(1) Max out 401k(s) -        $22,588    65%  (goal is $35,000)
(2) Max out IRA(s) -         $11,000    100% (goal is $11,000)
(3) Add to e/r fund -          $10,400    104% (goal is $10,000)
(4) Roof project -              $5,000       100%  (goal is $5,000)
(5) Vehicle replacement -  $5,000      100%  (goal is $5,000)
(6) House projects -          $3,000       100% (goal is $3,000)

Total:  $56,988  83%  (Goal is $69,000)

So, we saved almost $57,000 in 2014.  While a respectable number, we missed our goal by $12,000.  Mr. Sam was not eligible for his 401k until midway through the year and that is one of the main reasons that our 401k savings number was reduced in 2014.

We did have some major expenses in 2014 that are not reflected (entirely) in our savings goals.  First, a new car for Mr. Sam which was paid in part with cash.  Second,  a new roof for one of our properties.  The roof was a savings goal, but also cost more than what we saved and we could no longer put the project off.

We also incurred some debt in 2014.  Mr. Sam's new car was paid in part with cash (about 40%) and the rest is loan.  Second, we added to our family in 2014 (which is why I've been away from the blog for so long).  We had considerable expenses related to the conception (via IVF) and related to the nursery and birth (most covered by insurance, but a big chunk that was not).   We also had a major house project prior to the baby arriving.  We are working on paying down the baby debt and it will be part of our 2015 savings/debt killing plan which I am working on creating.

Mr. Sam's 401K

After more than a year, Mr. Sam is finally eligible for his 401k.  And it even comes with a match.  Hooray!

To start, since we are having a year of financial set backs and struggles we have set the contribution amount at a reasonable number.  We will, hopefully increase it as we work it into our budget.

401K Held Hostage

Interesting article from the NY Times about 401k accounts caught up in a company bankruptcy for more than 5 years forcing the employees to face tax penalties when they couldn't withdraw, and to continue working into retirement because they could not access their retirement funds.

Mr. Iyer, who has glaucoma and diabetes, retired last fall. He said he continued working far longer than planned because he could not withdraw any of his retirement savings — 41 years’ worth that he had earned at a variety of companies but had rolled over into his Penn Specialty account. He was also upset by the $49,728 in administrative and legal fees extracted from his account while it was in limbo.   Mr. Iyer said. “It is interesting to note that the fees I ended up paying exceed what Penn Specialty Chemicals contributed on my account. I have learned never to trust a 401(k).”

Scary stuff.  Like most people, my professional career has not been with one company.  Rather, I've been with three companies and during that journey, started 401k accounts with each employer.  My last company, let's call it Company B, had some financial strife and is actually no longer in existence.  Shortly after I left Company B, really shortly, I rolled over my Company B 401k to Company C (my current company).  I departed Company B with a group and some of the folks did, later, have some challenges in rolling over their 401k to Company C.  The reason, like Penn Specialty, Company B ended up in bankruptcy and that delayed the ability of some of my co-workers to roll over those monies.

Now, my first 401k remains with Company A.  The reason I leave it there is because I have access to some very highly rated, and low fee, institutional funds.  However, I have thought about rolling it over to Company C.  Now, after reading this article, it almost seems safer to have more than one 401k account.

NetWorth - Retirement Investment Progress

So, at almost the end of 2013 we have just over $800,000 in total retirement investment accounts which is mostly due to the performance of the market.  $200,000 more and our investments will be evenly divided between real estate and retirement accounts.

Holiday Cheer - 401K Match

For the first time in my corporate career, this year I received a 401K match.  My employer contributed "profit sharing" in the amount of $5,500.  

That was a surprise and certainly welcome holiday cheer at the end of somewhat tough financial year for us (with Mr. Sam's layoff).  

2013 Goals - Progress Has Exceeded 2012

(1) Max out 401k(s) -        $28,327 (80%)  (goal is $35,000)
(2) Max out IRA(s) -         $11,000 (100%)  (goal is $11,000) completed
(3) Add to e/r fund -          $10,400 (104%)   (goal is $10,000) completed
(4) Pay down mortgage -   $5,000 (100%)    (goal is $5,000) completed
(5) Trading account fund - $5,000  (100%)    (goal is $5,000) completed
(6) House projects -          $3,100 (103%)     (goal is $3,000) completed

Total:  $62,827 (91%)

Because I have contributions to our emergency and house fund on automatic transfer, those contributions continued even though we completed those goals.  As a result, our total has nudged past our 2012 total of $62,446.  Of course, we are going to fall short on our 2013 goals due, in large part, to Mr. Sam's layoff.  But, I am happy that we have at least completed 5 out of 6 goals and that we have saved more this year than last year.

Hopefully in 2014, we will save more than in 2013.  And sticking with that theme, I've already put away $800 into our 2014 IRA savings account.

Another Budget Proposal

In my humble opinion, if you have a budget, a spending plan or some other written system for managing your personal finances you are way ahead of most people.  Having a plan and working that plan, whether it is an envelope system, an Excel spreadsheet, an allowance system, etc. will help you kill debt, save more and have better control over your money.

We work off a spending plan/allowance system, but even though we have a plan that works for us I still am interested in reading proposed plans by the experts.

Mitchell Weiss via NBCnews.com suggests the 25% plan (25% for taxes, 25% for housing, 25% for debt and 25% for living expenses).  I think his advice of planning your budget before locking in expenses is a good one.  If you are going to limit housing expenses to 25% of your before tax income, then you need to know that number before you buy a house or rent an apartment.  And limiting big expenses is a great way to free up income to kill debt or save money.

But, the rest of the advice fell flat for me.  First, I was surprised that he would include payroll taxes in the budget plan.  It is true you need to pay attention to taxes, but I think most budget plans and advice just utilize after tax income which to me seems easier.  I guess if you are an independent contractor or you run your own business this advice makes more sense since you will be responsible for taxes.

25% of pretax income for housing seems reasonable, most guidance provides for limiting housing expenses to no more than a third of after tax income.

I thought the debt advice was lame.  Sure, limit your debt obligations to 25% of your gross monthly income, but that ignores a whole variety of issues.  Maybe your budget should be set up to put more towards debt if you are trying to kill debt, etc.  And since this advice seems geared towards recent graduates it ignores the topic of student loans all together.

Finally, the last 25% of the formula is for living expenses.  But, living expenses is supposed to also include savings for an emergency fund.  Nothing in the post mentions retirement savings, so I would assume that long term savings is also supposed to come out of the last 25%.  I prefer a budget plan that prioritizes savings rather than lumping it together with living expenses.

What Would You Tell Your Younger Self?

Over at Get Rich Slowly April Dykman posed the question of what would you tell your younger self regarding personal finance.  Below is my post.

This is fun! 

To College Sam – walk away from the credit card offer, you don’t need that free t-shirt.
To post college Sam – good job on taking that personal finance course through the local extension system. You learned a lot and it will help you in the future. Good job on paying off that college credit card, now you really ought to cut it up. Also, congrats on opening your first IRA even though you are earning poverty wages in social services. And tell your parents thanks for paying your way through college, you probably didn’t even appreciate the fact that they saved each month your entire life to give you a great education. 

To post professional school Sam – good job on paying off that student loan debt and good job on keeping your student loan debt lowish during school. You rushed into your first house purchase, but it will turn out great. Now that you are making a good living you are making a lot of good choices, paying off the student loan debt, creating your first budget (2001), investing in your work 401k and paying off all credit cards in full each month. I sure wish I could tell you that even when you are paying off your credit cards in full each month you are still spending too much money. You should have listened to me when I told you to cut up those cards post college. 

A few years later Sam, just because everyone is investing in Florida real estate doesn’t make it a good investment, maybe you should do some more research before you buy that investment property in 2005, 8 years later it will be worth half of what you and soon to be Mr. Sam paid for it. Good thing its rented. 

To engaged Sam, good job on picking a spouse that is hard working, frugal and recognizes that even though he has the MBA he is terrible at budgeting and bill paying so he turns it over to you upon marriage. 

To married Sam, whoo-hoo, good job to you and Mr. Sam in paying off $55,000+ in just over a year during your first year of marriage. That first year of marriage in which you created your first annual spending plan (an update on the 2001 individual budget), finally cutting up the credit cards, creating an allowance system, prioritizing savings and making sure that you and Mr. Sam are on the same page when it comes to money, that will pay off big time. Seven years later and you guys have increased your net worth by $550,000. 

Now, stop eating out so much.  :)

Looking back at my own journey, I certainly have made some mistakes along the way.  It is hard not to, and many of those mistakes or detours have helped to make me a better person.

I think the most important ingredients to my financial success are as follows.  First, I invested in a good education which lead to a well paying, good, professional job.  I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money.  Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.

How about you, what personal finance guidance would you give your younger self?

2013 Savings Goal - Another One Down

(1) Max out 401k(s) -        $27,677 (79%)  (goal is $35,000)
(2) Max out IRA(s) -         $11,000 (100%)  (goal is $11,000) completed
(3) Add to e/r fund -          $9,200 (92%)    (goal is $10,000)
(4) Pay down mortgage -   $5,000 (100%)    (goal is $5,000) completed
(5) Trading account fund - $4,902  (98%)    (goal is $5,000)
(6) House projects -          $2,300 (77%)     (goal is $3,000)

Total:  $60,079 (87%)

Today I closed out goal number 4 and I made the last extra principal payment to CitiMortgage.  In 12 months we have reduced our primary home mortgage by $18,500 which includes the $5,000 in extra payments.  Pleased to see our mortgage principal is now below $240,000.

At present, we are about $3,600 behind on our original 2013 savings goals.  To the extent we want to meet our revised 2013 savings goals, then we need to save another $2,950 before the year ends in just over a month.  I have another $1,998 in 401k contributions before the end of the year.   Which means that we would need to save another $1,000 towards our emergency fund, our trading account or our house project account.  Assuming we have five weeks left in the year, we will need to save $184 per week to meet our revised 2013 savings goals.

I think reaching our revised goal should be do-able, but December is always an expensive month.  

Florida - Fraud Capital of the Country

Today I read a news article about scammers targeting Nordstrom computers in South Florida.  Scammers distract the Nordstrom employees and take apart the register/computer back panel and add a credit card skimmer.

Thankfully these bad guys were caught because of surveillance camera footage.  But, as a consumer you wouldn't even be able to be on the look out for this kind of skimmer because it is hidden.  So make sure you pay close attention to those credit card and debit card statements.

Good News - Salary Adjustment

Last month I posted on the impact of The Great Recession on our career and salary . Overall, our salaries from our professional careers were down between 2008-2013.

 But, I am happy to report that I just received an upward salary adjustment, a 7% increase!, which means a couple of things.  First, this kind of increase outpaces inflation.  Second, this increase almost brings me back to my pay level in 2008.  Third, this increase almost makes up for Mr. Sam's pay cut that he took at his new job (post layoff).  Fourth, this big increase reflects on the kind of work I am doing, the level of complexity, the results I am attaining and the fact that my company is placing an increased value on me (it feels good).

I think, although I've not done the nitty gritty math, that our salaries are still down between 2008-2013, but now down just a bit.

Small Fries

Last weekend, Mr. Sam and I rented a two movies from Red Box and one of our selections didn't play.  This has happened to us before, I would guesstimate at 1 out of 20 movies.  I really like the Red Box system but I have never, until today, figured out how to get a movie credit or a refund.  And, something about not being able to get that $2 or $1 back really rubs me the wrong way.

I have the same aggravations with ATM fees and other small fees.  For a while, Home Depot kept charging us $2 on our 0% Home Depot credit card bill.  I would have to call each month and get them to refund the $2 charge which they could never explain.

So, anyways, the secret to getting a Red Box credit is as follows.
(1)  Google "red box how to get a refund";
(2) Click on the result that is labeled "what's the red box refund policy"
(3) Under the policy, click to talk to customer care and explain problem.

Red Box gave me two movie credits which I thought was reasonable for my request.  

Investment Property Debt

Hit a milestone this month with our investment property debt, at present we owe less than $300,000 on our investment properties.  

Feels good.  

2008 - 2013 The Great Recession Check Up - Part I

This morning, on the news, there was a story about where we are, as a society and as an economy, 5 years after the great recession.

I actually started this blog during 2008 and went back to read some of my posts during that time.  So, I am undertaking our own Great Recession Check Up.  

Career and Salary/Benefits

In 2008, both Mr. Sam and I had a job change in that we each changed companies.  

While my job change was voluntary, I would say that my departure from my prior company was caused by the recession.  Meaning, I could see that my opportunities for advancement were low and the amount of work/projects that I was handling was reduced.  As such, I felt like I had to make a change and therefore took a pretty big pay cut in 2008 when I changed companies.  But, my career and my life vastly improved even with the big pay cut.  Then, in my new company, I ended up taking another smaller pay cut which lasted about another year (which was directly caused by the recession).  Since 2010 my pay has steadily increased and I am generally happy with my job, my company and my career.  But, I'm still making at least 10% less, I calculate it as 13% but I'm not totally sure, than I was before I resigned from my prior job in 2008.   

Mr. Sam also changed companies in 2008.  His change was totally voluntary and a good career move for him.  He increased his salary and his benefits were great (his awesome 401k match directly contributed to our progress in that area).   And, his health benefits were so great that I ended up switching to his plan and we saved about $3000 each year in doing so (over 5 years).

Now, due to Mr. Sam's layoff he ended up taking a pay cut with his new job.  He is not happy about the pay cut, but I'm happy he is employed in a job that is a perfect match for his education, skills and background and I'm hopeful that the pay will follow.

As a result, overall, between 2008 and 2013 our compensation from employment decreased.  

So, More on the Good News

I wanted to share more about Mr. Sam's new job.

First, the positives.  Mr. Sam obtained new employment while he was still receiving severance from his old employer.  As such, we never had a real gap in income stream.  Mr. Sam also was able to obtain a few weeks of unemployment compensation from the State of Florida and we continue to have health insurance, paid for by his employer, until October.

The new job is with a much smaller company than Mr. Sam is used to working for.  But, that will provide him with more autonomy and opportunities for growth.  The new position is also an exact fit for his skills and experience.  Finally, the new job is located in reasonable proximity to our home (his commute is about the same distance it was before).

Second, the negatives.  Mr. Sam is not overly excited about the compensation.  While he believes he is being paid within the proper compensation band for his experience, education, etc., he is on the absolute low end with the new employer.  Furthermore, the benefits are not nearly as generous as his last job, which provided a 20% match on the 401k along with such awesome health benefits that I opted for their insurance as well.  The new company has also had a lot of turn over and flux with leadership, which is not surprising based on their growth and the size of the company.  And while the unsettled nature of this company may be a negative as I mentioned above, it is also a positive in that there are some real growth opportunities.

Since this is my blog and not Mr. Sam's blog, I think, overall, that this is a positive step in Mr. Sam's career.  While the pay and benefits are a bit reduced, the chance for growth and leadership may mean that he ends up in a higher pay grade within 6 months to a year.  And whether or not the pay grade increases, he will be gaining skills and experience (hopefully) that he never seemed to get with his past employers.

Unemployment Compensation - Follow Up # 2

Earlier I posted regarding Mr. Sam's Florida unemployment compensation adventures, and the fact that his application was denied because he received severance.  Well, now Florida has changed their minds and determined that he is entitled to benefits because he is not receiving ongoing severance.

As a result, yesterday he received a payment representing two weeks of benefits ($550).  Somehow I expect the State to change its mind and ask for the money back so we will be prepared to repay it.

It is Expensive to be Poor

If you have never read Nickel and Dimed by Barbara Ehrenreich, I highly recommend it.  At this point, the book is probably a bit dated since the events written about took place around 2000.  But in it Ms. Ehrenreich takes a series of low paying jobs and tries to make ends meet.  If my recollection is correct, she actually starts her journey with enough money to find an apartment and she has a car (which she notes puts her well ahead of many of the folks in her travels).  

Today, I read an nbc.com article that highlighted many of these issues. Yolanda Williams, the woman featured in this article, is trying to support an adult daughter, her disabled husband on less than $300 every two weeks.  She spends 28 hours a week commuting by bus to work and to school.  She also struggles to afford medication and treatment for her and her husband's diabetes treatment (which likely means more expensive treatment down the road). 

It is distressing to hear about this woman, who is working so very hard, but doesn't seem to be making much progress. 

2013 Savings Goals - August Update

(1) Max out 401k(s) -        $22,285 (64%)   (goal is $35,000)
(2) Max out IRA(s) -         $9,020 (82%)    (goal is $11,000)
(3) Add to e/r fund -          $6,000 (60%)   (goal is $10,000)
(4) Pay down mortgage -   $2,075 (42%)     (goal is $5,000)
(5) Trading account fund - $50  (1%)        (goal is $5,000)
(6) House projects -          $1,500 (50%)      (goal is $3,000)

Total:  $40,930 (59%)

We are about $300 behind on our 2013 goals.  And with Mr. Sam's lay off I expect that number to grow.  In July, I kind of kept up with most of our goals in that I continued to fund 2, 3, and 6.  But, all that money is sitting in my Capital One 360 (formerly know as ING) savings accounts, so I know that I can access that money if we need it.  I didn't put the $415 towards paying down our mortgage in July, since I'd rather have liquid assets available.

As for our 401ks, Mr. Sam can no longer contribute to his 401k this year, but with his match he has saved $15,676 for 2013.  While we don't normally count the match towards our savings goals, he is happy that he's not too far off our goal of maxing out his 401k.  In fact, with his match he is only short $1,824.

I would like to continue to fund my 401k during the lay off, although we've talked about whether it makes sense to scale back.  Frankly, I almost think it is more important to save towards our future during this time.  I still need to crunch the numbers and see if it is feasible.  And while I keep our 2013 IRAs money liquid, I'd like to be putting that into our IRA if we can (and we have until April 2014 to decide).