Category Archives for Invest & Retire
Carnival of Financial Planning – February 1st, 2013 Edition
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Welcome to the February 1st, 2013 Edition of the Carnival of Financial Planning!
The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. The focus is on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.
This edition is arranged by subject heading, so that you can browse efficiently.
Enjoy!
BUDGETING AND ECONOMICS
Little House @ Little House in the Valley writes Need Help Visualizing Financial Decisions? Try Planwise – There’s a free tool available online called Planwise. It’s a free online personal finance decision tool that allows you to input your expenses and income and set goals for yourself, such as pay down debt, buy a house, or take on a major expense. It also predicts your progress on paying off debt and potential affect of saving the remainder of your income through bar and line graphs.
Green Panda @ Green Panda Treehouse writes How Are You Going to Make Money? – How will you make money?
Grayson @ Debt Roundup writes Dang it! I Fought My Emotions and They Won – I have been fighting my emotions about a purchase for some time. After finally budgeting and saving for the purchase, I finally let my emotions win. You can’t win them all!
CAREER AND INCOME
Wealth Effect Blogger @ Your Wealth Effect writes Want to be Rich, Don’t be Fat – Thoughts on a Wall Street Journal article titled “Want to be CEO? What’s Your BMI?”
MR @ Money Reasons writes My Secret Wealth Goal – Today I’m going to reveal one of my secret wealth goals. If I can conquer this goal, I should be financially independent and on my way to becoming wealth.
James Petzke @ This Is Common Cents writes The Good and Bad of Self Employment – When planning your self employment career, make sure you consider the positives and negatives of that choice.
DEBT AND CREDIT
Maria @ The Money Principle writes Dealing with debt: change your mental attitude – Mentality is often underplayed when dealing with debt. Here I discuss three mental shifts that will help you pay your debt off and fast.
Michael Kitces @ Nerd’s Eye View writes An Efficient Solution To Implement Intra-Family Mortgage Loan Strategies – In this difficult borrowing environment, some potential homebuyers have found the best way to finance a purchase is not from a major commercial bank, but from the “family bank” instead through an intra-family loan. And as long as IRS guidelines are followed, the transaction can be remarkably appealing for the borrower – and a way for parents to earn a higher return while keeping the money in the family!
Hank @ Money Q&A writes Tips To Save Money On A Mortgage – There are a few solutions to make a mortgage more affordable. If paying down the principal in advance is feasible, it is an effective method to save money on a mortgage.
INVESTING AND SAVING
J.P. @ Novel Investor writes Tax Preparation Checklist – If you do your taxes or someone does them for you, here’s a tax preparation checklist to help organize everything and finish your tax return quickly.
Philip @ PT Money Personal Finance writes The JOBS Act and Crowdfunding: New Investment Opportunities for the Average Joe – What is crowdfunding and how could that change the way you invest in the very near future?
Jennifer Lynn @ Broke-Ass Mommy writes When quibbling over finances leads to a rift in friendship. – Sometime money discussions and escalate to bad feelings, read my experience and advice.
Mike @ Personal Finance Journey writes Eating Well but Saving More – You might not know it, but your bad habits can lead to costly meals. Here are some tips for saving money on food.
Ted Jenkin @ Your Smart Money Moves writes Money Unhappiness? It’s All About Expectations – Every year that the birthday clock turns another year I ask myself one simple question, Am I getting any wiser? Many say that gaining wisdom in life is
krantcents @ KrantCents writes Rich Man, Poor Man – Rich man, poor man is not intended to leave out women! I am really trying to examine the difference between rich and poor and help you achieve what you say is a goal. Most 18-25 year old say getting rich and becoming famous are important goals for them.
Pete @ Intelligent Speculator writes Adding Passive Income Flows: Buying A Farm? Am I Crazy? – An unconventional strategy worth exploring.
Jen @ Master the Art of Saving writes Why Didn’t I Get A PrePaid Cell Phone Sooner? – While I would love to have a shiny new iPhone and be able to get online no matter where I am, I’m not willing to spend that much money. Granted you can…
Suba @ Broke Professionals writes Why Can’t Men Remember Things? – Male traits set the guys up to fail when it comes to remembering names and other crucial details. Why memory matters, and why improving it can help your career.
JP @ My Family Finances writes Ways to Hoard Your Gold – While no storage method is perfect, there are many ways to hoard your gold. Just make sure you consider your own personal needs when making a decision.
Chris @ IRetireEarly.com writes Top 3 Advantages and Disadvantages of Mutual Funds – Mutual funds have been longstanding staples of the finance industry, but is mutual fund investing the right move for you and your financial goals? Check out the top 3 advantages and disadvantages of mutual funds.
RISK MANAGEMENT AND INSURANCE
Super Saver @ My Wealth Builder writes The Value of Health Insurance – In 2013, our medical insurance premium will more than pay for itself. I expect the billed amount for my medical treatments to exceed 50% of our annual living expenses. My out-of-pocket costs will only be a few hundred dollars.
Daniel @ Sweating the Big Stuff writes How Much Do You Need To Save To Switch Insurance Companies? – When your car insurance is up for renewal, how do you decide whether to switch? Use this guide to find out.
REAL ESTATE AND PROPERTY
Don @ MoneySmartGuides writes Create Wealth Through Property Investment – Read how to create wealth through property investments.
Daisy @ Add Vodka writes The Many Inspections Needed When Buying an Older Home – We are happily settled settling into our new house; many boxes are unpacked, we’ve been able to conquer some of the work required to make it a comfortable living space, and I’ve just been able to start sleeping better in our… Read our discoveries!
Dorethia Conner @ The Money Chat writes Was Your Mortgage Charged Off? – Mortgage charge-offs can throw a wrench into your financial planning and hit your credit rating. Learn about what you can do about mortgage charge-offs.
RETIREMENT AND TAXATION
A Blinkin @ Funancials writes Diversify Your Taxes, B!tch – Consider shifting some of your assets from a taxable account to one that is taxed later or never taxed. This way, you’ll be taxed on what you spend rather than what you earn. Checking accounts, savings accounts, stocks and bonds are examples of accounts that are taxed now. 401(k), IRAs, and annuities are examples of accounts that will be taxed later.
That concludes this edition. A big thanks to everyone for participating! Please submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found by clicking here.
***Photo courtesy of http://www.flickr.com/photos/bohman/5206587246/sizes/l/in/photostream/
Carnival of Passive Investing # 26 – What Passive Investing Is and Is Not – January 2013 Edition
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Welcome to the January 2013 (the 26th total!) edition of Carnival of Passive Investing – a monthly collection of the best and most intelligent passive investing strategy articles around the internet! Some people foolishly want to beat the market (want being the key word), but we just want to invest with it.
As discussed in my introductory post for this carnival, the purpose of this carnival is two-fold:
- To provide a forum to showcase articles and research in passive investing strategies (i.e. investing in ETFs, index mutual funds, etc. in such a way that one avoids employing active stock picking). By investing with the market, we are able to beat 70-80% of investment “professionals.”
- To create a community of passive investment bloggers to connect and share expertise.
As such, I thought it might be nice to make the theme for this month’s Carnival as showing several examples of topics that are and are not passive investing to keep this distinction fresh in our minds. This isn’t meant to point fingers or criticize anyone, but rather is simply for the sake of continuous improvement to our focused goal here with the Carnival of Passive Investing.
Please enjoy and stop by my blog on my non-carnival days as well.
As Darwin points out, these are some REALLY interesting results. Essentially, the conclusion is that you experience a much higher gain during the 10 year period if you were to invest all of the money at one time in a lump sum fashion.
While I do agree with lump sum investing generally resulting in more money overall (it was also the conclusion that Jeremy Siegel came to in his amazing book, Stocks for the Long Run), I think it would be hard for people to do in real life if they were confronted with the task of investing a VERY large amount of money all at once (we’re talking along the lines of more than 1x their annual salary). In this case, it might be better for a person to invest half of the money now to get in to the market, and then invest the remaining half gradually over a few years. However, if it was a more modest amount of money (maybe $10k-$20k), I would likely just invest it all at once according to the correct asset allocation.
3. John Schmoll presents Reader Question: Should I Invest in Mutual Funds or ETFs? posted at Frugal Rules. There are various similarities as well as differences between mutual funds and ETFs. If you do some simple homework you can determine which funds are better for you while also keeping down the costs associated with investing.
PK presents Treasury Return Calculator posted at Don’t Quit Your Day Job. Any passive investor surely has taken a look at the GS10 series – the constant maturity on the 10 Year Treasury as computed by the Treasury. However, a chart of yields isn’t enough to tell what an investor would earn over a period of time. Well, one sleepless night and 8 cups of coffee led me to make this tool, which will calculate the coupon-reinvested return on the 10 Year Note for any period dating back to 1871.
My Money Design presents What are the 401k Withdrawal Rules for Getting My Money Back? posted at IRA vs 401k Central. Before putting too much money into your employers retirement plan, it helps to understand the 401k withdrawal rules and when you’ll see your money again.
Rohit presents No minimum balance and No maintenance fees Roth IRA accounts posted at The Money Mail. Returns in your Roth IRA can be reduced by the fees the custodians charge. You should select accounts that have no minimum balance requirements or annual maintenance fees. Some brokerage houses are now offering many free mutual fund options within Roth IRA but you will still have to pay for individual stock transaction. There are other criteria you should look at when selecting a Roth IRA account provider such as real time quotes and customer service. This article reviews the criteria to select a no-fee Roth IRA account and the other important factors you should look at when selecting a custodian for your retirement accounts.
Philip presents Traditional and Roth IRA Contribution Limits Increased by $500 for 2013 posted at PT Money Personal Finance. The latest info on 2013 Traditional and Roth IRA contribution limits–including a breakdown of what it means for those under 50, over 50, and an explanation of why these limits matter.
Dan presents The 8 Largest ETFs on Earth posted at ETF Base. Here are the 8 largest ETFs on Earth. It’s worth checking them out to see tickers, assets under management and their low expense ratios.
harry campbell presents Be Wary of Frontloading Your 401(k) Contribution and Losing Company Match posted at Your PF Pro. January is a great time to re-assess your retirement accounts. It’s important to review your 401k contribution and at least consider re-balancing your accounts at the beginning of every year. You’ve probably made a couple New Year’s resolutions so why not add this one to your list? 2013 will be the first official year I’m able to max out my 401k since last year I received a raise about halfway through the year so I just missed out on contributing the full $17,000.
My Money Design presents The 403b vs 401k – How Are They the Same? How Are They Different? posted at My Money Design. Even though we have both types of plans, I didn’t always know what the differences between the 403b vs 401k. Here is what I found out about each one.
Rohit presents Comprehensive guide for Roth IRA posted at The Money Mail. A comprehensive post on Roth IRA that show you how to get started to make use of this powerful retirement saving option that is Roth IRA. You will learn about the contribution limits, the withdrawal options and where to get started. We also cover the most frequently asked questions for getting you to save for your retirement. Now there is no reason to start saving for your retirement.
Konvexity Institute presents This one concept from CFA level I QM curriculum can make a big difference in your wealth posted at konvexity.
Michael Kitces presents Financial Planning Implications of HR8 – the Taxpayer Relief Act of 2012 posted at Nerd’s Eye View. The last-minute legislation this week not only averted the so-called “fiscal cliff” – it also brings about a number of significant changes to the tax code itself, and its permanence (unlike so many temporary rules and sunsets of the past decade) may herald in a new era of productive tax planning for portfolios!
Michael presents Are My IRA Contributions Tax Deductible? posted at Financial Ramblings. Curious if you’ll be able to deduct your IRA contributions? It depends on your income and whether or not you’re covered by a retirement plan at work.
Well, that wraps up this month’s edition. A big thanks to everyone for participating!
You can submit your passive investing posts for the February 2013 edition of the Carnival of Passive Investing (hosted by Frugal Rules) by clicking the link below:
Blog Carnival HQ – Carnival of Passive Investing – Submit Your Posts
***Photo courtesy of http://www.flickr.com/photos/andy_myers/7428258076/sizes/l/in/photostream/
3 Tips To Pay Your Home Off Sooner
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.
The following is a guest post. Enjoy!
If you’ve considered buying a home but haven’t taken the plunge yet, one of the scariest things about it can be the time frame you’re looking at. Whether it’s your first home, a new home, or just a frustration that your current home is taking so long to pay off, let’s talk about a few steps you can take to pay off your home sooner.
Understanding Compound Interest
A friend once said that your first mortgage payment probably only buys you your front door. He meant that at the beginning of a mortgage, almost your entire payment goes towards interest. The idea of building actual equity in your home a few hundred dollars at a time can be pretty disheartening.
The real problem is that pretty soon, you’re going to be paying interest on your interest. If you haven’t done this math before, let’s take a brief example.
On a $200,000 loan, let’s say the current mortgage rates are about 3%. 3% of $200,000 is $6,000. But, that’s just for one year. Over the life of your mortgage (say 20 years), you’ll end up paying over $65,000 in interest!
But, compound interest also works in your favor. The earlier you put additional money down on your home, the more years you save paying the interest on that portion. For example, if you pay a lump sum of $10,000 in your 10th year of your mortgage, you’ll pay off your home about a year and a half sooner than you would have otherwise.
If, on the other hand, you pay that $10,000 on the FIRST year you own your home, you’ll own your home about two and a half years sooner. It’s the same amount of money, but you cut an entire extra year off of your mortgage.
1. Accelerated Payments
Your bank probably offers accelerated bi-weekly payments. By paying half your mortgage payment every two weeks, you’re actually making 26 half-payments per year instead of 12 full payments. That’s the same as an extra month’s payment every year. It’s automatic, you’ll never even notice it’s happening, and this alone will take a couple years off your mortgage.
2. House First, Furniture Second
Don’t fall into the trap of buying new furniture and renovating every room when you first move in. Remember – every extra dollar counts, so take a deep breath and spend a year or two living with your old stuff and pay the house down first.
3. Lump Sum It!
Bonuses, tax refunds, and other found money should all go towards your home. Lump sum payments really contribute to knocking down the principle and will save you a ton in interest down the road.
Have fun playing with the numbers and realize the power that decisions you make now will have over the life of your mortgage.
How about you all? Do you think it’s a good idea to try to pay off your home loan as soon as possible? If so, what strategies have you implemented successfully to meet this goal?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/surf98/400887772/sizes/l/in/photostream/
Making Up For Lost Time – A Late Starter’s Guide to Saving for Retirement
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.
The following article is by MPFJ staff writer, Miss T from Prairie Eco-Thrifter. If you want to learn how to live your dream life in a sustainable, healthy, and money savvy way, check out her site here.
Are you in your 40s or 50s and are realizing that you don’t have enough in retirement savings to get you very far?
Luckily, it’s never too late to save for retirement; so here’s some strategies to help you make up for lost time.
Current Landscape of Retirement Savings
You’re not alone, by the way. A survey conducted in 2011 by the Employee Benefit Research Institute found that more than 60% of workers in their 40s and 50s had less than $50,000 saved or invested for their retirement. Experts claim that even savings in excess of this amount may not be enough to allow people to live out their lives in comfort.
The important thing at this point is not to panic. We tend to make the wrong decisions when we are stressed out, so this has to be avoided at all costs. OK, so you probably should have started some sort of financial plan when you were younger, but you can’t change that now. What you can change is your money management from now; that’s a positive step, getting panicked is not.
You still have time – at least 25 years if you’re in your 40s, 15 years if you’re 50s. With a committed approach, you still have time to save enough to fund your retirement. Your options might be more limited than when you were younger, but there are still effective strategies you can implement. It doesn’t have to take forty years to fund a decent retirement; consider the entrepreneurs who have gone from relative poverty to millionaire in 15 years and retired at age 40.
Creating a Budget
Before you can start to plan how you are going to make up for lost time, you need to know what your current financial position is. This means you need to create a budget, often creatively called a life plan, an income and expense spreadsheet, or some other fancy name by financial advisors who don’t want you to react badly to being told you have to have a budget! A well-designed budget is great wealth-creating tool, but it will need to be updated at least twice every year to stay relevant.
How Much Money Will You Need for Retirement?
So, just how much is enough for retirement? The cynics would say it depends on how long you intend to live!
Of course, to a certain extent, this is true. The other figure that’s needed to crunch the retirement numbers is the age you retire at; at least this one is more under your control!
The popular thinking is that you need 80% of your current income to be able to maintain your lifestyle in retirement. However, if you can reduce this figure, you will take some of the pressure off. Here’s an example of the power of this concept – allowing for a rate of return on investment and savings of 4%, for every dollar you don’t need in retirement, you cut $25 off the amount you have to save. How’s that for incentive for you!
Consider ways you can reduce the amount you’ll need in retirement. Maybe travel is not for you; you probably won’t have the kids to support; you won’t have the same transportation costs; you won’t need to be saving for retirement; you might down-size your home or live in a cheaper area. Finding ways to reduce your retirement spending eases the burden on saving enough while you are still working.
Utilize Tax Favored Investment Accounts to Your Advantage
Playing catch up has been made easier for the over 50s group, due to the increased contributions that are allowed to be made into retirement accounts like IRAs, 401k and other employer sponsored plans. In 2012, the allowable annual contribution to a 401k is up to $22,500 for over 50s; others are restricted to $17,000.
As an example, if you start making the max contribution at 50 years of age and continue for every year until you retire at 65, at a 5% interest rate you would have amassed over $500,000. Any employer-matched contributions are then the icing on the cake!
Working During Retirement? – Another Possibility
Planning to continue working into retirement, even on a part-time basis, is another strategy for making up for lost time. Do your research now, so you can plan for this possibility. It might even be possible to start a small side-business while you are employed. Make enquiries about consultancy work in your current field – your expertise could be sought after. The same example used above, about reducing the amount you need to save for retirement, can also be applied to earnings. If you can come up with a plan to earn around $10,000 a year in retirement, this equates to $250,000 you don’t need to have saved before you retire.
So, now it’s time to stop thinking and stressing about how you are going to make up for lost time and take some action!
Start now to get your financial position down on paper; get those figures out of your head and do the calculations necessary to plan your retirement. Look for where you can cut spending so you can lift your retirement savings. Create a financial plan that will allow you to enjoy your years of retirement.
***Photo courtesy of http://prairieecothrifter.com/wp-content/uploads/2012/12/iStock_000000847554XSmall.jpg
Should Alternative Assets Be Part of Your Asset Allocation?
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.
The following is a guest post by Mario Favela from Gator Finance. Enjoy!
In this post, we will focus on some of the more mainstream and accessible alternative assets.
Should You Own Alternatives?
Tax Implications
How Much Should You Allocate?
List Of Alternative Assets
Silver And Gold
Diversified Commodity
Master Limited Partnerships (MLPs)
Real Estate Investment Trusts (REITs)
Merger And Acquisitions (M&A)
Hedge Funds
Leveraged ETFs
Conclusions and Personal Applications
How about you all? Do you incorporate alternative assets in to your investing strategy/asset allocation? Why or why not?
If you do, which categories of these alternative assets do you own?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/digitalcurrency/2438118193/
Financial Goal Setting for the 2013 New Year
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Happy New Year Everyone! It is that time again. That’s right – time to set my financial goals for 2013. It’s hard to believe that 2013 is already upon us. Just two more years, and we’ll be to the year that they traveled to in the movie, Back to the Future II (one of my personal favorites!).
I do this once every year as part of my goal to create what author David Bach calls a Purpose Focused Financial Plan. The goal of this system is to employ money in your life in a way that matches your life values and dreams. It is a very cool idea!
You can read more about my journey to create this system at the following links – Creating a Purposed Focused Financial Plan and My Personal Finance Journey’s Investment Strategy.
As is the case with many things in life, a good portion of financial goals are long-term commitments requiring attention in each passing year. As such, you might see many similar goals that I was trying to or did achieve in 2012 listed for 2013. I am perfectly fine with having some of the same goals year-to-year, provided that I believe in the causes they represent (which I ponder each year, and all of the ones listed below definitely do meet that criteria!). Nevertheless, I’ve tried to call attention to completely new financial goals for 2013 by highlighting them in bold red text for easier reading.
So, here goes, the unveiling of Jacob’s 2013 financial goals. Enjoy, and I look forward to reading any comments you all have!
- Contribute $5500 (or ~$458 per month) to my Roth IRA with Vanguard this year (maximum allowed, which increased $500 in 2013 compared to the $5000 maximum allowed in 2012!).
- Reach short-term net worth target for this year (1.42X my current net worth).
- Maintain target 6-9 months of expenses in cash reserve emergency fund in Dollar Savings Direct account.
- Rebalance mutual fund portfolio to meet asset allocation target %’s (70% equity, 30% fixed income overall).
- Put together a will and have it reviewed by a lawyer.
- Continue to save money for trip to Grand Canyon or to see Niagara Falls.
- Invest $500 in Microloans with Microplace.com to support Latin American micro entrepreneurship. This equates to $41.67 to invest per month.
- Donate $1,150 to Multiple Sclerosis Foundation in 2013 (5% of take-home pay in my graduate school research assistantship job).
- Fund raise $7500 for MS 150 bike event in June 2013.
- Save 3% of take home pay each month (after taxes) for Dream Account.
- $30 per month save for doing running races as part of health life values account.
- $20 per month save for buying fresh vegetables as part of health life values account.
- Save ~33% of (blogging income (if any) – amount of income deferred to Individual 401k with Vanguard + untaxed graduate fellowship income from my research job) in a high yield online savings account in preparation for 2013 taxes.
- Apply for new graduate research fellowships since the one I have from the NSF will run out in 2014 (and need to apply for new ones about a year ahead of time).
- $30 per month save for trips to visit friends/family in other states.
- $10 per month save for purchasing food for backpacking trips in the Blue Ridge Mountains once a month.
- Contribute at least 20% of blogging income to Individual 401(k) with Vanguard.
- Execute any business tax deductions I can for 2012 taxes.
- Use 1% home value home maintenance fund to fix various small things that are broken around my condo after 2.5 years of use. These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, and some pipes under the sink that need to be re-caulked. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account.
- Execute 4 estimated tax payments for blogging + graduate research fellowship income on the following dates – 1) April 15, 2013, 2) June 17, 2013, 3) Sept. 16, 2013, and 4) Jan. 15, 2014.
- Save $111 per month until have a total of $1600 for health expenses for dogs we adopted (for annual health checkup, Frontline/Interceptor, and miscellaneous health emergencies/treatments needed. I will have the $1600 total after March 2013.
- Help friends become debt-free.
- Continue investing in long-term content growth of blog.
Mid-Term (3-5 years out) Goals:
- Continue contributing $5500 to Roth IRA and Individual 401k each year using dollar cost averaging.
- Reach intermediate net worth target (2.8X my current net worth).
- Own a rental property by 2018.
Long-Term (greater than 5 years out) Goals:
- Obtain a net worth of $1,000,000.
- Own a home free of mortgage payments.
- Own a vacation home in the mountains or a ski resort.
- Accumulate enough funds not have to work, but will probably anyways because I would get bored.
How about you all? What goals have you laid out for yourself in 2013? What technique do you find is most effective in holding yourself accountable for your goals you set?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/gi/388322867/sizes/o/in/photostream/
Tools, Accounts, and Books I Use in My Personal Finance Journey
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.
Often times, I get asked about the various tools, accounts, and books that I personally use to organize and manage my personal finances/life (which often become very intertwined!) on a day-to-day basis.
In order to facilitate this sharing, I’ve decided to use this page as the central location for this information (also available via the Favorite PF Tools, Accounts, and Books tab at the top of my site). One thing I realized while putting this list together was that while I’ve discussed a lot of these topics on my site, I’ve never shared the specific companies that I use to make them happen in a central place (which I think may be of some value to people that are trying to figure these topics out in their own personal finances).
If there are any categories of things that you think I might be leaving out, definitely let me know! Let’s get started, shall we?!
CHECKING/SPENDING ACCOUNT
For my checking account, I use good ole’ Bank of America. Although Bank of America is not perfect and might not offer the best perks around, the main reason I’m still using Bank of America is that they are truly everywhere in the United States. They are in Arkansas where my parents live, they are on the East Coast where my sister and I live – they are everywhere. And, the fact that Bank of America is everywhere has made it very easy on me over the past few years since I have moved three times.
Often, I have considered moving my checking account to an online bank since they offer much better interest rates and other features. However, there is something to be said about having a physical bank if I need a certified cashier’s check (I just checked, and online banks such as ING Direct’s do not offer certified checks) to buy a house or pay a moving company. Additionally, I question the security of mailing a check through the Postal Service in order to make a deposit. On top of this, Bank of America has never charged me a monthly account maintenance fee since I have always met their required criteria.
CREDIT CARDS
As far as credit cards go, I generally use only 3 credit cards on a regular basis (even though I have close to 15 of them which I rarely use and keep in an envelope. I only opened these to take advantage of the $50-$100 cash back bonus that came with opening the account. Some nice easy money!).
If you’re interested in learning more about these credit cards or opening an account for yourself, I’d encourage you to first compare your options at CreditCards.com to make sure they best suit your needs.
- For the majority of my purchases (except ones at gas stations and Amazon), I use the Chase Freedom Visa Credit Card. This card offers:
- No annual fee.
- $100 cash back bonus after you make $500 or more in credit card purchases within the first three months (not very hard to do if you use it for all purchases).
- 0% introductory APR for purchases and balance transfers for the first year.
- 5% cash back on up to $1500 in purchases each quarter in rotating purchase general categories (examples are gas, groceries, restaurants, etc).
- Unlimited 1% cash back on all other purchases; rewards never expire.
- For all my gas purchases for my car, I use the Chase BP Visa Credit Card.
- First, aside from the Gulf of Mexico oil spill fiasco (which may or may not have been BP’s fault), I believe that BP is a fairly “good” company as far as big oil goes. They have a very active renewable energy (wind, solar, etc) program compared to Exxon Mobil, and are also located nationwide in the event that I have to move around.
- The card offers no annual fee, $0.15 per gallon rebates on every $100 spent at BP gas stations that can be redeemed in the form of discounts on gas purchases. This is sort of a confusing payout system, but if you sit down and do the calculations, I figured out that it equates to about 3% cash back. Not as good as the 5% cash back that it used to give, but still pretty competitive compared to the other cards available!
- For all of my Amazon purchases (cheap used books and Christmas/birthday gifts), I use the Chase Amazon Visa Credit Card. This card offers:
- No annual fee.
- $30 cash back bonus upon signing up for a card.
- 3% cash back on all Amazon purchases.
ROTH IRAS
Currently, I have two Roth IRAs – one with Vanguard that I contribute to on a regular basis (I HIGHLY recommend Vanguard. Read more below about Vanguard if you’re interested) and one with Capital One Sharebuilder that I opened back when I first started my investing “career” back in 2007. Sharebuilder has had quite a lifetime! First, it was an independent company, then it was purchased by ING Direct, which then got swallowed up by CapitalOne only recently.
In my opinion, I both love and hate Sharebuilder all at the same time.
- I love that they 1) have no required account minimums, 2) make it incredibly easy and affordable to invest new money in to stocks and ETFs through recurring automated investing plans (commissions of $4 or less per buy transaction, happens only once a week on Tuesday), and 3) often times offer $50 account opening bonuses.
- However, I hate the fact that it costs $10 per trade to sell out of any shares or purchase new shares in a market order fashion. This high “share leaving cost” is one of the primary reasons why I have kept my Roth IRA with Sharebuilder all of these years.
- So, the verdict on Sharebuilder essentially is that if you’re investing/buying for the long, long term, Sharebuilder is a good, simple alternative. However, if you’re looking to buy and sell more frequently, there are other cheaper discount brokerage options available out there (will discuss more below).
ROLLOVER IRA, INDIVIDUAL 401K, AND TAXABLE MUTUAL FUND ACCOUNT
For my Rollover IRA (rolled over from my Fidelity 401k at my job before graduate school), Individual 401k, and taxable mutual fund accounts, I proudly and very loyally use Vanguard.
I really cannot recommend how good Vanguard is enough. They are the industry leaders in offering low-cost, passively managed, index mutual funds (often times lower than Fidelity), which is the type of investing instrument I use as part of my passive investing strategy. They have very good, responsive customer service, never charge transaction fees, and waive account maintenance fees for portfolios over $50,000 in value.
LIFE VALUES, DOGGIE EMERGENCY FUND, PROPERTY TAX, AND HOUSE MAINTENANCE SAVINGS ACCOUNTS
I store my cash funds earmarked for my life values, doggie emergency fund, condo property tax, and house maintenance savings purposes in an HSBC Advance Online Savings Account that I opened up back in 2007 or so.
Although the interest rate it pays (currently 0.20% APY as of 12-Jan-2013) is lower than some of the market leaders (it used to pay one of the highest rates around when I first opened the account in 2007) such as Ally Bank (0.95% APY) and EverBank (0.76% APY), HSBC does offer a nice user interface along with no monthly account maintenance fees or minimums and automatic savings transfers.
While there are now better options around in today’s market for online savings accounts (one of them being ING Direct, discussed below), HSBC is acceptable enough for me to stick with them for the time being for these accounts. Additionally, I figured I could invest my time in to more value-added activities than chasing returns, as recommended by Ramit in his book, I Will Teach You to Be Rich.
LIFE DREAMS SAVINGS ACCOUNT
The 3% of my take-home pay that I save for fulfilling my life dreams is stored in a high-yield online savings account with ING Direct (recently purchased by Capital One).
I am a very big fan of ING Direct (this and Ally Bank are my two favorite online savings options). They offer a very high, competitive interest rate of 0.75% APY, no fees, no minimums, automatic scheduled transfers, and a very simple yet elegant online user interface. Another good thing about ING Direct is that people seem to be more aware of this company as compared to the other online-only banks, which seem more obscure to people that aren’t plugged in to the online finance world as much.
EMERGENCY FUND AND INCOME AND SELF-EMPLOYED INCOME TAX SAVINGS ACCOUNT
My emergency fund and self-employed/income tax savings are stored in a ‘high yield’ online savings account with Dollar Savings Direct (part of Emigrant Bank).
As was the case with HSBC, I opened this account probably 5 years ago when Dollar Savings Direct was offering a very high interest rate compared to other online banks. However, in the present day, this is definitely not the case. They have more requirements ($1000 minimum) for accounts than Ally Bank or ING Direct, yet offer a lower interest rate (currently at 0.55% APY).
Nevertheless, since they don’t charge any monthly account fees and the account is FDIC insured, I’m OK keeping this account on-board for the time being.
INTERNET PROVIDER
While I’m not happy about it, my Internet provider is Comcast. I use them only because they are the only Internet provider in my condo complex. I’ve written many times about how I don’t particularly like them and think their customer service is less than stellar/a headache.
However, their actual Internet service is not all that bad. Aside from that, they are always running promotion pricing deals which can be taken advantage of simply by calling every few months to see what is being offered. At the present, I am taking advantage of a promo deal for Blast Internet at the price of Economy. Not too shabby!!!
CABLE TV PROVIDER (OR LACK THEREOF IN MY CASE)
In general, I think that cable TV is a waste of money. Sure, it’s a nice thing to have, but is it required and worth the money? For me, it’s a significant expense that is not worth the money.
Instead, I use Netflix to rent DVDs for entertainment! For $12.59 per month, I can rent 2 – DVDs at a time among Netflix’s really good selection of both older movies and newer releases (just recently watched The Dark Knight Rises, a cool movie!). They even offer a free trial membership for new members if you’re interested in taking a look.
CHARITY THAT I CONTRIBUTE TO (AND SAVINGS ACCOUNT I USE TO SAVE MONEY FOR IT)
The charity that I choose to contribute 5% of my take-home salary to each year is the National Multiple Sclerosis Society Blue Ridge Virginia Chapter. 2013 will also be my 5th straight year of me participating in the MS150 Bike Ride Event here in Virginia in June each year. My goal for the 2013 event will be to raise $7500 for the cause!
I got/stay involved with this charity for several reasons: 1) MS is in the same general category of neurological diseases for which I do research in graduate school (Alzheimer’s disease), 2) there is a great team that I do the bike ride with here in Virginia each year, called Grateful Tread, 3) my girlfriend runs clinical research trials for MS, and 4) I’ve learned that MS is a disease that very greatly affects not only the patients, but also the caregivers which have to tend to the patients as their motor functions degrade. With everyone’s help, I sincerely hope we find a cure for this disease in my lifetime! 🙂
As mentioned above, I donate 5% of my income each year to the MS society. To do this, I execute automatic monthly withdrawals from my checking account to an online savings account with ING Direct(recently acquired by Capital One). As I stated previously, I am a big fan of ING Direct, and would highly recommend it to anyone reading this. I like it specifically for saving for charity purposes because it enables me to set up specific sub-accounts that I can name as I please in order to better organize my savings.
CONDO HOMEOWNER’S INSURANCE
I have my comprehensive homeowner’s condo insurance policy through Erie Insurance. I purchased this through a local agent here in Virginia because the price difference was no different than if I purchased it directly from the company. I pay $36 per month for the coverage. The details of the policy are shown below:
- $150,000 of personal property insurance.
- $1 MM of personal liability insurance.
- $5,000 in medical payments to others (each person).
- Loss assessment.
- Earthquake coverage, but not flood insurance.
- Replacement cost personal property.
- Enhancement endorsement.
- Identity recovery coverage.
PERSON-2-PERSON / MICROLOANS
As part of my quest to achieve my life values each year, I invest $500 per year in microloans to help Latin American countries. I invest in these through Microplace. I also have a small amount of money invested inLendingClub in order to try out their platform.
Overall, I am very satisfied with both LendingClub and Microplace. However, it is important to understand that they are VERY different! Microplace offers microloans primarily to help spur small business development and empowerment of poorer folks in 3rd world countries (which is why I use them to invest in causes in Latin America). On the other hand, LendingClub is geared at helping fund folks in the United States with repaying their credit card/automobile debt, build pools, and green projects.
From a pure investment-return perspective, you can likely get a higher rate of return at LendingClub (9% on some loans at LendingClub vs. 2-3% at Microplace). However, I like investing with Microplace because I believe my Dollars can make a big difference in these 3rd world countries. On top of that, I’ve never experienced a loan-default with Microplace, meaning that the investments are very safe/conservative. Microplace is also owned by Paypal, a company with which I have a lot of experience.
INDEX-ETF INVESTMENTS
As you might have read previously on my site, index-ETFs have quite a few advantages (including about a 0.1% lower expense ratio) over indexed mutual funds. However, these advantages only hold true if you can trade the ETFs commission free (or with very cheap commissions), similar to the way you can trade the proprietary mutual funds with Vanguard or Fidelity.
Because of this consideration, the two places I use for ETF investing are Vanguard (primarily) andSogotrade (if for some reason there is an ETF I want to buy that is not a Vanguard ETF, such as the IAU gold ETF I invest in as part of my test run with Harry Browne’s Permanent Portfolio). Vanguard is great for ETF investing, offering 50 total ETFs tracking a wide variety of indices and sectors (although sector funds are generally not necessary for good diversification). The best of all is that if you buy and sell these funds in a Vanguard brokerage account, they trade commission free! Can’t beat that (Sogotrade.com will be discussed more in the next section).
“PLAY MONEY” INDIVIDUAL STOCK INVESTMENTS
As a passive investor, I personally do not think that people have any business investing in individual stocks (even if they are following the advice of a stockbroker or stock newsletter) with large amounts of their retirement assets. Having said that, I do like to “try my hand” at different stock investing strategies from time to time, but when I do, I make sure to only bet money that I can afford to lose 100% of. This type of money is called “play money.” I speculate with this play money in individual stocks in an online discount brokerage account.
In my mind, the two best discount online stock brokerages are Zecco (recently merged with and is now called TradeKing) and Sogotrade, with Sogotrade being slightly more favored by me since they offer cheaper commissions. Sogotrade offers unlimited stock and ETF trading for $3 commission per trade, along with no account maintenance fees or minimums. Tradeking also is very good, offering $4.95 commissions for each trade.
HEALTH INSURANCE
Luckily, the cost of Aetna Student Health Insurance is fully covered through my graduate chemical engineering program. As I’ve posted about previously on this site, buying independent health insurance can be extremely expensive, so I’m very grateful that this coverage is provided through my work!
Being student health insurance, it’s not necessarily the most comprehensive, especially compared to the coverage I had with the company I worked with prior to coming to graduate school. For example, you pretty much HAVE to go visit the student health center on campus prior to seeing any other doctor or specialist. This isn’t too bad I suppose, but it is slightly restrictive. Even so, the coverage has satisfied my needs thus far while in graduate school.
LAPTOP COMPUTER
As you can imagine, all of the things related to my personal finances that I’ve discussed so far have been electronically based. Therefore, a good mobile laptop computer is required for me to ferry back and forth each day to the lab where I work in graduate school. The laptop computer I use is a Toshiba Satellite L555D-S7930.
I purchased the 17″ screen laptop over 3 years ago now, and it still works great! The only “finicky” thing about the computer is the charging step. What happens is that about 1 out of every 10 times I plug in the laptop, the battery doesn’t recognize that the cord has been inserted, and I have to plug and unplug it several times until it registers.
PRINTER / SCANNER / COPIER
Often times, in my personal finance endeavors, I’ll need to email scanned copies of forms carrying my signature for tax/financial account application purposes and print off numerous pages from the Internet in order to learn more about specific topics.
In order to accomplish all of these things with one device, I use the Brother All-in-One DCP7065DN Printer/Copier/Scanner. As the name suggests, it is a double-sided B/W laser printer that also includes scanner and copying purposes. At $150, it was fairly inexpensive for all of the capability that I get with the machine. Additionally, the fact that it is a laser printer drastically reduces my printing costs per page! I would highly recommend.
CELL PHONE AND CAR
Ok, so we’re getting a little far out here, now describing what type of cell phone and car I use. However, I promised you above that I would be complete!
You might think that being a PF blogger, I would definitely have a high-tech smart-phone. However, I still rock out the old school Samsung flip-phone with no Internet capability. I can send text messages and make phone calls though! On top of that, I am also able to email myself notes throughout the day if I am somewhere without pen and paper. Additionally, I use a FREE transcription service through ifttt.com, which enables me to call a voicemail, leave a message, and then it will automatically convert it to text and email me the transcript and mp3 audio file. Not too shabby for being free, eh!?
For my car, I drive a 2009 Toyota Rav-4, recently upgraded from a 2004 Honda Accord DX. My family is a big fan of cheap, reliable Japanese automobiles, even though most Toyotas are actually made in US plants nowadays!
FINANCIAL ORGANIZATION SYSTEM
EMAIL / CALENDAR MANAGEMENT
TAX PREPARATION
ZERO-BASED BUDGET AND NET WORTH TRACKING
In order to track my net worth each month and my zero-based budget, I use a simple, self-created Google Docs spreadsheet. I prefer to track these things manually in spreadsheet format because a lot of the accounts I have are not available in the automated personal finance software programs available, such as Mint (free), Manilla (free), SaveUp (free), Personal Capital (free), and Quicken Home ($). However, if you’re looking to make this process a lot quicker, these programs can be a great alternative!
BOOKS I USED TO CREATE MY OVERALL PERSONAL FINANCE STRATEGY
Personal Finance for Dummies by Eric Tyson, MBA
Looking back on it all, I believe this was the first book I ever read prior to getting in to personal finance. In this book, Eric Tyson us with a very good, high-level look at pretty much every financial topic you could ever need to know about – investing for retirement, mutual funds, retirement accounts, educational funds for your children, insurance, life insurance, car loans, house loans, etc. This is one of those books that I like to keep around the house for the random questions that come up about topics that I forget about since they only come up every year or two (should I have term life insurance?, for example). Definitely worth the money to buy your own copy (used of course).
BOOKS I USED TO CREATE MY INVESTING STRATEGY
Stocks for the Long Run by Jeremy Siegel
In my opinion, this book is the best investment book ever written, and definitely deserves a place on any My Personal Finance Journey followers’ book shelf. This is essentially the closest thing to an “investment bible” on the market today.
In this book, Siegel analyzes everything – historical returns on bonds, stocks, mutual funds, the effectiveness of active money management, the performance of the stock market with Democrats vs. Republicans in the presidency, and methods for building an effective portfolio using Modern Portfolio Theory. It is also a great primer for explaining why individual stock selection (or active investing in general) simply does not work in the long term.
What Wall Street Doesn’t Want You to Know by Larry E. Swedroe
This was another book that I very much enjoyed. From reading this, I really would break this book up in to two sections – the first 250 pages of talk about stock market history and essentially serve to build a case/show evidence for why active stock management is a loser’s game. The second section (last 150 pages or so) was the most beneficial for me since I already knew a lot about stock market history and the pitfalls of active stock investing. In this section, Swedroe goes about telling how to build a portfolio that will achieve superior returns and lower risk. As was the case with Stocks for the Long Run and A Random Walk Down Wall Street, Swedroe repeatedly emphasizes the use of index mutual funds. The most useful lessons learned in the 2nd part of the book are described below.
1. The method to use for rebalancing a portfolio – using the 5% rule.
2. Describes allocation % targets between REITS, US large, small, and value stock funds, and international stock funds. There is a very handy table that I printed a copy of on page 307. Be sure to get a copy of the book and check out that page!
3. For higher returns, tilt more towards value and small cap stock funds (index funds of course)
4. The idea that a bond fund may indeed not be the best engine for the fixed income portion of your portfolio. Swedroe suggests that nowadays, it is so easy to invest in the actual fixed income security (e.g. t-bills), that it is more cost effective to just go ahead and buy it directly from the source instead of paying for the 0.1% management fee
A Random Walk Down Wall Street by Burton G. Malkiel
This is another gem that I would highly recommend for anyone who is a big believer in modern portfolio theory and the unlikelihood of beating the market long term by investing in individual stocks.
Like most books of it’s kind, the first part of the book is dedicated to proving that the market moves randomly, and that it is not possible to beat the market by buying and selling individual stocks or relying on active mutual fund management. One thing that I really like is how it takes the time to analyze the performance of both technical and fundamental analysis and how it compares to the performance of a mutual fund that matches the market indices.
The last 100 pages or so are where this book really makes itself worth the purchase. It describes in detail approximate target asset allocations for different age groups. For example, for mid-twenty year olds like myself, it recommends 5% cash, 20% bonds (5% of portfolio should be TIPS), 65% stocks (of this, 2/3 should be domestic, 1/3 should be international stocks with good exposure to emerging markets), and 10% real estate. As you can see, this goes in to a lot more detail about target asset allocations than the asset allocation calculators available on the Internet.
Another couple of key points that Malkiel discusses in part 2 of this book are 1) tax-managed funds for taxable accounts and 2) investing in the Wilshire index vs. the S&P 500.
1) Malkiel brings up the point that it is better to invest in Tax-managed mutual funds that fund houses offer if the account is taxable. This is a good idea for people that have more money at hand I believe. However, for myself, since my money is fairly limited, I do not have the $10,000 initial principal required to buy a tax managed mutual fund.
2) Malkiel also reinforces the important point that one should try to invest in the Wilshire 2000 index instead of the S&P500 index if you can only afford to have a limited number of funds in your account. The reason for this is simple: the Wilshire index represents a broader range of stocks, ranging from small cap to large cap, throughout the US markets. Therefore, this gives an investor more diversification than an S&P500 fund, since the 500 companies in the S&P are only very large cap stocks.
The Four Pillars of Investing by William Bernstein
This was one of the first books I read on asset allocation and index mutual fund investing several years ago. It really was what got me interested in learning more about how it all works.
One of the things that I like about this book is that it dedicates more time to explaining how to build a portfolio vs. spending half of the book explaining why to invest in index mutual funds instead of active management. It goes in to a lot of detail about the different specific options of mutual funds available to an investor in each asset size/class.
It even goes as far as to address how to best approach investing, starting with say $1000 (when you can’t afford to have 10 mutual funds). It then details how you build a portfolio piece by piece as you accumulate money over the years.
Highly recommended for a first book to read in learning to invest!
The Smartest Investment Book You’ll Ever Read by Daniel Solin
This is a great little book (170 pages and a very quick read at that!) that basically grazes over all of the topics in the books of Stocks for the Long Run and A Random Walk Down Wall Street. However, Solin keeps it to the high level view of things, and doesn’t delve in to the details that the others do. So, it’s good for getting a general message across, begin to set up your investing system with index mutual fund, find your correct asset allocation, and learn why stock brokers and active money management do not work!
The Intelligent Asset Allocator by William Bernstein
This is another great title from Mr. Berstein that addresses how to build and maintain a successful portfolio of index mutual funds. It has a nice section that addresses the importance of portfolio rebalancing as well. I especially also like the section of the book that describes in detail each of the recommended funds from the Vanguard fund family along with whether that fund should be held in a taxable or tax-shelter account.
Another very neat aspect of this book is the long list of investment resources at the end. Definitely worth taking a look at!
How about you all? What is your favorite personal finance account, tool, or book?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/manitobamaps/3234259892/sizes/l/in/photostream/
Step 1 in Personal Finance – List Out All of Your Financial Accounts and Calculate Your Net Worth
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Click here to enter my free $51.95 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is January 31st, 2013.
As part of my blogging goals for 2012-2013, one of the ongoing projects I’ve been working on since Thanksgiving has been writing a book called, 31 Days to a Financial Revolution – Automate Your Finances To Achieve Financial Success. As the name suggests, the book details a series of 31 approachable steps over a one month period that people can take to optimize their finances. Along each step of the way, 2-minute automation action items are implemented to increase the likelihood of the financial planning steps continue to be followed going forward.
At first, my goal was to just write a short 20-30 page eBook on one specific topic. However, when I started looking at all of the material I had already covered on my site (now at 804 posts total), I realized it was complete enough to tie together in to the form of a book.
From there, the question then became what would be the first step/day to get the financial revolution started! In thinking for a while about the first step that I would take to get my finances set up, the answer became abundantly clear. In fact, it was so clear and obvious, that I realized I had never even thought to actually write a post about it on my site, despite the extreme importance of the step.
The purpose of this post will be to correct this annoying little discrepancy and cover the first step that I think should be taken in personal finance – listing out all of your financial accounts and calculating your net worth!
Step 1 in Personal Finance – List Out All of Your Financial Accounts and Calculate Your Net Worth
Of course, this fear only causes them to get further behind on their finances. Why is is this? Simple – because in order to start getting your financial house in order to achieve financial freedom, the first essential step is to get a clear picture of where you are currently (i.e. where your financial mistakes or successes in the past have lead you to right now).
Not convinced yet? Let’s take an example of a fictional man named Mark.
In other words, in order to make continually informed decisions about your personal finances, you have to keep up with what your current position is!
So, how do you obtain this clear financial picture? Easy – it’s called a personal financial statement. Wait a second, aren’t financial statements complex? Not really, but just to make things easier, let’s call this a personal net worth calculation.
How do You Calculate Your Personal Net Worth?
In short, your personal net worth is equal to your solvent assets (investments, cash accounts, etc) minus your liabilities (debts). So, in order to perform this calculation, you have to keep a running list of all of your accounts and their corresponding balances.
Depending on personal preference, this listing of financial accounts can be done manually in an Excel (or equivalent) spreadsheet or automatically through free or commercially available personal finance software.
- Personally, I prefer to handle this process manually using a Google Docs spreadsheet. Google Doc spreadsheets are super easy to use, handle just like a regular Excel spreadsheet, and are automatically stored/backed-up online, enabling my information to be protected from computer crashes and also accessible from any computer in the world with an Internet connection.
- If you’re interested in automating this process with personal finance software, there are now many great options available. Some of the ones I’ve tried and like are Mint (free), Manilla (free), SaveUp (free), Personal Capital (free), and Quicken Home ($). The only reason I don’t use this type of software is because some of the banks I have my money stored in are not listed in the directories of this software.
Regardless of whether you decide to handle this tracking manually on a spreadsheet or automatically with one of the personal finance software alternatives listed above, the overall process flow is the same:
Step 1 – List out all of your accounts (and corresponding balances) containing your “marketable” financial assets. Shown below are some examples of the types of accounts that should be included in your list:
Got all of them listed out? Good. Now, add up all of the balances.
Step 2 – List out all of your accounts (and corresponding balances) containing your loans/liabilities (debts). Shown below are some examples of the types of accounts that should be included in your list:
- Credit cards
- Personal loans
- Boat loans
- Car loans
- Furniture loans
- Student loans
- Or anywhere else that you owe money
After getting all of these listed, add up all of the balances and subtract the total from your asset total to calculate your net worth.
Now, if you’re like me, you easily forget things like this because your life is pretty hectic with many different commitments. Because of this, you need to complete the following 2-Minute Automation Action Item to maintain visibility.
2-Minute Automation Action Item – Place automatic monthly reminder on Gmail or Outlook calendar to update your net worth listing as your account balances change.
How about you all? Do perform a similar tracking exercise of your financial position/net worth on a routine basis? If so, how often? Do you do this manually or use a type of personal finance software?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/59937401@N07/5856725357/sizes/l/in/photostream/
401(k) Hardship Withdrawals And How To Obtain One
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There are not many good reasons to tap into your nest egg, but when a good reason arises, it is important to know how you can obtain the money that you need. Although there are various ways to borrow from or access the money in your 401(k) account, each method has benefits and consequences that you should be aware of.
What Is A 401(k) Hardship Withdrawal?
What Circumstances Are Necessary For The Withdrawal?
How Much Money Can Be Withdrawn?
What Documentation Is Needed?
Denial Of Hardship Withdrawals
The Consequences Of Obtaining A Hardship Withdrawal
Share your experiences by commenting below!
***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/a/a2/US_Dollar_banknotes.jpg
2012 Year-End Financial Goals Review and Progress Update
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Happy New Year everyone! 2013 is finally upon us! I hope you’ve had a nice holiday season, full of some fun vacations and spending time with family.
Back in January of 2012, I set my financial goals for 2012. Since the year is now over, I figured it would be a good time to sit down and take a few minutes to review how I’ve done in reaching or NOT reaching (in some cases) the various targets I set for myself almost a year ago today.
Overall, I would financially rate the 2012 year as being quite phenomenal! I’ve been able to establish a good doggy emergency fund, max out my Roth IRA, contribute significantly to my Individual 401k, invest in my site’s future growth, and my net worth has increased 40% during the past year. Of course, I’ll go in to more details on each of these points below. Read on!
So, here goes, a progress update (in bold below) on how I did in 2012 reaching my financial goals. Enjoy, and I look forward to reading any comments you all have!
- Contribute $5000 (or ~$420 per month) to my Roth IRA with Vanguard this year (maximum allowed).
- Done. Nice!
- Reach net worth target for this year (not displayed here).
- Done and surpassed! Nice!
- Maintain target 6-9 months of expenses in cash reserve emergency fund in Dollar Savings Direct account.
- Done.
- Rebalance mutual fund portfolio to meet asset allocation target %’s (75% equity, 25% fixed income overall).
- Done.
- Obtain 30% ownership / equity in condominium. Pay $500 per month for condo mortgage payment.
- Decided to delete this goal. Instead, I have been focusing on putting more money away in my Individual 401k account.
- Put together a will and have it reviewed by a lawyer.
- Not done. Oops! Dropped the ball on this one.
- Continue to save money for trip to Grand Canyon.
- On track – Currently have saved $1670 for this trip.
- Invest $500 in Microloans with Microplace.com to support Latin American micro entrepreneurship. This equates to $41.67 to invest per month.
- Done.
- Donate $1,150 to Multiple Sclerosis Foundation in 2012 (5% of take-home pay in my graduate school research assistantship job).
- Done – Donated probably close to $1,500 this year.
- Fund raise $7500 for MS 150 bike event in June 2012.
- Did not achieve. Raised $6,000 though! 🙂
- Save 3% of take home pay each month (after taxes) for Dream Account.
- Done.
- $30 per month save for doing running races as part of health life values account.
- Done.
- Was not able to do as many running and bike races/rides towards the end of the year since I twisted my ankle pretty badly in October.
- $20 per month save for buying fresh vegetables as part of health life values account.
- Done.
- Save ~33% of blogging income (if any) + untaxed graduate fellowship income from my research job in a high yield online savings account in preparation for 2012 taxes.
- Done.
- $30 per month save for trips to visit friends in other states I have not seen in a long time.
- Done.
- $10 per month save for purchasing food for backpacking trips in the Blue Ridge Mountains.
- Done and was able to take a nice backpacking trip along the Appalachian Trail this summer!
- Contribute 20% of blogging income to Individual 401(k) with Vanguard.
- Done and surpassed. I just ran the calculation, and it appears that I contributed 67% of my net income from blogging to my Individual 401k account. Nice!
- Investigate and execute any business tax deductions I can for 2011 taxes.
- Done. Deducted home as a business expense with the help of my accountant.
- Use 1% home value home maintenance fund to fix various small things that are broken around my condo after 2 years of use. These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, and some pipes under the sink that need to be re-caulked. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account.
- Not yet done. Need to do!
- Execute 4 estimated tax payments for blogging + graduate research fellowship income on the following dates – 1) April 17, 2012, 2) June 15, 2012, 3) Sept. 17, 2012, and 4) Jan. 15, 2013.
- Done. I’ll be doing this again in 2013!
- Organize move in of my girlfriend in to my condo in June-July 2012.
- Done. She moved in during June 2012.
- Start saving a little money each month to attend the Financial Bloggers Conference, 2012 in Denver in September.
- Cancelled due to lack of vacation in graduate school.
- Save $111 per month until have a total of $1600 for health expenses for new Greyhound we adopted (for annual health checkup, Frontline/Interceptor, and miscellaneous health emergencies/treatments needed – Greyhounds can have a lot of health issues because they were bread for racing!).
- On track – It actually worked out pretty well since I just am using the money that I was accumulating for the FINCON12 above towards savings for the dogs.
- I will have the $1600 total after March 2013.
Mid-Term (3-5 years out) Goals:
- Continue contributing $5000 to Roth IRA each year and using dollar cost averaging.
- Reach intermediate net worth target (not displayed here, but is 1.42X my current net worth).
- Own a rental property by 2016.
Long-Term (greater than 5 years out) Goals:
- Obtain a net worth of $1,000,000.
- Own a home free of mortgage payments.
- Own a vacation home in the mountains or a ski resort.
- Accumulate enough funds not have to work, but will probably anyways because I would get bored.
In reviewing my progress, it appears that there were only 3 items that I was not able to achieve during 2012 that I laid out for myself. Overall, I am highly satisfied with this! Thanks to everyone that helped out to make this year great!
How about you all? How did you do in reaching the goals you laid out for yourself in 2012? What techniques do you find most effective in holding yourself accountable and on-track for your goals you set?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/smemon/4805089632/sizes/l/in/photostream/