Balance sheet
As I had mentioned in my previous post, we are at the starting line of our goal to increase our networth. This post will provide a brief outline of our assets and debts. I will also provide an outline of how we intend to spend our second income in such a way that it increases our assets and decreases our debts.
We have two mortgage loans and an auto loan. We borrowed some money from our parents for our house down payment. We have about $2000 in our credit card. Our assets are our newly bought condo plus whatever we have as savings. Apart from these, we intend to buy a 46″ LCD HDTV.
After calculating our monthly expenses, we have decided to use my husband’s income to cover our monthly expenses including loan payments and household spending. The second income would be directed towards savings and debt reduction.
The first picks on our debt list is our second mortgage (the one with the highest interest rate) and the money borrowed from our parents (since we pay no interest on them). We would be making extra principal payments of $1000 for the second loan every month. We would be setting aside $1000 every month towards paying back our parents. This would be put in a high yield savings account and will be sent to our parents once it totals to $5000. By the end of year 2008, the principal amount on second mortgage should have reduced by an extra 12k and we should have paid back our parents money in full. With all the other payments we make towards the other loans, our total debt should decrease by 41k.
On the savings end, we intend to add about $2000 per month into our emergency fund account or retirement account. That should increase our assets by 24k. The condo might depreciate in price or might stay the same. But we ain’t selling the place until the price appreciates. So I am estimating the value of our condo to be the same as we bought it for.
By the end of year 2008, if we stick to the plan, our overall networth would increase by 65k. This is slightly higher than our second income after taxes. But I have always believed in setting slightly higher goals and trying to reach them than setting lower expectations and being easily satisfied with achieving them.
Tomorrow, I will discuss our monthly spending and how we intend to redirect some of our extra spending towards buying the TV.
