February 2008 Networth Update

Usually my networth updates are posted on the 10th of each month. The update is early this time since 10th comes on a weekend and the probability that I would write a post this weekend is pretty low. My husband is going on a trip next week and would be away for a month .

So here goes the update…

No major damages. We did everything right except we haven’t sent a check to our parents yet. That is why the assets are up and the debts are not as low as we projected it to be. We will be sending the check next week. So the numbers would adjust next month.

Goals 2008 Revisited

Very early in December I wrote about my goals for the year 2008. When I looked back at them I felt I need to be more quantitative in order for me to guage the quality of my success. Of course, I am going to succeed. I am looking to increase the quality of my success by concentrating on my personal and financial improvement.

I had set up 5 goals – 3 financial goals and 2 non-financial goals.

1. My first goal was to increase our networth by $50,000. My Dec 2007 Networth update gives a more specific look at how we would go about achieving this. This also needs to be revisited. I overestimated our 401k contributions for year 2007. When I do my Jan 2007 Networth Update, I will try to provide a more realistic estimate.
   • Cash reserve : This is our emergency fund plus our monthly account balance after all bills paid. We will be falling short of our goal for the first two months because of unpaid vacation days and vacation expenses. But we are going to try and make it up during the rest of the months.
   • 401k contribution : There was a delay in setting up the account in december. So it is currently at $400 compared to the estimated $1633. For the year 2008, we are going to max-out the 401k contribution. Since the employer match is 4.5%, the total balance at the end of year 2008 in the 401k should amount to $20,000. If I change my job to a full time employee (currently, I am a contractor), then our 401k could potentially double. This is one of the reasons why I am looking to find a new job.
   • Credit Card Debt : We have stopped using our credit cards except in cases where there is no other option (like online booking etc). And when this happens, we pay the card in full immediately to avoid any finance charges. The amount that we currently hold in credit card debt has a 0% APR until Sep 2008. To pay it off before this date, we need to pay $300 per month towards the card. The balance end of year 2008 should be 0.
   • Car Loan : This is another big debt we have. This might go up during the year 2008 because we might buy another car. We need to sell my car and buy a new one. We don’t intend to buy a second hand car because we will be using it for a very long period. Since we are looking to buy a SUV, we might be hit hard in this one category. I know a lot of personal finance bloggers do not agree with our plan, but we personally think this is a expense we need, and not just a want. If I get a job that pays more than my current income, It would be set aside to pay for the new car.
   • Loan from Parents : We will be paying back about $5000 every two months to our parents. This should bring us to 0 balance in about 8 months, probably sooner.
   • Mortgage : We are going to just pay the minimum on this loan for the year 2008.
2. My second goal is to learn about investing in stock. I opened an account at the virtual stock exchange. I created a portfolio and I am playing a game. It is fun and I am learning. I read all the blogs listed in my blogroll everyday and I am gathering all the information that this world wide web has to offer. Also I have started to watch CNBC whenever I can. I intend to continue doing this.
3. Roth IRA isn’t happening. We would not qualify and so this goal needs to be dropped.
4. Finding a new job : I am done with updating my resume. I have a few contacts who are going to get a first hand look at my resume. I am targetting Feb or March to have a new job. It would be nice to get a sign on bonus.
5. Get a promotion : My husband’s goal this year includes getting a promotion at work. Mabbe he needs a promotion at home too!!!
6. Exercise : I started researching a few fitness centers. But the fitness center facility in my own community opened and so I dropped the idea of spending money elsewhere. I signed up at Calorie Count Plus. I have started to log my food intake and activities during the day. I know how many calories I should consume and how much I should work out to attain my goal weight.

Apart from these I will set one goal per month. For January, it is to  ”Get rid of unwanted stuff”.

Goals for January 2008

Apart from the goals I already set for the year 2008, I am going to set one specific goals for each month. This month is going to be “Get Rid Of Junk” month. There is a fair amount of STUFF that has been lying around in our storage for several months now. I will take photographs of each of this item and post them on craigslist for sale. Some of them might be for free too. I have to start looking at how to price them (if they are worth any!!!).

With respect to our financial goals for January 2008, the networth update will be on 10 Jan 2008. We are expecting to be short of our goal. Couple of reasons are our last minute vacation plans and over-estimating our 401k contribution.

Emergency Fund

Why do you need an emergency fund?
     An article at bankrate.com outlines in great detail as to why an emergency fund is required. A few of the unexpected financial cracks are
     1) Car breakdowns / repairs
     You never know when your car is going to breakdown. You cannot anticipate this. Though you might have car insurance, you might have to pay a minimum deductible before your insurance covers the rest. This minimum can range from $100 to $2500.
     2) Losing a job
     Both me and my husband hold high tech jobs. So there is always a chance of losing our job with the market fluctuations. We need to have a reserve that totals to atleast 6 months of our household monthly budget.
     3) Last minute travel emergencies or vacations
     We don’t put aside money for travel. So when we plan our vacations, it would come out of that month’s income. We would try as much not to touch our emergency fund.
     4) Medical emergencies
     I haven’t faced one. But I would like to have about $10,000 for medical emergencies.
     5) Safe feeling
     I personally look at investing in stocks and mutual funds as a long term investment. So when the market fluctuates and goes south, the emergency fund would keep me from making any impulsive decisions to buy or sell any stocks.

How much money in an emergency fund?
     Including the above categories, the amount that we are comfortable for the emergency funds is $50000.
 
Where should you have the emergency fund?
     1) 3-month CD : I do not prefer this one because I will not have access to the account for 3 months. For me this is not ideal for an emergency fund. Also online savings account offer almost the same interest rate as those of 3-month CDs.
     2) short term bond fund : Same as the 3-month CD
     3) High yield savings account : I pick this because of the ease with which I can access the money and also because of the competitive interest rates.
 
When to use the emergency fund?
     This is a habit I want to emulate from my father. He saves money for a future event expected and unexpected. But when the event occurs, he tries as much not to use the emergency fund. He tries to cover it with that current months income. I think this is the best way because it is very hard to set aside money. I would prefer not saving anything for one month than touching what I have already saved.
 
     My goal for year 2008 looks at filling 80% of our emergency fund. The rest would go towards reducing our debt. It is a conscious choice that we made. Any extra income that we receive would be funneled into our emergency fund. So if everything goes better than we estimate, we should have our emergency fund completely funded by end of year 2008.

Goals Keep Me Focused

As I read the posts from each and every personal finance blog, it is extremely tempting to get my feet wet in the stock market. All that it takes for me to keep focused is my goals that I set forth in December 2007 Networth Update. It makes me realize that my goal for the next year is to fund our emergency savings account and pay back our parents. When I look at the goals, I know that it would be stupid for me to take the plunge into taking the risk without having a fall back strategy.

Another good thing that keeps me focused is that this blog makes me feel answerable to all my readers. Thanks to everybody who reads my posts. It really helps me stay on track.

After saying all this, I should probably confess about something that is going to put a small dent in this month’s objective. We are going on vacation this month and it is going to cost us. But I promise to save wherever I can and will still aim to reach this month’s target.

Bloggers Rock…Readers Rock and Setting Goals Rock!!

December 2007 Networth Update

This is my first networth update. Things did go really well because of a bonus check. I have set goals for the next month and for the next year.

We are projecting a small fall in the cash department since we are paying some money back to our parents. The good thing is that the 401k is set up. We are expecting to have some money before the next update into the 401k account. There was a jump in the credit card. But there is no interest on the credit card for another 9 months. I don’t intend to use the card anymore. So it’s only pay back time on the card from now on. The other loan payments would go just as scheduled. No extra payments towards the loans.Will keep you updated next month on our progress

Personal goals

Attaining personal and financial goals need benchmarks. Benchmarks are a means of evaluating if the progress made towards the goals are in track. I am going to write down my personal goals in this post and going to track them once every month or so to check where I am headed.

FINANCIAL GOALS:

1) Increase our networth by $50,000 by end of year 2008 : With us being a 2 income family and no kids [don't know what would be the status by end of 2008 ], I think this goal is achievable. To brief our current financial picture, we bought a condo in the very recent past. We have two mortgages (80-10). Also we have no money invested for our retirement. No money invested for any future education for me and my husband. So we are pretty much at our starting line. For the past month or so, I have been reading some personal finance blogs. These have helped us to analyze our monthly expenses. We have come up with a list of ‘needs’. We have also started to save some money in a high yield savings account. I will write in more detail about these in my next post.

2) Learn about investing in Stocks : My goal for the year after should potentially include investing in stocks. So I will be spending some time learning about stocks and the investment strategies during this year. So when we have enough money stocked up for our emergency funds and some portion of our loans paid off, we should be informed enough to get our legs wet in the stock market.

3) Invest in Roth IRA : I am very sure that we would not qualify for next year’s Roth IRA investment. About half of this year I was not employed. This would definitely make us eligible for Roth IRA this year and I am doing it to the full extent.

NON-FINANCIAL GOALS:

1) Find a new job : The job I currently have is good. It pays good. But I don’t seem to be motivated. I need to find a job that is more challenging. I will work on my resume and find a new challenging job.

2) Exercise : Before buying our new place, we always lived in an apartment complex that had a fitness center. It was a fairly important factor when we looked for a rental. Truth be said, we probably used it 10% of the time that we intended to use. I think we set ourselves to fail even before we started. We did not build our exercise routines slowly. We jumped into it with a goal of hitting the gym 5 days a week. The building we currently occupy will be opening a fitness center facility soon. But I am going to find a gym close to our home and use it once during the week(Saturdays). We will increase the usage when we are comfortable with this routine.

There I have set it out. I have never set any goals until today. I was convinced that setting goals is setting ourselves for failure. I have told my friends that if we really wanted to do it, we wouldn’t need goals. But I see that the older method did no good for us. I am willing to try this method. I will be happy to accept my fault if these goals help us.