Credit Card Debt
For newer readers, I have taken money from credit cards at 0% APR and placed it into online savings accounts, bank CDs, or savings bonds that earn 4-5% interest (much less recently), and keeping the difference as profit. I even put together a series of step-by-step posts on how to make money off of credit cards in this way. However, given the current lack of great no fee 0% APR balance transfer offers, I am mostly waiting on existing offers to end. I just paid off a large-ish balance this month.
Retirement and Brokerage accounts
Besides watching another market rally, we made a bunch of retirement contributions this month. Wife’s 401k is now maxed out at $16,500 for 2009. I made a $5,000 contribution to my Solo 401k. This makes us about 65% done with our goal of maxing out both our 401ks for 2009.
Early in the month, I also decided to go ahead and make our IRA contributions for 2009 (non-deductible due to income limits). So that’s another $10,000.
Cash Savings and Emergency Funds
We still have a little over a year’s worth of expenses in our emergency fund. I was supposed to use up some of the cash to make a principal prepayment this month, but didn’t do it due to a variety of reasons. Mainly, I wanted to do things in order and do the retirement contributions above first. We also found that we have a roof leak that may require some cash.
In addition, we have gotten some quotes on a solar hot-water system for the house, which seems like it would have a fast payback period of 2-3 years. A photovoltaic system would cost significantly more and have a payback period of around 8-9 years depending on size. Still researching this.
Home Equity
Using four different internet valuation tools – Zillow, Cyberhomes, Coldwell Banker, and Bank of America (old version) – I again took the average and took off 5% to be conservative and 6% for real estate agent commissions. The bloodshed slowed a bit this month. 🙂
All in all, more steady progress. I feel like I’m not learning a lot from these updates, but it seems to be a good habit to keep an eye on things.
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You have a $470K mortgage, but your monthly payment is only $553? Why the payment is so low?
@Sun – that is the principal portion of the mortgage payment (he just shows reduction in principal on Net Worth). My really rough estimate is that the interest portion would be more like $2000
“I feel like I’m not learning a lot from these updates, but it seems to be a good habit to keep an eye on things.”
I think you are 🙂 If you didn’t do it … you wouldn’t know it … you know alot more about your exact financial status than ‘most’ (alot) people i would imagine. All good stuff.
The house is the noose otherwise solid plan. Who needs a 600k now 400k house anyway with no kids both working probably 50+ hours / wk ?
I’m guessing your net worth would be double if you rented a new place in TX – same pay – no property tax or income tax –
Another year have over 500k net worth then wife quits to start family.
Either way you’re better off than 99% … Interested to see how you handle the Roth conversion. With my LLC next year I’ll pay myself minimal salary in 2010-2011 and will convert since I should have minimal to no income to keep it taxed as low as possible.
While you may not be “learning” much that you didn’t already know, tracking of assets/liabilities is a motivating tool to continue your efforts. There have been numerous reports lately about the simple benefits of just tracking your money, even if you haven’t created a solid budget.
Bottom line: Tracking provides the motivation to continue investing and make changes if necessary. But then again you already knew that.
I would like to see a monthly income statement to evaluate how well you and your partner are managing your expenses. I reckon a deep-dive into your monthly expenses would add quite a bit of value to your readers. It appears that you are saving quite a bit but there is very little visibility on how that is accomplished.
Trout
Yes, $2,000 in interest every month since I’m still early in the amortization! Just goes to show that if you really want to retire early, where you live is definitely a big factor. If I was willing to move I could probably stop working at least 5 years earlier. But I’m not, and I’ve made peace with that… more or less. 😉
Looks like you’ve given up updating the progress bars. If you give up on the monthly updates all of us won’t know what all the fuss is about! I personally like to see the bars, updates or things like that moving toward the completed mark, or just growing in general.
Didn’t you just post something about “if you just watch it, then it improves”… seems like you’ve been taking that advice all along even if you didn’t know/realize/post it before. Why question it now??
In another thought, you should try to predict next month / year’s monthly updates somewhere along the line and see how you do. There’d be some merit in figuring out what went wrong / right along the way and that might be even more valuable than simply “watching”.
Thanks for the tools, very useful. Please keep us updated!
Jonathan,
Since your wife maxed out her 401k already, is she losing a company match?
Ex: The company matches 100% up to 6% of her salary. If she makes $100,000/year, and she put in $16,500 after 7 months, that means she put in $2,357 a month, which is 28% of her salary for those 7 months. If the company matches up to 6% of her salary ($6,000 for the year), they would only match up to $500 a month. If she maxes out her contributions after 7 months, she got a match of $3,500, and she is not eligible for the remaining $2,500 due to the fact that she can not contribute anymore for 2009.
If my logic correct? I am assuming you considered this, so I want to hear your rational. Maybe she doesn’t get a match?
Thanks
I think you are much better off living in a desirable high cost area than just anywhere to save some money. Unless your whole family lived in the low cost area with you. So you work another 5 years, you never know anyway what’s down the road — and working really isn’t so horrible, is it? It gives you something in common with everyone else you know. I know people who retired early and weren’t happy either. I’d just like to work part time for the rest of my life, that would be ideal.
Is it possible to separate the new money and existing money in each account? Currently it’s hard to know how good you’re in selecting the portfolio because the increase % are the mix of both.
Uh yeah – please put a price on working 5 years vs not having to work another 5 years. I only work to live not live to work. And in only two more months I’m retired (40). Get to spend my time with my kids ( when they aren’t in school, exercise, hang out with like-minded people, donate time to charites (instead of the token “it makes me feel good” 50 bucks a month to United Way), start a home consulting biz for the winter mos, read some great books, take an afternoon nap, ….
Enjoy working.
Negative home equity already?
Very interested in your research on the hot water heater and photovoltaic system. Hope you will keep us updated about that.
Uhh… but it’s Texas, man.
It’s all a continuum of saving money vs. luxuries. Going from CA to TX may also result in salary reduction. I could live in a 4 bdrm house in TX, or I could live in a 2 bedroom apartment, or I could fit my family in a mobile home and retire even earlier. I could eat out 10 times a month, 3 times a month, or eat beans and rice plus vegetables at home every single day. You could fit a family of 4 in a mini-house that I posted about and live off of $10,000 a year. Think of how early you could retire then. Everyone has to find their own balance.
@Steve – That’s a good question. See my post on maxing out your 401k and true-up contributions. It varies by employer.
My job allows me to work anywhere in the world and I chose Austin, TX.
The primary reason California was eliminated for me was the cost. I think there is a reason things are a bit more laid back in Austin. You can earn half as much and live the same lifestyle. (I will never live somewhere that has state taxes again!)
In my mind, the difference between luxuries available in CA vs. Austin were minimal compared to the differences in cost of living which were significant.
I guess it is kind of like the difference between driving a Porsche and a Ferrari. Does the large difference in price justify the small difference in satisfaction? (It should be noted, I drive a Mazda3… : )
That said, I can understand people living where they want to live. I’m sure family plays a huge factor for most people as well.
Jonathan,
Maybe I’m misreading this, let me know what you think. Also, apologies if this is too blunt. It seems like what happened to you is a good example of why you shouldn’t prepay your house or sink lots of money into home equity, an asset with a low appreciation rate. Your house value clobbered your networth, while not having that money in equities caused you to miss out on a significant 45% market upswing.
My question is when will your credit card balance go back to a normal reflection of your monthly spendings? In other words, when are you going to make your full balance payment to the credit card from you 0%,no bt fee, cuz it’s been over 19 months since you took their offers?
Also, I think this whole have a huge emergency fund sitting in cash is not good advice for someone like you, i.e. a young person who has shown no predilection for getting into trouble with debt. You’re a responsible person, why not keep that massive amount of money in equities? No matter how mediocre the market is from here on out, I can’t see it not beating the cruddy return on cash. Also, its not like by putting in equities you won’t have access to it, and even if the market crashed like 30%, you’d still have a $70K emergency fund (in equities)
Looks like your mortgage payment went down $533 dollars either because of a refi, re-neg with the bank or because you have an arm that adjusted down.
I get feeling that you are not learning from these posts, but tracking progress is part of reaching any goal and that is one of the great features of your blog.
I appreciate it. 529 plans as a group have not done well. The WSJ just did a spread about 3 months ago on 529 plans. Have you decided to change your strategy there?
I just see huge home equity losses being propped up by a wife and husband every pay yet still going underwater. Kinda like the state of CA as well with I can only imagine how many 10s of thousands going to state taxes property taxes rediculous other state taxes (all going up to pay debt). As if FICA and FEDS aren’t enough?
Never filing a state income tax form rocks. And sorry, home debtorship isn’t my idea of fun. Give us our granite counters stainless appliances fully maintained pool top tier schools and the highest per capita family income in America (southlake TX look it up).
People in CA are getting hosed big time.
JMHO
I rent in nearby Keller don’t be fooled – stones throw from Southlake. Most here easily make 6 figures for any of the federal agencies or 55 and growing F500 companies. Bush did take care of Texas !
Keep payin those taxes Libs. When I convert to Roth in 2010 only Federal Tax comes put of that too.
@Rob — is there only one of you posting, or two? From the last post it looks like you are renting a home (with granite counterops, and a pool) right around a great school district. And previously, you said you are going to retire by 40? This sounds very interesting actually – I’m kind of impressed. I know someone around me who rents in the very best school district for about 1/3 of what most families have to pay to live in that area. I think that’s really a great idea in a way. I’m just kind of surprised that you would retire without owning a home – but maybe that’s not really necessary.
And by the way, congratulations Jonathan on maxing our your wife’s 401K in a year you are definitely seeing nice returns. I stopped contributing this year (my timing is always wrong, so no surprise there!), because I am saving for a variety of things right now. Yesterday was the 1st day my 403b was showing a balance that was a touch higher than my actual contributions for the last 12 years. I guess I should be grateful — hopefully the market keeps going.
Two words: short-term T-Bills. If you’re invested pretty much anywhere else, the next phase of economic collapse will wipe-out your savings.
I always enjoy reading the updates.
Rob – Quit being so obnoxious. Personally, I would rather work 10 extra years than have to live in Texas. I wish Texas would secede already.
I’ve looked through a few of your updates throughout the years and they are very uplifting to say the least. Its nice to see that consistent saving and investing works even in a mediocre market.
100k is a lot to have in cash however. Can you give us a December 09 update?
The problem with living in Texas…is that it is Texas.
I’ll take San Francisco and retire 5 years later any day.
It is all about priorities 🙂