About My Credit Card Debt
As usual, let me prevent any scathing e-mails by first explaining my high levels of credit card debt. In short, I’m borrowing money for free and keeping it in safe investments while earning me 5-6% interest. Along with other things, this helps me earn extra side income of thousands of dollars a year. Recently I wrote up a series of step-by-step posts on how I do this. Please do check it out if you are curious. This is why, although I have the ability to pay the balances off, I choose not too.
Commentary
- IRAs/401ks: The Dow breaks some arbitrary number!! Wee. While the CNBC shows have more things to chatter about, I continue to make my monthly $500 401(k) contributions.
- Brokerage: This consists of $2,173 in Bridgeway funds (BRSIX) and $1,054 of currently idle cash in my Zecco account.
- 529: This pops up because I ended up not using a portion of my 529 for tuition as intended. I guess the rest of this 529 will be left to grow for another 20 years until our kids need it.
- Good clean living (not really) gets us to $71,929 of non-retirement funds, reaching 67% of our midterm goal of house downpayment. Total cash is now $60,725.
You can see all my previous net worth updates here. Looking ahead to future expenses, we may buy some new furniture.
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I often wonder it’s better to focus on one goal, i.e. for you the downpayment, or if it’s better to focus on multiple goals and thefore more aggresively fund your brokerage account?
And again, I’m just curious (w/o directly asking how much money you make every month) how the @$~%^~@#~$@#$~@$^%~@#%~@#$~ you were able to sock away an extra $5,622 last month!
CC profits only grossed you $922 and your brokerage account only jumped $25. Where’s the extra $4,675 coming from??? (While still funding IRA and Roth IRA, no less)
(Dayuuum, I wish I could find an extra $5K layin’ around my monthly stroke somewhere)
=^)
I think Jonathan has a full time job now and that’s where the extra cash is coming from. it is not that hard to approximate how much Johnathan is making now from the extra saving ….. hopefully this is not a big issue in his company.
Dong – I don’t know the answer to that one, but for us it seems like the house downpayment goal is the best so far. A 2nd mortgage might have an interest rate of 10+%, and we’d rather not pay that. Anything left over will get rolled over to retirement savings, anyhow.
Red – There is no secret. Our income is higher from new jobs and finishing school, and I make money from advertising on this and other sites. Both my wife and I work multiple jobs right now. Although my employers know about this site, I choose to make any link between the two for various reasons.
Oh, and we spend less than we make 😉
Do you know what the effect of carrying such large credit card balances is on your credit score? All the books and articles I’ve read about the Fair Isaac scoring system have said you shouldn’t carry individual balances higher than 30-50% of each card’s individual limit. If your credit score (and your wife’s) aren’t comfortably above 720, I would pay off that debt immediately so you can qualify for a prime mortgage loan. My score is hovering around 760 right now, but I’m scared if I use your method of carrying high credit card balances, it might drop significantly. What do you think?
Dong: Since Jonathan’s net worth update was a monthly one, you have to consider temporary timing differences that result from exactly what day bills are paid, when the paycheck is received, and when Jon did this update. During my own personal net worth update, my cash increased $3500 last month even though I’m only taking home $3400/mo w/a rent of $1225/mo. How does THAT happen?!!
I was just thinking of an analogy, for anyone who’s taken accounting 101. Jon’s net worth update is like a balance sheet — it tells you his assets and liabilities on a particular day. That’s only half the story, since you’d need to see his “income statement” to really see the whole picture.
Jonathan- You forgot to update your mid-term and long-term goal percentages from last month. Should be 72 and 15, not 67 and 14.
Also, I’m sure this has been asked before, but why aren’t you maxing your (and your wife’s) 401k contributions? I imagine the answer has something to do with achieving your mid-term goal, however I would argue that even if you turned around and borrowed against your 401K (temporarily) to reach your downpayment, at least you are taking full advantage of a tax deferral that you can’t do retroactively.
Jonathan: Which brokerage firm you are using to buy BRSIX? Scottrade? I also have BRISIX and it’s with Scottrade. And why have $1,054 idle? Nothing to buy?
Net worth status bars have been updated.
My 401k is a solo 401(k) from Fidelity, which doesn’t support borrowing. However, I can also contribute more whenever I want, for example in December to make up any difference.
BRSIX is held directly at Bridgeway – They have no minimums, no transaction fees, and charge nothing to transfer out later. However, it is another account with more paperwork. Might switch to a micro-cap ETF later on.
Not nothing to buy, no time to research anything 🙂 It’s supposed to be my future “explore” account.
Dong,
I am not sure where you live, but in Canada it is possible to do both. There are some banks that will give you the downpayment as an incentive or lend 100% of the purchase price. With these products you will not be able to negotiate as much of a rate discount on the mortgage, but if you are able to earn a significantly higher investment rate (and long term you definitely can), you will still come out ahead.
Touche…with a solo 401K, your contribution limit is much higher (up to $45K, depending on income). Nevermind, you should have no problem catching up after you raise the downpayment.
43% increase in the 529 in one month? What are you invested in to get that kind of gain? Or did you stash some money in there?
Great month – Jonathan!
Do you save for particular purchases within your cash savings?
For example, how are you planning for your next car purchase?
Jonathan
How come you have been able to sock away ~$65k in a Roth IRA. I diligently put in the max allowed for the past 5 or so years and my account is close to ~17-18k. Is it possible to open one of myself and one for my wife? Is that what you’ve done?
529 balance went up because I deposited money into it.
No particular goal with cash savings besides the house downpayment. I’m not really planning any future car purchases, I think our current cars are fine for the next few years.
I have converted 401ks to Rollover Traditional IRAs to Roth IRAs.
Yes, you can open and fund a Roth IRA for your wife even if she doesn’t have earned income, as long as your do.
Healthy increase this month, Jonathan! Kudos and huzzah.
Jonathan,
This homeownership has millions of hidden cost!! (maybe trillions)
Previous owners of my newly purchased homes did not give me the postal keys to the mailbox(as they are deceased)…now….i gotta pay $50 to have the locks changed. Also got to find the universal remote for garage door opener!!
So much effort on calculations! You really made outstanding work!
I am an avid reader of your blog. Congratulations on all your savings. It is inspiring to read about how much you save! Reading your column is one of my favorite parts of the morning. How old are you again? I am 28 and I can’t wait to have my fiancee get out of college to get that financial boost in power.
Good luck with finding the house. I just bought one and I am trying to redo the kitchen before I move in. I’m sure you use consumer reports already, but I find their website incredible for appliance research and I have just gotten interested in their “green” homemade cleaning solutions.
Congrats again!
Jonathan,
Is your identity anonymous enough that you would feel comfortable talking about how much money you make from the blog?
I would be interested in an article by you on blogging for fun and profit.
Awesome Jonathan. That you can retain ~$5k in cash from your income each month is an amazing stat (I don’t even bring home $5k in cash in my net paycheck).
I’m gonna be honest I am completely amazed aswell. If I could stash away that much extra money each month then I would be set for life after ten to fifteen years. You are an idol man.
Is that 5k just you or you+wife? Either way that’s wonderful and you’ll hit 1M in 16 2/3yrs all by itself!
I know the value of a car should be in net worth but it’s just too depressing since that number only goes down (and there is no guarantee you’ll get that number either. Even if you do “get the trade in value” at the dealer after the usual haggling involved did you really get it? I hate car buying and I’ve only done it once so far!). For me I just write the purchase price off and be done with it. This also makes buying cars hard to do, knowing that you’re going to whack off ~20k to your most coveted number in one go. That and at 5% interest, 20k in the bank would’ve taken care of my phone/internet bill forever.
Gotta say Jon you’re doing a grand job! You always seem to turn over 5+% month to month increases…I’m lucky to get 2% a month as you can see here
http://www.networthiq.com/people/LordOfTheManor
Keep up the hard work!!
I would second the idea of a blog post by you “on blogging for fun and profit.” Since you are both finally working, is it true that your net worth updates of each month includes all of your expenses, whether it’s the $3.49 latte or the $99.99 cable bill? Wow, so between the both of you, i’d estimate your gross salaries to be at least $5000 each? Is that correct?
Jonathan,
Do you and your wife only have 1 car?
No, we have two, we just track it on the net worth since we bought the car after starting this blog for legacy reasons. However, once this mid-term goal is met (or sooner), I’m going to stop tracking cars and maybe even home value.
Jonathan I have been using your website for the past 3 months and love it. My net worth is almost identical to yours and the excel sheet has been great help. I’m also saving to put a downpayment on a house over here in Orange County. However as you know the market is going terribly sour, and I’m afraid I will lose alot of equity just to get a decent tax writeoff. What are your thoughts on the market now? My income is over 200k per year and keep feeling pressured into purchasing for the tax write off?
Keep up the great insight!!!