December 31, 2007

A Look Back At 2007: Digging Out From A Negative Net Worth

2007 has been a great financial turnaround year for us. We went from a negative net worth of -$3,168.85 to a positive net worth of $23,873.25. That’s a $27,042.10 increase in 11 months!

2007 financial highlights include:

  • Paid off all of our credit card debt ($5,064)
  • Fully funded both of our Roth IRA's ($8,000 total)
  • Restarted my 401(k) contribution in April at 2%, and increased it to 3% in July
  • Increased our savings account balance to almost half of our $10,000 emergency fund goal
  • Paid down 25% of my wife's student loans
  • Sold one of our vehicles and replaced it with a vehicle that has less mileage, lower monthly payments, and more affordable insurance costs

As I set our net worth goals for the next 20 years back in April 2007, I wasn't totally sure they were achievable. Sure, I crunched some numbers and kept my assumptions conservative, but I could have been way off. While we still have 19 years left in the plan, it's comforting to have the first year in the bag and to have surpassed our 2007 goal. We are truly blessed.

Some financial plans for 2008 include:

  • Increase my 401(k) contribution to 4% in January
  • Fully fund both of our Roth IRA's ($10,000 total)
  • Begin accelerated payments on our 2nd mortgage balance ($52,648.72)
  • Increase our savings account balance to $7,000

I’ve refined our net worth goals table (click on spreadsheet below) to include additional information that I would like to capture each year including household income (not including commissions), % of income invested, and retirement savings. God willing, 2007 is just the beginning to our 20 year journey towards early retirement.

December 30, 2007

December 2007 Income Statement

We spent more than we earned in December. I was wrong last month when I said that we should not have any large annual expenses hit in December. We prepaid 16 months of my gym membership for $828. With the holiday and birthdays, we also spent $148.09 on gifts. Thankfully we spread our Christmas gift spending over a couple of months so it didn’t all hit in one month. I also bought a couple of pairs of work pants, shoes, and a shirt on sales for $166.03. We purchased our first term insurance policies and had to prepay 2 months ($78.86 total).

January should be a better month since I receive an extra paycheck (3 total), I plan to cash out a few vacation days, and I should receive my annual pay raise. Hopefully we can keep our expenses next month below our income.

December 27, 2007

December 2007 Net Worth Update (-$3,301.44)

December was the first decrease to our net worth since we began tracking it in February. Our net worth decreased $3,301.44 from last month to $23,873.25 (click on spreadsheet below).

What worked this month?
While December was a roller coaster month in the stock market, thankfully, our investments ended on an up note.

What did not work this month?

December was a bad net worth month because of my poor accounting methods earlier in the year. As I mentioned in a previously post, I have not been depreciating our vehicle values each month, thus, I have been over stating our net worth. Before closing out 2007, I wanted to adjust the vehicle values to give us a more accurate net worth. To reflect the depreciation, you will notice a change of ($2,085) in the asset column for Car 1 and a change of ($2,760) in the asset column for Car 2. It’s no fun taking a $4,845 depreciation hit in one month. So, beginning in January, we will depreciate our vehicles monthly at 1%.

What's coming next month?
The end of 2007 was rough on our net worth, but thank God we were still able to finish the year 8.51% above our net worth goal of $22,000. I will be posting a review of 2007 within the next couple of weeks.

January should be a strong month and an awesome start to 2008. I receive an extra paycheck (3 total), I plan to cash out a few vacation days, and I should receive my annual pay raise. Most of this extra money will go towards our plan to pay down our 2nd mortgage, but we will also begin contributing to our Roth IRA’s for 2008.

December 25, 2007

Merry Christmas

Merry Christmas!

My wife and I just returned from spending Christmas with her Mom (yesterday) and her Dad (today). It was a lot of fun, as always. We were talking on the drive home about how lucky we are to have such great families.

On a financial note, we were able to keep our gift shopping within reason this year.

December 22, 2007

Carnival of Personal Finance #131: Naughty or Nice Edition

JD at Get Rich Slowly did a great job putting together the Christmas themed Carnival of Personal Finance #131: Naughty or Nice Edition. My Well Rewarded post was included in the "Five Gold Rings" section of the Carnival.

December 19, 2007

Vechicle Depreciation Plan

I've reconsidered our depreciation plan for our vehicles. Instead of depreciating them at $200/month, I’m going to use a 12% per year (1% per month) depreciation schedule. This will more accurately reflect our vehicles decline in value over time.

December 18, 2007

Spending Money To Save Money

Our savings account just took a big hit. The 16 months of prepaid gym membership that my awesome wife bought me expires this month. Thankfully, we were able to score the same great deal that she originally negotiated: 16 months for $828, plus a free set of boxing gloves ($50 value).

The membership is normally $65/month, but our special deal ends up only costing $51.75/month. That equates to ~20% discount! The gym is only a couple of blocks from our condo, allowing me to easily shoot of for a class or to lift weights after work.

At my heaviest, I weights 205lbs, but have been able to gradually whittle it down to 185lbs. So, not only do I really enjoy the training, but it is also slowly helping me shed some weight.

December 14, 2007

Insurance Shake-up

We have decided to get term life insurance to protect us financially in case one of us. . . well, you know.

My wife found $500,000 10 year term life insurance from Farmers for $20.68/month for me and $18.60/month for her. We made sure there is an option to increase coverage for when we buy a home as well as to renew the policy at the end of the 10 year term.

We are also switching our condo insurance and my truck insurance from AAA to Farmers. The condo insurance will increase $35/year ($451/year vs. $416), but my truck insurance will decrease $254/year ($626/year vs. $880/year). Both policies will have the same coverage and deductibles as before. The money we’re saving on the truck insurance will help offset some to the cost of the term insurance. Plus, it just makes sense to have all of the policies with one company.

December 9, 2007

Well Rewarded

I love cash back rewards credit cards! My wife and I both have cash back rewards cards that we use for business expenses (reimbursed by our companies) as well as a separate cash back rewards card we use for our household expenses. We are able to charge 30% of our total monthly household expenses to the cash back reward card each month.

If you don't currently have a rewards credit card, and you are able to properly manage your credit card debt, I recommend looking into it. My wife was the mastermind behind getting us signed up for the cash back rewards cards and it’s really paid off. We have averaged $59/month in rewards from our various cash back rewards credit cards over the past 10 months. Annually, that would be more than $700, and over 20 years it would exceed $14,000. That’s free money! In addition, charging expenses to a credit card helps with our monthly cash flow.

After having been in a great deal of credit card debt previously and paid untold amounts of interest to the credit card companies, it’s nice to get a little payback. . . literally.

A great resource for comparing various cash back credit cards can be found at It's important to note that the balance needs to be paid off each month so that you don't incur interest, otherwise cash back rewards don't mean jack.

December 7, 2007

401(k) Increase Time

I just submitted paperwork to increase my 401(k) contribution by 1% next year (effective 1/2/08). This will bring us to a 4% total contribution to my 401(k) plan. This percentage is low because our first priority is to contribute the max to our Roth IRA’s each year ($5,000 each in 2008).

Based on my current income, a 4% contribution represents $2,646 annually. However, my annual review is also in January, and I would guess that my raise will be ~5% this year. If that assumption is true, the total 2008 contribution will be $2,778. In addition to my 401(k) contribution, I also receive company profit sharing into my 401(k) in September, which last year was $3,005.63.

Our plan is to increase my 401(k) contribution 1% each year until we reach the maximum contribution. By timing this increase with my annual raise, we don’t even feel the effects of the extra contribution money missing from my paychecks.

December 4, 2007

Vehicle Depreciation

You may have noticed that our vehicle values in the assets section of our Net Worth Updates have remained the same since March. We take good care of our cars, but they still depreciate. Therefore, we must make an adjustment to our balance sheet to account for the current value of the vehicles.

I had planned to adjust our vehicle values annually using the Kelly Blue Book value. However, now that I am faced with taking a $4,800 adjustment in one month. . . I'm rethinking my plan. For the first time since beginning this blog, we will post a negative change to our net worth in December.

To avoid this big hit and the associated sorrow every year, we will begin depreciating our vehicles in January at $200/month.