Monthly Review 
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July ’08 Net Worth Monthly Review

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July was a month of peace and it was wonderful. No roof to replace, plants are flourishing, and life was nice and relaxing. Net worth increased 7.7% this month despite retirement accounts falling 1.93% this last month (yesterday’s nearly 3% increase in the DJIA will help correct that), mostly because we didn’t have any major expenses to record for the first time in what feels like a long time.

The only significant expense of the month was a wonderful wedding up by the Finger Lakes region of New York where we had a wonderful time. It was a Friday wedding so we drove up early to stay with a college friend. Her family has a cabin on Lake Canandaigua and she graciously let us stay there the night before. We’ve been up there before for holidays and it’s absolutely beautiful. The weather was wonderful, the water looked refreshing, and we were so glad to be able to have a nights sleep after a six hour drive. The wedding the next day was on Lake Seneca and the weather cooperated wonderfully. Afterwards, we stopped by Cornell as one of our friends showed us around his old stomping ground.

All in all, it was a great little weekend mini-vacation.

Irregular Income

As a full time blogger, I pay taxes on a quarterly basis. This means that my income will seem abnormally large for a few months, then drop down significantly for a month, then seem abnormally large for a few months… you get the picture. This is the case for all independent contractors, which is technically my employment status, and I don’t see a need to adjust earnings to account for this. To smooth things out I could adjust my earnings by a suitable withholding amount, say 25%, to make the number seem smoother but that seems like a lot more work than its worth. At the end of the day, the actual number doesn’t matter as much as the meaning behind it and I’ll know the meaning.

If you have irregular income and track your net worth, how do you manage it for your planning purposes? At the moment my income, while irregular, is still pretty stable within reasonable single digit variances. I think of seasonal contractors or teachers as the ones who face this most often when there is a lull in work, how do you, or if you even do, factor this into your net worth tracking?

Laughable Rollover Story

I’ve rolled over my 401(k)s from my two previous employers into Vanguard Rollover IRAs. With the first employer, I wrote about how you should liquidate your funds and then rollover, because otherwise you might find yourself with some dividends left over. Well, I cashed out the dollar or two in the 401(k) and took the 10 cent hit. Three days ago I received another letter, notifying me that my account still had forty cents in it. Unbelievable.

That, and the 401(k) at my last employer had a dollar or two left in them. Argh.

Oh, and the taxes you pay on the withdrawal isn’t even recordable on your return because it’s less than a dollar (and gets truncated).

The Future

Last month we talked about some super-long-term items and then some not so long term, one of them being a pet. That’s still on hold (along with the tankless water heater!) as we’re going to try enjoying life with what we have now rather than adding to it, but they’re still ideas floating around in our mind. Our dishwasher stopped draining so that’s the current minor headache (don’t know if it’s the solenoid, though we don’t hear the thud, or the actual drain pump failing) on the brain right now.

Update: I ordered the pump assembly from AppliancePartPros.com (I chose economy delivery, 4-7 days but it arrived the next day because their distributor is located in Williamsport, PA) and discovered a piece of plastic stuck in the old pump assembly when I removed it. We are lucky the motor didn’t burn out. I put back the original, turned on the dishwasher, and it drains perfectly! I’m going to keep the part around for a few days (thirty day return policy) just in case but it sounds like this mini-disaster was averted.

Until next month!

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10 Responses to “July ’08 Net Worth Monthly Review”

  1. Start-Up says:

    I have self-employed income, however, it is not my sole (and is definitely not the majority) source of income. I plan on opening a solo 401k and depositing all of my self-employed earnings so I don’t have to worry about making quarterly payments or adjusting my net worth. I think removing 25% of your income for each month when reporting net worth is sufficient.

  2. jim says:

    The net worth figure is on assets, so do I just discount the cash flow by 25%? Also, 25% is low considering you have to pay both sides of Social Security and Medicare; just for your own records anyway.

  3. Todd A says:

    To follow up on the prospect of pet ownership, I have to put in my plug for owning a dog. I believe there is no pet like a dog to comfort/console/and love you unconditionally. Man has been domesticating dogs for over 15,000 years, and, at this point, a domesticated dog interprets a human’s gestures & facial expressions more accurately than some of our closest animal relatives (apes, etc.). But, don’t expect a dog to be cheap. Besides the initial acquisition cost, there are annual vaccinations, food, haircuts (!), etc.. But, no pet will deliver on that investment like a dog.

  4. Start-Up says:

    You’re right about the 25% being too low. Since I’m planning on putting all of my self-employed income into a solo 401K I didn’t stop to think about what percent to actually use, but you do have to pay both sides of the Social Security and Medicare. Isn’t there a salary barrier that once you surpass you no longer pay Social Security, or your Social Security payments do not increase?

    As for reporting net worth I would take a suitable percentage (33% maybe) and remove that portion of your self-employed income before adding it to your assets. Although in the end of the tax year you will have to adjust to compensate for the difference due to estimation. I suppose adjusting once a year is better than four times. Although you could stick to the asterisk method and just comment or make a note that the values haven’t fully taken into account taxes.

  5. Matt says:

    As a fellow contractor for several years, I have a policy of setting 35% aside in a separate savings account. This allows for an easy net worth calculation by eliminating the figure entirely, as well as acting as a “psychological IRS withdrawal” meaning I’m never tempted to touch this money.

    I also cycled this money through short term CD ladders to solve the low savings rate problem, so that I can earn as much interest as possible for donating my hard earned funds to my favorite charity – the IRS (sarcasm of course).

  6. Late comment, but…

    WHOA was I surprised to see a you mention Canandaigua! Not to reveal TOO much personal information, but that’s pretty darn close to my hometown (the grocery store we frequented when I was growing up was the Canandaigua Wegmans).

    Small world much?

  7. Uh… one thing I forgot… it’s Canadandaigua Lake, not Lake Canandaigua, just for reference ;) Some with Seneca – it’s Seneca Lake.

  8. jim says:

    I’ll remember for next time that’s it’s Lake second and name first. :)

    Where is Lake Canadandaigua? :)

  9. Hahaha, I guess I went waaaaaaay beyond typos there! That’s what I get for not re-reading my posts before submit them!

  10. Lorrie says:

    Hey Stephanie –
    Wegmans is my favorite store!


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