Monthly Review, Personal Finance 
11
comments

June – August 2005 Monthly Review

Email  Print Print  

I’ve been a little derelict in my monthly reviews because I’ve fallen off the budgeting horse – but I have some good excuses! The month spent living in my friend’s basement plus the last month of not having the Internet at home has meant my computer at home has laid dormant for the better part of two months. Normally I’ve kept careful records on my computer but with the two month hiatus I’ve enjoyed not recording every possible transaction I’ve had. What you will read below is instead a summary of the last few months and major financial decisions I’ve made.



Housing:
Documented extensively in this long-winded and extremely boring linkfest of an article (unless you are buying a house, then I think you’ll find it fascinating), my rent went from a very affordable $600/mo. rent to a $1,900/mo. mortgage (which includes taxes, etc). I spent a month living in my friend’s basement (paying less in rent) which was an interesting experience. Sleeping is easier when you can close a door to your room… even if you’re absolutely certain no one is going to come in anyway. (this doesn’t even touch upon the amount I’ve since spent on improvements and other little things)

Fixed Monthly Costs:
The biggest drop was in transportation. With my girlfriend moving down, the EZPass bills of approximately $40 a month fall off the table. In addition, we’d each probably been paying around $120/mo for gasoline (I’ve kept accurate gas consumption records in a vain attempt to figure out if gasoline really matters) which was only $2/gal the last time I made the MD->NJ->MD trek.
The two months without Internet (and TV really) bills saved me about $40/mo, but that bad boy is back but only at $70/mo for Internet and cable TV minus whatever rebates I will be able to finagle.

Lunches:
I’ve stopped bringing my own lunches and have spent approximately $5 a day on lunch for the better part of the last two months. It’s not every day but when you live in your friend’s basement, it’s extremely difficult to prepare food. I believe I averaged about $20 a week, which is about $10 over my average while living at home.

Net Worth:
Based on bank statements, brokerage account statements, and other financial documents, I believe my current net worth to be approximately $63,913.60. (hovering close to what I reported in April this year) I do not include either the value of the home or the value of my car in this calculation.

Recently, my net worth has held steady despite earning an income because I’ve decided to put as much money as I can into the second mortgage, which has an interest rate of 7.585%. Given the “high” rate, I’ve tried to pay as much as possible and the mortgage (originally $29,500, of which I was able to pay off $10k immediately) is now around $10,000. I hope to finish it off within a year. (yeah, that’s the first semi-long term goal I’ve set for myself) That coupled with the expenses of owning a home and you’re looking at quite a bit of money being spent.

My Roth IRA also took a huge hit when Jamdat Mobile lost 20% of its value when it released earnings but my 401(k) has performed admirably, unfortunately I have cut by my contribution to close to the minimum (to get more cash on hand because of the home).

I apologize for the vagueness of this “summary” but I don’t have much else to provide in the way of recapping the last few months. I’ve tried to hit the major points and if there are some more questions you have, write it in the comments and I’ll try to respond.

{ 11 comments, please add your thoughts now! }

Related Posts


RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

11 Responses to “June – August 2005 Monthly Review”

  1. Dan Hopkins says:

    ……taxes & inflation are hard to “budget” for

    How do you budget for tax & inflation ‘expenses’ ?

    How much in ‘property-taxes’ do you estimate you will pay for your home … over the course of your mortgage ?

    How much dollar purchasing power do you estimate you will lose over the next 10-20 years, due to inflation of the U.S. dollar ?

  2. jim says:

    I don’t budget for either taxes or inflation, I don’t see why I would need to. As for property taxes, I don’t know how much I will pay in property taxes over the life of the loan/ownership but it’s pretty sizeable right now. It’s all based on assessed property values and a tax rate of about 1% in the county I live in.

    I think 3% inflation is always a useful “rule of thumb” when talking about loss of purchasing power so I believe a loss of 3% a year seems fair. (of course who knows what will happen)

  3. Aditya says:

    Do you have and ARm or an 30 yr Mortgage. I am assuming what ever r mortgage you have you are planning to pay waybefore that.
    DO you have student Loans sorry if you have mentioned that before.

  4. jim says:

    Yeah I have a little under $25k in student loans and I have a 30 yr mortgage… and I hope to pay it off way before that.

  5. Jarred says:

    I am a new reader, thanks to the NYT article and am very interested and impressed with your diligence and budgeting. I am a 24 year old tax CPA and find personal finance intriguing.

    Why pay off your 2nd mortgage so quickly? The interest paid is tax deductible and therefore your rate would be lower than you originally state. If you can invest better than 7% (an estimate of your current interest rate less tax savings) then you are using your dollars more wisely.

    This is backwards from Dave Ramsey’s advice of paying off your mortgage before investing even in your 401K, but I wondered what your thoughts were.

    Thanks
    Jarred

  6. Jarred says:

    Last comment as I have read on. Are you maxing out your Roth IRA? If your income limit allows you to invest in a Roth you should divert a portion of your 401K to the 4K in a Roth every year. When you retire and if you retire your tax bracket will probably be higher than it is when you are 24. Add to the fact that unless Jenna or Barbara marry and reproduce well, we will not have a Bush in office and therefore will probably have higher taxes when you are forced to withdraw from your 401K. Just a theory, however I would recommend maxing out your Roth rather than going all to your 401K.

  7. jim says:

    My Roth is maxxed out whereas my 401(k) isn’t.

    As for deciding to “invest” in my mortgage instead of something else, I think of it like this. I can pay down my mortgage and essentially save myself the 7%+ interest which was tax deductible or I can invest and hope that I achieve the historic 11% return of the S&P. Granted, the numbers aren’t entirely correct but I’d rather pay down the 7% guaranteed instead of attempting to achieve the 11%, on which I’d pay a tax on. I’m in the 25% tax bracket so on the 11% return, a quarter of it will get chopped away, or approximately 3.6% – which yields a net return of 7.4% which is less than my interest rate.

    If you’ll pardon the ugly and imprecise math, you’ll see the decision isn’t as clear as you may think. Plus, add the unquantifiable joys of being closer to owning your home and the decision is relatively simple for me.

  8. Shirl says:

    Hi Jim,

    I came to read your blog via the NYTimes link. Thanks for sharing a very personal part ofyour life with us.

    Jared’s comment about why pay off your second mtg when you can invest hits close to home as I’m in the same situation as you are (as well as many others as well). For me it’s definitely about having this extra debt on my shoulders as well as the guaranteed return of mtg interest rate. Doing this brings more piece of mind than investing the extra dollars. Sometimes it’s what alleviates the stress/worry that makes it all worthwhile.

    Lucky for you on the 20% contrib. rate to your 401k. I’m only allowed up to 12% ( due to the high compensation rule). I snicker at that, as I do not consider myself ‘Highly compensated’.

  9. jim says:

    I wish I was considered “highly compensated.” :)

    My contribution rate is currently now the minimum amount necessary to get the maximum matching money from my employer. John, in later posts, makes good points about the risks of 401(k)s and IRAs.

  10. John says:

    I like to chime in on this conversation on paying off your mortgage. I have been a saver all my life. So much of saver that I was always in the position of buying a house for cash instead of taking a mortgage even at the most expensive housing area in the country. Yet, when I brought my house many years I took the a the biggest mortgage I could so that I could invest in other areas. As interest rates drop, I decided to refinance my 9% mortgage. A no-brainer. As everyone knows interest drop further. I paid off my mortgage. Savings rates drop to .25%. The stock indexes haven’t paid off in 5 years. Blah, blah, blah. A mortgage was a watse of time in my circumstance. I had paid thousands in cost to get them. What I learned is that most people don’t get the full deduction of a mortgage, or people don’t get any deduction of a mortgage until they exceed the zero tax backet. Basically a mortgage is for people [who] can’t afford the house outright, or investors leveraging an investment for more gain.

    (Bolded text modified at John’s request)

  11. John says:

    Jarred wrote “…If you can invest better than 7% (an estimate of your current interest rate less tax savings) then you are using your dollars more wisely.”

    In today’s market, this is a pipedream. If you can consistently do this, quit your job because you belong in the hall of fame. Even if you can meet this amount you’re just breaking even.


Comments are closed for this post.


Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2014 by www.Bargaineering.com. All rights reserved.