Friday, December 28, 2007

A Look Back at 2007

2007! The first year I started keeping track of my finances. I graduated from college in May of 2006 and took what I consider my first real job (current job) in September of 2006. Now I have worked for an entire year and have made significant financial progress.

I started keeping track of my finances more in depth in August of 2007. Back then my net worth started at $2,952. I know have a net worth of $5,321 for an increase of 80.25%. That is quite an increase. My best month was December which accounted for almost half of those gains.

2007 wasn't just a good year for my net worth. This was my first year out in the real world after college and I want to take a look at some things I did right that I am proud of and some things I did that were probably bad ideas.

First lets take a look at what I did right this past year:
  1. I began the year by opening a traditional IRA. I contributed 5% of my salary a month into the IRA until I was able to start contributing to my 401k.
  2. Once eligible to contribute to my company's 401k in September, I took full advantage. I contribute the maximum amount needed to recieve the company's full match.
  3. I opened an online money market account and funded it with $1,000 for emergencies through automatic savings.
  4. I got engaged to a beautiful woman who I love with all my heart. I can't wait to get married next year and spend the rest of our lives together.
  5. I took a nice vacation with my girlfriend (now fiance) to Mexico. A great experience and well worth the money to enjoy a vacation with her.

Now lets take a look at the things that could've gone better:

  1. I racked up quite a bit of credit card debt through the year before I got serious about finances. I paid for last christmas with my credit cards. I overspent on christmas trying to impress my family with the money I now make. I also paid for the Mexico trip with a credit card. I now know I would have been better off saving for things before I spend money on them and not racking up the debt.
  2. I bought a new bike and took out a loan to pay for it. The loan is at 0% interest and will be paid off so I won't owe any interest on it. I still count this as part of my current debt. The bike was an impulse purchase and if I would have waited a few weeks I probably would not have bought the bike.
  3. I opened up a stock brokerage account and tried trading stocks without really knowing what I was doing. I felt like I've read alot about investing but I ended up losing over a thousand dollars. I funded the account with $1,700 and now have about $600. I now plan on leaving the money in the stocks I currently have them in and earning dividends and hopefully seeing some appreciation over the next year. However, I absolutely will NOT add any more money to the account this year. Once I have a better financial base, I will consider trying to invest in stocks on my own. If I had not tried jumping into the stock market prematurely, I would have a net worth of about $7,000 instead of $5,300. In the long run this will be an inmaterial amount but currently, it would have been nice to have that much less debt or that much more into my retirement account.

So, I generally feel like I had a good year. I made some good progress and since tracking my finances have increased my net worth and lowered my credit card debt. Hopefully I continue to make good progress in 2008.

Raise for 2008

Today we were informed of our raises effective the first pay period of 2008. I will be recieving a 5% raise or $1,800. I am fairly pleased with this raise. It would have been nice to get more but I could have gotten less. This puts my salary up to 38k plus a bonus if we recieve one next year. I calculated that I will be saving an extra $480 in my 401k plus company match and I will have about $1,200 more take home pay next year then this year with the raise. Right now this money will be earmarked for paying down my credit card debt until I can rid myself of the debt. Then the extra money will be saved each month.

I have been working at my new job for about a year and 3 months now and am currently making about 3k more then when I started. I have also recieved over 5k in holiday bonuses. This is nothing to be ashamed of and pretty soon in another year or so my base salary should be over the 40k mark. I am looking forward to it.

December 2007 Net Worth Update

Today was pay day at work and since I have no more bills going out this month I updated my net worth on NetworthIQ. I had a feeling this month was going to be a good month. I am proud to say that this was the best month I have had since starting to keep track of my net worth earlier this year. The increase in my net worth from last month is 28.22% increase. The dollar amount is a $1,171 increase. This puts my total net worth now up to $5,321. I am extremely pleased to have crossed over the 5k mark before the end of the year.

My cash went up slightly this month. My stocks took another hit losing $223. I have sold out of my big losing stock and bought into a preferred stock that will yeild over 10% in dividends for 2008. My retirement account jumped up nicely by $617 for an increase in retirement assets of 23.31%. On the debt side of the equation, my credit card debt went down $279 or almost 10%. Overall my assets increased 2.67% while liabilities decreased 3.26% giving me a huge boost to my bottom line. These numbers do not include my big bonus I recieved this month from work or the christmas money I recieved. I did not put these figures into my net worth because they are in a joint account set up for my fiance and I's upcoming wedding.

The next step for me is that the fiance and I are about to combine our finances. I will be updating my networth IQ chart again probably this weekend or on January 1st and will get a good picture of where my fiance and I will be starting out together.

Thursday, December 27, 2007

The 4 Financial Books I Recieved for Christmas

This Christmas I recieved 4 financial books that I have been wanting to read. Three of the books are more about investing and one is overall personal finance.

The personal finance book, with picture to the left, is Dave Ramsey's Financial Peace Revisited. I am a big fan of Dave Ramsey after reading his book "Total Money Makeover." I believe if you follow his steps you will find yourself in a better financial position. He can help you get out of debt and not have to worry about finances too much. I am excited to get started on this book. I doubt it has any new information in it for me but it will be very motivational to keep on track towards my own "financial peace!"

The investing books I recieved are Micheal Covel's "Trend Following" and "The Complete Turtle Trader." I also recieved Timothy Sykes "An American Hedge Fund." I like reading about stock investing and about peoples success so these books will be very interesting.

So far I have started reading my first book which is the Complete Turtle Trader. It has been interesting so far giving the background of Richard Dennis. He started out with a hundred dollar stake and became a millionaire by his early 20's. He traded on the commodities trading floor in Chicago but soon moved to an office so he could trade all the markets. This book will be about how Richard Dennis trained some random people that answered an ad he put out in papers on how to trade. He let them trade his money and they all turned out to be very successful. This experiment shows that you can be taught how to trade and how to make millions of dollars. I look forward to reading more of it.

Wednesday, December 26, 2007

2008 Goals

This past weekend I sat down with my fiance and we discussed our goals for the upcoming year. We came up with a list of goals that we wanted to work towards together and then we prioritized them into order from most important to us to least for the year.

Goal #1: Our first goal is our wedding coming up in the Fall of 2008. Our date is October 11, 2008 and so that gives us about 9 more months to continue saving and paying for the wedding. Currently we have just under $2,500 in our wedding fund. We are putting another $250 in there that we recieved for Christmas. We have set up automatic deposits of $225 a month into the fund to save. We are also planning on putting our tax refunds into the fund. Any leftover money in our budget each month will also be put into the wedding fund. Our goal is to be able to pay for our wedding off of savings through the year and not have to tap into our emergency fund and house savings.

Goal #2: Our second goal for the year and a longer term goal is to save for retirement. My fiance will continue to contribute 5% to her work 401k. I have increased my contribution so that I will contribute 6% of my salary to my 401k. It is very important for us both to remember to keep saving for our future even though there are alot of current pressures to save our money for weddings and a house that we want to purchase. We have made the decision, however, that we will not compromise saving for our retirement.

Goal #3: Purchasing a house. We have decided to go ahead and look for a house this spring. If we find one that we like and feel we can afford then we will go ahead and make an offer. If we do not find anything then we will discontinue looking and rent for another year. We would like to keep our emergency fund above $15,000 after the purchase of a house. This means we need to not draw out any money for the wedding. This will give us a comfortable level to not worry about anything happening where we would not be able to meet our future mortgage obligation.

Goal #4: We want to ultimately bring our emergency fund equal to and over $20,000. This will equal about 6 months of current expenses for us. Currently, all our savings will be going to the wedding fund until the wedding. After the wedding we will be working on growing our emergency fund. The main objective with this goal is not using any of the money currently saved up for the emergency fund on the wedding.

Goal #5: Our last goal is to continue paying down our debt and eventually be debt free. Currently our debt consists of $2,500 in credit card debt, 2 car loans, 1 student loan, a 0% financing deal on some furniture, a 0% financing deal on the engagement ring, and a 0% financing deal on a bike. Our top priority is the credit card debt. We will be working towards paying this off as soon as possible and hopefully have it all gone by the end of the year. We are currently paying the car loans off each month with no extra payments. We are currently paying the minimum on my fiances student loans. We are currently paying the amount owed divided by the number of months to repay for the furniture, ring, and bike. The ring will be paid off this year. The furniture and bike next year. We are aggresively working towards paying off the credit card debt and then will work to pay down the car loans quicker.

These are our main goals for 2008. These are the things we want to accomplish and will keep our sights on throughout the year to work towards these goals.

Consolidating our Finances

The fiance and I have decided it is time to combine our finances and work together towards common goals. Starting in January we are going to get a joint checking account where our paychecks will be deposited. We will use this one checking account to pay all of our bills from. We have decided to each keep our individual checking accounts where we will deposit a small allowance each month for each of us to do with what we please. We will continue to hold our online money market accounts for different goals. We currently have the wedding fund which is a joint account. Seperately I have two other money market funds for different goals and she has one for her emergency money. We will keep her money market fund as our emergency fund. My two funds will be for insurance bills and the second for saving for gifts, vacations, other big purchases. We will try to get all these accounts put into both of our names within the next few weeks.

We sat down this past weekend and worked out a combined budget for January. I believe the budget looks pretty good and we should be able to stick to it. We have budgeted for retirement and savings for the wedding fund. We will also be paying down our debts.

Our main goals that we decided to focus on for 2008 were saving for wedding fund, saving for retirement, paying off bad debts (and eventually all debts), saving up to $20,000 in the emergency fund, and purchasing a house. I will write more about these goals in a follow up post and how we are planning on achieving them.

Otherwise, I will be combining our net worth figures into networth IQ soon and we will look to keep increasing our net worth month after month.

A Wonderful Christmas

This was a great Christmas for me this year. This was the first Christmas I spent with my fiance where we stayed together. We started our Christmas festivities off by going up to my hometown and going to Christmas Eve mass with my grandmother. Then the whole family got together at grandma's house for some pizza, visiting, and gifts. My fiance and I then went over to my father and stepmothers house for more gifts and then spent the night at thier house on the sofa sleeper. An uncomfortable sleep and probably not the best nights rest but it was ok. Up early in the morning to head out to my mother and stepfathers house for more gifts. We then had christmas lunch and it was off back to KC to the fiances family for christmas dinner and more gifts.

It was a busy couple days and I am exhausted. I was so excited to get to spend the entire time with my fiance. I love that she got to come experience how christmas is with me with my family and I enjoyed getting to experience christmas with her family as well.

The best part was seeing people open our gifts and seeing them happy with them. I think most people were happy with what we got them this year. I was also very pleased with what we got this year as well. We got some christmas money which we have already decided will go into our Wedding Fund to help pay for the wedding. Along with the money we recieved jointly a new nice silverware set, a digital picture frame, and season tickets to the Kansas City Royals. That last one is the one that has me most excited. Individually I got a few books, a couple cd's, a video game, dress pants for work, a paper shredder, and a sweater.

Overall it was a great Christmas spent with family and the fiance and I got quite a few things to enjoy for the next few months.

Friday, December 21, 2007

Why am I Such a Terrible Stock Investor?

I think I must be one of the worst investors in the stock market ever! I love the stock market! I read books about investing, read stories of other people turning small sums of money into large sums of money, do research into stocks and love everything about the market. However, I cannot seem to make any money in stocks.

I opened up an online stock brokerage account back in June and have lost over half the money I've invested. Luckily for me I started out with a small amount of money to begin with. I'm not sure why but it seems like every time I pick a stock to buy it plummets shortly after I buy it. This is a sad story considering how much I love the stock market and how badly I want to be a successful investor. It seems however that I would be better off just putting my money into some mutual funds and leave the individual stock picking up to the professionals.

For now, I currently own two dividend paying stocks in my account. They have gone down considerably since I bought them but I am planning on holding onto the stocks for a few years to see what happens. I don't think I'll be putting in any more money to my account for awhile until I have lots of money saved up towards all my other financial goals. Only then will I feel comfortable risking some money to "play" with in the stock market.

Just Increased My 401k Contribution

Well, I just walked down to the HR department and put in my form to increase the amount I contribute to my 401k to 6%. Starting the first pay check of 2008 I should be contributing 6% of my salary with the company matching another 4% putting me up to a total of 10% of saved for retirement next year. It's a small increase but I am working my way up slowly until I am personally contributing at least 10% myself. I'm not sure when the next time I will increase it will be but I felt like this would be a good time for a small increase since I should be getting a raise for 2008. I should find out about the raise the first or second week of January. I think it is very important to maintain the same standard of living even though I will be making more money. This is an effective strategy to save more money by saving any increases I recieve in salary every year.

Thursday, December 20, 2007

December is a Good Month!

I admit it, I was nervous heading into the last month of 2007. Along with December comes the big spending time of Christmas. Having a list of family members who expecting something from you for Christmas can put a damper on your budget and goal of a higher net worth. I was worried that this may be my first month since starting to keep track of my net worth back in August where I would have a decrease in net worth.

Now, I'm not so sure and definately not as worried. This month has been going great for me! I have completely paid off credit card #1. My retirement account has risen to the over 3k mark. I recieved a nice bonus at work that will go towards my fiance and my wedding plans. I made a budget for Christmas and stuck to it and actually came in under budget. I didn't buy my gifts this year with credit but instead used the cash I had been saving since October for this specific purpose.

So far the only downside I can see to this month has been my loss in the stock market. I don't have a lot invested in my individual stock account so I am not too worried about the loss. However it is dissappointing that I can't seem to make money with stocks.

December has been a good month for me! I am not sure what I am more excited about. Am I more excited for Christmas in less then a week or am I more excited for a week later when I get to update my net worth chart and see my progress? Both should be good days for me!

Retirement Accounts over 3k!

Ok, $3,000 might not seem like much for retirement so some people might not understand why I am soo excited to be over $3,000 in my IRA and 401k. Well, I am 25 years old. I just started saving for retirement earlier this year and have gone from $0 for retirement to just under $3,200. I like to think that that is a pretty good amount starting out.

I have set up an excel spreadsheet to calculate some projected retirement amounts. I have started with my current salary and figured a 4% annual raise. I have set up three different scenarios where I will contribute 10% total per year to my retirement with the returns being 5%, 8%, and 10%. Based on my calculations, I can hope to have $863,063 if I earn only 5% on my money. I can hope to have $1,657,763 if I earn 8%, and I can hope to have $2,676,029 if I earn a 10% return. Hopefully I can average 10% returns over the next 40 years to have over $2.5 million by the time I turn 65.

The excel spreadsheet has given me some goal numbers I would like to shoot for in the future. One year from now I hope to have $7,265 total in my 401k and IRA combined. This will require me to put in 10% of my salary and to earn a 10% return. Another goal is when I hope to cross the million dollar mark in my retirement accounts. The retirement simulation I set up shows me crossing over into the millionairre category by the time I am 56 years old or 31 years from now. I am hoping to accomplish this goal 6 years before that when I am 50 years old or 25 years from now. In order to accomplish this I will aim to sock away even more of my hard earned money for retirement when I am able. Hopefully I can average some good returns which will also help along the way.

Tuesday, December 18, 2007

Cigarrete Smoking is a Waste of Money

This morning on my drive to work I was stopped at a stop light and looked to my right to see a lady with her window down. "What is she doing with her window down!" I thought to myself before I noticed the cigarette between her fingers hanging out the window. "Oh, she is smoking." Apparently smokers don't care that it is only 30 degrees outside. They need to have their smoke and don't mind freezing their arses off to get it. The same concept can be seen when exiting the south doors of my office building where the smokers gather to have their cigs. I can't imagine wanting something so bad that I would stand outside in below freezing temperatures to get it.

I think smokers are idiots. There are the health issues and then the financial issues. I'm not sure on the price of a pack of cigarettes but I imagine it is around $4/pack. If you are a pack a day smoker, then you are wasting $28 a week on cigarettes. That is a total of $121.33 per month or $1456 per year. That is ridiculous. I wish I had over a hundred dollars a month in my budget to waste. It's even stupider when you think that they are paying out almost $1500 a year for something that is slowly killing them. I think I'll continue to save my money and stay away from the cigarettes.

Monday, December 17, 2007

How I Dealt with the Costs of Christmas

Christmas can be an expensive time of year. For me, I want to buy those close to me nice gifts. I like to show my love by buying them something that is really great and this usually means spending quite a bit of money. Unfortunately, I am not rich. I have quite a few family members that I will buy presents for this year. This list includes my mother, stepfather, father, stepmother, brother, sister, grandma and fiance. On my fiance's side we also have to get gifts for her two parents, her sister and future brother in law. This can get pretty expensive but I feel this year we did a good job keeping our costs low and still getting gifts that everyone will enjoy.

The first thing I did in preparation for the Christmas money spending season is that I opened up a money market account to specifically save for the holiday. I opened this account back in October with $50 and set up an automatic deposit of $25 every two weeks. Sometime in November I put another hundred in the account so that now I ended up with $275 saved up to spend on Christmas. This is an idea I would like to carry forward in the future with my fiance. Since we have the account set up, we will continue to put in $25 or so every couple weeks automatically throughout the year. This will help us cover all gift giving through the year and the big spending time of Christmas at year end. If there is anything left over we can spend that on ourselves or use for a different goal.

The next thing I did was set a budget. There are 8 people that I personally needed to get gifts for this year. This includes my side of the family and my fiance. I let her take care of her own side of the family but we used the same budget. We decided to spend a maximum of $50 per person. For my grandma we decided to spend $20 and for each other we decided on around $75.

Next came the spending. This year I asked everyone for ideas of what they wanted or needed for Christmas. This way I knew I wasn't wasting money on a gift that will just go in the closet and be forgotten about. Once I had a list I was easily able to find gifts for each person that were in my budget. I am very pleased with what I got everyone this year and don't feel like it is breaking my budget. My total Christmas budget amounted to $395 and I actually spent about $320. Because I prepared for these expenditures, I was able to use cash and take on no new debt. This is a big difference from a year ago when I racked up over $500 on the credit cards and really didn't have gifts that were any better then this year. I just had a debt cloud hanging over my head that was a big hassle to pay off.

Credit Card #1 Paid Off

I have finally done it! Credit card #1 is finally paid off with a balance of $0. This weekend when going over my finances and figuring out exactly where my paycheck for the second half of the month was going I realized I had enough to bring that balance down to zero. This has been something I have been trying to accomplish for the past 3 months and finally have made it. The next target of debt reduction will be the credit card #2. This card will be a little more difficult because I am still using it for gas. I get a 5% discount for gas by using this card and don't want to lose that. Therefore I need to make sure I am paying more towards the card each month then I put on it for gas. Towards the end of the month I will post more on my goals for 2008 and this credit card #2 will definately be a part of those goals. I'll do some math but I hope to have most of it paid off in the next year.

Holiday Bonus Time!

It's always a nice surprise when you get a big holiday bonus at work. I wasn't expecting a bonus but am definately happy and the money is needed. This year I got $3,300 for my bonus which amounted to just under $2,000 once taxes were taken out. I also didn't know that they would take out 5% to put into my 401k but I am happy they did. This adds an extra $160 or so to my 401k and more if they match with the usual match. The bonus money that I recieved in my bank account is going to be used for the upcoming wedding (October 2008). I immediately transferred the money into our joint money market account where we have automatic savings going each month to try to save up some for the different wedding expenses. The fiance has paid all of our down payments so this has me pretty happy that I can finally contribute something to the wedding. She is the one of the two of us with the most cash saved up.

There are many different things to do with that nice holiday bonus you recieve. I find it interesting to hear how the different people I work with plan on using thier bonuses.

Thier is CZ who has plans to use her bonus for a vacation for her and her boyfriend. I think this is a good idea because vacations are good experiences and not a waste of money. However, since she just bought a house with zero down and sometimes complains about money, I think I would look to save the money for an emergency fund or put towards the house.

Next there is RP. She complains all the time about having no money. I find it amusing because she wastes money all the time. Recently she just bought 6 video games for example. Another example is the gym membership for a year that never gets used and the glider excersice machine recently purchased that does not get used. I haven't heard exactly what they plan on blowing her bonus on but I am certain it is not going towards savings.

Last thier is CW. She seems to be the more financially smart of the people I work with. She is a fan of Dave Ramsey and sometimes refers to her budget so I know her and her husband work on saving and sticking to a budget. Since her husband also works here I expect they got about double a bonus. She said they are using thier bonuses to pay for a new needed roof for thier house. I would hate to spend my whole bonus but if it is needed then it will be worth it.

My boss of course asked me what I was going to do with my bonus. She thinks it should be spent on something nice for myself. I believe in saving. Last years bonus went into an IRA. This year I will use it to pay for the wedding so we don't need to take on any new debt. I am a little disappointed that I don't get to put some towards savings or current debt, but I am pleased that I finally get to put some towards the wedding and feel like I have contributed.

What will you do with your bonus if you get one?

Sunday, December 16, 2007

Net Worth Update

Keeping track of the net worth is one of my main goals with this blog. I use NetworthIQ to track everything and you can see the results in a graph on the left sidebar. I started tracking my net worth back in August of this year (2007). I am pleased to say that I have had positive months every month since through November which was the last update. My net worth started out at $2,952 in August and as of the last update was $4,150. This is a total gain of $1,198 or 40.6% in 4 months. I'm pleased with the percentage gain so far but the total dollar amount doesn't have me too excited. Here in a couple weeks I will update my net worth for December and give a new post about the year in review. I don't expect it to change too much from where the numbers were in November. This is the christmas season and that means spending money on gifts. My fiance and I do expect/hope to get some cash for presents from our family but this will go straight into the wedding fund which I do not count as part of my net worth. Coming up in the new year the fiance and I will be combining our finances and I will start tracking our net worth together. I wonder if this will make my overall net worth increase or decrease? She has a lot of cash but she also carries a student loan and car loan. Either way the goal is to always make progress and increase our net worth.

A New Beginning to this Blog

Well, I'm back! I have been gone for awhile as I decided not to blog anymore but have recently had a change of heart and decided I wanted to write some more about my life. I will continue to do what I had been doing in the past keeping track of networth and goals. I am leaving this blog open though to anything and everything I feel the need to express my opinions on or talk about. Moving forward this blog will probably end up being a lot more personal and less personal finance. Most people won't be interested in alot of the things I'm going to write about because this is going to have stuff about my everyday life. Not just my financial every day life. Stay tuned if your interested to follow my journey through life.