Been Awhile

It's been awhile since I've blogged about my personal finance situation.  Things have been going well over the past few years.  We've received raises and a couple promotions and generally are better off than we were a couple years ago.  There's been some saving and some buying.  Some traveling thrown in there as well.  But all in all our net worth has fortunately continued to rise.  Although I haven't been around to give frequent updates here, you can see from the Net Worth IQ in the sidebar that we have been doing well growing our wealth.  So I plan on updating this site a little more often.  Mostly will be updates on how things are going but also some opinions of different personal finance issues.  Today I'd like to update on how we've been growing our net worth over the past couple years.

Investing

We've been making an effort every single month to put away money in some sort of investment.  My wife and I both have retirement accounts through work in which we contribute to every single paycheck.  This is automatic.  This has probably been the greatest contributor to our net worth increase over the years.

We also invest money as we can in taxable accounts.  I have latched onto a new strategy for investing and have started building a nice portfolio of dividend growth stocks.  I invest in companies I know and understand who pay out increasing dividends year after year.  Along with the stocks we try to put some money away into fixed income mutual funds.  These funds invest in bonds that may be less risky than the stocks.

Paying Down Debt

We continue to pay down our house and other debts such as student loans.  My wife was in a car accident where we ended up buying a new car after and we took out a loan to help with this.  After a short period of time I was also able to pay this loan off.  We also put a sun room on our house.  We financed this and each month make a payment towards this loan.  So overall I think our actual debt level has increased because of the sun room purchase.  But each month we scratch away at this total and eventually we will bring this down to zero.

Saving

It's important to save every month.  We keep an emergency fund as well as saving for short term expenses that I know will occur such as medical bills, insurance bills, vet bills and other random bills.  This money is kept in money market accounts.  While we aren't really earning much interest on this cash, I believe it is important to continually save in case we need it in the future.

Summary

So over the past couple years our net worth has naturally been increasing.  This will happen as long as you focus on increasing assets and decreasing debts.  The biggest gains have come from investing in retirement and taxable accounts.  We will try to continue this progress going forward.

Goal Progress Bars Updated

Just updated our 2009 Goal Progress Bars to take into account progress made for January. Looks like we had a fairly good month in the way of reaching our net worth goal. If the rest of the year is as good as January then we should be able to surpass this goal. As for our investment account goal, we only obtained 3% towards this goal. However, I am not concerned because we know the majority of progress towards this goal will happen in the later months of 2009. Thus I feel pretty good about our progress so far towards these two goals.

January 2009 Net Worth Update

I updated our net worth calculations today for January. I screwed up and saved over December so I had to go back and try to guess what the December numbers were. I know the November numbers and January numbers are correct. So our net worth increased by about 7%. This could be slightly off since I screwed up the December numbers but it's close. Overall we increased our net worth by about $3,000.

Assets increased slightly with contributions to our retirement accounts and the opening of our mutual fund investment account. Total assets went up about $900.

The big jump came from decreasing debts. We paid off a little over $1,000 on my car loan leaving us owing just over $4,000 more. Other debts also went down with payments to our Lowe's card and to our furniture bill. These other debts are at 0% interest so we are in no hurry to pay these off. Total Liabilities decreased about $2,163.

Good month overall. For February we will continue trying to pay off my car. Should look about the same as January.

Should We Invest or Pay Down Mortgage

At the beginning of the year my wife and I worked out a plan for our finances for 2009. We worked up a budget and made decisions about paying down debt, saving and investing. Most of the decisions were fairly easy such as deciding to aggressively pay down my car loan so that we are car loan free shortly into 2009. We also made decisions about how much to save for certain areas of future spending such as gifts, travel, car insurance, car repairs and home repairs. But one decision was not so easy for us to make. We had a dilemma to decide on.

Once we were done paying off my car we had to decide what to do with our extra cash flow each month. At this point our only debt left would be student loans at a really low interest rate and our mortgage. We also have a sizable emergency fund saved up in a money market account and cds. So our decision was between aggressively paying down our mortgage or beginning to invest more aggressively in mutual funds.

The risk with paying down our mortgage is that this money that we could have been investing will not be available to us in the future if we ever needed it. However, by aggressively paying down our mortgage we would be able to cut off about 18 years off our mortgage and save tens of thousands of dollars in interest.

The risk with investing all our extra cash flow is that money could be loss. With the drops in the market over the past year who is to say it can't keep dropping. Sure history is on our side and the market should rebound at some point. However we don't know when this rebound may occur therefore there is a risk for losing our investments. But it is highly unlikely that we will end up losing all of our money this way. The reward for investing could be a better return then we would recieve by paying down our mortgage. Also, this money will be available if ever needed in the future.

We made the decision to invest. We are willing to risk a loss for the possibility of a greater gain. We also want the added security that having this money in an investment account will give us. In our individual situation this is the best decision. There is the possibility that my wife will not be able to work in the future due to health reasons. If this were to occur we will feel more comfortable knowing we have this extra money saved up in case it is needed.

This decision would be different for every individual person. You must look at your own circumstances before making your decision. I am a believer in paying down debt. However with our own circumstances and the risk of losing an income in the future, it feels safest to me to invest this money. I believe that in personal finance there should be an emphasis on personal. Every individual must look at thier own situation before making decisions regarding thier own finances.

$7,500 Tax Credit for First Time Homebuyers

I've been reading a few articles about this $7,500 tax credit for purchasers of a home after April 8, 2008. This is good news for my wife and I as we recently purchased our first home back in April so we will qualify to take this credit. The way I understand it is basically an interest free loan from the government that will be paid back over the course of the next 15 years.

Why has the government provided this tax credit? It is part of the stimulus bill that they hope to help stimulate the economy with. Policy makers are hoping that by realizing they will be getting this credit, Americans will be motivated to go out and buy their first home. I doubt this will work. Partly because right now I don't think Americans have the money to go out and by their first home. My wife and I bought a home but not because of this credit. We were at a time in our life where we were ready to buy. Had we not been to the point of being ready to buy, we would not have went out and bought just because of this credit being offered.

However, this year I can claim this $7,500 tax credit because we did buy a house and starting in 2010 I will add $500 a year to my next 15 years worth of taxes owed. My wife and I are definitely going to take this credit. Not quite sure what we will do with it yet though. I have thought about putting it directly towards our mortgage saving us quite a bit in interest expense over the next 30 years. The other option and probably the chosen path will be to invest the money in our mutual fund investment account. This will hopefully give us a higher return for our money and will provide some sort of cushion if we ever have a drastic emergency that drains our emergency fund.

Recently, I've been reading about a new change to this tax credit that is up for vote by congress. The change would make it so that we do not have to pay back this tax credit. Therefore it won't be like an interest free loan but rather like free money for us. I hope this passes.

For more information on the tax credit refer to the IRS site.

Out to Eat Again!

Yesterday I posted about my growing waistline. Well today I didn't help matters by continuing some of the same actions that have contributed to the extra weight gain. Going out to eat at fast food restaurants during lunch. So now I am going to make a dedicated pact with myself. I will no longer eat out at fast food restaurants during the work week except for one day a week. This along with some excercise will help decrease my waistline and increase my savings. For god's sake man have some control over yourself!

No Savings? Let's Go On Vacation!

So there is a woman I work with who is so excited about her upcoming vacation. She is going on a cruise somewhere in the Bahamas so I didn't think much of it except that sounds fun. But today she was talking about how the heater in her car quit working and they don't have the money to fix it because all of the money they have saved up is to be used for thier vacation.

This blows my mind! You have no money saved up but yet you are going on a vacation? I guess at least they aren't putting the vacation on credit cards. But seriously people. If you don't have an emergency fund saved up and can't afford to get a minor repair to your car when needed then I think you need to rethink going on an expensive vacation. This is why America is in the mess we are in.

Bank Account Not Only Thing Getting Fatter!

It's been a little over two and a half years since I graduated college. I've been in my current corporate sit at a desk working on a computer 40 plus hours a week job since just after graduation. The effect has not only been a boost to my savings account and net worth but also a boost to my weight!

In college I used to live about a half mile off campus. Therefore I was walking back and forth between campus and my house three or four times a day. I wouldn't hang around on campus since I lived so close. I was also a runner on the track team.

Now, I don't get that same kind of excercise. I leave for work around 7:30 in the morning and get home around 6 that night. At that time I rarely feel like going out for a run anymore. But behold I think I've gained about 15 pounds since college and I can definately tell in my mid section!

So, it's time to get motivated. I'm motivated to spend the time on my personal finances and help my net worth grow. I need to be motivated enough to spend the time on my personal health. Keep the waistline trim and the heart pumping.

Hotpants: A Memoir

Recently I found out one of my friends from high school wrote a book. The book is titled Hotpants: A Memoir. The book is his account of growing up as a teenage cancer patient. It is an inspirational book about a boy trying to balance life in high school as a survivor of cancer, an avid cross country runner and a devout christian. Many lessons can be learned from this book about perseverance. This book really puts life into perspective for many people and I encourage everyone to check it out. If you might be interested in this book I have provided a link on the sidebar.

Professor Money's Classroom

A good friend of mine who is probably the only person who reads this blog has decided he wants to start his own blog. He is going to call it Professor Money's Classroom and wants to use it as a platform to try to teach people all about money and finance. He asked me to write about it and post a link here on my blog for him. I told him I would do this for him even though I told him I don't think anyone reads my own blog so I don't know how much good it will do for him.

When I checked there were currently no posts on his site but he has created it and should be posting soon. The way he explained it to me is that he sees people all around him all the time who don't know how to handle their finances. He told me how he always feels like he should step in and help people out but without them asking for his advice he feels it's not his place to give it. He wants to use his blog as a platform where people can go to for tips and to ask him advice. He'll be blogging about everything finance related in a teaching way. Rather then write about his own experiences he plans on writing in a more teaching style about different topics.

So I thought it sounds interesting to me. If anyone reads this blog feel free to click on the link and check out his site called Professor Money's Classroom.

Our Progress Since Buying a House

I wanted to do a post on the progress my wife and I have made since combining our finances together about a year ago. Looking back over our net worth statements I decided it would be beneficial to look at the period since we bought our house back in April up until now. This is a period of 9 months and I've wanted to see what we have accomplished and what I feel we need to work on. I also need to take into consideration that we put on and paid for a wedding in that timeframe as well so that takes away from our savings and debt repayment.

First comparing our assets. Comparing the two months I notice our assets has gone up just over $2,000. Most of this jump came from our Retirement accounts with a small portion coming from an increase in personal property (wedding rings, furniture). Our cash level has stayed about the same with a negative $62 difference.

Next, looking at liabilities we can see that our total debts have gone down. Doing the math shows that we decreased our debt by $13,447 since April. The majority of this came from paying off my wifes car and almost paying off my car. Our other debts have gone down slightly but nothing to get excited about.

Combined this gives us a total increase in net worth of $15,644 over the past 9 months.

Looking forward, I think the logistics of how our net worth will increase is going to change. Once we have my car loan paid off and our other personal debts paid off we are planning on changing our focus from paying off debt to accumulating assets. At that point the only liabilities we will still have will be the mortgage on the house we just bought and student loans. We are in no rush to pay off the student loans with thier low interest rates. As for the mortgage, we feel it will be more beneficial to grow an investment account rather then paying this off at a faster rate. I will probably add a little each month to pay down the principal but not as aggressive as I have been trying to pay off our car loans. So for 2009 I see an increase in our net worth coming from a combination of asset growth and decreasing liabilities. But the focus will be for the first half of the year paying off debt and then asset accumulation for the second half of the year.

Updated Progress Bars with 2009 Goals

I just updated our progress bars on the right with two of our 2009 financial goals. My wife and I recently opened an investment account and started contributing a small amount each paycheck to try to grow our investments. We haven't really figured out how much we will able to grow this account by this year but I think a goal of $10,000 by the end of the year is reasonable. Currently we are only contributing $200 a month but once we have paid off my car (hopefully by June or sooner depending on tax refund) we will be able to contribute at least $1,000 a month.

Another goal is to increase our Net Worth up to $75,000. I'll be honest, I just picked this number out of the blue. Hopefully with the combination of paying off our debts and saving in the investment account and retirement accounts we will be able to accomplish this goal. I'll update these progress bars at the end of each month!

Simple Low Stress Finances

A few months ago I decided that I needed a change in the way I deal with my finances each month. It seemed like would spend hours and hours and multiple nights a week every week of the month paying our bills, balancing our checkbooks and allocating money to savings and investment accounts. When I was not looking over our finances I would be stressing about them. Did I get all the bills paid? Should I have paid more towards this debt or put more in the emergency savings account? It was stressful and time consuming.

Well a few months ago I decided I needed to come up with a better way of dealing with our finances. I made an excel spreadsheet listing all the bills, debts and savings goals we have each month. I split up the bills and debts into two groups based on due dates. If a bill was due in the first 15 days of the month it went in one group and in the last 15 days of the month was in the second group. At the end was our different savings goals such as emergency fund, investment account, gift fund and vacation fund.

Now I only look at our finances twice a month. At the beginning of the month I take care of paying all the bills due those first 15 days. Then around the 15th of the month I take care of all the bills due the second half. After all the bills have been taken care of I allocate any leftover cash to our savings goals. For these savings goals we already have set amounts we want to try to save each month so I don't have to think how much to put towards each goal. Thus I only deal with my finances twice a month and don't have to worry about whether the bills have been paid or our savings goals have been met. It's my simple low stress low worry way to deal with our finances.

Preparing for Future Expenses

Many people feel overwhelmed after the holidays. They bought a bunch of gifts for family and friends and without the cash to pay for these gifts they used thier credit cards. Same can be said for some people with vacations or big house bills and car repairs. Without preparing for these expenses many people have to resort to the use of thier credit card and thus are paying for these unforseen or possibly forseen expenses months after they've been incurred. My wife and I decided to do things different. We intend to be prepared for these unforseen or forseen expenses when they incur and be able to pay for them in cash.



My wife and I have set up a system using ING online bank to prepare for our future expenses that we know about. We have done this by opening up different online money market accounts through ING for each of our known future expenses categories. The categories we currently save for are vacation, gifts, house, yard, car expenses and car insurance. We have a different account set up for each.



We set aside a set amount each month in each of these accounts to help us pay for future expenses. We may not yet even know what this money will be spent on. For example we set aside a certain amount each month for vacations while we currently don't have a vacation planned. But when the time comes that we do want to plan a vacation we will have the money. Same can be said for gifts. We don't know what we will be buying for gifts but we do know next christmas we will be buying gifts for family. Thus we estimate the amount of money we will be spending in the future for each of these categories and when we will be spending this money and set aside some money each month to be able to pay for these things in the future.



This is an easy planning technique that anyone can set up. I think it is always better to be prepared for the unknown then to let the unknown come by one day and knock you flat on your behind. Get prepared!

A New Day of Hope

Today Barack Obama has become President of the United States. This makes me excited. This makes me have hope again. With everything going on lately with this country I have faith that we can turn it around and head in the directions our founding fathers envisioned. Obama is the man to do it. The United States is sailing through a dark thunderous storm and Obama is just the man to lead us to safer waters! Good luck President Obama and to quote a great movie, "May the force be with you."

Easiest Way to Save $5,475 in a Year

Alright, I don't claim to be a financial genius but I have come up with a sure fire fool proof way to save $5,475 in a single year! It's so easy that once you've set it up you just sit back and relax and a mere year later you are $5,475 richer!

So what's the trick? I'll tell you. It's so simple I'm surprised no one has ever thought of this before. First you open up an online savings account. I don't care where you do it. I use ING but other good ones are through Capital One, HSBC or Emigrant and I'm sure there are others. Once you have this account opened you need to go in and set up daily automatic transfers. Set these transfers up to occur every single day for the amount of $15. And that is it! One year later you will have saved $5,475! Actually, you'll have more with interest! It's genius!

Now go do it!

Opened a Mutual Fund Investment Account

Mrs. Dreamer and I recently opened our first investment account together. It is an account through a local mutual fund company. We made this decision based on the fact that our emergency fund is fully funded to the point we want it to be. If we both lost our jobs tomorrow we would be ok without getting new jobs for at least 6 months. Probably longer considering we would cut back some on expenses. Since we have our emergency fund fully funded, we were unsure what to do next with excess cash we have each month after the bills are paid. We made the decision to go ahead and open a joint investment account. I'll post later on how we came up with this decision over other options such as paying off our mortage at an accelerated rate.

So once the new year was upon us we opened the joint account. We are putting our money in two different funds (a government securities fund and an asset allocation fund which invests in all different kinds of securities). Ideally the government securities fund will give us a solid return with fairly low risk on our investment while the asset allocation fund will offer us the posibility of higher returns. As of right now we are set up to put in a total of $200 a month towards these two funds. This will have to do for now until we completely pay off my car loan which we hope to have accomplished by June of this year. At that point we will allocate all extra cashflow each month into this investment account.

We don't really have a goal for this investment account. It will merely be in place to provide us extra security in case of bad times.

Where have I Been?

Wow, I really let myself forget about this blog the past few months. I'm sorry. I'll try not to let it happen again. For now, I will say I'm back and I promise I'll try to mean it this time!

So what's been going on in my life? Well, a lot. Back in October my fiance and I tied the not. She is now Mrs. Dreamer, love of my life. The wedding made it difficult for us to reach financial goals. We shelled out quite a bit of money for the wedding and we still have one more payment to shell out for our wedding albums when we recieve them. However, with the expenses of the wedding we were still able to increase our emergency fund to the level we decided we would be happy with. Not only were we able to increase our emergency fund to where we want but we also were able to pay off Mrs. Dreamers car. Accomplishing those two things while still paying for a wedding makes me very happy. 2008 was a great year for us and hopefully 2009 will prove to be the same.

Are You Supposed to Tip for Certain Wedding Services?

The future Mrs. Dreamer and I were talking last night about whether or not we are supposed to tip for certain wedding services we hired people to perform. She had read on some website that you are expected to tip the dj and hair and makeup people. I hadn't thought of this before but it makes sense that they would expect a tip. However, I don't believe they should.

For one reason, we have hired an individual person to be the dj at our upcoming wedding. The $700 or so price that we agreed upon will go directly to him, not some company he works for. Therefore I don't believe he should recieve an extra tip. Same goes for the hair and makeup person that future Mrs. Dreamer has hired. We are not paying a company who then sends out an employee. We are paying the person directly and they are keeping all the profit themselves.

What do you think? Am I missing something? Should we tip for certain wedding services? What services would require a tip? Any suggestions and thoughts are welcome!

I'm Back!

Ok, I've been gone awhile (read 4 months). The truth is I became a little uninterested for awhile in writing. I don't know why. But now, I am back. I am ready to go. I have lots of things floating around in my head I want to get out. So now I will try to update my blog more often and hopefully my faithful readers will forgive me for abandoning them and come back to join me once again on my progress towards wealth!