August 2006 Financial Status / Net Worth Update

Net Worth Update August 2006


Dude, Why So Much Credit Card Debt?
Newer readers may note some serious credit card debt going on above. In short, I’m borrowing the money for “free” and keeping it in safe investments while earning me interest. Please see my posts on taking advantage of no fee 0% APR balance transfers for more. Some recent examples are my $9,000 from Citibank and $10,000 from Discover Card.

I was supposed to write up a brilliant summary of all this stuff over the weekend, but instead I spent it trying (unsuccessfully) to convert this blog seamlessly to WordPress.

Thoughts
We broke $100k this month! Not really a big deal though, as it all depends on how you calculate your net worth. I’m more interested in the change each month.

I’m working this summer, so that’s the main reason for the healthy increase as opposed to previous months. (I also got a decent amount of free money from $20 Unwired Buyer bonuses.) Our living standards are the same as ever, so every extra dollar earned goes straight into the bank (whichever one is earning the best interest, of course!). I’m mostly motivated by a future home purchase, but we are still trying to strike a balance between saving cash towards a mortgage downpayment and putting away money for an early retirement.

On that note, I’m definitely going to open up a Solo 401k this month, can’t keep putting it off. Most likely at Fidelity, as no other good index fund provider has one with minimal fees. Unless I’m overlooking someone?

I also made some changes to the spreadsheet above, including merging my 529 funds into the “Brokerage” category for simplicity. My wife’s new 401k funds are also combined with the rest of my Traditional/Rollover IRA funds.

As commenter Susannah pointed out last month, I should really separate investment movements from actual cash savings. I haven’t done so this month, mostly due to laziness. I should really use Quicken, but I’ve had a bad track record at keeping it updated. Right now I just add up my individual account balances and go.

Comments

  1. Are you sure you’re at $3130 (for last month change in cash savings), and not $1880?

  2. Is the cash savings the mortgage down payment and your emergency fund? Or, is your emergency fund in the brokerage?

  3. Just curious. Why would you open a Solo 401K if you already have a traditional IRA? Aren?t the tax advantages the same with both? You can just put whenever money you would put into your 401K into your IRA. What am I missing?

  4. krispy – You’re right, I had the wrong values from last month. I must have not saved the Excel file before all the accounts were added in. Thanks!

    dixie – It’s all mixed in there.

    EAF – Because the Trad IRA is old, and I already maxed out my Roth IRA this year. The Solo 401k allows me to defer much more income into a tax-advantaged account.

  5. Thanks for posting this. I just remembered I gotta update my spreadsheet too. I focus more on cash-flow rather than the account balances, but it’s all in there.

    It’s insipiring to see someone doing it right!

    - Bryan

  6. Along with Fidelity, Vanguard and TIAA Cref are two excellent companies. Vanguard and TIAA are both “non-profit” companies, so they have tax advantages that Fidelity doesn’t have, consequently, they often have lower fees.

  7. Vanguard and TIAA-CREF are great, but my main point was that neither of them currently offer a Self-Employed 401k plan, whereas Fidelity does.

  8. I liked it when the 529 was seperate.

    I wouldn’t count a car as an asset. I know some people count their couch, gold clubs and their lawn chair as an asset. If it doesn’t appreciate or create cash flow I do not see it as an asset, but either an expense or liablity before an asset.

    Seems like a pain to use excel also as I’ve been spoiled with everbank. Everyday it goes into all the accounts I have such as 401k, 529, Roth IRA, credit cards, mortgage and I can see any changes and on the bottom it tells me my total assets, total liablity and net worth. Since the new security with emigrantdirect, it won’t update the way it used to. Basically everbank gives you the capability of something similar to quicken and ms money, but I never liked quicken or ms money.

    Thanks for posting an update

  9. Along the lines of Traditional IRA, Roth IRA, and Traditional 401K. My wife and I both have 401K plans. We would also both like to open IRAs this year. When we file jointly, our combined AGI is getting close to the $140K mark in which you are no longer eligible for a Roth IRA. I estimate in 2-3 years we will make more than is allowed under the rules to contribute.

    My question is whether or not we should open a Roth vs. Traditional. Right now I am leaning towards opening a Roth and would use that for the next 3 years, then open a Traditional. I would then just leave the Roth as it is and continue on with the Traditional. I don?t like the idea of rolling my Roth into a Traditional b/c that would defeat the purpose of opening a Roth in the first place and I would have to pay all of those taxes.

    Any suggestions?

  10. I use Yodlee via Bank of America, which also auto-updates everything. I can even access both ING Direct and Emigrant after all the recent security changes. I just use Excel to add up all the numbers in my self chosen category.

    EAF – I would do a Roth when you can, and then do a Traditional. In 2010, the income limit on Trad-to-Roth conversions will be gone, so no matter what your income, you can convert your Traditional to a Roth anyways! Unless the law is changed again before then, this basically removes the income limits for Roths.

  11. I had a real problem with BOA that I left when I switched to everbank, but I wasn’t aware of Yodlee. You aren’t just talking about an ACH transfer, you’re talking about a pag that shows you all your assets and liablities right?

    I’m wondering how they did it with emigrantdirect, since each time you login now they have random questions that you answered in the past. Did Yodlee ask you all the questions that were recently added?

  12. Financial Freedumb says:

    I really liked Yodlee, but when I left my credit union, I lost access. The more I think about it though, there are some concerns about giving a company so much critical information…I mean what happens if some hacker cracks their DB or some disgruntled worker decided to snake some financial info.

  13. Yeah, I just input all the questions and answers for Emigrant and ING.

  14. Steve the K says:

    On the subject of the credit card debt, I’m in the same boat, as it were. I got a CC with 0% APR on purchases until January. I’ve been using that as my primary CC, paying the minimum every month and putting the rest of that month’s purchases into Emigrant Direct. I’ve been consolidating unused credit limits on other accounts with the same company to ensure I have available credit line available. I may get to the point of having to request a credit line increase. At this time, my myFICO.com score is 761, so I’m still okay on that front.

  15. A question, why doesn’t anyone adjust their value of their 401K (any pre-tax account) with a reduction for taxes? Even a simple estimation of 20% would make it a more realistic number. I have always considered my networth to be “Sell everything” what would I have in my pocket.

  16. IRAs

    IMO – A young person should convert all traditional IRAs to Roth IRAs provided thir MAGI (roughly income – 401k contributions) is less than 100K. Or do it during the one year loophole when MAGI won’t matter – provided that loophole is still open.

    Whenever one leaves a job, they should roll their 401k into an IRA (better investment choices, better estate planning), then if possible convert it to a Roth IRA.

    I’m a big believer that we will have to pay the piper for our irresponsible goverment spending and borrowing in the future – so getting things into Tax Free accounts is very desirable to me.

    The younger you are the better those accounts are since the compounded earnings are tax free.

    Be careful with your credit card debt – you are absolutely right that taking free money and investing it makes financial sense – but your credit score will suffer – even when you pay all those cards off your score will reflect your credit available, number of inquiries, cards open, etc. Trying to get your score up when you are ready to purchase a home may not be as easy as you hope for. I agree with your strategy, but be cautious.

  17. Oh follow on for high income people.

    If you are in the phase out range for the Roth, or you cannot contribute to a Roth, open a Traditional IRA and contribute post tax.

    At some point in the future (when you make less than 100K MAGI or during the one year loophole) you can convert to a Roth and only owe taxes on the gains.

    PS: this strategy can be used if you make more than 95K but less than 100K (MAGI) to make a full Roth IRA contribution. Contribute your allowed amount to the Roth, before April 15th of the next year contriubute the rest to a traditional post-tax – then immediately do a Roth Conversion – you owe no taxes and get the full contribution into your Roth.

    Note: When converting Traditional IRAs to Roth IRA, always pay the taxes from cash – do not have the brokerage withold any IRA money for taxes – instead have your employer withhold more from your paycheck.

Trackbacks

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