Finances Gone Naked

Net Worth January 2010

2010-01-02T18:58:00.000-08:00

Our latest net worth check

DEBT:

House: $115,976.02
Car #1: $19,920.34
Boat: $33,971.51
My Student Loans: $51,637.15
R's Student Loans: $43,867.71
Discover: $4,417.12
Citibank: $2,831
Cabin: $268,439.02
Total Debt: $538,228.87

ASSETS:
Kids 529 Plan: $5,943.41
Blue Chip Mutual Fund: $9,319.34
ING Direct Savings: $210.00
Growth and Income Mutual Fund: $3,894.08
NW Mutual TSA: $3,436.55
My State Retirement Account: $13,660.91
R's State Retirement Account: $10,707.08
My State Retirement IAP: $13,660.91
R's State Retirement IAP: $15,563.78

Play $ (in Sharebuilder Stock Account): $1,042.91
Roth IRA: $5,030.20
Special Situations Fund A TSA: $7,228.99
Investment Growth TSA: $11,693.70
Select Growth TSA: $10,095.58
Opportunity Mutual Fund: $11,787.12
Growth Mutual Fund: $14,681.38
Play $ #2: $690.84
L's College Side Account: $9,318.58
E's College Side Account: $6,212.35
Kids College General Savings: $752.36
It's Hit the Fan (Emergency Fund): $10,049.40
Graduation Gift Accounts for Nieces/Nephews: $715.69
House: $147,000
Cabin: $385,000
Boat: $24,000
Car #1: $21,055
Car #2: $19,680
Truck: $4,000
Total Assets: $777,729.19

Bottom Line Net Worth: $ 239,500.32

It was interesting to compare the scenarios from 2005 and today. Cars and boats have come and gone, we added a cabin to our list and extensively remodeled our main home (all sweat equity).

We've also added many work hours as I got a new job (CEO of a Governmental Agency) and continue to teach college classes and R added more coaching and some college teaching to his list as well. In general, we've sacrificed a lot of work to make the financial gains we have but I'd say they've been worth it.

Now, we're off to see what 2010 brings! We're facing pay cuts at both jobs as the economy is hitting states very hard and both of us are employed in state jobs (education) and our side jobs are also seeing the impact of the economy (as sports are being cut and we work for private colleges on the side which are more expensive than state Universities, and thus, face declining enrollment). We'll just work hard and trust that the Lord will again guide us toward our best path...and dumb luck will cover what He doesn't.

Net Worth March 2005

2010-01-02T18:33:00.000-08:00

This was our first net worth check. What a reality check it was!

DEBT:

House: $106,967
Car #1: $26,000
Car #2: 8,066
Boat: $26,561 (this is the boat we got because we co-signed on a loan, not an intended purchase!)
My Student Loans: $52,000 (BA and MA)
R's Student Loans: $52,000 (BA and MA)
Private Student Loan: $26,000
Citibank: $2,831
Total Debt: $302,925

ASSETS:
Kids 529 Plan: $1,800
Blue Chip Mutual Fund: $3,121
ING Direct Savings: $1,300
Mid Cap Mutual Fund: $13,616.12
NW Mutual TSA: $3,830
My State Retirement Account: $8,065
R's State Retirement Account: $6,910
Play $ (in Sharebuilder Stock Account): $217.43
Roth IRA: $950
Special Situations Fund A TSA: $3,911
House: $125,000
Car #2: $6,000
Car #1: $18,000
Boat: $26,000
Total Assets: $218,720

Bottom Line Net Worth: $ -84,205

As one can easily see, we weren't financial disasters, we had savings, we invested regularly, we didn't have crazy amounts of credit card debt, and we had good jobs. This fairly solid foundation allowed us to change in small steps to allow for progress that was measurable and significant in a fairly short amount of time.

What's Net Worth Got to Do With It?

2010-01-02T18:21:00.000-08:00

The biggest concept I took away from the book, The Millionaire Next Door, was to track net worth. Because of this book, we stopped looking at our assets only and started realizing the impact our debt had on our goals. I'm embarrased to admit that it took a book to point this obvious fact out to me, but I'm afraid it's true.

Before this book, and the actions that followed, we'd managed budgets and felt we were responsible money managers; however, we believed that if we could afford the payment, we could afford the item. Our net worth analysis forced to to re-examine this false thinking and reconsider our financial planning.

When we first began tracking our net worth in March of 2005, our net worth was a terrifying $-84,205.00 Your eyes are not deceiving you, that was a negative sign in front of the figure. The saddest part of this situation is that we honestly felt as though we were doing well at the time. Without the net worth reality check, we'd still be living a financial mirage.

Once we realized how severe the problem was (mainly due to student loans), we began working on cutting expenses and adding income through job changes and extra work (a lesson learned from Dave Ramsey and his The Total Money Makeover: A Proven Plan for Financial Fitness). I began teaching for a college on the side and R began coaching more sports at the school. We increased our income by over $20,000 per year and dedicated the extra income toward debt.

While Dave Ramsey encourages people to live on the bare minimum and focus solely on reducing their debt, we realized this wouldn't work for us. Instead, we applied our extra income toward debt and combined it with the free online debt pay down calculators (http://www.dinkytown.com) to maximize our contributions. These efforts, combined with a commitment to avoid new debt, allowed us to continue to travel and enjoy our children (when we had the time!) but also tackle our debt.

Did our process make the most financial sense? Probably not. That said, it did allow us to make progress without feeling deprived our missing out of the experiences we'll treasure with our children so we felt it was a fair compromise between best practice and our reality. More importantly to us, it allowed us to experience some level of success so we could maintain our motivation and still enjoy our lives.

Fast forward just under four years and our current net worth is now $239,500.32. Yes, that's now a positive number! I'll share the analysis of both net worth checks in the next post.

Credit Score Time

2010-01-02T14:24:00.000-08:00

Each January begins with the annual tradition of checking credit scores. Free credits reports are available through http://www.annualcreditreport.com and I use this site as my starting point each year. After viewing the general credit report, I pay for our scores from one bureau to give us a general idea of our scores. This year, I paid $5.95/credit score.

Since we learned the hard way not to co-sign with anyone on a loan (a story for another day), this is always a stressful activity. We have never paid a bill even a day late, yet my score was destroyed a number of years ago due to the co-signing experience. Fortunately, R's report somehow dodged the negative information so we've always had his score to rely upon when needed. This year showed that 2010 may truly be my best year yet as the negative account information from the co-signed loan is officially GONE! Hooray!

My score has now raised to 896 and R's is now 906. His score earns an "A" according to Transunion and my score earns a "B." I cannot figure out why his is higher than mine since we've been married for all of our adult lives and have the exact same accounts on both reports; however, I guess this is the thanks I get for managing the money.

I'm thrilled with these scores as they definitely show the results of our efforts to get our credit under control and live responsibly...well, at least when it comes to money!

Vote for Me!

2010-01-02T14:07:00.000-08:00

New Year, New Project

2009-12-30T09:20:00.000-08:00

Resolutions come and go, but the web is forever. Well, maybe not, but that's my thinking as I start our naked finances project. I believe this project will force me to be honest with myself as I'm forced to be honest with others. My hope is that this honestly will allow us to reach our financial goals with greater speed and focus....if that doesn't work, at least it will provide some PG-rated voyeuristic opportunities for others.

I've always been fascinated with finances, I think in a healthy way, but my husband may have a differing opinion and state that I am obsessed. He might be right he usually is. In addition to managing our money, I am constantly wondering, "How can they afford that?" or "What would their checkbook look like?" when I see the financial decisions of others. While I can't force them to open their checkbooks for me to peek at and learn from, I can open ours and hope that others can learn from our mistakes and successes.

With all that information in mind, we leap into 2010 and the following goals:

· We will stick to our budget without dipping into reserves or credit in 2010! This seems exceptionally simple; however, our failing grade for 2009 in this area led to this blog. Maybe being publicly open about our failures will motivate us to prevent them?

· Each month, I'll post our family's spending by category. Yes, this will mean diving through the receipts each month, but as stated earlier, I love this level of number crunching and am actually excited about this aspect of the project.

· Every six months, I'll post our net worth. There’s nothing like a net worth check to really bring reality home!

· I'll agonize over the financial decisions I usually run only past my husband here as well. This will allow others to see the thought process behind our decisions, for better or worse.

· I'll share stories of our past successes, and failures so others may learn from, or laugh at, our experiences.

On to the New Year, and our new project!