Sunday, December 30, 2012

Year-End Progress Review

I guess this should be titled, "My One and Only 2012 Progress Review."   Rather than a month-to-month comparison, this will be a year-to-year comparison.

I know it isn't year-end yet, but with family around on New Year's Eve and Day, I doubt I'll capture all of the relevant data as of 12/31/12.  This will be as close as it gets.



MY DEBT



Starting Debt
Last Year This Month*This MonthDIFFERENCE
Fed'l SL (06/08)$55,852.68$50,115.88$48,542.02$1,573.86
Mortgage (1/6/12)$274,000.00$274,000.00$269,463.90$4,536.10
Bank of Mom (1/6/12)$68,500.00$68,050.00$60,421.00$7,629.00
CC (3/31/12)$34,188.50*$34,188.50*$26,047.00*$8,141.50*
TOTAL$476,414.00$426,354.38$404,473.92$21,880.46
* This credit card debt was incurred for the renovation work on my condo.  The renovation work wasn't completed until Feb. 2012 and the total was unknown until March 2012.  Thus, the balance of $34,188.50 is not from Dec. 2011 but rather from March 2012.

I eliminated approximately 5.13% of my debt.  Thankfully, I have not incurred any more debt since 3/31/12.  I would like to snowball my student loans to pay it off sooner, but I feel compelled to pay back my mom ASAP since this money will be used for her care if my sister and I ever have to put her in an assisted living facility.  So right now, my payoff priority is equally split between my student loans and my "mom loan."  Hopefully, at this rate, I will be debt-free (except mortgage) in 8 years.  I hope to be completely debt-free in 18 years.

SAVINGS

LAST YEAR THIS MONTH
THIS MONTH
DIFFERENCE
$14,437.72$15,527.40+$1,089.68

I'm actually short $277 from where I should be.  I had to borrow $632 from my EF to cover a Supplemental Property Tax bill that I'd overlooked when budgeting last year.  Due to Prop 13 in California, the prior owner of my condo paid artificially low property taxes because she bought the property 15 years ago when property values were much lower.  When I closed on my condo, I paid 50% of the property tax in 2011 based upon the prior owner's tax rate.  I budgeted and saved enough to cover my 2012 property tax at the newly assessed value, but I'd forgotten to budget for the retroactively reassessed property value for 2011.  Hence, the $632 shortfall.  *Dagnabbit*  I've already reimbursed $350 back into my EF.  My EF should be fully reimbursed by the end of January.

The savings I report here is with respect to my emergency fund only and does not include my future spending earmarks. Currently, the total amount in my liquid savings account is $22,054.62, which is actually $1,375.92 less than last year.  Not a good trend. 

MY ROP (LIFE INS) FUND

LAST YEAR THIS MONTH
THIS MONTH
DIFFERENCE
$1,823.93$2,854.63+$1,030.70


Long story short, I'm pretending to pay myself $55/month for a "hypothetical" return of premium (ROP) term life insurance policy. (A ROP policy pays back your premium at the end of the term if you outlive the policy term.)  Investopedia looked into whether ROP premiums are worth it and it concluded that "for policy owners that can invest in tax-deferred or tax-free accounts and are comfortable investing in the markets, a basic term policy without the rider probably makes more sense." 

That is exactly what I am doing:  I bought a plain-vanilla term life insurance policy and putting the $55/month savings in my Roth.  I've calculated that I need an annual return of approximately 3.7% to make this experiment worthwhile.

I've paid $4,422 in premiums to date and my ROP balance is $2,584.63.  I've recouped 58.45% of my premiums and the annual return on my investments is currently 3.34%, which is a bit below my target.  I'm not concerned because I haven't invested any of my contributions from this past year.  I feel stocks are a bit too expensive right now so rather than dollar cost averaging while the market's up, I'm just parking the money in my Roth and waiting on the sidelines.  I hope down the line, this strategy will pay dividends.

MY NET WORTH


LAST YEAR THIS MONTHTHIS MONTHDIFFERENCE
$187,878.14$241,536.92$53,658.78

I think I can take maybe 20% of the credit for the increase in my net worth through debt reduction and savings.  But I suspect that 80% of the increase is from the market rise.  In light of the fact that I'd ignored my finances this past year, I'm pleased with the results. 

The history of my net worth can be found here.

Friday, December 28, 2012

Payroll Tax Cut Savings Plan Fail

Back in January 2011, I planned to save the extra money I got in my paycheck from Bush's Payroll Tax Cut.  And I did -- I either deposited the extra $86/paycheck in my Roth or my savings account.  But from my accounting records, it looks like I stopped cold turkey in July 2011.  I recall that I started looking to buy a condo in July 2011 and I think I diverted the funds towards my "down payment fund."  In the interim, I'd completely forgotten that my paycheck was artificially inflated and I became accustomed to the extra money.


I'd already created my estimated monthly cashflow for 2013 and 2014.  But now that it looks like we're going off the fiscal cliff and the Bush tax cuts will expire, I have to re-jigger my cashflow.

I found this calculator on the Tax Foundation's website.  According to this calculator, I should expect my take-home pay to go down approximately $96 per paycheck.  Back to the drawing board.

I'm disappointed that I didn't have the will-power to follow through with my plan to prepare for this eventuality.  I've let lifestyle inflation take over.  *Sigh*

Monday, December 24, 2012

PF Goals Reboot

I discovered my long forgotten 2008 PF Goals and had fun going through each item seeing where I beat it, where I'm on track and where I just totally strayed off course (*cough*overspending*cough*).  Now that the short-term goals from 2008 done, I think it's time for a re-boot.

I wonder whether I went too easy on myself, seeing that I'd accomplished all of my prior short term goals (and actually surpassed most).  But on the other hand, I don't want to create unrealistic goals that will only set myself up for failure.  After all, I'm easily discouraged.  :-P

All I pray for is that my re-boot will be better than that terrible Total Recall remake.  I mean, what's the point of re-doing Total Recall without the psychic, belly mutant, Kuato?

 


2013 Goals



SHORT-TERM FINANCIAL GOALS (1-3 years; 2013 to 2015)



By 12/31/2013 (Age 41)

·         Reduce:

Ø  SL debt to $42,600

Ø  Mortgage to $264,500

Ø  Personal Loan from Mom to $54,875

Ø  Credit card debt to $13,000

TOTAL:  $374,975



·         Increase:

Ø  EF to $16,250

Ø  401k to $275,000

Ø  Roth IRA to $4,500

Ø  Traditional IRA to $4,275

Ø  Investment account to $16,000



By 12/31/2014 (Age 42)

·         Reduce:

Ø  SL debt to $36,400

Ø  Mortgage to $259,500

Ø  Personal Loan from Mom to $48,175

Ø  Credit card debt to $0

TOTAL:  $344,075



·         Increase:

Ø  EF to $17,450

Ø  Increase EF savings from $100/month to $600/month

Ø  Start saving $150/month towards home reno or new car fund

Ø  401k to $313,500

Ø  Roth IRA to $5,350          

Ø  Traditional IRA to $4,360

Ø  Investment account to $18,500



By 12/31/2015 (Age 43)

·         Reduce:

Ø  SL debt to $29,560

Ø  Mortgage to $254,250

Ø  Personal Loan from Mom to $41,475

TOTAL:  $325,285



·         Increase:

Ø  EF to $24,650

Ø  Home Reno/New Car Fund to $1,800

Ø  401k to $353,000

Ø  Roth IRA to $6,250

Ø  Traditional IRA to $4,500

Ø  Investment account to $26,000



MID-TERM FINANCIAL GOALS (4 – 10 years; 2016 to 2022)



By 12/31/2018 (Age 46)

·         Reduce:

Ø  SL debt to $7,400;  Pay off by 9/30/2019

Ø  Mortgage to $236,000

Ø  Personal Loan from Mom to $21,375; Pay off by 12/31/2021

TOTAL:  $264,775



·         Increase:

Ø  EF to $43,670;  Reduce EF saving rate to $170/month in June.  Start saving $430/month for Annuity purchase

Ø  Start contributing maximum yearly limit ($5500) to IRA  eff. 1/1/2019      

Ø  Annuity Fund:  $2,580

Ø  Home Reno/New Car Fund to $7,200

Ø  401k to $460,000

Ø  Roth IRA to $9,000

Ø  Traditional IRA to $5,000

Ø  Investment account to $48,000 (May be reduced if sold to purchase new car.)



By 12/31/2022 (Age 50)

·         Reduce:

Ø  Mortgage to $181,000   

TOTAL:  $181,000



·         Increase:

Ø  EF to $51,830

Ø  Annuity Fund:  $23,220

Ø  Home Reno/New Car Fund to $14,400 (May be reduced if used for renovation work or new car purchase.)

Ø  401k to $685,000

Ø  Roth IRA to $21,000

Ø  Traditional IRA to $33,000

Ø  Investment account to $78,000 (May be reduced if used for renovation work or new car purchase.)



LONG-TERM FINANCIAL GOALS (11 – 22 years; 2023 to 2034)



By 12/31/2027 (Age 55)

·         Reduce:

Ø  Mortgage to $66,000  (Pay off by 6/30/2030)

TOTAL:  $66,000               



·         Increase:

Ø  EF to $62,030

Ø  Annuity Fund:  $46,400+

Ø  Home Reno/New Car Fund to $23,400 (May be reduced if used for renovation work or new car purchase.)

Ø  401k to $1,000,000

Ø  Roth IRA to $38,500

Ø  Traditional IRA to $87,500

Ø  Investment account to $116,000 (May be reduced if used for renovation work or new car purchase.)



By 12/31/2034 (Age 62)



·         Increase:

Ø  EF to $76,310

Ø  Purchase $50,000 Annuity

Ø  Home Reno/New Car Fund to $36,000 (May be reduced if used for renovation work or new car purchase.)

Ø  401k to $1.7 million

Ø  Roth IRA to $54,000

Ø  Traditional IRA to $182,000

Ø  Investment account to $169,200



RETIRE!!!