The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

April 1, 2010

March ’10 Net Worth Update (+6.23%)

Filed under: Net Worth, Personal Finance, Real Example — Tags: , , , — thebalancedspreadsheet @ 10:25 am

March included hitting a milestone as we crossed the $100,000 mark!  We might actually dip below that in April due to some cash expenses described below but it is exciting to see our net worth grow.  After hitting the six figure mark our next goal is the seven-figure mark although that is a few years away. 🙂

Cash-The usual decrease for the month, the balance will decrease a little in April and May due to some big financial changes for us which will be discussed about in the coming weeks.  Also in May is our one year anniversary trip to San Diego!  Our flight and hotel are already paid for but there will be money spent on food, entertainment, and a car while we are out there. 

Employee Stock Purchase Program– End of a quarter so the amount is maxed out at $5,000.  Stock was bought at the close of business on March 31st and after quickly selling it will be posted to my checking account in about a week.

House-I have recently tried some of the online home evaluators and got a wide range of values. The average was around the $95,000 and I will be using the amount for a while.

Retirement-Big increase in retirement in the month of March as only a third of the increase is due to contributions into our 401(K) and ROTH IRA accounts.  Starting in 2010 my company began offering a ROTH 401(K)feature which I started to participate in.

Pension-Back to the normal contribution this month.  This amount should stay steady until October or November of this year. 

Mortgage-Another triple mortgage payment reduces the principal by ~$1,800!  We are trying to pay down the mortgage as quickly as we can and it is really cool to see the principle reduced by big chunks every month.  I have added a sidebar on the right side of the blog that has a graph that charts our progress as well as a goal sheet that shows how much time we have left.  At our current pace we will pay the mortgage off in 3 years and 2 months.

You can see past net worth updates at the net worth history page.

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February 8, 2010

Cash Breakdown January 2010

Filed under: Excel fun, Personal Finance, Real Example — Tags: , — thebalancedspreadsheet @ 7:20 pm

Sorry for not making any posts in a week but I have not had time to do any posts due to being busy at work this week as well as being out of town this past weekend.  I thought I would just post a cash update that I try and do every two months or so.  Normal posts will resume this week as I have been reading some good business/financial books that I want to review in addition to having some other goodies.  

 Cash Breakdown Jan '10

Emergency Fund-No changes here with the amount staying at the same at $10,000.  It is great to know that we have ten grand in the bank in case of medical emergency or job loss.  Currently there is no discussion to increase or decrease this amount.

Working Funds-With January being the first month of the quarter I have two months in the “Working Funds” category to cover the $1,667 that is taken out of my paycheck each month to participate in my Employers Stock purchase program.  Each month this drops by $1,667 until the end of the quarter when it goes to zero, but goes back to $5,000 at the beginning of the quarter.

Insurance Accrual-This currently includes 8 months of our life insurance accrual as well as 2 months worth of Car Insurance.  Since we pay our car insurance semi-annually (June and December) and the life insurance annually (June), I need to “accrue” monthly the cash needed to pay the bill when it is due instead of having to come up with the full amount on the month it is due.  I simply just take premium due and divide by the number of months in the payment period for my accrual.

IRA Funding-No IRA funding accrued.  I think we are done with this for now as we have caught up on all of my wife’s IRA funding for 2009 and her 2010 funding is funded in the same month as the pay check.

Car/Vacation-The remainder of the cash balance goes in this fund.  The balanced did not increase much since November but that is mostly due to Christmas in December.  Good to see this fund almost hitting over $11,000 but it probably will not be there for much longer.  We are planning on taking our one year anniversary trip in May at a yet to be determined location.  I am also planning on going to a training seminar to learn how to become a financial counselor in April which I will discuss more in detail soon.  Some of this should be offset by a 2009 bonus from my employer, but how much is yet to be determined.  With all that being said, there are no plans to purchase a new car but it is nice to have the money in the bank just in case.

January 20, 2010

Price Wars over Cell Phone Service heating up

Filed under: News Review, Real Example — Tags: , , , , — thebalancedspreadsheet @ 3:06 pm

Have an unlimited voice or text plan for your cell phone?  Well according to an article in CNNMoney.com it looks like you might be getting a price break on your monthly service.  Verizon and AT&T have announced lower prices for their monthly plan and Sprint Nextel and T-Mobile are expected to follow suite.  This is good news for those looking to shave some money off of your monthly budget and getting some extra cash flow for debt payments.  We personally have Verizon so we might be taking advantage of the price wars soon.  I love it when price wars occur because usually that means the customers win!

January 16, 2010

The Financial How to series Part II. How to get out of debt

Today we are going to continue in our “Financial How to . . . . .” series. The goal of this series is to give practical insight on how to get one’s finances in order for 2010. In part I we discussed how to set up a budget and today in part II we will discuss how to get out of debt.

What kind of Debt are we talking about?

I simply divide debt into two types; mortgage debt and non-mortgage debt. When talking about getting out of debt I am talking about non-mortgage debt. While ultimately your goal is to become 100% debt free, I am focusing on becoming non-mortgage debt free because that is something that usually can be done in a short time frame between 6 months to a couple of years. Mortgages, however, are usually one’s biggest debt and take usually 7+ years to fully pay off.

That leaves us today with every other kind of debt imaginable from credit cards, car loans, and student loans to IRS and family loans. Second mortgages can be a little tricky though. Typically if the balance is greater then half your income, I would just treat the debt like a first mortgage and put it on the back burner. If it is less then half I would then treat it like any other debt.

Listing your debts

Now that we have established what debts we are talking about it is now time to start the debt reduction process! First thing you will want to do is list your debts from smallest to largest. Next, after doing your budget you should know how much “extra” money you will have each month, after necessities and fixed expenses, to apply to your debt. Then start making the minimum payment on all of your debts and put the extra money from your budget onto the smallest debt. This is called the “Debt snowball” method. Below is an example that illustrates how this is done. In our scenario the person has $22,400 in debt and four different monthly payments. The minimum payments total $531.25 with $750 of extra money for total monthly reduction of $1,281.25.

Why the lowest amount? Would it be better to pay off the higher interest rate debt first?

From a mathematical stand point the debt snowball is usually the costliest way to go. By paying off the smaller loan first you can sometimes allow greater balance with a higher interest rate to accrue more interest. However I have found that the problem with debt is not the interest rate, but rather with personal behavior and by paying your smallest debt first and knocking it out, you will gain momentum and become more aggressive in paying off your debts then you would if you paid off the higher interest rate but kept more debts outstanding. By changing your personal behaviors you will never go back to debt which will more then make up for the extra interest paid.

After you pay off the first debt

Going back to our example, after three months our student loan would be paid off! After paying off the student loan we would then take the $60.00 minimum payment and apply it to our credit card #1 balance. We would then pay $885 a month on credit card #1 ($75 minimum + $60 student loans +$750 in extra money). After paying that debt you would then apply that payment to credit card #2 and son on. Your debt reduction would approximately look like this:

 

In 19 months you would be debt free!

Exception to the Debt Snowball

There is really only one exception to the debt snowball. That is IRS, State, or local income taxes. Always put them atop of the debt snowball. The reason is simple, the IRS has the ability to garnish wages without actually suing you, and the debt does not go away if you ever have to file for bankruptcy. Couple that with high late fees and interest payments and you will want to get them out of your life as soon as possible.

Conclusion

Getting out of debt is not a piece of cake. It is hard work and a lot of sacrifice but the payoff is well worth it! The debt snowball might seem daunting to you at first, but go ahead and try it, and if it does not work you can always go back into debt. J In our made up scenario 19 months is probably a little conservative. During the 19 months we took to pay off the debt, a variety of positive financial events could have happened such as getting a raise, getting a refund back from the IRS, or tightening your budget even more and coming up with extra payments to make on your debt, which would all decrease your time in debt!

Come back soon for Part III in our “Financial How to . . . . . .” series on how to start and use your emergency fund.

January 9, 2010

The Financial How to series Part I. How to start a budget

As a New Year is upon us, many people are making their New Year goals and resolutions. In these economic times, one of the more popular goals is to get financially healthy. This goal ties in to a new series from The Balanced Spreadsheet titled “The Financial how to . . . . “. During the month of January I will have posts with helpful hints on how to get started with some basic financial principles such as getting out of debt, building an emergency fund, saving for retirement, and more. Today’s topic is how to build a budget.

I decided to start the series with budgeting because a budget is the first step towards reaching your financial goals. Many people hate using the dreaded “B” word because to them a budget is constrictive or limiting their freedom. However those who do a budget find it more freeing then they imagined and now see it as an essential part of their finances.

How to start

The first thing you will need to do is find a budget format that works for you. A simple budget search on Google or through Microsoft brings up many different templates. I recommend keeping it very basic to start by keeping your categories very broad. For example I just have an entertainment category instead of having a separate category for movies, sporting events, concerts, etc. For those who may not be computer savvy, a basic pencil and paper budget will do just fine.

Determine your take home pay

Next thing you will need to do is determine what your monthly take home pay is. Your take home pay is simply your gross income less what is taken out of your paycheck for things such as taxes and insurance. For those of us who are salaried this is pretty simple as it is the same every month. Those of us who are paid hourly will need to estimate how many hours they will be working for the month and determine their estimated take home pay. The hard part is for those who get paid bi-weekly, because two times a year they get three paychecks in a month instead of two. In this situation, I recommend making a budget based on two paychecks a month and when a three paycheck month comes you can simply use that money to either pay down on existing debt, or if you are out of debt, to save for something special such as a vacation or for Christmas.

Preparing the Budget

After determining your take home pay you are now ready to make your budget! I break down the budget into three main categories: Necessities, Fixed items, and Luxuries

Necessities-Obviously these things are the most important expenses each month and will get paid first in order:
Groceries
Utilities
Housing
Gas/Transportation

I have food first because if you have enough money to do only one thing each month it would be to eat. Next would be keeping the heat and electric on, followed by your housing, and finally your transportation.

Fixed-These are your expenses that stay the same every month. Common examples could include your phone bill, contributions to a 401(K) or IRA, or car insurance. Also included here are any minimum debt payments such as credit card payments, student loans, or car notes.

Luxuries-Whatever is left goes into the luxuries category. This is where the biggest decisions have to be made. You have a finite amount and usually more wants then what you have money for. In the end you have to decide what is more important to you between eating out, buying clothes, going out for entertainment, or any other thing.

Carrying out the Budget

You have now taken the time to setup and prepare the budget and now this is the most important step! Every time you make a purchase keep track of what category it belongs to. If you reach your budgeted amount before the months ends, you are done for the month or you take away from another category. As you go along you will be amazed at how much money you are spending on certain things. It will also get rid of the question in your head “Can I afford this?” every time you make a purchase because you will have budgeted the purchase ahead of time at the beginning of the month.

How to budget with an irregular income

You might be asking what about those on irregular incomes. Those who are on irregular incomes have a little trickier time doing a budget. But by dividing your budget into the three categories you will be able to prioritize what you will spend your money on. Start with your necessities and go down from there in order until you run out of money for that month. Next month start at the beginning and work your way down until you run out of money for that month. Also for those whose paychecks are seasonal, it would be wise to save money in the good months to help cover the bad months.

I hope you find this helpful. For those of you who have never done a budget before it may seem like a daunting task, but just start and you will get better at it as time goes on. When starting out you will make many mistakes and your budget will change a lot until you can get comfortable with your income. That is ok! Budgeting is best when done with trial and error! For those of us who have been budgeting a while this is a nice review

Next week we will continue in our “The Financial how to . . . .” series with, how to get out Debt.

January 2, 2010

December ’09 Net Worth Update (+4.67%)

Another good month to close out a great 2009. The most significant thing that occurred this month was the fact our net worth is now greater then our liabilities!

Net Worth Dec '09

Net Worth Dec '09

Cash-Dropped a little more the normal do to the Christmas season. Still a $13,000 increase since this time last year is always pleasant. The cash is made up of a $10,000 emergency fund while the rest is mostly in savings for a car/vacation.

Employee Stock Purchase Program– End of a quarter so the amount is maxed out at ~$5,000. Stock was bought at the close of business on Dec 31st and will be posted to my account in about a week. I’ll sell it soon after for a quick 11% profit.

House-I have recently tried some of the online home valuators and got a wide range of values. The average was around the $95,000 and I will be using the amount for a while.

Retirement-Another good month in the stock market as about half of the gain was due to appreciation while the other half was contributions. Starting in January, my company will be offering a ROTH 401(K) feature which I will be participating in. Overall our investments are up around or over 30% since the beginning of the year.

Pension-I passed the income threshold in November so that is the reason for the increase. From month to month you barely notice the $200 increase, but over time it is nice to see that build up.

Mortgage-Another triple mortgage payment reduces the principal by ~$1,775! I have discussed our decision to pay down the mortgage as quickly as we can before. It is really cool to see the principle reduced by big chunks every month. At our current rate, we will pay the mortgage off on July, 2013. We have decided against refinancing for now due to the breakeven point being 24 months. For 2009 we paid off over $21,000 in principal.

You can see past net worth updates at the net worth history page.

December 18, 2009

79.9% Credit Card? Who would use that?

Filed under: News Review, Personal Finance — Tags: , , , , , — thebalancedspreadsheet @ 2:56 pm

I came across this article from the AP this morning while browsing the web titled Credit card’s newest trick: 79.9 percent interest.  It is about First Premier Bank and how it is marketing the expensive credit card at 79.9% APR.  It is marketed toward subprime customers who can not get a traditional credit card.

There are some interesting quotes and figures in the article.  The cards credit limit is only $250-$300 but the annual fees are currently $256 in the first year!  Although starting in Feb 2010 the fees will drop to $75 in compliance with the new credit card regulations.  With all that being said this quote really got me:

“Even when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit,” said Odysseas Papadimitriou, CEO of CardHub.com.

If you have read this blog for any length of time, you know that I am pretty much anti-credit card.  With that being said, I can not believe that quote.  They would be better off to continually get ripped off with high fees and interest rates then to not have access to credit?  Well how much of a blessing has their credit been so far?  It has lead to defaults and higher interest rates!  Unbelievable!  People who have shown the inability to handle credit should not be extended more!  To me this is just another example of the poor being taken advantage of, similar to pay day loans.  Now granted the people who sign up for this card did have a choice before filling out the application and they should be held responsible for their debt, but to me you have to have some kind of moral responsibility as a business to not market this stuff.  Sadly the reason they do market this junk is because people use it and it is profitable.  I think we just need to educate more on how bad of a product this is and how it is not beneficial to consumers in the long run.

Well there’s my soap box.  Anybody else have any thoughts on this?

December 11, 2009

Cash Breakdown November 2009

Filed under: Excel fun, Personal Finance, Real Example — Tags: , — thebalancedspreadsheet @ 9:27 am

Here is a quick cash breakdown before the end of the year.  Despite having  various emergencies, our Car/Vacation fund has surprisingly risen since September.

Cash Breakdown November 2009

Emergency Fund-No changes here with the amount staying at the same at $10,000.  It is great to know that we have ten grand in the bank in case of medical emergency or job loss.  Currently there is no desire to increase or decrease this amount.

Working Funds-This is the last month before I buy some company stock.  As described in June’s cash breakdown update, because I participate in my employers stock purchase program, I need to cover the $1,667 that is withheld from my pay check each month.  Next month this amount will reset to zero. 

Insurance Accrual-This only include our life insurance accrual as our car insurance premium got paid in December.  Since we pay our car insurance semi-annually (June and December) and the our life insurance annually (June), I need to “accrue” monthly the cash needed to pay the bill when it is due instead of having to come up with the full amount on the month it is due.  I simply just take premium due and divide by 12 for my accrual.

IRA Funding-This amount is just for me.  We have fully caught up on my wife’s IRA funding.  It is part of our financial goals that we put 15% of our gross pay into retirement accounts.  For 2009 we have combined to contribute over $2,500.00 each into a ROTH IRA for 2009.  The maximum for 2009 that you can individually contribute is $5,000.  The rest of our retirement funding goes into a 401(K) where our employers match.

Car/Vacation-The remainder of the cash balance goes in this fund.  It’s nice to see the balance increase over $1,000 in two months.  We are planning on taking our one year anniversary trip in May at a yet to be determined location.  There are no plans to purchase a new car but it is nice to have the money in the bank just in case.

December 1, 2009

November ’09 Net Worth Update (+4.23%)

Filed under: Uncategorized — Tags: , , — thebalancedspreadsheet @ 6:34 pm

Net Worth Nov '09

Net Worth Nov '09

Cash-This took a bigger hit then what was expected primarily due to some unexpected financial emergencies this month.  We also had our semi annual car insurance payment due at the end of the month.  Thankfully we were able to weather the storm by good budgeting.  We pretty much have Christmas all budgeted so next month that will make things easier.

Employee Stock Purchase Program– Nothing new to report here, as another $1,667 was taken out of my paycheck and will be used to buy company stock at the end of the quarter which is December 31st.

House-A few condos have sold for more then the $95,000 that is on the balance sheet.  I think we have might have hit the bottom of the real estate market.  With that being said I am still leaving the condo valued at $95,000 for now.  I would rather be conservative then jumping the gun.

Retirement-After a flat October, the market rebounded some more.  About a third of our increase this month is due to new contributions, the rest was gains. Overall our investments are up around or over 30% since the beginning of the year.

Pension-I passed the income threshold in November so that is the reason for the increase.  From month to month you barely notice the $200 increase, but over time it is nice to see that build up.

Mortgage-Another triple mortgage payment reduces the principal by ~$1,750!  I have discussed our decision to pay down the mortgage as quickly as we can before. It is really cool to see the principle reduced by big chunks every month.  At our current rate, we will pay the mortgage off on July, 2013.  I have decided against refinancing for now due to the breakeven point being 24 months.  YTD we have almost paid off $20,000 in principal.

You can see past net worth updates at the net worth history page.

November 30, 2009

FICO reveals how certain financial events affect your score

Filed under: News Review, Personal Finance, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 6:09 pm

After years of mystery surrounding how certain financial events affect your credit score, FICO is revealing how some mistakes change your score according to an article by Jeremy M Simon of Creditscards.com.  The article titled “FICO reveals how commons credit mistakes affect score” is an interesting read.  I am not a huge fan of the FICO and do not believe it is the end all and be all in determining your credit worthiness but I do feel it is important to pay your bills all the time and have clean credit.

It is interesting to see how the different financial events lower your scored.  Obviously Bankruptcy and Foreclosures are an atomic bomb to your score.  But it is also interesting to see how debt Settlement lowers your score.  It is actually pretty close to a foreclosure in terms of lowering your score.  It will be interesting to see what happens in a few years when all the people who are short selling their homes recover enough to buy another house.  Will they take longer to qualify again for a mortgage or will the banks have easier standards considering this will affect many applicants?

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