April 2009 Net Worth Update (+$3,318.51)

We had another really good increase to our new worth this month. It increased $3,318.51 from last month to $45,954.70 (click on spreadsheet below).

What worked:

We invested a total of $975.19 in our retirement accounts (401k, Roth IRAs & Traditional IRA) and saw them increase a total of $2,926.45 over last month. Very nice. My wife's began contributing 5% to her company 401(k) this month.

What did not work:

We are in the process of trying to short sell our house (we began this when my wife lost her job). Our banks are considering an offer now, so our 1^st mortgage balance did not go down even though we made our payment this month. We also weren’t able to put any money into savings and actually spent ~$80 from it to cover part of my $1,100 gym membership. We're way off track to meet our 2009 net worth goal of $75,600.

Next month:

May has the potential to be another good month. I'm taking a trip to go see my family, but other than that, the only non-standard expense we have a $204.79 medical bill for my wife.

Health Savings Account (HSA)

My wife's has severe allergies and recently began getting weekly injections to help. It's not cheap, so she opened a Health Savings Account (HSA) through her new company.

The HSA is a tax-advantaged medical savings account that allows her to pay for the shots (and other medical costs) using pretax dollars. Unlike a Flexible Spending Account, funds roll over and accumulate year over year if not spent.

She's having $50/check taken out and pays for the doctor visits using a "debit" type card. The HSA should help save us a good chunk of money on the injections.

Wife Beginning New 401(k) Plan

My wife's eligible to contribute to her new company’s 401(k) beginning next month. She completed the online forms over the weekend and will begin contribution 5% of her pay in May. It works out to be a $115.63 contribution per check or $2,775.12 per year. I'm currently contributing 5% to my 401(k) plan ($3,171.15/year) and we're hoping to max out our Roth IRA contributions this year ($5,000 each). So far, we've contributed $2,000 this year towards our $10,000 total contribution.

If we’re able to fully fund our Roth IRA’s and don’t make any other changes to our 401(k) plans, we’ll be looking at a total contribution to our retirement accounts this year of $15,946.15. This is 13.41% of our gross income - not including any bonuses that my wife receives. If successful, this will be the largest percentage of our income we have invested to our retirement accounts. Ideally, we will slowly increase this percentage every year.

Parent's Paid Off Mortgage

My parent's just paid off their mortgage! What an amazing accomplishment and very inspiring. Plus, this is the second house they paid off.

They were able to do this through a lot of hard work and sacrafice. It's got to feel great to no longer have a monthly mortgage payment. I hope one day my wife and I can do the same thing.

Attacking Credit Card Debt

Having credit card debt sucks. It was one of the most stressful times I’ve experienced. In order to pay off my credit card debt, I found I had to attack it every minute of the day through learning, strategizing, and sacrificing. After awhile, the progress I was making paying down my credit cards was almost as much as I had racking up the debt. I’d scrounging for a couple of extra dollars just so I could send it to the credit card companies to see the balance go down. Here’s a strategy I think is pretty successful:

1. Pray
1. Sometimes the toughest times in our lives are there so we focus more on God instead of thinking we can do it ourselves.

2. Quit using credit cards
1. This goes without saying, but you’ll see me speak out of the other side of my mouth below when I suggest getting a cash back rewards card.

3. Create a plan
1. Put together a spreadsheet listing the total amount owed and what the interest rates are. The visibility this provides is invaluable. Plus, you can include formulas in the spreadsheet to calculate how long until the card will be paid off based on a certain monthly payment.
2. Negotiate lower rates where possible with credit card companies or transfer the balance to a lower rate card.
3. Pay the minimums on all credit cards, except for the highest interest rate card. For the highest interest rate card, pay as much as possible each month. Put every dollar you can spare toward the balance. If “extra” money pops up mid month, send it to the credit card immediately to get it out of your hands and reduce the balance you are paying interest on. Use your credit card company’s online payment feature to make payments quick and easy and to save postage. Once that card is paid off, use the same strategy to pay down the next highest interest rate card. And so on…

4. Look for way to bring in more money
1. Get a cash back rewards credit card. This card should be used for as many of your standard monthly expenses as possible and should be PAID OFF EACH MONTH. This will not only give you 1%-5% cash back on everything you charge (things you are already paying cash for anyways), but will also help with monthly cash flow since you get a 30 day float. Use the cash back rewards you earn to pay down other credit cards. Note: Do not get a rewards card if you are unsure that you will pay it off every month. Rewards cards have high interest rates and slipping up one month will eliminate the cash back rewards gained over many months. We average ~$40+ a month in cash back rewards. This is some of the easiest money I’ve ever made.
2. Have kids? Babysit a neighbor’s kids for a couple of hours each week. It will be fun for your kids and help tire them out.
3. Have lots of “stuff”? Sell items on craigslist. One man’s trash is another man’s treasure. It’s free and if you place the ads on Friday, you can have people come by on Saturday and Sunday to purchase. I’ve sold an old can opener for $5, scratched up sunglasses for $15, and even a couple of parts off my car that I did not need (a truck cover and truck mat).
4. Love dogs? Offer to walk neighbor’s dogs for a few bucks.
5. Enjoy needles? Donated plasma. It’s quick (~1 hour), easy, and pays ~$30 a visit. Plus, you’re helping others.

5. Save money wherever possible
1. Eliminated all entertainment that cost more than a nominal amount. Find free things to do like borrowing books for your library
2. Don’t eat out. Food is expensive and easy to over look. Buy food on sale and prepare large meals to have leftovers.
3. Plan driving trips to reduce fuel costs. Gas is expensive. Car pool if possible.
4. Cancel gym membership. Go for a jog, swim, or bike ride to get a workout.
5. Cancel retirement contributions. Every extra dollar needs to go towards paying off the credit card debt. Once it’s paid off, you can save like crazy. UPDATE: Thanks to Kristy at Master Your Card for pointing out that you should always contribute up to your employer's match (free money). I totally overlooked this. Thanks Kristy!

Paying off debt is a war. Fight like crazy to win.

March 2009 Income Statement

March was a strong income month (click on spreadsheet below), but a large month in terms of expenses.

In addition to my two paychecks, my wife received two paychecks for March and a paycheck for her first week of work at the end of February for a total of $4,196.26. She also received her final $405 unemployment from February and a $490.91 bonus check from her old company and $61.12 check from her old company for an insurance deduction mistake. All said and done, my wife brought in $5,153.29 for us this month. Oh, I earned a $25 HSBC cash back credit card reward (go me!). Our interest income on our savings account was $4.20.

Thank God we had a good income month because our expenses were insane ($9,104.29). Some of the larger expenses were: $2,024 total for federal and state income taxes, $229 to resurface my cars rotors and replace break pads, $215.36 for my wife’s medical bill, $344.77 for a Wii and accessories, $175 for my car registration, and $170.29 for a new phone for my wife (she will be receiving a $70 rebate next month). We were also apparently very hungry this month because we spent $506.50 on groceries and $335.04 eating out. We had our 3^rd year anniversary, so $165 of dinning was for one REALLY nice dinner. I am going to increase our groceries budget from $400/month to $500/month, since this is what we have been averaging for the last 11 months. With

my wife’s new company car and company gas card, our fuel expenses were only $92.94.

Next month should be an average income month. In additional to our regular paychecks, we have ~$75 in credit card cash back rewards coming in, my wife will begin receiving her cell phone and internet reimbursements for a total of ~$110/month, and she should also get a $70 rebate from Verizon. In terms of non-monthly expenses, I have a $1,100 gym membership bill and we have a $50 Costco membership bill. I will be on a business trip for 7 days, so that may help reduce some of our expenses. To save some extra money, my wife will be canceling her $19/month gym membership and use our condo gym and Wii instead. She has also been cutting our dogs nails to save us a few extra bucks.