Balancing Act

My wife and I are trying to find the balance between long term investing (retirement) and short term savings (emergency fund, house, etc.).

I tend to focus too much on investing for retirement, and am eager to put all of our spare money into either our Roth IRA’s or 401(k). The power of compounding is amazing and time is the most important element. The more money we can invest now, the better off we should be later. This simple table demonstrates that a person who invests early and for just eight years will have more money at 65 years old than will someone who starts late and invests for nearly 40 years.

My wife, on the other hand, reminds me that we can't keep all of our money tied up in retirement accounts. We want to buy a house in a few years and need to save for a down payment. We also need to have cash on hand for unexpected emergencies. We had a real world example of why this is important when my wife was recently laid off. The value of an emergency fund, even the smallish amount we had in our savings at the time (~$3,000), provided a great deal of peace of mind. Thankfully, my wife found a new job within a week, and we did not have to dip into our savings.

Like most things in life, we have to find a balance. Currently, our retirement investments represent 78.30% of our total liquid assets. We’ve agreed to work on increasing our savings, but not at the expense of fully funding our Roth IRA’s. In fact, we have already added another $1,300 to our savings this month, while simultaneously investing another $200 in my wife’s Roth IRA.

Net Worth Milestone In September?

Although we’re only one week into it, September is already shaping up to be an excellent month. In addition to our average monthly decrease in liabilities of ~$1,000, we just contributed $200 to my Wife’s Roth IRA and deposited $1,300 into our savings account.

God willing, we should surpass the $20,000 net worth milestone this month. This would put us at just over 90% of our 2007 net worth goal of $22,000, and on schedule to hit our 2007 goal in October (2 months early!). After that point, anything extra we were able to add to our net worth in 2007 would help us begin making ground on our 2008 net worth goal of $47,800.

Another Contribution to Wife's Roth IRA

We deposited another $200 into my Wife's Roth IRA, and plan to deposit another $300 next month to bring her total contributions to $4,000, the maximum for 2007. We have another $1,000 to contribute to my Roth IRA to reach the maximum for 2007.

Next year, the maximum contribution goes up to $5,000 for each of us. That will be a fun challenge.

Carnival of Personal Finance #116

Thank you to Advanced Personal Finance for including my Delicious Savings post in the Carnival of Personal Finance #116.

Please check out the carnival - there are many great posts to read.

Beat The HEAT

The heat lately has been oppressive. Since our condo is so close to the ocean, it does not have central air conditioning. During this recent heat wave, my wife and I have found it difficult to sleep at night. To make matters worse, our condo is only open on one side, so there is no opportunity for cross ventilation. The best we can do it put a fan in front of an open window.

We've lived in our condo for ~2 years and have finally decided to throw in the towel and purchase a Soleus Air 9000 BTU Evaporative Portable Air Conditioner. A few of our neighbors have similar units and they do a great job cooling our little condos for ~$50/month. My wife found this unit online for $295.20, it regularly sells for $369.00. Since it’s portable, we can take it with us when we move to another place at a later date.

It would be great to be able to put this money into our investments, but it sure is going to be nice to be comfortable at the push of a button.

Have A Great Labor Day!

It's nice to have a break from work. Labor Day marks the end of summer and I've got to say that I'm ready for winter. It's been stiflingly hot lately. To beat the heat, we're joining some friends for a relaxing day by the pool. Have a safe Labor Day.

August 2007 Income Statement

As I mentioned in my July 2007 Income Statement post, I didn't expected that we would be able to match the relatively low expense levels of July in August. Well, August, with all of its ups and downs, ended up being a great month in terms of our expenses (click spreadsheet below). We only went over budget ~$300, $716.53 of which was for a new mattress. That puts our August expenses $264.69 lower than our July expenses!

In terms of income, August was a mixed bag. I received an extra paycheck this month, but my wife's 1st paycheck was only for one week. We were able to earn an extra $104.53 thru credit card cash back rewards and $100.00 thru selling our old mattress. And finally, with our increased savings account balance, we earned $12.14 in interest income, our largest amount yet.

September should be a great month incomewise. My wife is expecting a commission check on a job that she referred to her dad’s company (~$700), a final commission check from her old job ($600-$1,000), a final check from the job that laid her off (~$1920), and her first paycheck from her new job(~$1,075). Hopefully, we can continue keeping our expenses down.