March Budget & Net Worth Update

This months budget update is kind of misleading, but I guess all of them are going to be misleading because I have no idea how to incorporate our actual expenditures.   We use our credit card for a lot of our purchases and our bill never comes until mid-month.   Either way I guess the budget corrects itself every month. 

Savings:  +$2481     Although we had another good increase, it is not as much as it could have been.  This month was one of my 3 paycheck months, but we spent a lot more on stuff than we thought during the month.  We finally kept track of everything that was spent this month and by doing this we now see where we are overspending.  We bought some one time purchases like a paper shredder, a winter jacket (75% off), and spent way to much on eating out.   We also spent another $414 on a second appraisal due to our first refinance not working out due to not having enough comparable sales.  Hopefully this bank will approve it.   We also went skiing for the first time in years, and don’t regret spending the money on it. 

Investments:  +$1728.95   I guess I can’t be angry about a gain, but wow did I have a bad month in my 401.  Due to a really dumb trade by me, my account went from being up a little less than 17% on the year, to being up a little under 10%.  Although I can’t be too mad, it would be negative if I didn’t sell when I did.  Still have 9 months to make up for my stupidity. 

Debt Payments:  -$521.94  Still waiting for our refinance to get done.  So no extra payments on any of the debt until that is done.  I can’t wait until we can start throwing extra down on these.  Until then I feel like we aren’t making progress that I know we can make.  Either way, we are supposed to close on our refinance by the end of May at the latest.  If for some reason it doesn’t go through we are done trying and will pay pretty much everything except for the mortgage off. 

Total Asset Increase:  $4210.29

Total Debt Decrease:  $521.94

Net Worth End of Feb:  -$78,335

Net Worth End of March: -$73,613

Total Increase in Net Worth: $4,722

Can’t complain about a positive month.  We also haven’t gotten our taxes back yet.  Once we do it will be going into savings until the refinance is done (we are hoarding cash til then).  Then it will be part of our debt snowball.  Here’s to hoping next month will be productive. 


Weekly Linkin’ It Up

Here are some of my favorite blog articles throughout the week.

Drew Snyder’s opinion over @Epic Finances’ on Student Loan Forgiveness

The Happy Homeowner tells us ways she tries to save money

As part of the RothIRA Movement, Kevin over @ Thousandaire put in his two cents on why a Roth IRA can be a good investment tool.  Check out his article and definitely watch his video.  It was my favorite post out of everybody that wrote for the movement. 

Alice over @ Don’t Debt continues to walk the path of honesty/integrity, and confesses to making a decision that hurt the finances a little bit.  One reason why I like her blog so much is her honesty.   

J$’s @ Budgets Are $exy has some tips to save more.  A lot of them are really simple but often people just don’t do them.

401k’s and 5k’s

So this post really has nothing to do with 401k’s.  I just lack a major quality of being a good writer, that quality some people call creativity.  Figured I would just throw that out there incase you didn’t notice already. 

This post is dedicated to all things running.  All part of the bucket list.

I want to run a full marathon-  This will take a while, especially right now seeing as I have been lacking motivation to exercise.  It’s also not going to get any easier as every year passes.  The thing that sucks most about it, is that I used to be a pretty damn good runner.  I just wish I had the motivation that I had when I was in basic training.  Every morning we would wake up at 4am, go out and stretch and do exercises.  I thought it sucked at the time, but as I look back now I realize it wasn’t so bad.  Back in basic they would split you into different groups, based on what your 1 mile time was during reception week.  I’m not exactly sure what my time was (it was back in 2003) but I think it was around 7 minutes.  I was placed in A group with the “fast” runners. 

During the 9 weeks of basic training, our drill sergeants would push us, even when we thought we couldn’t go any farther or any faster.  They pushed us, motivated us and demanded that we run harder.  Each day as this went on it got easier and easier.  We were in pretty good shape by the time our first PT test came.  I ran my first 2 mile test in 13min and 36 seconds.  That would turn out to be the worst time of all my tests.  By the time we finished basic I had dropped it to under 12 minutes.  Our drill sergeants still pushed us, demanding we try harder.  After basic came AIT (job training).  Our last 2 mile was my best.  It was a simple course, a straight 1 mile track, turn around and run back.  They had a timer where you turned around and when I got there I couldn’t believe my time.  On my 2 mile pace I ran the first mile in 5 minutes flat.  I was thrilled, even during high school I had never broke the 6 minute barrier.  My total time when I finished was 10 min and 54 seconds.  I finished 4th out of the 180+ we had in our company. 

So why do I write about 2 mile tests when a marathon is 26 miles.  Because this is going to be my motivation, to try to get back into that shape.  I know at times during basic we ran 10+ miles and I wasn’t tired at the end of it.  I also know that 26 is a whole other ball game.  There is the physical challenges of running a marathon, but there will also be the mental challenges.  Some say the mental aspect is just as hard.  Before I train for a marathon, there are a couple other runs that I would like to do, runs that the wife is also interested in. 

I want to complete the Tough Mudder–  This is a race/obstacle course that was designed by the British Special Forces.  Not only is the race itself awesome, they also raise money to support the Wounded Warrior Project.  Something that I truly believe in and am very passionate about as my wife can attest to, is that I love all things military.  This race is normally 10-12 miles long, depending on location, and has obstacles along the way.  The obstacles include crawling under barbwire through mud, wall climbs, a 15 ft jump into water, climbing across netting and ropes, running through fire, running through mud in a maze of trenches, running while carrying a log, a slip-n-slide (not as hardcore lol), jumping into ice water, log jumping, climbing over a giant hay-bale pyramid, about 30 feet of monkey bars (some of which are greased) and last but not least, running through a bunch of wires, some of which are electrified with 10,000 volts.  I have no idea why I want to do this, probably because I like to test myself, and to prove that I can do it.  The race itself relies heavily on teamwork, helping others through the obstacles, but the top 5% of people who finish are invited to the World’s Toughest Mudder, which is a 24 hour race, whoever completes the most laps wins.  The ultimate goal of mine would be to finish in the top 5% and run the final.  The next race is one that the wife wants to do together.

We want to Run For Our Lives  We want to do this race purely on our love for the tv show The Walking Dead.  I don’t know if you watch it, but you should check it out.  It’s a pretty awesome show.  This race is a 5k obstacle course.  It has some basic obstacles in it but with a twist.  You have to wear a belt and on the belt are 3 flags which are your health flags.  In order to be considered a “survivor” you have to complete the race, and do all the obstacles with at least 1 flag left when you cross the finish line.  There are a bunch of people dressed up as zombies throughout the course who try to take your flags.  I don’t know about you but this sounds like it could be a blast.  We ran a 5k obstacle course together last year and had tons of fun, I think this could be even better.  We’re just not sure if we are going to do it this year or wait until next year.  It kind of sucks because the dates for the zombie one coincide with MX races I want to do. 

Do you like to challenge yourself?  What motivates you to get into shape?

aROTHaclypse Now, or Later

Today the PF blogosphere will start a movement to educate people on the awesomeness that is the Roth IRA.  This movement, led by Jeff Rose over at Good Financial Cents, the peeps that run, IRA Market and 140+ other bloggers like myself want you to know how sweet a Roth IRA can be.  The following article is one of the reasons why I think you should open a Roth IRA. 

I like to read about all types of investment accounts, from college savings plans (I don’t even have kids yet), to IRA’s, 401k’s and individual accounts.  When I was researching where to open a Roth IRA I came across an article explaining some benefits of IRA’s, both Traditional and Roth’s.  One of the side benefits of Roth IRA’s is that You Can Use Roth IRA Contributions to Buy Your First Home!!!!   There are some strict conditions to this, but it can be a good way to save for retirement and a home at the same time. 

I’m not saying this would be a good idea for everybody.  This doesn’t make as much sense  to me if a person in their 40’s and 50’s were to do this.  Withdrawing such a large amount this late in the game could reduce your earnings potential to a point where it wouldn’t make it financially beneficial for you to do so.  I suppose it depends also on how much you have in your account and how much time you have left until retirement.  Being later in the game it could make a dent in your retirement plans.  I do however think that if a person was in their 20’s or early 30’s and they decide to do this it could be an awesome way to kill two birds with one stone. 

I will try to explain it in a simple way.  The first requirement is that you have to be a “First-time Homebuyer.”  Does that mean that because you have owned a home in the past that you are disqualified for this?  Nope.  To be qualified as a “First-time Homebuyer” you couldn’t have owned a house during the past two years.   A second requirement is that you must use the money to buy or build a home within 120 days of the withdrawal. 

You can do this with both a Traditional IRA (tax deferred and pre-tax contributions) and a Roth IRA (tax-free and after-tax contributions).  There are more limits going the Traditional route than going with the Roth.  The biggest limit is that you can only withdraw $10k penalty free over your lifetime from a Traditional IRA to build or purchase a home.  This can be done by your spouse also.  The other problem that runs with the Traditional is that the withdrawal will be taxed, because your contributions are pre-tax dollars.  To me that pretty much knocks that option off the table.  Lets take a look at the Roth IRA option. 

With a Roth IRA you can withdraw your contributions at any point in time (penalty and tax-free) if you need them.  The key word here is Contributions, not the money you hopefully made from your investments.  As of today a person under the age of 50 can contribute a maximum of $5k into a Roth IRA each year.  Say you maxed out your contributions each year for 10 years, you would have contributed $50k into your Roth.  You are able to pull that money (your contributions) out for any reason because it was all after tax money.  You can also withdraw up to $10k more (which would be drawing from your earnings, assuming you had earnings) but this also has stipulations to it.  One being that the account had to have been open for 5 years or more from the date of your first contribution.  If you meet this requirement the $10k would be tax and penalty free.   If the account has been open for less than 5 years, you can still withdraw the extra $10k without the early 10% distribution tax, but the $10k would be taxed at your current tax rate.  The extra $10k is a lifetime limit per person and once you have used that limit up its done.  For an account that has been open for 10 years (maxed-out contributions) you would be able to withdraw a total of $60k ($50k in contributions and $10k of earnings) tax and penalty free.  Your spouse could also do this with his/her Roth IRA, so if both of you have been maxing out your Roth IRA contributions there is potential to have $120k towards building or purchasing your first home. 

If after 10 years you decide that owning a home is not what you want to do, then you have an awesome start to a retirement account.  If you decide you want to use a Roth IRA as a home purchase account and withdraw money later on for that reason, you still have whatever you earned in those 10 years in your Roth IRA, with plenty of time to make up for the money you are withdrawing for a home purchase. 

I don’t know about you, but I hate seeing how much of my mortgage payment goes towards interest and not the principle.  The point of this for those that decide to use Roth contributions towards purchasing a home, is that you could potentially save a boatload of money on interest by sacrificing some of your early earnings potential in your retirement account.  If you do this by age 30, you still have 30 years left to make up for it.   You should take account of what the interest rates are at and what your returns are in your Roth.  It might not make financial sense to do this when interest rates are so low.  Unless you really hate debt like I do.  I purchased my home before I got into investing, not saying that we wouldn’t have bought our home if we would have known about this option, but it would have given us something to think about.   Either way, contributing to a Roth is a win-win for you.

What do you think, could this be a good tool to use for the younger generation to save for a home? 

P.S. I am not at all a tax or real estate professional.  This is just my observations and understanding from what I’ve researched.  You should always consult with a tax professional and your investment manager prior to making decisions like this.  Information in this article was found here specifically pages 51 and 62.  Always research and read the fine print before making your decision. 

Rent To Own

I was watching some tv with the wife tonight when a commercial came on.   This commercial was from a store that sells electronics, furniture and appliances.   Not to different from many stores in the same industry.  The biggest difference between this store and it’s competitors is that it “leases/rents” the items if you don’t have the money to pay for it outright, or if you don’t have a sufficient credit score to finance it. 

I don’t know about you, but if I’m going to buy something, I want to see the price while I’m shopping without having to ask anyone for it. This goes for anything. If I go to a car dealership and see one I like and there is no price sticker on it, I leave. They obviously don’t want to sell the vehicle to me so I’ll take my business elsewhere. 

I don’t have one of these stores locally anymore, it shut down about two years ago which I think is a good thing.   People probably saw how much of a scam renting to own is.   I visited this stores website, wanting to do some research to show how much the prices are jacked up, but for some reason, they don’t want to tell you what the price of an item is on the site until after you have filled out your contact info, email and only then the store calls you to tell you the price.  Screw that.  You can’t even find any of the terms of service for their lease program.  I looked up a comparable TV on one of their competitors websites.  The tv sells for roughly $700.  Since I can’t find exact prices and details on their lease agreements,  I averaged some prices from sites about renting to own.  When renting to own you should expect to pay at least double for the item versus if you were paying cash for it.  More likely you will be paying closer to 4-5x what it actually costs, this tv would probably run $2500-$3000 if you paid minimum payments for the whole lease term. What a rip-off.  If you bought the same tv from somewhere else it would cost you $700 + Tax.  

I can’t remember what blog I read it on, but I read an article on cash-advance companies and how much interest they charge.  This is basically the same idea.  They market renting to own appliances, furniture and electronics to lower earning consumers because they know they can’t finance or because they can’t pay outright cash for it.  Brilliant marketing strategy, but is ethical?  Hell no.  Making someone pay $4k for something that costs $1k is unethical.  They are in the business to make money though, which is the point of owning a business.  This won’t go away though, they will continue to market towards low wage earners until it stops working.  People have to wise up to how much money it really costs them by renting versus saving for it and buying with cash. 

This is one of the reasons why I stress research.  It doesn’t matter what you are buying, a home, tv, freezer, vehicle or anything else you can think of.  Always research it.  Look at everything in your contract, read the small print.  Is there an early payoff penalty?  What is your interest rate?  What is your total payment going to be?  Could you finance this through your local bank cheaper instead of choosing the company’s financing?  My best advice is never rent to own.  Instead of renting, save cash by cutting something in your budget.  Anything but renting to own.   Luckily I have never done this, although you could probably classify a car loan as basically the same thing if the interest rates are high enough. 

Have you ever participated in renting to own?   How was your experience and would you ever do it again?

Things I don’t Understand

There are many things in this world that I do not understand.  Like the computer I am using.  I have no idea how its made, no clue as to why certain circuits connected to each other make something happen.  I don’t really care all that much though, as long as I know how to use it, and it does its job.  There are some things though, that as much as I try to understand them, it just doesn’t make any sense to me.

Consumer Credit, and why its a Good Thing:  Investopedia defines consumer credit as a debt (credit card, line of credit, and other loans) that a person incurs for the purpose of purchasing a good or service.  It includes vehicle, student and other recreation loans but excludes real estate and margin for investment accounts.   So basically people taking on debt to purchase stuff they want and need. 

Consumer Credit is one of the major economic factors in the stock market.  It is reported by the fed once a month.  They have a prior number, expected number (which is the average of analysts) and the actual number.  The stock market loves when this number is higher than both the prior and expected numbers because it means the that population is increasing borrowing, which means that they are purchasing goods and services and potentially increasing companies earnings. 

I get that increased spending is a major factor in helping the economy recover, that makes sense to me.  What I don’t understand is why going into debt to do so is a good thing.  Why is it that the government, companies and investors think that by individuals going deeper in debt is the greatest thing in the world.   They see that consumers are taking on debt, which means consumers are more confident that they can pay back the money borrowed.

Here is my thinking of what the government thinks of consumer credit. Person A takes out a loan from the bank B, to buy a good or service from company C.  Person A goes into debt by purchasing goods/service from company C and is taxed on that good/service so the gov makes money from taxes paid by person A.  Person A takes out a loan with interest from bank B, which increases bank B’s earnings.  Bank B pays taxes on those earnings, and the gov makes money.  The goods/services purchased from company C are also taxed, and the gov also makes money on this.  Everybody makes money, except for the consumer, but they do receive the end product. 

I am currently one that these people seem to love.  We took on debt to purchase our camper, our house, and in the past our vehicles.  I sometimes think that we should have saved more and took on less debt.  I don’t regret buying these things, just that we didn’t pay cash for them.  Obviously many people take on debt to purchase their homes, saving enough cash to pay for one outright would take a while. 

So why is increased consumer credit considered a good thing?  Why can’t the government come up with a different economic indicator?   They could still use an indicator that tracks how much consumers are spending, just not from incurring debt.  Look at how much debt our country has.  It’s going to be harder than heck to pay back.  Shouldn’t we consider what is happening to Greece and change our spending habits?  How much does the economy really grow if people are going into debt to spend?

Weekly Bucket

Here goes the second post to my weekly series of stuff I want to do/experience/accomplish in my lifetime.  So in keeping with the same idea of the last post, this one will be in the same category of adrenaline rushes. 

I want to Jump out of a Plane

A lot of people might think this is a stupid idea.  My dad always asks me, “Why would you want to jump out of a perfectly good airplane?”  My answer to his question is always, “Why would you not want to?”  From snowboarding, to  racing motocross, I have loved doing jumps, and having the feeling of weightlessness.  It’s a pure adrenaline rush. 

I’m not saying that I am fearless when it comes to any of this stuff.  That would be a lie.  Some motocross jumps scare me, especially ones like this (start at :12).  The adrenaline rush on those is crazy.  I am not afraid of the heights part of it, its more the landing than anything.  So skydiving would not be a problem for me, it only takes a split second to make the decision to make the leap.  The part that would scare me is the parachute not opening, which is pretty rare, even then you still have a backup parachute. 

I am trying to get the wife to do this with me.  I think it would be an awesome experience for both of us.  Not sure if I can get her on board though.  If not I have a couple of buddies that would also like to go, so it wouldn’t be by myself.  I’m thinking it would be way easier to do with friends to motivate me (or shame me into doing it). 

Am I crazy for wanting to skydive?  Has anyone experienced this and if so how was it?