Income Statement

February 2012 Income Statement

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We had another very high spending month in February and an above average income month (click on spreadsheet below).
Our total income for February was $8,940.28. In addition to our regular paychecks, my wife earned a $868.27 gross ($723.70 net) quarterly bonus. We also received a $701.43 auto insurance refund, $200.41 rental insurance refund, and $225 in credit card rewards. We earned $0.65 in interest income from our online savings account. My wife’s February reimbursement from her company will arrive in March.
We spent a total of $13,038.03 in February; our fourth largest spending month since we began tracking in March 2007. Two large, non-recurring expenses include $6,497.54 for furniture and $3,744.40 for household items (for the new house).
I thought that we might have all of our major home items purchased in February, but we still need to have our security camera system install, a security door in the garage installed, and our ADT alarm system installed. We put a high value on security, so this money will be well spent. Sadly, our income will not keep pace with our spending in March, so we will be adding to our 0% credit card debt 🙁
Net Worth

February 2012 Net Worth Update (-1,556.74)

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February was another month of heavy spending, resulting in a drop in our net worth of $1,556.74 from last month, to a total of $158,302.36 (click on spreadsheet below).

What Worked

We contributed a total of $1,434.26 our retirement accounts, and saw them increase $3,061.88 to $48,947.37 total. Our savings account also increased from $1,830.39 to $2,608.15. Our first mortgage payment went through reducing our mortgage debt by $589.21.

CORRECTION: Our first mortgage payment was for our March bill and should not have been included in our February numbers. I will correct the spreadsheet before posting our March Net Worth Update.

What Didn’t Work

In February, we did something we haven’t done in a LONG time: we went into credit card debt. We ended the month owing $7,065.02 to a zero percent interest card (0% for 15 months) to buy more furniture/house stuff. We have roughly $3,000 more in furniture/house stuff that we need to buy and then we’re done. I promise.

Next Month

March will get us one step closer to getting back on track, but we’ll still be spending more than saving.

Income Statement

December 2012 Income Statement

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January was a CRAZY expense month and, thankfully, a very good largest income month (click on spreadsheet below).

Our total income for January was $13,358.37, our 4th largest income month ever. In addition to my two regular paychecks, my wife received $632.86 in Paid Family Leave (had a baby via C-section) and $2,586.22 in paychecks from her company. We also received a $2,050 rental deposit refund, $2,588.75 mortgage refund, $1,000 move in gift, $500 hospital refund, $254.24 in credit card rewards, $100 from selling items on craigslist, and a $20 sitter sittercity.com refund. After wiping out our savings for the down payment, we earned $0.02 in interest income from our meger online savings account.

We spent a total of $22,902.72 in January; by far the most money we’ve spent in one month. We expected this to be the case and sold our recreational vehicle and other items to pay for a great deal of it. Some of the substantial outlays include $12,251.68 for furniture, $3,542.51 for household items (for the new house), $1,010 for our nanny (includes some weekend work), $694.31 for home repair/maintenance items, and $685 for 6 months of prepaid 20 year term insurance for wife and me.

The shopping will continue in February, as we have much more “stuff” to buy for our home. I expect that the spending will begin to settle down in March, and it needs to because we cannot sustain our current level of spending for long. Our income has been much higher than normal the past two months, but should return to its normal level in February.

Net Worth

January 2012 Net Worth Update (-4,962.60)

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Due to heavy, heavy spending in January, our net worth dropped $4,962.60 from last month, to a total of $159,859.10 (click on spreadsheet below).

What Worked
We have a another asset on our balance sheet – our new home! Moving is always exhausting, but we are finally getting settled in. Beyond the home, we contributed $220 to our son’s 529 Plan thanks to gifts from our parents and aunts. We contributed a total of $1,280.42 our retirement accounts, and saw them increase $3,940.79 to $45,885.49 total. My wife’s company contributed $1,256.63 in company match and profit sharing to her 401(k). I did not include them in the balance sheet because the vesting is 3 years and 6 years, respectively.

What Didn’t Work
Money flew out of our saving faster in January than any time before. Beyond the $97,800 down payment that we put on our new home, we also spent ~$15,000 on furniture and items for the house.

Next Month
It was fun splurging, but now we need to tone it back down. For the next couple of months, our expenses will continue to be higher than normal as we buy things for the house, but January was the BIG spending month.

Budget

Insurance

My wife did a great job getting insurance quotes from various companies and ended up saving us $1,113/year by switching from Farmers to Allstate. Here are the details:

$768 Farmer Auto
$664 Allstate Auto
$104 Savings

$1806 Farmer Home
$1043 Allstate Home
$763 Savings

$402 Farmer 20-Year Term
$284 Allstate 20-Year Term
$118 Savings

$528 Farmer 20-Year Term
$400 Allstate 20-Year Term
$128 Savings

Total savings per year: $1,113 – NICE WORK!!

Goals

2012 Financial Goals

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We were very happy with how we did on our 2011 financial goals. While it’s unlikely the economy is going to dramatically improve anytime soon, that’s no reason not to shoot for the stars:) Here are our 2012 financial goals.

1) Increase net worth to $ 173,200
We are beginning 2012 with a great head start on our net worth goal, having passed our 2011 goal by $26,721.70. Based on my calculations, we should be able to reach our 2012 goal by September 2012.

2) Furnish our new home
We are moving from a 2 bed / 2 bath condo to a 5 bed / 3 bath house. As you can imagine, we are a bit short on furniture. Our wish list of items totals $25,000. Thanks to the $14,995 sale of our recreational 4×4, we can afford a good chuck of that wish list, however, there is another $10,000 worth of furnishings that we would like to get. I’m not sure we’ll be able to buy it all the first year, but we’ll give it a try.

3) Rebuild savings account balance to $15,000
We plan to use most of our $107,722.13 in savings ($52,696.37 + $51,000 pulled from retirement accounts) in savings for our down payment and to furnish our new home. So, we have set a goal of rebuilding our savings account balance to $15,000 by the end of the year. This will include emergency fund money and private adoption money.

4) Contribute $24,000 to retirement accounts
After cutting our retirement account balance in half for our home down payment, we intend to work hard to rebuild our retirement savings. We have averaged ~$15,000/year in contributions over the past 5 years. For 2012, our goal will be to contribute $24,000 to our retirement accounts. $18,569 of the $24,000 will be automatically deposited into our 401(k) accounts. The remaining $5,431 will be deposited into our Roth IRAs as we have the extra cash.

5) Increase son’s 529 Plan to $6,000
We opened our baby boy’s 529 Plan with $3,000 in October 2011 and ended the year with $3,158.24 in the account. We hope to increase the balance, through contributions and market performance, to $6,000 by the end of 2012.

Goals

Review of 2011 Financial Goals:

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Below are the 5 goals that we set for ourselves 12 months ago and the results of our efforts to achieve them. Reaching 4 of our 5 goals in this economy feels great. The game changer for us in 2011 was my wife’s new job. She already had a good paying job, but was recruited away in April and given a $20,000 higher annual salary and an opportunity to make larger bonuses each quarter. I am so proud of the success she has enjoyed in her career and feel that her new position was pivotal in reaching our goals this year. I’ll be posting our 2012 goals shortly.

1) Increase net worth to $138,100 SUCCESS
Thanks to a good head start on our 2011 net worth goal (we passed our 2010 goal by $9,600.07), this was relatively easy. In fact, we passed our 2011 net worth goal in April and by July our net worth was over $150,000. Shortly after, however, the stock market began to fluctuate wildly and our net worth took a dive, but we still finished the year with a net worth of $164,821.70, $26,721.70 over our goal of $138,100.

2) Increase savings account balance to $20,000 SUCCESS
We started 2011 with $9,215.82 in savings, but we pulled $3,000 out to pay off our student loan and another $3,000 out to open a 529 Plan for my son. That being said, we still CRUSHED this goal, ending the year with $107,722.13 in savings ($52,696.37 + $51,000 pulled from retirement accounts). The biggest boost to our savings came from selling our recreational 4×4 for $14,995. While it was nice to hit this goal, we will be depleting most of our savings account in the next 30 days to fund our 20% home down payment and to purchase furniture.

3) $100,000 total balance in retirement accounts FAIL
In July 2011, we had over $95,000 in our retirement accounts and it looked like we would surely reach this goal by the end of the year. However, with the market correction, our balance dropped to ~$92,000 by the early December 2011. It was at this time that we raided our retirement accounts ($21,000 loan from 401k and $30,000 withdrawal from Roth IRAs) to help fund our 20% ($97,800) home down payment. So, we ended 2011 with retirement account balances totaling $41,944.70. We contributed $14,280.72 total to our retirement accounts in 2011.

4) Decrease debt by $1,000 SUCCESS
We started 2011 with only $3,041.81 in student loan debt. I’m happy to report that we ended the year with no debt ($0.00)! It is such a great feeling to finally be completely DEBT FREE.

5) Start a family SUCCESS
Accomplishing this goal was the biggest blessing of all. After dealing with some fertility issues, my wife and I were shocked to find out that she was pregnant. In September, after a challenging labor, our healthy baby boy was born and we couldn’t be more happy.

Income Statement

December 2011 Income Statement

December was a big expense month and our largest income month EVER (click on spreadsheet below).

Our total income for December was $25,449.19, by far the best that we have ever had. Most of the money came from selling our recreational 4×4 for $14,995. Even if you subtract out the vehicle sale, we’re still at $10,454.19. With the birth of our baby and our home purchase, I changed my filing status from M1 to M3. As a result, my take home pay increased $59.51 per check. In addition to my two regular paychecks, my wife received $4,683.14 in Paid Family Leave (had a baby via C-section). We also received $131.13 from her PTO payout, $1,638 from selling items on craigslist, $220 in cash for our son’s 529 Plan, and $75 in credit card rewards. We earned $25.76 in interest income from our online savings account.

We spent a total of $7,394.91 in December. Some of the larger expenditures include $210 co-pay cord blood banking, $950 security camera system, $400 for home appraisal and $300 for a home inspection.

January is going to be a busy month as we prepare to move from our rental unit to our new home. There should be a huge spike in our expenses and we fill the home with furniture. In terms of income, January should be a pretty normal month as my wife goes back to work. With my wife heading back to work in January, we will be paying a nanny $900 a month to care for our baby.

401(k), Roth IRA

Poaching Retirement Accounts For Down Payment

We are currently in escrow on a beautiful 5 bed/3 bath home that should fit our needs for many, many years to come. To keep our monthly mortgage payment low and to avoid PMI, we have elected to raid our retirement accounts for some of the down payment. I know, I know, hear me out..

The 2 bedroom condo that we are renting is $1,550/month and, with our growing family, it is a tight squeeze. After finding our dream home, we quickly realized that the ~$47,000 in our savings was not enough for a 20% down payment. The home was $489,000, so 20% down is $97,800, meaning that we needed to come up with another $51,000.

We poached $51,000 from our almost $100,000 in retirement savings. $30,000 came from Roth IRA contributions and $21,000 was borrowed from my 401(k). You can withdraw Roth IRA contributions at any time without penalty or taxes. The 401(k) loan has a 5 year payment schedule at $179.44/check. If I were to leave my company for any reason before the loan is paid back, the balance would be due, or I would have to pay a 10% penalty and income tax on the money.

If the deal goes through, our interest rate will be 3.75%, resulting in a monthly mortgage payment of $1,811 on a mortgage of $391,200. Add $600/month for tax and insurance and we are up to $2,411/month. This is a very comfortable number for us, especially when you consider the tax benefits of owning a home.

Our gross annual income is $150,460, not including my wife’s quarterly bonuses. Using the rule of thumb to spend no more than 35% of our gross income on housing, we can “afford” $4,388/month. Frankly, we had no intentions of spending anywhere close to that. We simply want a nice home with payments that we can still afford if one of us lost our job.

Net Worth

December 2011 Net Worth Update (+$8,349.58)

December was an exciting month for us. We have been renting a condo for 2+ years and have been looking for a home as we saved money. After a lot of searching and savings, we found a beautiful 5 bed/3 bath with a pool in a great part of town. Our offer of $489,000, with 3% back towards closing costs, was accepted and escrow is scheduled to close 1/23. Anyways, on to our net worth. We had another great net worth increase of $8,349.58 from last month, to a total of $164,821.70 (click on spreadsheet below).

What Worked
We sold Car 3, our recreational 4×4, for $14,995 in order to provide an influx of cash to furnish our new home. For now this is going into savings, but it will start to flow out of savings once we move in to the new place in January. We were able to deposit $17,095 into savings, plus an addition to $51,000 from our retirement accounts for the down payment.

What Didn’t Work
We contributed a total of $893.96 our retirement accounts, but they decreased $49,649.99 because we raided our retirement accounts for $51,000 to help fund our 20% down payment ($97,800) on our new home.

Next Month
January will be a huge month for us. We’re scheduled to move into our new home and will be spending copious amounts of money to furnish and decorate it. My wife also goes back to work on January 2, so we will begin paying a nanny $225/week to care for our baby boy.

I will be posting a review of our 2011 Financial Goals in a few days.

Our path to financial independence and retiring early.