Emergency Fund

Chasing Savings Account Rates

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When we first opened our Emigrant Direct savings account ~1 year ago, the APY was 5.15%. Since then, the APY has been reduced multiple times, and is currently at 3.60%. Emigrant Direct has worked well for us, but we’ve been disappointed with how much the APY has dropped over the year.

Today, my wife saw an E*TRADE ad on television mentioning their 4.40% APY savings account. After checking out their website, we decided to apply. Like Emigrant Direct, E*TRADE does not have minimums balances or account fees and is FDIC-insured up to $100,000.

The new E*TRADE account will be opened within a couple of days, at which time we will begin moving our $6,051.84 Emigrant Direct balance to the E*TRADE account. We understand the futility of switching banks everytime rates drop a bit, however, we feel it’s worth it to go from 3.60% APY to 4.40% APY.

Income Statement

January 2008 Income Statement

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We did a good job keeping our expenses below our income in January (click on spreadsheet below). If you subtract out our extra $691.00 payment we made to our 2nd mortgage principle, we were more or less within our monthly budget.

I received a 4.5% raise this month and 3 paychecks (1 more than usual). My wife received a $348.98 commission check, but her standard paycheck was slightly reduced because she transitioned from being a 1099 with no taxes taken out of her check, to an employee with taxes automatically deducted. This is good because it saves us the hassle of having to put money aside for income taxes. In other income news, we received a $64.38 Citi credit card cash back reward and $19.00 in interest income on our Emigrant Direct savings account.

Next month is going to be a somewhat typical income month, with my wife and I each receiving two paychecks. However, my wife is expecting a small commission check and I hope to cash out 6 days of vacation time for an extra $1,200 or so.

Net Worth

January 2008 Net Worth Update (+$806.53)

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Our net worth increase this month may not be as much as usual, but we’re still making progress. Our net worth increased $806.53 over last month, to $24,679.78 (click on spreadsheet below).

What worked this month?
Much went well this month. We began our 2nd mortgage accelerated payment plan by paying an additional $691.00 in principle, increased our savings account balance by $1,390.61, began our 2008 Roth IRA contributions with $300, and increased my 401(k) contribution by 1% (4% total contribution).

What did not work this month?
Unfortunately, our 401(k) and Roth IRA retirement accounts went down a total of $1,786.17 this month, even with our $609.74 in total contributions. Seeing as we should not need to access these investments for a couple of decades, this is good for us. We’re buying low! Hopefully in 20+ years, we will be able to sell high.

What’s coming next month?
Next month is looking good. We hope to be able to continue our 2nd mortgage accelerated payment plan with money from my wife’s commission check and by cashing in some of my vacation time. It will also be the first full month of pay after receiving my raise, further helping our bottom line. The big unknown is income taxes. We plan to do our taxes next month, determine how much we owe, and if we want to wait until April to pay it.

Money Musings

Property Taxes – Were We Able To Get Them Reduced?

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In a previous post, I mentioned that we filed an APPLICATION FOR CHANGED ASSESSMENT in an attempt to get our property taxes reduced.

We received a letter from the County’s Assessor’s Office today stating that they reviewed comparable properties and agree that property values have declined. In our application, we requested that they reduce our property value from $340,016 to $275,000. Instead, they reduced our property value to $270,000, $5,000 more that we requested!

We simply have to sign the form and send it in. From that point, it should take 30-45 days to receive a corrected tax bill. We have already paid $1,842.50, half of our original $3,685.00 tax bill. We’re guesing that our 2nd half of the tax bill will be reduced by ~$700, to $1,142.

Looking back, I thought this whole process was going to be a hassle. Thankfully, my wife was not of the same opinion and took it upon herself to call the County’s Assessor’s Office to find out where to download the form. After downloading the form, we spent a few minutes checking comps in the area on http://www.zillow.com/, completed the form, and drop it in the mail. . .Easy money.

Income

2008 Annual Review

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I had my annual review today and received good marks, as well a 4.5% raise. This $2,880 raise brings my annual salary to $69,030.

The raise was a bit lower than I usual receive because I will be getting another review, and hopefully another raise, in April. They are doing this in an effort to get all employee’s annual review dates back to their date of hire anniversary (April for me). I had received a promotion a couple of years ago (in January) that threw my annual review date off from of my date of hire.

Prosper

Not Worth The Risk

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As a follow-up to my last post regarding Prosper, we have decided to quit lending on Prosper and begin moving our money out of this investment. While our loans are current and we’re earning an average interest rate of 12.21%, we don’t like the fact that each time we receive a payment, the money sits in our Prosper account accruing no interest, thus, reducing our return. For the amount of risk involved in personal loans, it’s just not worth it to us.

The money deposited in our Prosper account with each payment can’t be loaned again or even withdrawn until it reaches a $25 minimum balance. Since we have 2 loans and the payments are only ~$1.65/month each, it took many months for our Prosper account balance to reach the $25 mark. Now that our account has reached the minimum transaction amount, we are moving $25 out of Prosper and into our Emigrant Direct savings account. At this rate though, it will take a couple of years until we have all of our money out.

We had such high hopes when we first learned about Prosper, but I’m glad that we did not invest more money because I have read numerous reports of defaults, even with A grade borrowers such as we lent to. Once in collections, these lenders are lucky if they get pennies on their dollar.

Debt

Slight Change In Plan

As I posted before, we have begun our 2nd mortgage accelerated payment plan. However, we are deviating from our plan a bit this month by not paying 100% of my extra check ($1859.07) to the 2nd mortgage. Instead, it will be spent as such:

$500.00 to 2nd mortgage
$785.00 to savings account
$100.00 to my Roth IRA
$474.07 to checking

I can rationalize the deviation from our plan because I found out that I will be receiving 3 months with 3 paychecks in 2008, one more than our 2nd mortgage payment plan is based on.

The money is being put to good use. We wanted to increase our savings to ensure we had more than enough to pay for our income taxes. We also wanted to bolster our checking account balance because our February mortgage payment will be due before we receive our 1st paycheck in February. We need a large enough balance to get us by until February 8th.

Money Musings

Net Worth Comparison

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Check out this interesting net worth comparison tool based on your age and income: http://cgi.money.cnn.com/tools/networth_ageincome/index.html.

This calculator is set-up for individual comparison; I don’t think it really applies for couples. Nonetheless, I ran a few scenarios just to see how our current $23,873.25 net worth compares. The details are below.

SCENARIO #1
Using my age (32) and annual income ($66,150):

SCENARIO #2
Using my wife’s age (23) and annual income ($40,000):

SCENARIO #3
Using my age (32) and our combined annual income ($106,150):

Based on the results, it seems that we are doing great for our ages. However, we are not don’t as great when comparing our net worth based on our income. We just barely came out ahead in Scenario #2 using my wife’s income and in the other two scenarios, we get badly beaten.

While this calculator was fun to play with, I do not put a lot of weight into its usefulness. One flaw is that it does not take into account how long you have been making your current income. Just a couple of years ago, my salary was considerably less. In real life, this has to play into the equation.

Okay, maybe I’m just a little bitter that we didn’t get better results. Ultimately, I know that what matters is where we are at in achieving our goals, not how we compare to everyone else.

Income

3 Months Of 3 Checks in 2008

I was updating my work calendar for 2008 (holidays, paydays, etc.) and noticed that I will receive 3 months of 3 checks in 2008. This discovery was a nice surprise.

I get paid every two weeks, which usually results in 2 months with 3 checks. But, in 2008 it works out where there will be 3 months with 3 checks (January, July, and December). This “extra” money will go towards paying down our 2nd mortgage.

I call this “extra” money since our budget is based on my wife and I each earning 2 paychecks a month. I thought by chance my wife might also be getting 3 months with 3 checks in 2008, but it turns out she will be getting her standard 2 months with 3 checks.

Our path to financial independence and retiring early.