401(k)

2007 Profit Sharing

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I’ve been eagerly awaiting my company’s annual profit sharing. In the past, it has represented a $550 increase to my 401(k) each year. It’s typically paid around July, but my company was running a bit late this year because of administration issues.

Well, I woke up this morning and was shocked to see that my 401(k) balance jumped $3,000 since yesterday. I checked the transaction history and it turns out a $3,005.63 employer contribution was made!

I had heard that the profit sharing contribution was going to be big this year, but that’s quite a jump compared to previous years. I hope it is not a mistake. I’m not sure how each person’s share is calculated, but I’ve been told it has something to do with how long you have been with the company and that being in management helps too. I’ve been with the company over 6 years and have been a manager for ~1-1/2. I hope these are the reasons for the dramatic increase.

Assuming there was not a mistake, this would mean that we will likely hit our 2007 net worth goal of $22,000 this month, 3 months early. What a blessing!

Money Musings

Could Have Been Worse

Today is a busy meeting day for me at work (4 meetings total). I try to get my work done between meetings, making for a hectic day. In-between meetings, one of my co-workers popped in my office today asking “Do you know you have a flat tire?”. I thought he was joking, but unfortunately, he wasn’t. Since my day was packed, I figured I’d wait until after work to take care of it.

After work, I removed the flat tire and put on my spare tire – one of my co-workers was nice enough to lend a hand. I hesitated going to the tire store because I figured it would be packed with customers coming in after work. When I pulled up, there was not one customer in the office or a single car in the bay. They were able to patch my tire in 15 minutes, for no charge. Heck, they even saved me the trouble of putting my spare back under my truck.

What started off as a bad situation that didn’t turn out so bad after all.

401(k), Emergency Fund, Investing, Roth IRA

Balancing Act

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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.

Goals

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.

Deals and Bargains

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.

Income Statement

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.

Net Worth

August 2007 Net Worth Update (+$2,205.39)

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August has been a volatile month in more ways than one. Nonetheless, our net worth increased $2,205.39 over last month, to $17,267.23 (click on spreadsheet below). We are currently at 78.49% of our 2007 net worth goal. Thank God, we’re still ahead of schedule to meet our goal.

What worked this month?
I received an extra (3rd) check this month that provided us with an additional $1,880.70. We were able to increase our savings by $831.02, which is amazing because we had a couple of large expenses come due in August, such as a $716.53 mattress bill and $300 seat sponsorship for our church. Surprisingly, we did not have a $1,000 business expense that we are expecting post to our credit card; this will likely post in September. In other good news, we were also able to contribute another $500 to my wife’s Roth IRA and we continue to make progress on our liabilities, decreasing them by ~$1,000 each month.

What did not work this month?
Obviously, this was a roller coaster month for the stock market. After subtracting out our contributions, our retirement investments were either flat or lagged behind last month’s balances. Another shake-up this month was that the company my wife just started with 1 month ago laid off 75% of their employees, including her. The great news is that she already has a replacement job.

What’s coming next month?
Now that August’s books are closed, we’re looking ahead toward September. All indications are that it should be a good month too. 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). I’m also hoping to receive my company profit sharing (~$550) in September.

Our path to financial independence and retiring early.