401(k), Investing, Roth IRA

Investing Plan – Update

We have made good progress with our Investing Plan, and have tweaked it a bit along the way.

401(k)
Our 401(k) is currently at $13,184.13. We have increase our contribution from 2% to 3%, effective July 4. To better diversify our 401(k), we have reduced the percentage allocation of each mutual fund, and added a couple of additional funds. Our current holdings are:

16% – JH Lifestyle Aggressive (1.47% expense ratio)
16% – Pacific Rim Fund (1.46% expense ratio)
16% – Real Est. Securities Fund (1.19% expense ratio)
20% – Natural Resources Fund (1.49% expense ratio)
16% – International Small Cap Fund (1.55% expense ratio)
16% – Small Cap Index Fund (0.95% expense ratio)

I really dislike the high expense ratios of my 401(k) choices, and I was surprised to find they increased on some of the funds since my last post, and went down on others.

My wife is eligible to enroll in her company’s 401(k) plan in October. She will get a 100% match on the first 3% and a 50% match for the next 2%. Needless to say, we plan to invest 5% of her paycheck to get the company match (free money).

Roth IRA’s
My wife and I have opened Roth IRA’s thru Vanguard.

For my wife, we invested $3,000 in Vanguard 500 Index Fund Investor Shares (VFINX) (0.18% expense ratio).

And for me, we invested $3,000 in Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) (0.19% expense ratio).

We hope to have both Roths fully funded by the end of the year.

Taxable Accounts (Brokerage, Prosper, etc.)
Our 300 shares of ADVENTRX Pharmaceuticals (ANX) are now worth $798.00. My parents gave me this stock, and have a large amount of money invested in this stock. Since they first bought in, the stock has almost doubled. They expect it will go to $10/share. That would be sweet.

My wife and I invested $100 in two Proper loans. Both loans are current and our average interest rate is 12.23%, which is great, but for a variety of reasons, I’m glad we didn’t invest more money.

Savings Accounts
With just a $1,286.79 balance, we haven’t made as much progress on our saving as we would like. Most of our spare money has gone to funding our Roth IRA’s. We should be able to build this up the 2nd half of the year. Our goal is to eventually have a $10,000 emergency fund.

We feel that things are clicking along nicely. We’re working towards our goals, while not having to overly sacrifice. God willing, this success will continue.

Deals and Bargains

Free Gas

1 Comment

Another benefit that we received as a result of purchasing the new (old) car is $35 worth of FREE gas. The credit union we funded the loan thru gave us a $10 gas card since a friend referred us to them, we also received another $25 gas card since we opened an auto loan within 30 days of our new credit union membership. They’re not big perks, but they’re free.
Roth IRA

Opened Roth IRA

As you may recall, we opened a Roth IRA for my wife last month. I’m happy to report that we just opened a Roth IRA with Vanguard for myself as well. I invested in Vanguard’s Total Stock Market Index Fund (VTSMX).

We had planned to open my Roth IRA next month, but I received a $1,000 reimbursement check from my company a month or two before the business expense will post to my credit card. So, we used the $1,000 reimbursement check and $2,000 from our savings account to open my Roth IRA. The $1,000 business expense will be paid off (using savings) as soon as it posts to my credit card. In the meantime, it has allowed us to open my Roth IRA a little sooner than expected.

So, my wife and I each have $3,000 in our Roth IRA’s thus far for 2007. We plan to contribute another $1,000 each in the coming months to fully fund our Roth IRA’s for 2007.

Health

The Benefits Of Acupunture

My wife has suffered with severe allergies her whole life, and none of the prescriptions her doctors have provided gave any lasting relief. She began going to an acupuncturist a little over a year ago on the recommendation of a friend. I’m a bit of a skeptic, so I didn’t expect results from such an unusual field of medicine. Acupuncture seemed so foreign to me and more of a novelty than anything. However, after a few visits, she was able to reduce her allergy medicine and, eventually, quit taking the medicine altogether. I was surprised at the results – there was no doubt that she was feeling much better.
Fast forward to March 2007 (when we combined our finances): My wife quit going to the acupuncturist because she was feeling better and wanted to help us save the money. As a result, her allergies have begun to worsen again. That being said, we have decided to add the $60 acupuncturist visit to our monthly budget beginning this month.
Although I wouldn’t believe it if I didn’t see it, this is money well spent.
Goals

Steady Progress

Although I only post our net worth in this blog once a month, I check our progress almost daily. Well this morning, we broke $20,000 ($20,235.09 to be precise) in liquid assets (Pre-tax Retirement Accounts, Roth IRAs, Taxable Accounts, Cash & Savings Accounts). Unfortunately, our net worth is well below this amount because we have liabilities that pull it down (0% interest credit card debt, student loan balance, and a mortgage that is slightly higher than what our condo is worth).

The details of this increase in our liquid assets will be noted in our new worth update post at the end of the month.

Income

Cashing In Some Vacation Days

My company provides 4 paid days off (PDO) each year. The vacation days are structured as follows:

  • After your 1st year, you receive 1 week of vacation

  • After your 2nd year, you receive 2 weeks of vacation

  • After your 5th year, you receive 3 weeks of vacation

I have been with my company for just over 6 years, and currently have 92.29 hours of Vacation/PDO saved up. My goal was to always have 2 weeks of Vacation/PDO available in case of an emergency. Today, I decided to cash in 48 hours of vacation so that we can start earning interest on it.

My company’s HR Department and Accounting Department are quick – I received the check this afternoon. The gross amount was $1,526.54, but after taxes, social security, and a mandatory 401(k) contribution, the net amount is $1,219.11. What a blessing. I plan to deposit these funds into our Emigrant Direct Savings Account, and eventually use them to fund my Roth IRA.

I can cash in Vacation/PDO whenever I want, but will probably limit it to 6-8 days cashed in a year. Effectively, giving myself a 1.9 % – 2.7% raise.

Credit Scores

Credit Score Update

Another benefit of buying a new (used) vehicle is that I was able to get updated credit scores from Experian and Equifax thru a couple of the car dealers. Best of all, my scores were they highest they have ever been.

Experian: 784
Equifax: 756

My understanding is that your credit score for financing a car may be different than your credit score for, say, financing real estate because they are calculated slightly differently. Nevertheless, it’s nice to have current credit reports to review for any discrepancies. I found none and didn’t expect to since the credit scores were strong.

Credit Cards, Deals and Bargains

Cash Back Credit Card

As I have mentioned before, my Wife and I use our Citi Dividend Platinum Select credit card most of our monthly expenses. We receive 1%-2% cash rewards for these purchases and have been averaging a $50 cash back check every two months. It’s free money for bills we have to pay anyways. Plus, charging the expenses to a credit card helps with our monthly cash flow.

Citi Bank recently sent us a special referral offer. If you would like to sign up for a Dividend Platinum Select credit card, I can request that they email you a special offer that allows you to get 5% cash back for the first six months. That’s a great deal and an easy way to keep a little more of your money. After six months, the cash back reward reverts to the standard 1%-2% cash back.

If you’re interested, let me know and I’ll request the offer be emailed to you.

Full disclosure: Citi Bank provides me a $25 reward for each approved account (up to 5 accounts). So, we’re both benefiting.

Money Musings

Sold One Car, Bought Another

After 3+ months of trying, we were able to sell Car 1 over the weekend. We sold it to help reduce our monthly expenses and allow us to tow a ski boat my father-in-law is giving us. So, after the selling the car, we bought a used truck.

The 2001 truck only has 55,000 miles, 11,000 less than the 2002 car we sold. We will save $140/month on car payments and $15.66/month on auto insurance. This money will be deposited into our Emigrant Direct savings account each month. An added bonus is the truck gets the same gas mileage as the car we sold.

My wife did a great job of getting us an awesome interest rate at a local credit union. She was able to secure a 5.49% rate by taking advantage of a membership discount, direct deposit discount, and auto pay discount. We’re also getting a gas card because she was referred by a friend. To contrast that, other credit unions and the dealerships were quoting us 6.90% – 7.25%.

One change to our plans is that we will not be paying off our 0% interest credit card, but instead, use the money to repay $1,000 that we had to take out of savings for the car transactions. Of this money, $523.16 was used to pay off a balance on the car we sold (we sold it for a bit less than we owed), $30.00 was used to smog the car we sold, and the balance was used as a down payment on the car we purchased.

I love my new (used) truck, and we’re saving money at the same time. It doesn’t get any better than that.

Income Statement

May 2007 Income Statement

We’ve gone over budget each month, so I decided to revise our monthly budget to more accurately reflect our expenses. Our new monthly budget is $6,113.42, to help better account for household expenses, entertainment costs, and a little extra buffer for random expenses.

Nonetheless, we still went over budget, but by a smaller margin. Our total expenses for May were $6,251.88. Click on the spreadsheet below to see the breakdown.

Our path to financial independence and retiring early.