Tuesday, August 23, 2016

My Target Graphs

Mornin’ y’all. I wanted to take a few minutes and share with you guys something that I’ve spent quite a bit of time creating lately (don’t tell my boss please ;)). For a little over t years now I’ve started off every work day by logging into Personal Capital and logging my net worth in a spreadsheet that I made for my personal finances. A few months into this schedule I started breaking it out and noting how much I had in each type of account. i.e. Bank Accounts, Credit Cards, Mortgage, Home Value, Investments. So, now I have almost two years worth of data summarizing the nearly daily change in our investment situations.
    
Up till now I’ve been using these daily values for some other things in the spreadsheets but not very often, and I had never really looked at the story they tell as a whole. But now I am going to unveil to you the whole story they have and how I’ve found to use them more effectively.

Introducing my Progress to Target Graph.

Shortly after I started tracking my investment position daily I turned 27 and set myself a series of financial goals. One of the long term goals that I had set was that I wanted to have a net worth of $500K in 10 years. Since then I’ve re-evaluated that as being too easily achieved and instead set myself a stretch goal of reaching my ER (Early Retirement) number of $780K by age 37 instead.

Really? Being able to retire at age 37 when I didn’t graduate from college and begin a real career until I was 26 while raising two kids (and hopefully more) on one income of around $60k a year? I’ll agree, it sounds pretty lofty, but I’m also pretty confident that it can be done if I can play the cards correctly.

Like any worthwhile goal that you are going to go out and actively pursue though, I needed a way to track my performance and see how I am doing compared to where I need to be at to achieve the goal. So I tapped into my two years of basically unused data and created this graph.



This view shows me the trajectory that I need to maintain to reach my goal within the 10 year time frame. As you can see. After the first two years we are maintaining the path and keeping our heads a little above water. But it’s also clear to see that the road ahead is going to become increasingly more and more difficult to maintain as the compounding returns start to increase the slope of the line towards the end. That’s why it’s crucially important that we can set a solid foundation now and get as much set aside in investment vehicles as possible so that we have something bringing in the needed returns later on.

However, while it’s nice to keep an eye on the big picture like this it is too difficult to see the small movements from this view. This is why I more typically look at this view which shows just the time period that we have completed.



From here we can more easily see that over the past two years we have had times where we have been well above the line, then after purchasing a car for my wife with cash and a downturn in the market we have had months where we were clawing our way back up out of the whole. But luckily the market has done good lately and our cash position has remained stable and thus left us with a nice little $3,500 buffer over the target. While I’m painfully aware that this could dissipate very quickly, we at least now have a way to measure and track how we are performing relative to our goals.
Now it’s your turn. Try it out. Make a little graph to track your performance relative to your goals. (If you don’t have any goals like this set then please take some time to do so. Here are some articles that might help you get going: What Is Your Motivation?SMART Goal SettingDeveloping Your Action Outline). Then if you need some help setting up a graph let me know but I think that it’s more beneficial for us to build our own spreadsheets so that we understand the processes involved in updating them, otherwise we won’t do it and it will be of no benefit.

By way of information, I have chosen to include all of the money contained in my checking and saving accounts, all investments, and credit card liabilities in this number that I am tracking.

Have FUN with it!

Saturday, August 20, 2016

Quick Debt Survey

Hey all, can you help me? I have a quick survery that I was hoping you guys would take a few minutes to fill out for me. These questions that I have listed below were given to me on a preparedness survey that I saw recently. I already have several responses from it but was hoping that you guys would help me collect some additional data on the subject. In a hope to build your trust in me I'm going to share my answers with all of you.

All information that is shared with my will be kept confidential. Please email responses to bandofsavers@gmail.com.


1) Are you debt free?   Yes or No.  (I am not debt free :( )

2) What type of debt do you have (select an that apply):
     Home mortgage     (yes, $111k)
     Car                            (no)
     Credit Card             (no)
     Student Loans        (no)
     Other                        (no)

3) Are you actively following a plan to become debt-free?     (Yes, additional information found here)

4) Estimate how many years/months before you become debt free.     (25 months is our stretch goal, 60 months is our worst case deadline)

5) Age     (29)

6) Country     (USA)

Hope seeing my answers was helpful to you, and hopefully we can get enough to make some significant observations that I can let you all know about.

Thank you Savers

Wednesday, August 17, 2016

Entrepreneur? Getting Started With Your Federal Tax ID


Hey all. Since starting this blog I’ve had a few people contact me with entrepreneurship questions. I’ve done my best to answer them but I have to admit that this is not me specialty, and I don’t really like taxes either. So, today we are calling in the professionals to get us started. Introducing Andrew Burgess from irs-ein-tax-id.com. Now please join us in welcoming our first guest poster here on the site.


“If you’re an entrepreneur or are thinking of starting your own business, you might wonder how your tax responsibilities might change. The truth is that starting a business is a huge undertaking that can absolutely affect your taxes as well as your life. One of the main things that can affect how you file your taxes when you have your own business is the entity under which you are conducting business. One of the most common options that professionals find themselves using is known as a “doing business as” entity.

DBA Tax Form        
When you register your “doing business as”, or DBA, name, you will have to fill out particular lines when it comes to filing your taxes. In general, you will still need to fill out the tax form that corresponds to your business entity. A business entity is something like a partnership, an LLC, a sole proprietorship, or a corporation. In order to fill out your taxes properly, you’ll need to find the correct DBA tax form that works with your business entity, and fill it out completely and thoroughly. Pay special attention to the Schedule C, and make sure that you fill it out with the DBA name only when it comes to line C.

Apply for Federal Tax ID
Are you ready to start filling out your DBA tax form and get your taxes completely filed? Then you need to apply for a federal tax ID! A federal tax ID is a number that identifies you to the IRS, and enables them to keep track of your business endeavors. If you don’t have a number, don’t worry! You can apply for a federal tax ID quickly and easily online.

I hope that you were able to find that starting point helpful. If you have any additional questions let us know in the comments below and we’ll see if we can’t track down some answers for you.

*Photo curtesy of www.secretentourage.com.

Wednesday, August 10, 2016

Saving Tips: Ask For A Sales Price Adjustment

*I'm really disappointed in myself that I didn't think to take a "before" picture, but this is the completed product. Cost: $168.28 and about 30 hours of labor.

I came across this saving tip be accident the other day. I had heard about it but never had an opportunity (that I was aware of) to try it out. But when I did get the chance it saved me a quick $10.84.

Ask for a Sales Price Adjustment

A few weeks ago my wife informed me that her and the boys were going to go visit her dad for his birthday. The plan was to leave on a weekend and return sometime the next weekend. I remember when I was a kid and any time that my mom was away on a trip to visit her parents like this that my dad would always surprise her and do a big project around the house while she was gone. So, following my dad’s example I started making plans to re-do the shelving systems in our master bedroom.

There really wasn’t much there in the first place, 3 shelves and 3 coat racks between the two closets. So it didn’t really utilize much of the available space and required us to also use dressers. This post really wasn’t intended to be about my closet project.

But long story short I had to buy 6 sheets of ¾” white melamine from Menard's for the project. They rang up at $32 each and I ended up spending $204 on them after taxes. Because I did such a great job planning out my intended cuts and didn’t make any mistakes I was able to get away with only using 5 of the 6 sheets which saved my $34.16 when I returned it.

But here is where it gets interesting. The next day I happened to be back at Menard's and noticed that the same pieces of melamine that I had just bought to $32 each were labeled at only $29.97 each. So the next day I stopped by on my way home from work, armed with my receipt, just to see if there was anything that they could do for me. I had heard about the policies that some stores had about retrospectively giving you the lower price if the price drops within a certain amount of time after the purchase but I wasn’t sure how legit it was or if Menard's would do it.

But all I had to do was ask Customer Services about it (I found out that it was referred to as a Sales Price Adjustment) and just like that they gave me $10.84 back since it was under 2 weeks since the time of purchase. It literally took me about 5 minutes and basically no effort, can’t beat that. All it really took was paying attention to the prices.

For smaller purchases this might be a little harder to keep an eye on all the prices that you paid versus the current prices, but for large items this could really come in handy. And it makes me wonder if there is a good way to use this to cash-in on Black Friday deals without having to deal with the Black Friday mayhem? Has anyone out there tried that out yet?

Take Home Challenge: Next time you have to make a larger purchase try holding onto the receipt and paying attention to see if the price happens to drop in the near future so that you can go in and claim your free money. 

Or, if you shop online you should look into signing up for Paribus because they will do this same thing for you automatically with your online purchases. They will use your order confirmations to keep a track of the prices of the items that you purchased and if they can find a price change they will go get the refund for you (keeping a small percentage for themselves of course) then send you a check for the money that they saved you. And they are free to you if they can’t find you and money.

*Note: I have Paribus set up but I shop online so rarely (twice in the past year) that it actually hasn’t saved me any money yet. But since it is free to have set up I leave it there to provide me with some piece of mind for when I do have to buy something online. 

Sunday, August 7, 2016

10 Things Duck Tales Taught Me About Money



Q: “Every day we’re out there making …” ?

A: Not money, it’s Duck Tales – Ahhwoohoo!

A few weeks ago I came home from work to see that my wife and son had checked out Duck Tales Season 3 Disk 2 from the library. I think I was the only one who was genuinely excited about it but my son decided that he loves Duck Tales after the first few episode. I tried explaining the concept of Saturday morning cartoons to him but I think that went over his head a bit.

While I watched these old cartoons that I use to watch when I was little I was amazed at how much financial information they had scattered into the storylines. One of them was about Uncle Scrooge falling in love with the wealthiest woman in Duckberg and all of their words or affirmation and pet names were based on financial terms (i.e. “Oh, my Long Term Investment, you make my dividends rise.”)  Basically all of these were things that would be way over the head of the intended audience but as a financially minded adult I found them hilarious.

While watching this episode it made me start thinking about how much financial conditioning I must have received from watching cartoons like Duck Tales as a kid without even realizing it. So, I got out a piece of paper and started writing out the top 10 lessons that Duck Tales taught me about money.

What I’ve learned about money from Duck Tales:
1.       Always find a way to turn a profit – Scrooge always boasts that he has never lost money on a business venture but when he invested a ton of money in a lost cause hotel it starts to look like his high risk venture is going to ruin his winning streak when he unknowingly allows a monster convention to book the new hotel for the night. They first destroy the hotel then move the party to Scrooge’s mansion and begin to destroy that as well. But that clever old Scrooge refuses to cut his losses and instead he is able to contrive a way to capitalize on the real monsters as a publicity stunt to sell out every showing of monster movies at the theater that he owns. This unexpected theater revenue then provides him with enough to cover all of the costs incurred due to the damage and getting the hotel up and running in the first place.

2.       It only counts if you earn it fair and square – Scrooge is constantly trying to teach his nephews that if you have to steal or cheat your way into wealth that it doesn’t do you any good. That the effort and knowledge required to earn the money is the most valuable part of being rich, because it means that you can get there again if something happens that causes you to lose all of your money.

3.       “Work smarter, not harder” – This lesson came from the episode that tells how Scrooge first went from being a pennyless bagpipe player to being able to swim in his gold. He says that the motto that his dad use to always tell him was to work smarter, not harder. And by finding ways to work more effectively he was able to increase his productivity and thus start making the money that he needed to get started on his path to riches.

4.       Sometimes you just have to trust in luck – In the same episode as before, we find out that Scrooge had made quite a bit of money by working smarter but then spends everything except for his lucky dime on a speculative timber operation in Oklahoma, only to get there and find out that there is no timber on the land that he bought. And, to make matters worse, that he is now indebted to the guys he hired to build a train track to move the supposed lumber. The disgruntled workers chase him intending to take their pay out of his skin. But during the chase Scrooge tries to hide his lucky dime under a big rock and ends up discovering oil. And it’s this accidental oil operation that allows Scrooge to begin really building his wealth. Sometimes all the planning in the world can’t beat out dumb luck.

5.       Set goals then go after them – Scrooge is never idle. He is constantly making plans about how to make more money, then going out and doing something about it and not just waiting around for good things to come his way.

6.       You’re never too rich to be thrifty/frugal – In one of the episodes Scrooge’s nephews notice someone selling sodas for 5 cents each and ask Scrooge if the can get some. He says sure, then hands them one nickel. They seem disappointed that the three of them are going to have to share one soda but then Scrooge reminds them to get four straws, one for him as well.  He was trying to teach the boys that just because you can afford something doesn’t mean that you shouldn’t always be on the lookout for ways to be frugal. 

7.       Financial vocabulary – This cartoon follows the financial endeavors of a business mogul so every episode is based on some sort of financial adventure. This allowed the creators to scatter financial concepts and the associated vocabulary throughout every episode.

8.       The pursuit of money can become all consuming – While Uncle Scrooge might have several redeeming qualities he also has his vices. Often it seems that he allows the pursuit of a dollar to occupy all of his life and rarely takes the time to stop and enjoy the fruits of his efforts. It made me realize that we too need to slow down and enjoy ourselves every once in a while and have at least a few moments each day when we refuse to allow ourselves to feel the stresses of chasing after a greater net worth.  

9.       What two things do Mark Zuckerberg and Uncle Scrooge have in common? They are both filthy rich and they wear basically the same outfit every day. I think we can see a pattern emerging here. – It’s alright to wear the same clothes everyday (see mom?)

10.   No matter how much you love accumulating wealth, some things are more important that money –Even the infamous Scrooge would have to admit that there are some things that are more important to him than money. A few times in the episodes that we watched Scrooge is forced to make a hard decision and admit to himself and the audience that he would rather sacrifice the treasure that he had been hunting rather than allow something bad to happen to his family, friends, or reputation of honesty and integrity. I think that this is one of the main points that the creators were trying to teach us as kids, that money is needed but there are some things in life that are more valuable than all of it.

Monday, August 1, 2016

Monthly Progress: July 2016


The first day of the month is always a big day for me with my personal finance spreadsheets. While I update them nearly every day there are a few things that I do and track on a monthly basis, so the first day of a new month means that I get to hard code the actuals of the previous month and see how we did. I LOVE IT!
So, how'd we do in July?
1)     Net worth: $174,608.63, up $5,761.64
I am a bit obsessive but I actually track my net worth every morning that I work, just because I love seeing the graph it makes and knowing what's going on, and it only takes me about 10 minutes using Personal Capital if I go slowly and analyze anything (if you’re not already using Personal Capital please click on the banner ad for them on the right of this article, they are 100% free and I love them and use their android app nearly every day). But over the past month our net worth has increased from $168,846.99 to $174,608.63, for a total gain of $5,761.64 for July. I think that is probably one of the best months that we’ve had yet.
2)     Investment income: $3,870.07
Another detail that I measure on a monthly basis is how much we've made (or lost) due solely to our investments. This helps me to see what I would have to live off if I didn't work at all and choose to live exclusively off of investments, which is the goal. The current amount needed from investments each month is $2,600, which means that at a 4% withdrawal rate we would need roughly $780k in investments (easy calculation: $2,600*12*25=$780,000). On the first of every month I document what all of our investments are worth and back out the beginning value of the previous month and all of the investments that we made during the month.
In July we started with $100,759.10, invested $734.87 and ended the month with $105,363.86. Meaning that, in July, we gained $3870.07 on our investments. So, for this month we would have exceeded our monthly investment gains goal of $2,600, but we are still a long way away from the estimated $780k that we would need to sustain the $2,600 withdrawal rate. Now that we are 7/12th of the way through the year we have seen an investment increase of 8.57% this year which, if things continue at this pace, could set us up for a 14.7% return this year. That would be awesome since my conservative models that I’ve built to project our future retirement date (November 4, 2033) assumes a 6% annual increase, so that extra 8% this year would be padding for future years when the market might drop some.
3)     Financial plan savings: $1,065.84


I'm not going to go into the details behind the calculations on this one since it's more lengthy but you can read more about it in my post about Our Current Financial Plan. But after all of our income, expenses and planned savings for the month we ended up with an extra $1,065.84 in our checking account to use for investing in our future.

We have actually made one small change from our previously stated plan and instead on dividing this 50/50 between our mortgage and Vanguard we have begun dividing it evenly 4 ways, adding 2 more buckets for remodels and vacation. So this time we invested $266.46 divided evenly between the mutual fund VGHCX and VHCOX at Vanguard.

Then I called up my bank and scheduled a payment for an additional $266.46 to go to the principle on our mortgage. So after our regular mortgage payment that automatically pays on the 1st of each month and this extra payment our mortgage dropped down to $111,859.14 today. Which means that, as of today, we actually own 35.71% (roughly 671 sq. ft.) of our home. We bought 10 sq. ft. this month, that’s almost a whole closet!!!

So, by and large our July turned out rather …? AWESOME! How did things go for you? 

And here's to having a great August ahead of us.

Wednesday, July 27, 2016

Saving Your Way Out Of Debt



I saw an article titled “Finances: Oatmeal, Bread, and Rice and Beans” in a magazine that my family gets and I wanted to share it with you because I enjoyed the message that it shared and some of the points that it made, all in the context of a real family and event in their lives. It is written by a mother of 5 living in Hawaii and describes how they were able to get out of credit card and student loan debt. 

Enjoy – (sorry if the picture of the article is hard to read)



Part of the reason that I enjoyed this article was this families food choices. For years now we have eaten oatmeal for breakfast nearly every day – our boys are so use to eating oatmeal for breakfast that they consider the rare bowl of cereal or pancakes a luxury to only expect on special days. And rice and beans is my 5 year old’s favorite meal. 9 times out of 10 if I ask him what he wants for diner he happily says “Rice and Beans” then runs to pick out which kind of beans he wants and gets heart broken if we end up making something different. And as I write this I am eating a large bowl of rice and beans for lunch for the third day in a row.

I also think that it is worth pointing out that this family hit it hard for a few months and was able to cut back on as many expenses as possible in order to get themselves out of debt – “There were no luxuries such as butter, fresh milk, or juice.” But they still paid a full tithing (10% of their income) and considered that to be one of the reasons that they were able to make such fast progress instead of a hinderance to it.

So, if you are currently struggeling with debts I hope that you can find solice in this short story and a new resolution to attack it and free yourself from your creditors.