People’s bad choices

I found out recently that one of my friends has filed for bankruptcy and it pisses me off.  It irritates me because over the years her and her husband have made very poor financial decisions and now the people who they told they were going to pay back are not going to get paid.  I feel like my friends are going to get away scott free and get to keep the items they bought on credit without having to pay for them.  I know, I know bankruptcy will follow you around for the rest of your life whenever you try to get credit, but it still feels like they stole because they bought things that were out of their range.

Here are some of the dumb financial decisions they have made over the years.  They bought a house when they got married, but 2 years later they bought another house.  They couldn’t sell their first house and still decided to buy a second house.  They couldn’t rent out their first house for more than their payments and because they were short on cash they had to take renters who they shouldn’t have in order to make payments.  Some of these renters were terrible and cost them thousands of dollars in damages.  

They have bought more than one car per year over the last 5 years!  And those cars were new.  After only having a new car for a year, they would trade it in for something else.  Since they didn’t put down money, they were upside down on the cars when they traded them in to get a new car.  They were constantly rolling in the cost of old car into their new car payment.  Why they needed so many cars, I have no idea.

They have bought every new gadget over the years.  They always have the latest phone, or computer or tv.  Did they need a new phone?  No!  Their old phones worked just fine.

Finally, they didn’t constantly improve their income.  They have switched jobs multiple times looking for greener grass and thought they would make more at their new job, only to find out after a couple of months that they were making less. I am not sure if they were lied to or if they are just not good at math.  Also, the wife stayed home for a while after having a child.  Needless to say they couldn’t really afford that.

That is why it pisses me off that they have filed for bankruptcy.  Nothing bad happened to them, they made bad financial choices and it isn’t the creditor’s fault! I want to go over to their house and slap them around and tell them not to file for bankruptcy, make them a plan to get them out of the hole, and watch them like a hawk for a year or two to make sure they are on track.  However, I don’t think they would really appreciate that.

 

February 2014 Net Worth Update

Assets:

Checking: $1,056.38 (-$191.01 change from last month).  I like to keep around $1,000 in our checking account just in case we need cash for something or I forget about a check I wrote.

Savings: $6,843.83 ($336.07 change from last month).  I have started to put a little bit of money into my savings account each month.  I would like to get this up to $10,000 by the end of the year so I put a little into it each paycheck.

Investments: $148,966.79 ($9,948.05 change from last month).  This includes our 401ks and dividend stocks.  The stock market rose during February, which helped make up for our losses the month before.

Property: $238,944 (-$671.00 change from last month).  This includes our home value via Zillow and our vehicles via KBB.  Pretty much every month this goes down some.  Our house went up a little in value but our cars went down, so overall our property is worth less.

Total Assets: $395,811.00, which is an increase of $9,422.11 for the month

Liabilities:

Credit Cards: $6,745.03 ($1,580.31 change from last month).  We pay these off every month, but I am sad that we spent $1500 more than the month before!

Car: $46,864.04 ($1,284.42 change from last month).  Yes, we have one car payment with a high balance.  I will be glad when this is paid off…in three years!

Home: $126,557.57 ($1,467.98 change from last month).  We are paying this off early.  We are hoping to use our house to buy a sailboat when we retire.  The goal is to get this to $0 so when we sell it, we can use all the money to buy a sailboat.

Total Liabilities: $180,166.64, which is a decrease of $1,172.09 for the month

Total Net Worth: $215,644.36, which is an increase of $10,594.20.

I am glad our net worth increased, but I am still sad about our numbers.  We are spending too much so we cannot invest more.  The only way we are going to be able to retire early is if we save more.  We are only saving 32.334% of our income.  In order to retire when we want, we need to save more.

March Goals

Last month, our dividend goal was to purchase two shares, KRFT and VZ, in the amount of $2,500 each.  Also, I expected to get $194.47 in payments from the three stocks that we own that payout in the first month of the quarter.   So, how did we do?  We didn’t meet our goal 😦

We made less money than I had anticipated and had higher expenses than I wanted, so we ended up buying $1800 of both KRFT and VZ, which is $700 shy of where I wanted to be.  Overall, we bought $1,400 less than I wanted.  I am very mad at myself for this.  We took a weekend trip, which meant we mad less money and also meant we spent more than we normally do.

Our dividends paid us $197.53, so that was slightly higher than what I thought it would be.  That is good, but honestly I don’t really understand why the numbers are different.  I mean you take the number of shares you own and times that by the dividend payout and it should equal the amount you were paid.  Last month, I stated, “HCP should pay $67.80, PAA should pay $56.70 and T should pay $69.97 for a total of $194.47.”  Instead, HCP paid us $70.39, PAA paid $58.12, and T paid $69.02.  I must not be doing my calculations correctly…something to look into in another post.

Now that we know how we did last month, what are our goals for March?  First, continue to buy KRFT and VZ in equal amounts.  I am estimating that this month we will able to buy $4,000 total or $2,000 each.  We may be able to do more, but what the heck is a goal for if you never hit it?  Also, and I hate mentioning this for a variety of reasons, but we overpaid our taxes by a lot and will get a substantial refund back this month.  I haven’t quite made up my mind what we are going to do with it, but I am thinking that some of it will go to buying more shares…so my stretch goal would be to finish getting these two stocks to $5,000 each by the end of this month so putting in a total of $6,400 or $3,200 each.

Our second goal is to get each month of the quarter paying out $250 in dividends.  I believe that with the additional stock purchases we will hit that by the end of this month.  In March, I estimate that we will receive the following payments: COP will pay $57.15, LMT will pay $72.39, ORI will pay $65.98 and UHT will pay $75.18 for a total of $270.69.  This month will already hit this goal, but the other two months of the quarter are slacking so I am buying stocks to increasing those.

My third goal is to say within my budget on expenses.  My budget is $1,000 for food, gas, and anything else.  I know my car is about to need a service and I can’t remember if this is an expensive one or if it is just an oil change…but it is making lots of noises so even if it is only an oil change, I may end up spending a lot of my budget on my car. 😦  I just have to be diligent about being good with my money the rest of the month.

Disclosure: Just in case you couldn’t figure it out by reading, I am long on everything I mention.  Right now we own these stocks: COP, HCP, KRFT, LMT, MO, ORI, PAA, PM, RAI, T, UHT and VZ.  Just so I don’t get in trouble from some crazy entity, you should know that I am long on all of the

Savings Rate

This lazy Sunday morning I was sitting around in my pj’s and all of a sudden I was like I wonder what our savings rate was so far for 2014.  Does anyone else wonder about these things?  Instead of sitting around thinking I wonder who is going to win American Idol or when is that new purse coming out, I think, “I wonder what my savings rate is.”  LOL  I know I am a weirdo.  I love calculating things and making projections.

Do people calculate their savings rate based on before taxes or after taxes? I mean, when websites says you should save 10% of your income, do they mean before or after taxes? I think that there are probably some people who do it each way.  I wonder what is the correct method.  I am a perfectionist and I hate doing things wrong!!! For this post, I will calculate both ways so I can see the difference.

First thing, is to figure out how much money we have made.  Luckily, that is pretty easy since we have no side income and our paystubs are online.  My gross wages for January and February were $15,059.50 and my husband’s were $18,450.44 or $33,509.94 total.  Side note: wow, some people only make that in the whole year.  What if we only lived on that and saved all the rest of our money!?

My after tax income is $11,004.89 and my husband’s is $13,135.26 or $24,140.15 total.  Side note: Can I tell you how much I hate taxes!?!?  I need to figure out how to pay less tax!  Seriously!! I know we are well off, but we have almost paid $10k in taxes in two months.  I know that not all taxes go to welfare, but we could give 6 people $10k each year.  That just seems a little high to me.

Now to figure out how much we have saved.  We have contributed a total of $1,659.97 to our 401k’s, $4,179 to our dividend stocks, and $654.52 to our savings account.  What about our extra payments to our mortgage?  We have sent in an extra $1,312.14 above our normal payment amount. I have mixed feelings about including this number, I mean at some point our house will be paid for and I will be sticking those extra payments into some sort of savings.  I could not pay extra on the mortgage and they would definitely be considered savings in my mind.  But since they don’t show up in a savings/investment account, I have a hard time saying that they are savings.  I guess I am going to include it and maybe change my mind later.  So all in all, we saved a total of $7,805.63.

Our savings rate if you use our gross income is 23.293% and our savings rate if you use or net income is 32.334%.  That is higher than I expected!  Per Mr. Money Mustache, if we save 30% of our income we can expect to retire in 28 years.  His calculation uses take home pay…so I guess we are on track to retire in 28 years.  That is a bummer!  I don’t want to work for another 28 years!!!!

I don’t want to live in fantasyland, but in three years my husband’s car will be paid for and that will be another $1400/month we can through into savings.  We don’t anticipate buying him or I another car for at least 10 years.  Also, our home should be paid for in 5 years, which will mean another $2000/month that we will be throwing at savings.  If we had saved an additional $3,400 for the first two months of the year or a total of $6,800, we would have saved a total of $14,605.63 and our after tax savings rate would have been 60.503%.  At that savings rate, we can retire in 12.5 years.  Once we get to that savings rate, we will already have some money saved up and it will be less than 12.5 years away.  That makes me feel a little better, but 12.5 years plus the 5 years from now until then, is 17.5 years.  I will be an old woman by then!!!!

We need to spend less and earn more so we can save more!  We are working on pretty hard on making more at our current jobs.  Both of us can make more if we help our employers make more and it is much less scary to help them improve vs. starting a side hustle, so at this time we are not focused on finding another way to make money….just making more where we are at.  Instead, we need to focus on spending less money!

January 2014 Net Worth Update

Assets:

Checking: $1,247.39 (-$7,189.42 change from last month).  I like to keep around $1,000 in our checking account just in case we need cash for something or I forget about a check I wrote.

Savings: $6,507.76 (431.13 change from last month).  I have started to put a little bit of money into my savings account each month.  I would like to get this up to $10,000 by the end of the year.  I have no reason why, but I would like to have a little bit more liquid cash available.

Investments: $139,018.74 (-$394.80 change from last month).  This includes our 401ks and dividend stocks.  Even though we put in several thousand dollars it wasn’t enough to offset the losses in the stock market last month so we ended up negative a little.

Property: $239,615 (-$583.00 change from last month).  This includes our home value via Zillow and our vehicles via KBB.  Pretty much every month this goes down some.

Total Assets: $386,388.89, which is a decrease of $7,736.09 for the month

Liabilities:

Credit Cards: $5,164.72 (-$1,732.75 change from last month).  We pay these off every month, so I am not sure the change is important.

Car: $48,148.46 ($1,268.31 change from last month).  Yes, we have one car payment with a high balance.  I will be glad when this is paid off…in three years!

Home: $128,025.55 ($1,462.95 change from last month).  We are paying this off early.  We are hoping to use our house to buy a sailboat when we retire.  The goal is to get this to $0 so when we sell it, we can use all the money to buy a sailboat.

Total Liabilities: $181,338.73, which is a decrease of $4,464.01 for the month

Total Net Worth: $205,050.16, which is decrease of $3,272.08.

I am very sad that our net worth went down.  However, we only got paid half our normal income in January, so if we had gotten paid the normal amount we would have been positive for the month.  If you are wondering why, we got paid extra in December and so we got paid less in January. This happens every year and to keep the numbers matching actual dollars in accounts I don’t “move” some of that income to January.  December will always be amazing and January will always suck.

February Goals

We are onto goal 2 of our dividend plan!  It is exciting to be able to cross off goal 1!!!!  However, I wish we would have been able to hit goal 1 and 2 in 2013, but that didn’t happen so I am a little disappointed.  I feel like we are never going to be able to retire early and we both semi-love semi-hate our jobs.  We do not want to work forever, but it feels like we will have to 😦

Just to refresh, goal 2 is to increase the total amount of money we have put in to $60,000 by purchasing $5,000 worth of shares with an average yield of 4% in two more stocks in the first two months of the quarter.  Let me explain a couple of things.

First, I like to think of dividends in groups based on the month they pay out.  Most dividends pay out 4 times a year and they usually pay out the same month of each quarter.  The first month of the quarter would be January, April, July and October.  I want to get as close to equal amounts of payments each month, so I want to buy stocks in each quarter.

Second, we already have $50,000+ in 10 stocks where we bought $5,000 worth of shares for each stock.  Right now, we have 3 stocks in the first month of the quarter, 3 in the second and 4 in the third.  Goal 2 makes it so we have 12 stocks total with 4 in each month.  I only need to focus on getting stocks in the first two months of the quarter.

Third, I say, “we already have $50,000+ in 10 stocks” because although we have put in $50,000, the stocks have grown in value and we have been paid dividends which has made it so we have more than $50,000 in stocks.

Fourth, I have no idea what the future will hold as far as the value of stocks but we can control how much we invest.  This is why I am focused on how many shares I buy vs how I expect everything to grow.  The stock market may tank this year and be 50% less than what it was in 2013.  The stock market may grow at the same rate it did last year.  Whatever happens, I still have the ability to buy shares and so that is what I am focused on.

Now that we got that out of the way, let me explain what I plan to do in February to help me hit goal 2. The two shares I plan on purchasing are KRFT and VZ.

KRFT has a yield of 4.01% and it pays out in the first month of the quarter.  This stock is performing in-line with the market and its earnings estimates are uptrending.  I believe KRFT will continue to pay a dividend and may increase the percent in the coming years.

VZ has a yield of 4.41% and it pays out in the second month of the quarter.  This stock is under performing a little but it has been increasing its dividend for the last seven years.  I believe VZ will continue to increase the dividend for the next couple of years.

With these two shares, we will get part of goal 2 to have 12 stocks with 4 in each month of the quarter that average 4% yield.  Now that we got the easy part out of the way, we have to come up with the last piece of the goal….the $10,000 to purchase these two shares.  I am hoping to buy at least $5,000 worth this month.  We will buy the same amount of both shares until we are at our goal.

Also, part of goal 2 is to get every month of the quarter paying at least $200 in dividend payments.  We have three stocks that we should be getting payments from in February.  They are HCP, PAA and T.  Per my calculations based on how many shares we own right now, we should get the following payments.  HCP should pay $67.80, PAA should pay $56.70 and T should pay $69.97 for a total of $194.47.  With the purchase of VZ, we will be above $200 this month of the quarter.  Of course, we won’t see any results of that purchase until May since you have to own the stock about one month prior to the pay date.