Tuesday, November 18, 2014

Goal Complete: Pay Off Student Loan

Well I have some good news, a weight has been lifted and one of my student loan accounts is paid off in full! At the beginning of the year my loan stood at just over $20,000 and as of last week it is now $0! It feels good have this proverbial monkey off my back

As I have written before, originally my intention was not to pay down this debt early and instead focus on building wealth. But after filing my 2013 taxes I realized that:

  1. I was not getting a tax benefit for the interest paid (due to my income level being to high, first world problems)
  2. After looking into my loans in more detail I was reminded that my interest rate was at almost 7% 
  3. The scheduled payments I was making were not even covering interest!

So I made the decision in February or March to make paying of this account a priority, and I did just that! Started paying down the debt at $2,000 a month a now I am free and clear of this debt. Here is the proof:

I actually thought I had paid off this debt about a week earlier but it turns out that I incurred $0.18 of interest between when I scheduled the payment and when it was processed so I had to make one final  payment of a measly 18 cents. But it doesn't matter now!

Unfortunately this does not make me debt free yet. I still have an additional $7,000 or so in student loans and another $10,000 left on my car loan. I definitely won't be paying down the car loan early, it is sitting at only 3.60% interest. I haven't decided yet what I will do about the remaining student loan but I probably won't be paying it off early, I'll have to give it some more thought.

What about you? Have you paid off any debt recently?

Thanks for stopping by,


Wednesday, November 12, 2014

Total Lifetime Earnings

So this was a homework assignment from J. Money at Budgets Are Sexy. The idea is too look up your total lifetime earnings (at www.ssa.gov/myaccount) and compare it to your current net worth to get some sort of lifetime savings rate or as J. Money calls it Lifetime Wealth Ratio or LWR. Is it meaningful? Most certainly not, but is should be a fun experiment.

It was pretty easy to log into the SSA site (except for finding an available user name) and I copied the info into Excel and added my "phase" of life for reference.

Obviously I didn't really start earning money until the last couple of years (having a grown-up job will do that to you).

My total (taxable) earnings turned out to be: $295,760
That's a pretty high number, its not surprising in that I can pretty easily account for my earning. But it is surprising to see it all at once, it makes you wonder where did all that money go?

My latest Net Worth:  $107,806

Giving me a LWR: 36%
This number is pretty meaningless but 36% sounds like a pretty good number to me. And according to J. Money's made up lifetime savings index, my 36% puts me squarely in the "You’re on fire, baby! Give me your number!". So even J. Money agrees its good!
Additional note: I used my current net worth with my total earning only through 2013 so my savings rate will actually be lower, I'll have to experiment with this again at the end of the year.

J. Money's LWR is 55% and Jacob from iHeartBudgets.net has an LWR of 9%. What does all of this mean? Nothing but its fun to look at.

Because I recently put together my net worth history for another post, I can combine my net worth history with my history of earnings and come up with an LWR over time.

Well my LWR bounced around a lot more than I would have expected but I suppose that's what happens when you go back to grad school (also known as going broke).

What about you? What is your LWR?

Thanks for stopping by.


Sunday, November 9, 2014

October Wrap Up

If feels like just yesterday that I writing my September Wrap Up and mentioned how fast time has been flying, and then life really hit the accelerator. October flew by even faster than September mostly due to putting in some significant hours at work. Hurray for overtime!
This is my second monthly roundup and I hope to use these posts to discuss my current state of affairs including income/expenses, stock buys and sells, dividend income, and of course my progress on all of my yearly goals

My expenses are listed to the side. On each line I have the budgeted amount per month, the actual amount spent for the month of October, and finally the total amount spent in that category for the year. Those items in yellow have either exceeded or are in danger of exceeding the total amount budgeted for the year.
With my total expenses around $2000, it was a pretty good month. My phone budget was high due to purchasing a used phone, otherwise I think everything was right in line with where it should be, I guess that is one thing that is good about being busy with work: less time to spend my money on other things.

Paycheck: $4,540 this is a bit higher than my usual 2 paycheck month due to all the overtime I have been putting in at work.

% Expenses = 46%  of income
Not bad at all, and it brings my yearly expense rate under 50% so hitting my goal is very likely.

Dividend Income:
Because I have been working hard on paying down my debts, I haven't been able to add much to my portfolio this year. But the great thing about dividend investing is that its still working whether I am adding to it or not. This month I earned $111 without lifting a finger, not bad. The following companies paid me this month:

October was another boring month for trading for me, this is due to me focusing on paying down my student debt.

Scottrade offers a Flexible Reinvestment Plan, where dividends from qualifying companies can be used to purchase shares in any other qualifying companies without any commission. So I take advantage of this every month and I usually use it to build up my positions in companies where my positions are lagging.
This month my dividends were used to purchase 3 shares of Kimco Realty Corporation (KIM) and 3 shares of Chimeria Investment Corporation (CIM).

Net Worth
Net worth will always be a secondary goal for me with generating passive income being my primary goal. But net worth is something I would like to start tracking and monitoring. Given how much of my net worth is in stocks, my net worth will have a tendency to fluctuate frequently with the market but hopefully my net worth continue an overall upward trend over time.
   - 401k:                   $66,712
   - Investments:        $58,722
   - Student Loan 1:  $1,018
   - Student Loan 2:  $6,980
   - Car Loan:           $9,630
NETWORTH:       $107,806

  • Spend less than 50% of my net income - This was a good month and helped protect my expense rate for the rest of the year.
  • Pay off one of my student loans - I paid down this loan by another $2,000 this month for a current balance of $1,018, I should have no problem paying this off in November.
  • Keep taxable income in the 25% tax bracket - My current federal taxable income is $71,720 from my day job and considering dividends, capital gains, and interest I am about 83% of the way to the 25% bracket limit of $89,350 and we are currently 84% complete with this year. So, I need to watch this carefully and probably increase my pretax 401k contribution, I have already increased my contribution since last month.
  • Weight under 200 lbs - My current weight is 207 lbs which is actually higher than last month's but my body fat % was actually lower so I've been making some progress.
  • Run a half marathon - COMPLETE
  • Complete the Tough Mudder - COMPLETE
  • Work out my legs regularly - I have not been as good as I would like you to be but I have been better than in the past. This one still needs some work.
  • Increase my running pace - I have not been running lately because of all of basketball games so I need to figure some way to incorporate running back into my routine, perhaps I will start running on the treadmill at the gym as a warm up before a workout.
  • Take an online class - I have chosen a class but have yet to start, when will I find the time?
  • Work through my backlog of magazines - I started reading for a book club of sorts so I have not been getting around to the magazines lately.
How was your October?

Photo Credit: freedigitalphotos.net

Saturday, November 1, 2014

What Does Net Worth Say About Your Life's Story?

 I had the idea for this post long before I even started this blog. The basic question I wanted to answer was: What does my net work history say about me? Can you tell all of the significant events (financially speaking) in my life just from a graph of my net worth?

Well I put together my net worth history as best I could to try to answer these questions. It was harder than I thought to obtain all of the information I needed. This was especially true for my student loan information; information on student loans I paid off years ago was unavailable and one of the student loan servicing companies for my current loans is completely worthless at doing anything other than automatically deducting from my account each month.

Well here is a look at my net worth from August 2005 to September 2014:


And here is look with the sources of my net worth: Cash, Investment, 401k, Student Loans, and my Car loan.

There are several key events that I want to highlight: 
11. August 2005 - May 2009 My College Years
It would have been nice to start this from 2004 giving me a nice even 10 years of data but I could not find anything past August 2005. But this was actually a great time to start as August '05 is when I left home to start my undergraduate degree. As you can see I did not have a lot of money in the bank and right away the student loans started and didn't stop increasing for the next 4 years. My cash bounced around a lot, peaking each summer due to my various summer jobs: pest control, intern with the City's construction management department, and intern with a small structural engineering firm. I also worked various jobs during school: laborer with the maintenance department, painter, tutor, research assistant, and lab assistant. These jobs did little to offset the growing student loans and so my net worth mirrored my student loan debt.
  2.  May/Jun 2009 – From Graduate to World Traveler to Working Stiff
This was my lowest net worth ever, and rightfully so, I had just graduated with my Bachelor’s in Civil Engineering so my student loan debt was peaking. To make matters worse, my roommate and I decided to go to Europe for three weeks further depleting my limited cash reserves. But I wouldn’t trade that experience for anything, in the years since I have plenty of money but no time so I have not gone travelling to that scale since. After getting back from Europe I immediately started my new engineering job. You can see from here on my net worth started improving dramatically; my 401k was slowly but steadily growing, and I made paying off loans a priority so while my cash and investments were still small my net worth was improving.
  3.  February 2010 – Debt Free!!
As I mentioned above, I had made paying down my debt and in less than a year of working I have paid off over $23,000 in student loans. Up to this point in time I don’t think I made many financial mistakes, sure my students loans were a lot of debt (but not that much compared to a lot of people) but they were necessary for me to attend school and I got a job out of it. But now that I was debt free I made my biggest financial mistake: I didn’t invest I just kept all of my money in cash. For the next year or so I saved diligently and was able to put away over $40,000, unfortunately all in cash. At the time I had my sights set on buying a house so that piggy bank was meant for a down payment, but it still would have been better to at least start investing, especially since I did not end up buying a house. Alas, the best time to invest is always in the past.
  4.  August 2011 – Back to School and Back in Debt
In 2011 I decided to go back to school and get my Master’s in Civil Engineering. At the time I thought it would be a good bridge between my job in aerospace industry and my desire to be in a more traditional civil engineering setting, although that didn’t end up happening. So, my girlfriend and I literally drove across the country (I-90 all the way) to Boston so I could attend MIT. My experience at MIT was fantastic; I had an amazing education, met some of the most wonderful people, and loved my time in Boston (it helps that it was one of the mildest winters ever). But my amazing experience came with an equally amazing price tag: in the 9 months I was there I spent over $60,000 on tuition and living. It both exhausted my bank account and put me $30,000 in debt. My experience was amazing so I will never regret my time at MIT but I’ll be the first to admit that financially there were better options.
  5.  June 2012 – Graduation
I graduated from MIT in June of 2012 but didn’t start work (back at my old company) until August. In the mean time we spent about a month driving the long way home from Boston to Seattle visiting NYC, D.C., Georgia, Jacksonville, New Orleans, Austin, the Grand Canyon, and Las Vegas, before making a final long push for home. As you can see, all of that traveling without any income did not bode well for my net worth.
  6.  August 2012 – Back to Working Stiff
Back at work you can see that my cash, 401k, and net worth started to increase steadily, although this time I did not make paying down loans my priority so my students loans started gathering interest.
  7.  December 2012 – Financial Mistake #2: A New Car
It’s funny how when you start looking for a car your price range slowly increases until all of a sudden you find yourself thinking that a brand new car makes perfect sense. I had some very good reasons to buy my car, the biggest of them being that what I wanted did not exist in the used market place. But between my $10k down payment (my choice) and the loan, my net worth took quite a hit.
  8.  March 2013 – My First Foray Into Investing
At this time I was actually saving up for a down payment for a house so I had some cash in the bank and during this time is when I first stumbled on Dividend Mantra’s blog and after a lot of reading and some thought I decided I should start at least some investing. I didn’t know what I was doing at the time (I still don’t) but my basic criteria was that a company needed to be a company I liked as a customer and be on one of David Fish’s Dividend Champion, Challenger, or Contender lists. So I ended up buying shares in FedEx, Sherwin Williams, Target, Lowes, Coca Cola, and Johnson and Johnson.
  9.  September 2013 – All In On Investing
As I mentioned above, I had been saving money as a down payment for a house, but after several months of looking and one (thankfully) rejected offer I decided I was tired of looking so I moved into to an apartment in Seattle. I immediately put all of my cash into investments and you can see that reflected as my “cash” and “investment” lines cross paths.
  10.  March 2014 –Paying it Down
I had originally intended to pay off my student loans slowly and invest any excess capital I had. But after filing my 2013 taxes I realized that 1) I was paying almost 8% interest on my student loans and 2) I was not able to claim my student loan interest due to my income level so I immediately put all my effort into paying down this debt, as you can see by the sharp upward trend in my student loans.
  11.  Today
My net work graph ends September 2014 and tops out at a personal high of $107,400. I have paid down a large portion of my debt and in the next couple of years even more will be coming of the books. So from now on I hope that every month I will be sporting a new high in net worth. Net worth is not the most important thing to me but it is great to see such a positive trend over the last couple of years.

Well this was a fun a little experiment and I enjoyed being able to see how well my net worth has reflected greater aspects of my live and I hoped you enjoyed it as well.
What about you? What does your net worth history look like?

Thanks for stopping by,


Photo: Freedigitalphotos.net