• 02:35:44 am on April 4, 2009 | 12
    Tags: , ,

    Just Numbers

    Mark discovers that living his “Life’s Purpose” too early can have a financial cost … do you see something a little ironic in this? 😛

    What advice can you give Mark?

    __________________

    cash-flow-markI’ve been tracking my numbers using Quicken for a while. I remember using it a lot more a few years ago when I have the 2001 edition. It is more manual but at least I know I need to work on it to keep it updated. Unfortunately, I upgraded to the 2007 version. The conversion didn’t go quite well and I lost some of the reports I used to keep track of my income and expenses. 2007 includes automatic updates which makes me use it lesser and I do lose track on my expenses as we discover below.

    How do we compare the usage of Quicken and NetworthIQ?

    Although I prefer to use Quicken, it is harder to add notes to it or get involved with other like minded people. I haven’t been leveraging NetworthIQ that much although there are good information among the Questions and Tips.

    Over the last year, I have been struggling in terms of aligning my goals towards achieving my number. I seem to do quite well following Money Making 101 and some of its rules, but I haven’t quite make it to Money Making 201 with much success yet. I did experiment with stocks and options trading, some real estate investments and a half-hearted effort to do something online. My main enemy has been time where I am unable concentrate on any one of the investment activities and unable to cope when my current work requires extra effort (working nights and weekends).

    Some of them are my own doing where I choose to travel to various destinations and enjoying life. I may have put too much emphasis on  the “enjoy life” part of my life’s purpose. 🙂

    Let’s go through our current exercise where we focus on our “Income Statement” and “Net Worth Statement”. The reference will be the numbers from my NetworthIQ profile.

    Income Statement

    My current monthly net income after taxes is about $6,425

    I haven’t tracked my expenses in detail for a while even though I’ve been using Quicken and I’m surprised to see some areas where I can easily cut down.

    Current Monthly Expenses (average for the last 12 months):

    • Housing – $980
    • Gifts (gifts for family and friends, mostly family) – $925
    • Auto – $267
    • Entertainment (been to many concerts, musicals, activities and events) – $266
    • Utilities – $256
    • Dinner and Lunch outside – $228
    • Vacation (low number since I’ve used airline miles for 2 international trips) – $224
    • Charity – $191
    • Misc (Electronics, Clothes, Insurance, Cash) –  $406

    The total is about $3,743.

    This indicates a savings of $6,425 – $3,743 = $2682

    The $2682 goes into the 401K ($891), ESPP ($1248), HSA ($162) and building cash reserves or fund investment activities ($381).

    My income and expenses will definitely change in the near future since the above numbers does not include my new residence and potential rental income. These numbers are not available yet but the Net Worth Statement below did take my newly acquired primary residence into account.

    Net Worth Statement

    Using my NetworthIQ profile, you can see that my current assets are:

    • Cash     $21,016
    • Stocks     $22,387
    • Retirement     $78,781
    • Home     $209,900
    • Other Real Estate     $141,300
    • Cars     $8,500
    • Business accounts (savings, checking, investments) $4,500

    The total is $486,384.

    However, the liabilities are:

    • Home Mortgage(s)     $183,420
    • Other Mortgage(s)     $108,966

    Total liabilities: $292,386.

    Current Net Worth: $486,384 – $292,386 = $193,998

     

Comments

  • Scott 6:33 am on April 4, 2009 | #

    Great job so far Mark. It looks to me like you are in Money Making 201 with no debt and a recently started rental property.

  • Jeff 9:11 am on April 4, 2009 | #

    Good work Mark.

    Keying in on Adrian’s intro, a couple things jump out at me. Your “living the good life” activities account for about 43% of your monthly expenses (gifts, travel, eating out, entertainment).

    I’m not proposing eliminating everything, but if you cut those expenses by 1/3 – 1/2, you could increase your monthly surplus (or profit 🙂 ) by 20-30%.

    In an extreme case, eliminating them all together could boost your monthly profit by 61%.

    Just something to think about.

  • Scott 3:51 pm on April 4, 2009 | #

    Yeah, good points Jeff. I’m all for getting to the number faster, then living the good life 😉

  • Josh 5:20 pm on April 4, 2009 | #

    Mark, is the 20K in cash just sitting, waiting for an opporutnity, or is that an emergency fund?

  • Mark 5:24 pm on April 4, 2009 | #

    Thanks Scott and Jeff. I can definitely scale down. I’m being pushed enough yet. With the rental property and a side business I’m ramping up, I hope I’ll be busy making money instead of spending money 😉 I just moved into a new home today! Unfortunately, it will be money coming out

  • Jeff 7:21 pm on April 4, 2009 | #

    Mark, Congrats on moving into the new home.

    I hear you loud and clear about “new home = money out.”

    It seems like every time I turn around in my new home there’s something new to spend money around.

  • Adrian 1:52 am on April 5, 2009 | #

    @ Scott – You stole my thunder – Debbie last post, now you! 😛

    @ Mark – Jeff’s right: I was going to say “Your “living the good life” activities account for about 43% of your monthly expenses (gifts, travel, eating out, entertainment)” but, he beat me to it.

    However, I probably have a slightly different reason; sure adding an extra, say, $800 p.m. can put you into Jeff/Scott (High Income / High Saver) territory, producing $11 mill. in 25 years, BUT:

    1. That’s ‘only’ $4 mill. in today’s dollars (within sight of your Number, which is $5 Mill.) but you have to wait 25 years to get it

    2. In 10 years (Your Date) you ‘only’ have $1.25 Mill. in today’s dollars … certainly not enough to even reopen up the spending gates 😉

    3. Your current expenses are unlikely to reflect the reality of ‘family life’ over the next 10 years (assuming that marriage and children are in your future), therefore you are unlikely to be able to maintain that level of monthly salary without doing something about your income.

    AHA!

    It seems that you need to be “doing something about your income” [ AJC: scary, now I’m quoting MYSELF 😛 ] …

    … so, you really need to be saving more to help you increase your income:

    a) By building up a ‘war chest’ (working capital, R&D costs, etc.) for your business venture/s, and

    b) By building up a ‘backup reserve’ in case things don’t work out.

    Save a little now, so you can still afford to spend later …

    … but, ONLY if you are serious about your Number, otherwise spend away! Go ahead and enjoy your life as it is, you’re already ahead of 99% of those in your age group 🙂

  • Mark 7:44 am on April 6, 2009 | #

    @Josh – The 20K was a leftover after the purchase of the new home but about $6K of it will be gone fixing up the rental property (new HVAC, painting and cleaning). I’ll transfer some of the leftover to a business venture I’m gearing up soon.

    @Jeff – Thanks! Looks like I’m a few steps behind on this transition. I’m taking car of the old townhouse too which bleeds some cash at the moment.

    @Adrian – Agreed. I can cut down on eating out, entertainment and travel but I don’t think I can cut down on gifts that much. I do have some responsibilities and obligations to send money home. I can funnel some funds into a few businesses that will be the main vehicle to reach my number. I’m focusing on one area now – Real Estate. The 401K is indeed my fallback or safety net. On point #3, what if I marry a rich girl? That is still an option for me 🙂

  • Adrian 4:13 pm on April 6, 2009 | #

    @ Mark – LOL. In that case you’ll be needing this:

  • MM101 Summary « 12:07 am on April 27, 2009 | #

    […] our housing, to our choice of transportation, retirement accounts, debts, income statements and net worth statements. These MM101 building blocks are definitely important for us to check if we have the […]

  • Save your way to wealth? « How to Make 7 Million in 7 Years™ 1:03 am on May 2, 2009 | #

    […] example, let’s look at Mark from our 7 Millionaires … In Training! ‘ grand experiment’: My current monthly […]

  • Automated Budget? « 2:29 am on May 18, 2009 | #

    […] I must admit I’m not a big fan of budgeting. I did attempt to follow the No Budget Budget, but I failed miserably, hence the broken pie chart above. I’m too used to letting Quicken download my financial data and perform monthly analysis on my spending. I usually have a 12-month average that I use as a benchmark. This is how I compare against my average spending. My average spending is actually here. […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: