NetWorth

I think I am going to include past big purchase items into my networth.  A part of me feels like I’m cheating by adding those items but another part of me feels like I paid good money for those things and they should be taken into account.  So, here is the list of my precious items that I feel are worth more than a few dollars:

Car: $5,000 (I need to look up the blue book value to be sure, but the car is only four years old so I believe it’s a good estimate)

Bed: $1,000 (I love my bedroom set)

Tables: $700 (Me like pretty wood)

TV:  $500 (me like my big flat screen)

Total: $7,200

If I was to sell the items today I would take no less than the above prices but it would probably be in my best interest to do some research on the subject.  The $7,200 increase in my networth will not affect my overall networth goal.  I still want to increase my networth by $16,000.

 

Who Am I Cheating?

It’s the end of the month, I’m over budget and I’m wondering if I should count this purchase in this category because then it’ll help in that category so I won’t be so much over budget in that category.  It sounds like I’m trying to cheat somebody out of something to make myself look good.  Seriously, I don’t answer to anyone but myself.  I am the boss of my personal finances.   I’ve been fudging my numbers but who am I cheating?   I’m cheating myself out of a much needed vacuum cleaner, my daughter of her college ed-u-ma-cation all because I wanted to buy a pretty water thingy and a scarecrow for Halloween.  Tsk, tsk, tsk.

Although, I have to admit I bought the pretty water thingy to motivate me to clean my home and it worked.  I am flawed in that way, sometimes I need major motivation to clean.  The 20 dollar purchase wouldn’t have been so bad if I hadn’t spent $60 on Halloween things for mom and then $30 in a restaurant that same day. Tsk, tsk, tsk.

Goal for next month: control impulse (off of work) spending.

Today I learned about Capitalized Interest....

So I log into my Sallie Mae account to see just how much principle is paid off on my student loan per month. I assumed it was atleast $100 per month. Well, over the past year only $9 has been posted to principle (and that entire $9 was this month). WTF! Something must be wrong. I looked closer and apparently I've been paying something called capitalized interest. This is the definition from Sallie Mae:

What does it mean when interest is capitalized? When does it occur?

During periods when a payment is not required to be made on a loan, interest continues to accrue or build up on the principal balance of your loan. When this unpaid, accrued interest is “capitalized” it is added to the principal balance of your loan, which increases the total outstanding balance due. Because interest continues to accrue on the outstanding principal balance if a payment is not made, any future interest that accrues will be based on the new outstanding principal amount (previous principal balance plus capitalized interest). Therefore, capitalization increases the total cost of your loan. You can avoid this cost of capitalization by making interest payments while in school.For certain Federal Family Education Loan Program (FFELP) loans (i.e. unsubsidized Stafford, Parent PLUS and Grad PLUS), federal law permits unpaid interest to be added (“capitalized”) to your principal balance at certain points or milestones during your loan term.

I am speechless...... Oh wait I have something to say afterall... WTF!

2008 Financial Goals

2008 Financial Goals

1.  credit card debt free by July 2008

2.  $2,500 Cash Emergency Fund by March 2008

3.  Start 529 plan for my kids

4.  $2,500 into Roth IRA by December 2008

5.  Debt to Income Ratio of 3.1 by  December 2008

6. Increase net worth by 16,000

 

Plan

Can’t have goals without a plan on how to achieve them, right?  So here is the plan.

 

1.  credit card debt

I currently have ~6,000 in cc debt.  Believe it or not, 8 months ago I had no cc debt but then I stopped paying attention to my budget and now look!

I’m paying $1,000 towards the debt this month and $3,000 next month (I’m expecting a lump some of money (fingers crossed)).  So I’ll be entering 2008 with $2,000 in cc debt. 

In order to achieve this goal I must pay $330/month. (Doable). 

-Contigency..what if I don’t get the $3,000 lump sum, making total cc debt for 2008 $5,000.  --- Then I’ll have to increase payments to $420 and extend payoff deadline to Dec. 1. (Hard but doable)

 

2.  Cash Emergency Fund

$2,500 is weak emergency fund for a single mother of two, but I am compromising a bit until I get cc’s paid off and more debt paid down.

 

3.  College Savings

I have yet to start my kids’ college savings plan.  I suck. I’ve been talking about starting it for nine years.  Tsk, tsk.   Once I pass my P.E. the amount will increase but something is better than nothing.

 

4. $2,500 into Roth IRA for 2008 ($209/month)

This account will back up as my Emergency fund.  It’s not the maximum contribution but it’s a good start.

 

5. Debt to Income Ratio of 1.7 (my goal would be from 3.5 to 3.1) by the end of 2008

I recently read an article which said the debt to income ratio for a thirty year old should only be 1.7 times her income.  My debt to income ratio is 3.5.  Thus, I owe 3 and half times my yearly salary.  That is scary.  I worked on a few numbers and if things go as planned I should decrease that number to 3.1 by the end of December.  It’s still pretty high but it’ll be better than it was.

 

6. Increase net worth by $16,000 by the end of December

My current networth is -32,000 (includes home equity of $25,000), largely due to a student loan debt of $56,000.  In order to achieve this goal I will pay off $3,000 of my HELOC since it has a higher interest than my mortgage and student loans.

 

CC payoff	6,000
Roth	2,500
Mortgage will decrease by	1,200
Student Loan will decrease by	1,500
HELOC	3,000
401 (k)	1,021
Savings increases by	1,500
Total Networth Increase	$16,721

 

Conclusion

I plugged these numbers into my budget and it looks doable.  In fact, it looks easy.  If I stick to this plan I can actually have a positive networth in two years (Happy dance!!!)

I always get happy and lose sight of the long term goals when ever I gain short term success. But this time there will be no back sliding, no money lending to family members, and no crazy Christmas and Birthday gifts/parties. I will be well on my way to having a positive neworth by the end of next year!      

Essence's Mutual Funds for under $50 part 2

I looked up the other mutual funds suggested by Essence and once I eliminated the funds which had to have a broker and the mutual funds that had a minimum I was only left with fund #1. 

In the end, the funds were under $20, but the funds did not do any good if the minimum investment was over $50, since that is what my initial investment will be.

I tend to learn more by putting my feet into the water than standing by and watching other people swim.  But if I pick a fund I want it to be for the long run…. So I want to have more than one choice for a cheap low-cost fund with no minimum investment. 

I’ll keep on looking. 

In the meantime, I need to decide on who I’ll go through to get the fund. 

All in all, the more I read about investing, the more difficult it is becoming.  I’m sure that will change once I actually make a choice. 

 

Internet Use, email, and blogging

My job has severely restricted internet use.  The bad part is I severely restricted my normal internet usage and I still got a tongue lashing.  Tsk, tsk.  So I’ve had to cut it out completely except for work.  –Once an addict, always an addict--

 

I’m not complaining I’m glad they did it.  It’s so easy to abuse the privilege and I’ve become a better employee.  But something’s a sista just can’t do without.  So here is a few ways I’m trying to sustain:

 

I am a pf blogger addict.  But I think it’s a good thing because it keeps me on point with my financial goals.  It’s a good thing most pf bloggers do it for enjoyment and MONEY so they all have email subscriptions, which have the posts delivered directly to me at my work email.  So to all you who don’t have email subscriptions please get them. 

 

You can also email posts directly to your blog. So that is how I will be keeping up with my posts.  Actually, this will be my first post via email.  If you’re reading this I guess it worked.

 

The directions to posting via email are linked here:   http://help.blogger.com/bin/answer.py?answer=41452&topic=8929

 

 

Mutual Fund #1

Mutual Fund #1 From Essence Magazine's "Five Mutual Funds You Can Afford" will be Van Kampen Comstock (ACSTX).


According to the it's Morningstar report there are actually three of the funds: Class A, Class B, and Class C. The mutual fund mentioned in the magazine article is Class A. What does it mean to have a Class A, Class B, Class C mutual fund.

Right now the Class A fund is priced at $19.43. The 1 year Annual total return is 18.85% without sales charge and 12.02% with the sales charge. According the the Morningstar report the Class A stock has a maximum of 5.75% sales charge.

On the otherhand, the Class C fund (ACSYX) priced at $19.44, has a 1 year Annual total return of 17.94% without sales charge and 16.94% with the sales charge.

Hmm, so what is the the difference between the Class A, Class B, and Class C fund, I don't know. I'll save that for another day.

FYI, you can not invest in mutual funds over at Sharebuilder, and Zecco has a $10 charge for investing in Mutual Funds. E*Trade, Scottrade, and TD Ameritrade have no charge for mutual funds. I'm sure theres some other trade off, though. I'll have to figure this out too before I start up the Roth IRA.