Family Member Loan

There has been a lot of discussion in the personal finance blogosphere about this topic. Some people think it is the right thing to do and others think it can only cause problems. The reason I bring this up is that I received a call this morning from my sister and she asked if I could loan her $2,500. It is but it isn't a lot of money so I really couldn't decide what to do. Needless to say, the wife and I had a long discussion ranging from expectations of payback, can we afford to even help out, should we charge interest. We finally reached a consensus that we would help out this one time. I am going to try and keep my expectations of payback low and if they don't come through with repayment I will chalk it up to experience and make every effort to let it go so it doesn't become a source of contention within the family.

Tax Refund Received

Just like Tax Act estimated, my full tax refund showed up in my bank account today, exactly ten days after submitting the return. Life is good. We are going to try and save most of it but I have been putting off the purchase of new tires for my car so a portion will likely go to that.

Credit Card Courtesy Checks

Among the items in my mail today were courtesy checks from Citibank for my Sears Mastercard. Two of them stated 3.99% interest until the balance was paid off and no transaction fees. While it isn't that great of a deal since my savings account only earns 4.50% interest before taxes, I thought I would give it a try for the simple benefit of boosting my emergency savings. I currently only have two months of expenses built up and it would be nice to have it closer to four. So, I made the check out to myself for $7,500 and cashed it without issue at my local bank. In a few days, the money will be in my EmigrantDirect account. Based on the 2% minimum payment requirement, I will need to pay $150 to begin with. Hopefully, I can squeeze my budget enough to make this extra payment from current funds and keep the entire $7,500 in my savings. In a way, this is an extra incentive to save.

Preschool

For the past few weeks, my daughter has been attending pre-school two days a week as a sort of trial run. Things have gone well so we made the decision to enroll her for next year. It is a Spanish immersion school and it has been amazing to see how much she has picked up already. The development of little minds is amazing. Anyways, the personal finance aspect of this decision relates to payment of tuition for next year. The school offers three payment options: 5% discount if you pay in full at time of registration, 3% discount if you pay the full amount at registration with a credit card, and full price if you pay on a monthly schedule. Fortunately, we have the money to be able to pay cash now and get the full discount. Our emergency fund will take a short-term hit, but we should be able to build it back up over the next few months as my wife gets paid for coaching soccer.

New Credit Scoring System

The three credit reporting agencies, Experian, TransUnion and Equifax have created a new "VantageScore" that will replace the FICO score. According to the article at Yahoo!, the new credit scores will be available to lenders immediately but will not be available to consumers until later in the year. I am anxious to see what my score will be under this new system, so I will be keeping a lookout for the announcement that will proclaim that this is available for customers as well.

Tax Refund

I just e-filed our federal tax return. We should be getting a refund of $2,588 deposited into our checking account on or around the 24th of March. I used TaxAct to complete and file our return. We used their free software and paid $7.95 to e-file the return. Fortunately, we live in the great state of Washington so there is no state return to file.

Back in November, I did a rough estimate of our taxes and realized then that we would be getting a sizeable refund. I adjusted my tax withholdings but was still way off. Hopefully, I can be a little more accurate this year so we don't end up giving Uncle Sam a free loan.

Budget Pains

March has thrown some early curveballs, and I am expecting to be well over our budget by the end of the month. I have decided that I don't want to "pinch pennies" the rest of the month to try to get closer to the budget. Instead, I want March to be a month we do like we always have. After I have a full month of data, I will identify areas we can hopefully trim.

February Net Worth

February was a rather boring month financially. We held everything constant and just made our normal debt payments and savings allocations. Our net worth increased to $86,045 from $84,254. This is an increase of $1,791 or 2.13%. Our detailed balance sheet for February can be viewed at NetworthIQ.

Credit Card Arbitrage - Update

The process is complete and I am now earning 4.75% on $6,500 thanks to Citi Bank. I received my Citi Bank credit card a week and a half ago and immediately requested a check from their website. The check arrived a few days later and now has been transferred to my savings account with ING. The process went smoother than I expected, so I am going to try this arbitrage thing once more. This time my wife will be applying for the card. I will post once everything is set up with that account.

2006 Budget

After much procrastination and tweaking, I have finally developed a budget that I am hoping my wife and I can adhere to. We will begin tracking each and every expense starting March 1st. I will post the results after the first month. We will see how it goes and how accurate my projections are.

American Express - The Recurring Battle

Back in December, I applied for an American Express Blue credit card. I applied for this card because it advertised a 3.99% lifetime interest rate on balance transfers initiated during the application process. I ended up transferring $13,000 to the card from two merchant cards issued by Citi Bank. I didn't have balances on either of these cards and was able to request refund checks due to the credit balance the transfers caused. This all went smoothly. Unfortunately, my first and now my second statement both show the balance transfer as a regular purchase and thus is accruing interest at 13.99%. I called customer service and they assured me it would be fixed this month and that my next statement would have the proper adjustments. Hopefully this will be true, so I don't have to go through the hassle of calling them again.

As an FYI, I applied for this card so I could payoff my Home Equity Line of Credit (HELOC) which had a variable rate that had jumped to over 8%.

Mortgage Escrow Account

In February of last year, we bought our current home and established an escrow account through our mortgage provider. Our mortgage provider collects money from us each month and holds on to it until property taxes or homeowners insurance is due. They then pay those bills and life seems easy since we don't have to worry about paying them. However, it is also an interest free loan to the bank during the months that nothing is paid by them. As such, I have decided to close our escrow account and instead allocate the monthly amount they were charging us to savings and then make the payments ourselves. Sure it gives us an extra couple of bills to pay and worry about, but I also will be able to earn a little interest while we save up to pay the bills. An easy bonus without much effort.

Credit Card Arbitrage

My wife and I decided to take the now popular (at least within the personal finance blogging circle) plunge into credit card arbitrage. Following the advice of Jonathon at MyMoneyBlog, I have applied for a new credit card with Citi Bank. I was approved for a $6,600 credit line and will request a check for $6,500 when the card arrives and online access is established. If everything goes as expected, I will be applying for additional card(s) for myself and my wife.

Net Worth - January 2006

I have updated my net worth as of January 31, 2006 at Networth IQ.

A quick synopsis of our situation--

Assets
Cash - We have our cash split between our checking and savings accounts. We currently have saving accounts with Emigrant Direct and ING.
Stocks - This is the value of my Employee Stock Participation Plan (ESPP). I currently allocate $25 each pay period to this plan.
Retirement - Roth IRAs for myself and my wife plus my 401K make up this balance.
Real Estate - The purchase price for our primary residence plus minimal appreciation. We bought this house in February 2005.
Cars - We own a 1997 Honda Accord and a 2004 Pontiac Aztek. The value noted here is from Kelley Blue Book.
Other - My wife started a small business a couple years ago and this is the initial capital we invested.

Liabilities
Mortgage - This is the outstanding balance on our primary residence.
Student Loans - The debt we incurred to send my wife to graduate school. We consolidated this debt in 2005 at 3.125%.
Credit Cards - In December, we transferred our outstanding Home Equity Line of Credit (HELOC) to a fixed interest credit card. We are now paying 3.99% instead a variable rate that was most recently at 8.125%. In addition, our monthly credit cards bills are included here. We pay these off in full each month.
Car Loan - We are two years into paying a 0% loan on the Aztek.

Vanguard IRA

After several hours of researching different options and looking at opinions voiced on other personal finance blogs, I have decided to open a Roth IRA account at Vanguard. I deposited $1,000. (the minimum for opening an account) Since I want to concentrate my investments in one account to shorten the time frame to reach the $5,000 fee waiver limit, I have decided to invest in the 2045 Target Retirement fund. This fund will allow me to have a little diversity and still have potential for reasonable gains. I also established an automatic investing plan where I will be contributing an additional $125 each month.

Roth IRA

Over the past several months I have been reading other personal finance blogs and many proclaim the benefits of the Roth IRA. The tax-free growth and the ability to withdraw contributions penalty free are just two such benefits. In the past, I was always comfortable simply allocating as much as I could afford to my 401k account. I have done some thinking and reading and now feel that is likely not the most tax effective strategy for someone my age and with my income. Going forward, I am going to continue to contribute 8% of my salary to my 401k; therefore insuring that I continue to receive the full company match. The extra 2% I was contributing to my 401k will now be invested in a Roth IRA. I will end up contributing the same amount towards my retirement in total just in a little different way. Since I currently do not have a Roth IRA established, I will be researching the various brokers, likely just Fidelity and Vanguard, and establishing an account at the one that is better suited for me.

Budgeting Woes

Tracking my spending has always been a task that I want to tackle but also one I constantly avoid. I have a general idea where most of our money goes and I know we rarely ever spend more than we make so maybe that is why it has never been much of a priority. However, in reading other personal finance blogs, I am beginning to realize that there is likely some "fat" in our spending that could be trimmed. I like nice starting points, so I will begin tracking our expenses on February 1st. That gives me two weeks to finalize a preliminary budget.

Goal Progress

Today, I thought I would share where I am at related to my goals and outline the steps I am taking to reach those goals.

Long-term Retirement Goal

I currently have a little over $30,000 saved for retirement. While it is a good start and appears to be above average for someone my age, it is still less than 2% of my retirement goal. I currently allocate 10% of each paycheck to my company 401k plan and my employer contributes 2.5%. The company match is structured that they match 50% of my contribution up to 2% and then 25% of my contribution up to 8%. I have projected out that my 401k balance will reach my magical goal of $1.75 million when I am in my mid-fifties. The assumptions in my projection are 3% wage increases annually, 1% contribution increases annually and 8% return on investment. I am hoping that the first and third assumptions turn out to be conservative so that I can reach this goal a little sooner. Once my wife returns to the workforce (when the kids are old enough to go to school), we should be able to ramp up the retirement savings even more.

Where to then?

Now that the introduction is out of the way, I will focus on sharing my financial goals. This post will cover my long-term financial goal. In future posts, I will share my mid-term and short-term goals.

I have read numerous personal finance blogs and unfortunately my long-term goal is not going to be much different. I am hoping to retire early (mid 50s) so that gives me roughly 25 years to accumulate enough to support my wife and I for 30 plus years of retirement (I hope). So what kind of number am I shooting for.....to be totally honest I do not know. The calculator on Money Chimp gave me a number around the $1.75 million range which is just mind boggling. Still, I am going to try and take the necessary steps to reach that goal.

What steps you might be asking? Well for starters, I am utilizing my company's 401k and hope to branch out into other investment vehicles such as the Roth IRA in the near future.

Introduction

Hello-

This blog is my personal journey through the financial ups and downs of family life. I am a 28 year old accounting manager living in Washington state. I have a wonderful wife and two adorable children. My daughter is two going on twelve and my son is quickly approaching six months.

My hope is to post the financial happenings in my life and my journey down the road to prosperity.