Wednesday, January 31, 2007

Financial Ratios…

Money $mart Life has a terrific post called Stop Comparing Your Finances to Others. Five Ratios to Keep You on Track.

I know that I often read PF Blogs and compare myself to others. For a while, I just read PF Blogs because I was too afraid and ashamed to start my own. While my financial condition has deteriorated since starting my blog, I’ve learned a lot and I know that my financial condition is going to improve with focus and hard work. The following ratios are a good measure for determining if you are on track and living within your means and they will also highlight some room for improvement.

Here are the ratios and how I stack up:

Liquidity Ratio
Formula: Liquid Assets / Monthly Expenses
Target: 3-6 months
Me: $9,000 / $5,000 = 1.8 months (expense is based on emergency scenario)

Housing Payment Ratio
Formula: Monthly Housing Costs / Monthly Gross Income
Target: Less than 28%
Me: $1,100 / $4,500 = 24% (33% with utilities)

Solvency Ratio
Formula: Total Assets / Total Debt
Target: Greater than 1.0
Me: $208,980 / $301,330 = 0.69

Savings Ratio
Formula: Savings per Year / Annual Gross Income
Target: 8-25% depending on age
Me: $2,700 / $54,000 = 5% (10% with company match)

Debt to Income Ratio
Formula: Annual Debt Payment / Annual Gross Income
Target: Less than or equal to 30%
Me: $20,400 / $54,000 = 38% (Student Loans and CC/HELOC Refi)

*** Definitely some room for improvement. =)

Steps Towards Financial Success…

These are the steps I need to take to reach financial freedom.

  1. Spend less than I earn.
  2. Establish an emergency fund -- 3 months = $15,000 (conservative)
  3. Put extra cash towards debt repayment - Total to repay $203,100.
  4. Increase retirement savings -- Currently 5%.
Can anyone add to my list?

Financial Software…

Well, I’ve been working with my new Quicken software and I am getting the hang of it finally. It’s actually pretty time consuming and I have the bags under my eyes to prove it. Not really, but the darn thing is pretty addictive and can have you working with it hours at a time. I also downloaded the trial version of Microsoft Money. I am still working with it and will report on which software I think is better once I get a better feel for both programs.

In Quicken…

I finally got my ShareBuilder accounts downloaded. Yeah!!! I don’t have much invested but I am hoping this will change in the near future.

I still can’t download my Countrywide mortgage or 401K information but I can manually enter in the balances. I am going to tinker with it a bit more to see if I can set up an amortization for the mortgage. I am pretty sure that I can.

Overall, I can see how Quicken will probably be a good tool for budgeting and strategizing debt repayment once my student loans go into repayment. Also, the reminders and direct account link access will make bill payment a lot easier.

I just wish the screen didn’t flicker all the time. I guess that’s what people meant by bugs in the software.

Monday, January 29, 2007

Millionaire in the Making… has a fabulous Millionaire in the Making article today. Check it out here.

Sherelle Derico, 36, had a three-week-old daughter and no job when she and her husband split in 1996. But the challenges of the separation and single motherhood didn't deter her from seeking financial success.


February Goals…

My goals for February are to limit discretionary spending, eat at home more, stay within budget and improve my net worth.

Expected Income: $7,500
Expected Expenses: $3,100
Expected Savings: $4,400 – trying to transfer my entire bonus and tuition refund to WaMU.

*** Income Breakdown: $3,100 monthly income. Extra income: $3,100 annual bonus (after tax) and $1,300 in tuition reimbursement.

I received a medical bill for ~ $250 over the weekend. I am not sure where that bill is coming from so I will have to call the doc’s office to inquire.

Good news…I got a refund from State Farm of my $250 deductible and a check for $80 from Aetna to reimburse me for dental expenses. I will transfer all extra money into my WaMu savings, which has a current balance of $9,000.

I am trying to bulk up my savings in preparation for student loan repayment. I may need to use the money to float me if I can’t find a better paying job right away and my student loans enter the repayment period. Once I find a better paying law job, I will reevaluate to decide on debt repayment or an emergency fund.

Quicken Update…

I purchased Quicken Deluxe 2007 over the weekend at Sam’s Club for about $40. I couldn’t wait to get home and download it on my laptop. To say the least, I was a little disappointed. For one, Quicken won’t download my 401k information and I can’t export it from my 401k’s site. I don’t think this would be any different with Quicken Premium. Second, I can’t get the one touch automatic update to work with my banking accounts. I have to go to each Bank’s website and download the information from there. Finally, It won’t download my mortgage, student loan, or ShareBuilder information. The providers are not on the financial institution list. So basically, I have to manually enter in a lot of information so it seems like my regular excel spreadsheet is actually better.

I wonder if Microsoft Money would be better a better option.

Wednesday, January 24, 2007

Oprah’s Debt Diet…

I watched Oprah’s recap of her Debt Diet series last night. For those who watched the Debt Diet last season, you will know that it highlighted three families who were struggling with their finances and deep in debt. You can read more about it here on Oprah’s Website.

Here is a brief introduction of the families and how they performed on the Debt Diet in just one year!!!

The Bradleys: Lisa and Steven Bradley have two children, Madison and Michael. Lisa works as a case manager, while Steven is a government employee. Together, they made $102,000 a year but were $170,000 in debt.

Result: With Jean Chatzky’s help, Lisa and Steven paid off $50,000 in debt. They sold two cars, which brought in $30,000. They also paid off $7,000 in medical bills and $3,000 in credit card debt. By taking back a big-screen television, they saved an additional $2,000.

Key to their success? Lisa and Steven started saving and they did not start spending again. Lisa saved $5,000 by not going to the mall every day and $6,000 by not eating out three times a day.

They also managed to increase their income by $26,000 when Lisa took on a second full-time job and Steven worked overtime. Currently, they have $6,500 in savings, and they're saving another $2,500 a month for the next year. Then, Jean suggests that they scale their savings back to about $1,000 a month. When Lisa and Steven are ready to retire, Jean predicts that they'll have $1.7 million in the bank.

Comments: Wowza…I am so proud of the Bradleys!!! Keep up the good work!!! They genuinely seemed a lot happier and like this brought them together in so many ways. I hope they continue to work hard and reap all the benefits. Too bad their friends turned their backs on them. They could have learned a lot about strength, honesty, and their finances.


The Widlunds: Marnie and Mark's combined annual income was over $75,000 but they had no retirement savings, no college savings for their two daughters, Victoria and Gracie, and no life insurance. They were $81,000 in debt.

Result: After a year on the Debt Diet, their debt increased by $37,000. Marnie and Mark admitted that they stopped listening to Glinda Bridgforth’s suggestions and stopped following the Debt Diet principles about six months into the program. Marnie even stopped speaking to their money coach entirely. Although the Widlunds ended up deeper in debt, they did refinance their home, pay off some bills and increase their income by more than $15,000.

Comments: This is so sad. The Widlunds could have turned things around with Glinda Bridgeforth’s help. It’s unfortunate that the Widlunds did not take advantage of a one in a lifetime opportunity to work with a financial expert for free in order to secure a better life for themselves and their daughters. Marnie seemed (to me) a little defensive on the program, saying the Debt Diet was too intrusive. Finances are personal. So, if someone is willing to help you, they will have to go over your finances with a fine tooth comb and will have to be intrusive on some level.


The Egglestons: Sally and Dan Eggleston have three children, Emily, Danny and Sam. Dan is a fifth grade teacher and Sally is a fourth grade teacher. Together, they made $92,000 a year but were $115,000 in debt. They had 12 maxed out credit cards.

Result: The Egglestons paid off $26,000 in debt. The first money-saving technique David Bach taught the Egglestons was how to lower interest rates and waive credit card fees with one phone call. By calling and writing letters to credit card companies, the Egglestons reduced the rates on 11 out of 12 cards resulting in a savings of $15,000 in interest payments.

The Eggleston’s increased their income by $19,000. Sally taught summer school and Dan raised the rates at his lawn care business. Their financial decisions also helped them raise their credit score by 100 points which allowed them to qualify for a standard 30-year mortgage saving them $400 a month.

Comments: Go Egglestons!!! I am also very proud of them. They exhibited a very “go get em” positive attitude and were really committed to turning things around. I wish them the very best and continued success!!!

*** Info from Oprah's website. Check it out guys...You will be inspired!

Tuesday, January 23, 2007


I am thinking about purchasing Quicken to help me track everything in one place.

If anyone has the time, would you please share what version of Quicken you like best, why you like Quicken, why you don’t like Quicken, and if possible, any cool aspects of the software that you find most helpful.

Thank you in advance!!!

Monday, January 22, 2007

Closed my ING Account…

I closed my ING accounts over the weekend. The customer service at ING was fantastic and the process was very easy. It took less than 5 minutes. My reason for closing my account was the lack of a beneficiary option and I didn’t want a joint account. I know a lot of people don’t think they need to worry about this but as a law student, I learned in class that everyone should think about planning for unfortunate circumstances.

My main savings vehicle right now is my WaMu online savings account with a 5% APY. So, not only does it have a higher rate of return but it also has a beneficiary feature. Overall, I opened the account in October and I am very pleased with my experience. I learned about WaMu from Jonathan at MyMoneyBlog. Here is the link to WaMu if you are interested in learning more.

Friday, January 19, 2007

Final Tuition Payment...

My student loans dispersed and I paid my last tuition bill for law school. What a wonderful thing!!! With the payment of tuition and full repayment of my Christmas expenses, my net worth took a tumble to ($92k). From this point on, I am hoping things will get better and my net worth will improve.

Next month, I expect to receive my bonus and tuition reimbursement totaling approximately $4,500 after taxes. Bar exam fees including prep programs will cost me approximately $4,200 so I am going to use the extra money to pay for those expenses.

The leftover funds from my loan distribution will be transferred to my WaMu high yield savings account earning 5%.

Classes start back on Monday. I am looking forward to finishing up my law school career on a strong note. I hope 2007 will be full of new beginnings and success!!!

Monday, January 15, 2007

Credit History and Scores...

I am in the process of applying to take the bar exam so I needed to pull my credit to check on my payment history and also to gather my previous addresses. I am pleased to report that my credit history is completely clean and I have excellent credit scores.


TransUnion: 762

  • Between good and very good
  • Higher than 83% of others

Experian: 769

  • Between good and very good
  • Higher than 85% of others

Equifax: 730 *** They are always so low...

  • Good
  • Higher than 72% of others

Listed areas of improvement:

  • Too many inquiries on my credit report. (TransUnion)
  • Installment balances are too high in comparison with my credit limits. (TransUnion, Experian)
  • Total revolving balances are too high. (TransUnion, Experian)
  • Not enough mortgage accounts on my credit report. (Experian)
  • Not enough revolving debt experience. (Equifax)
  • Balances on my bankcard accounts are too high in comparison with my credit limits. (Equifax)
  • Too many personal finance accounts on my credit report. (Equifax)

My Comments:

  • Revolving credit: Admittedly, my HELOC refinance placed my outstanding balance on my credit card well above the recommended 35% of the credit limit. I just completed another balance transfer to 3.99% fixed for the life of the balance which will further hamper this credit factor. My outstanding balance will now be 95% of my total credit limit but I won’t have to make any more changes to this account and it will continue to decline. *** I am thinking about opening a new Capital One miles card because I don’t have a good rewards card right now and I am tired of paying the annual fee on my AMEX. Each month, I charge my utilities on my credit card as well as large necessary purchases, like a new computer or my trip for my sister’s wedding.
  • Installment credit: My student loans constitute installment credit. Since they have yet to enter repayment, the balance equals 100% of the credit limit. This factor will improve in the near future once my loans enter repayment.
  • Mortgage accounts: Experian can forget about me adding another mortgage account to my credit history. My condo mortgage and HELOC account is enough for me right now until I land a good law position.

Well, that’s it. I am pleased with the result of my credit inquiry and I am hoping for improvement in the future.

Friday, January 12, 2007

Net Worth…

I am waiting for the final blows to my net worth. I am expecting a $10-12k dip this month with the last payment of law school tuition and full payment of my Christmas expenses. I also expect another $4k drop in February when I pay my bar exam expenses.

I am having a hard time focusing on my finances because there is so much in limbo.

I graduate from law school in May and I don’t have a new job lined up. My current position as a financial analyst pays me an annual salary of $54k with a bonus of ~$5k. That is not enough to pay my current bills and my new student loan payments. I can easily get a banker position paying a higher salary but 1) I know I am going to leave the bank as soon as I land a law position and 2) I don’t want to burn any bridges and take a position that I know I will vacate in a short amount of time.

My federal loans enter repayment in July and my private loans enter repayment in February 2008. I have a little time to find a new position but I am still a little worried. There are all types of deferment/forbearance options but I suppose I never thought I would ever have to use them.

I am tired of struggling but I can’t say that I am doing my best to mitigate damages to my net worth. Every month, I overspend. I am almost 30 years old and I swear I feel like I need someone to give me an allowance. It’s so sad. I had hoped that I would be better with my spending by now but this blog is helping me. I can promise you that my negative net worth would be worse if it weren’t for this blog.

Thank you for reading and for the support. I know 2007 will be my year to turn it all around. =)

Wednesday, January 10, 2007

Lack of Posting…

Sorry for the lack of posts. I will have my 2007 goals and 2006 Fiscal recap posted sometime this week. I hope everyone is enjoying a wonderful start to 2007.

Tuesday, January 02, 2007

December 2006 Recap...

December wasn’t so bad but I did place my Christmas purchases on my credit card in lieu of debit so my cash position isn’t adequately reflected. The credit card balances will be paid off in full within the next week. As usual, I overspent on Christmas but not too bad.

Next semester I have class only 2 nights a week from 4-9pm. Therefore, my goal is to take my lunch at least twice a week and cook dinner 3-4 times per week.

My 401k did well in December and I am still paying down my credit card balance. I had a reader gasp (I don’t blame them, I would too.) at my almost 19k in credit card debt but I failed to keep a disclosure stating that my credit card balance is the result of a home equity refinance. My HELOC interest rate is 10.75% so I transferred the balance to my credit card at 1.99%. Instead of paying $250 in interest, I paid $250 and at least $200 went towards principal reduction. It made sense to me at the time because I was still paying the same amount but the principal was reducing. The HELOC balance is the result of an 80/20 mortgage on my condo. The original balance was $25k.

Overall, it wasn’t a bad month. January will be drastic. My tuition for my final semester is due, I have bar exam fees to pay, and I have to pay off my Christmas damage. Then, it should be smooth sailing from then on out.

*** Credit card balance is the result of a HELOC refinance. Original HELOC balance was $25k and resulted from an 80/20 mortgage. HELOC interest rate is 10.75% but cc interest rate is currently at 1.99%.