Step3 Prophet

Current Financial State

I have a confession to make. I have no idea what my financial status is. A lot of other finance bloggers have a plan and are working toward specific goals with certain milestones. Right now I'm just kind of winging it. My one real goal so far has been to setup an emergency cash fund, and I just took a serious look at that last month. I know overall I'm in pretty good shape. I have no major debt, so my finances are better than many people out there. But I have a few questions that I need to answer: How much am I investing/saving every month? Will this be enough to retire early? How long until I can expect to have a million dollars at my current savings/investment rate? What should my asset allocation be?

In today's post I'll look at how I'm distributing my income each month. I have all the data I need from my Quicken accounts and my pay stub. Of course, things change from month to month, but I can look at some recent data and get an idea of where I stand.  This will also be useful to compare when I'm evaulating P2P loans on prosper, because people usually give a break down on their monthly expenses. People who state they only spend a $100/month on food and entrainment I find hard to believe.

Here are my averages for the past 12 months:

Item	Percent
Total Income	100.00%
Investments	18.71%
Taxes	15.79%
Rent	14.46%
Retirement	12.50%
Savings	10.21%
Food	9.02%
Auto	3.96%
Household	3.84%
Utilities	3.41%
Insurance	2.86%
Travel	2.55%
Entertainment	1.92%
Other	0.75%

So now I have some numbers on where my money goes each month. These are just averages of course. For instance, I haven't spent a dime on my cars (gas, repairs, oil changes, etc) for the past 2 months. My monthly savings is a healthy 41%. I knew it was significant, but this is higher than I expected. My biggest discretionary expense after savings/investments is food, which is pretty much what I expected.

Rent is 14.46%. This is pretty good. Even though right now I'm paying more than I ever have for housing (its a pretty good house) its not consuming a large portion of my budget. In general, you should be paying no more than 25% of your income toward housing. Housing is something that is difficult to change quickly if you find yourself in a tight spot with money. 

If I found myself in a tough financial situation, there is also lots of room to downsize. Cutting back on investments would not be my preferred method though. There is also room to downsize in the food budget. I'm pretty sure I could easily cut my food budget in half if I strongly desired to do so. (Spaghetti'O's and ramen are pretty cheap after all). If I had to, I could also sell some posessions and move to a smaller living arrangment.

This also shows that to maintain my current lifestyle, I need a replacement income of 60% of my current income. In other words, to retire and live off my investments, with nothing else changing, I would need to bring in significantly less than I'm making now. The usual figure quoted by retirement experts is 80% of your current income.

Now that I have an idea of where I am, in some future post I'll examine what it will take to meet my goals.

(photo by mang maning2000 via flickr)

July Networth Update( and 100th Post!)

I've updated my networth on NetworhIQ. This month saw a rebound in terms of overall net worth, but that was mostly due to aggressive saving on my part. Now that my car loan is paid off, over half of my salary goes to investments and savings.

My cash cushion took a hit last month due to troubles getting my credit card arbitrage system in place. I deemed it better to use some funds from savings than pay more in finance charges. Also, on a lighter note, I switched my goal tracker from a bar graph made in GIMP to a gauge from google docs. I figure it will be easier to update.

A review of my goal to have $12,000 by the end of the year shows that at this time it would be unrealistic. I would have to save over $1600 a month to meet that goal! I think that meeting it in the next 5 months is not really necessary. I would rather use most of that income on potentially more rewarding investments like stocks and peer to peer loans. To that end I'm only going to be saving about $600 a month, in which case it will take me about 12 more months to have sufficient funds.

Finally, this makes my 100th blog post! Actually, I wish I would have reached this milestone sooner, but I haven't had time to make very many quality posts. Here's to trying harder in the future to make more time, or use my time more efficiently.

New Goal: Cash Cushion

I've added a new entry to the right hand column. After finishing "Smart couples finish rich", one of the basic financial tenets it reminded me of is to have a good cash reserve. So far this hasn't been an issue for me because I have a steady and sizable paycheck, but one day that may not be the case and now is the time to prepare. It's hard to dedicate a large chunk of money to doing nothing(except earning some modest interest), because there is always something to spend it on: flat screen TV's, higher yielding investments, or new gadgets. So to spur myself to higher ground I'm making the commitment public. I'm not going to lay any hard and fast rules, except that I want to accomplish this before the year's end and that the percentage should always go up unless there is an emergency.

First Post

    After several years I've decided once again to do the blog thing. My first blog was more more of a parody of a friends blog( sorry Kelsey) than an actual attempt to paint my life on the wall of the web. So this first post will be a statement of intentions for my blog and my life. These are broad goals, and to achieve them I'm going to create a more detailed plan of action for each one, but than will come later.

    My goals for the blog:
        1. Keep a record of my life to look back on and evaluate where I've been and where I'm going with                 emphasis on financial status.
        2. Help other people along the way with things I've picked up about personal finance and other                     aspects of life. (should be pretty simple right?)

    My goals for my life:
        Short term (1-5 years):
              1. Live in a foreign country and learn a foreign language (preferable Japan)
              2. Get a civilian job
              3. Improve my physical shape
         Long Term (5-10 years):
               1. Get married
               2. Have children
               3. Buy a house (maybe. I want to run a spread sheet on various rent vs own scenarios)

          Longest Term (10+ years)
               1. Have a net worth of over 1 million by the time I'm 40
               2. Retire early
               3. Live forever( or die trying)

   Wow that's a beautiful post (and boast).  I hope I don't live to regret it : ) This post makes me look way more organized than I am.