Category Archives: Personal Finance

Forks in the Financial Path

Deciding What’s Next (Financially)

Over the past couple of month’s I’ve been mulling over a couple of ideas in regards to the next steps of my financial plan and pursuit of Financial Independence (and possibly Retire Early).  Now that we’re down to a single debt with our mortgage, I need to re-analyze our current state and adjust some of the sliders.  Our Next Life had an excellent post about how their goals changed over the course of implementing their plan.  For me, debt removal was a goal, but not necessarily the goal post.

Hopefully over the course of this post, I can take a look at the current goals as well as the new goals that I’m considering and discuss what I need to adjust to accomplish them.

Here’s where we were…

Debt payoff

When I started really tracking my debt situation at then end of 2014, we had accumulated around $230,000 in total liabilities.  That was a combination of mortgage, student loans, personal loans, and credit card debt.  Once upon a time, I thought this was pretty reasonable although my perspective may have been skewed due to working with so many folks in the SF Bay area.

Luckily I came to my senses and realized I needed to do something about it.  My original plan was to shoot for 10% of the total per year.  2015 was a success and we eliminated a little over that with a 10.65% reduction.  This year, I needed to target 15% of the remaining balance to stay on track.  I’ve closed every balance but the mortgage an we’re on target for a 17.73% drop this year!  That’s a little over $60k worth of debt gone in two short years.

Taking those items off of the balance sheet gives me around $30k of free cash flow next year (assuming no major life changes) that I need to reallocate.  I just need to figure out where to send it.

Here are the things I’m considering…

Home Repairs

This one is inevitable when you own a home.  Eventually, something is going to require a larger sum of money to repair.  It’s really annoying, because it came up just after making all of this super progress.  Chalk one up to Murphy.

The good news is that I can handle the cost of the project.  I’ve got to get some siding repaired (ours is cedar), exterior paint done, and some deck repairs done.  There’s also some cabinetry repair in the kitchen as well as some drywall repair and interior paint touch-up.

The bad news is that the work on the exterior really needs to be done now, but the cash won’t be available until Feb of next year.  I’m going to solve this with a Home Equity Line of Credit with the knowledge that I will be able to re-pay that in a few months.  This will keep the interest payments to a minimum.

That eats up between $10-15k.  Annoying but necessary.

Investment Contributions

In order to make a decision about investment contributions, I need to understand where I am and what my goals are.  Ideally, I’d like to be FI by the time I’m 50.  That gives me eight years to build (I turn 42 this week).  That’s the goal, but where do I stand?

If I look at the statistics for the average American, I see that folks in my age group have a mean savings of around $63000.  Woohoo!  I have a little over $170k depending on where the market happens to land today.  That’s almost three times as much as my peers, but it doesn’t give me the warm fuzzies since I don’t want to wait until 65 to retire.

I need to do a really thorough analysis of what a FIRE life would look like for me.  I’ve seen several examples on other blogs and need to take the time for it.  For now, I’m just going to plug in to one of the simple retirement calculators that one can find through Google.

It was hard to find one that actually let me put in the exact numbers I needed as in how much income I need post retirement (60% of my salary is still too much).  Schwab has a tool that let’s me do just that so that’s where I started.

My current spending per year (that isn’t debt payment) is around 55% of my gross income.  That’s around $85,000 for a family of 4.  I’m planning to reduce that to $65,000 per year which is much more reasonable (this will also free up more cash flow as we move in that direction).  With my current yearly contributions of $21k and planned retirement age of 50, I’m told I have a shortfall of $762,500. retirement1Shit!  That’s a lot of money to conjure in the next 8 years.  Obviously some adjustments are in order.  If I adjust the contributions up to $44k and add an additional four years to make my retirement at 54, then I can get it to the point where I have a surplus.


Now, this isn’t exactly ideal and the tool does make some assumptions about life expectancy, investment gains, and inflation but as a basic starting point it gets the point across.

New goal:  Save at least $44,000 (that’s $23k of my cash surplus next year) per year going forward!

Diving Into Rental Property

I’ve also been thinking a lot about my asset allocation and how it’s almost all in the stock/bond market right now (If I don’t count my home as an asset).  I’ve been including the house in the Net Worth calculation, but don’t really consider it an asset since it doesn’t generate income and I would still take a loss if I sold now considering loan + interest.

It’s not high priority by any stretch, but I know that I could put together the funds to purchase a smaller rental and get started in that market.  I’m currently in research mode on this topic and trying to learn as much as possible before pulling the trigger.

Stay tuned.

Additional Mortgage Payments

This is apparently a hotly debated topic.  Many argue that if interest rates on the loan are low and the market is favorable then money is better allocated towards investments.  Money spent towards extra mortgage payments also ties up capital in an illiquid asset.  Depending on one’s financial health, liquidity may or may not be a concern.

The other side of the coin that I see is the amount of money that I’m spending on interest.  With a somewhat reasonable rate on a 30 year fixed loan of 5.25%, I would end up spending an additional 96% of my original loan value on interest!  That basically doubles what I’ve paid for the house.  Insane!

So far, I’ve managed to get a little bit ahead on the loan.  Over the entire duration, I’ve been spending a little over $6 towards the principal.  Since I paid the car and personal loan off this fall, I’ve used some of the extra cash flow and made almost a full payment extra toward principal (~$1250).

Now, the neat thing about this is when I look at an amortization table for my loan.  With just this little bit extra, I have cut ten months from the loan as well as around $2000 worth of total interest.  That’s OK, but not great.

Now, if I can maintain the extra $500/month towards principal then things get really interesting.  My projected payoff date would move from Oct. 2039 to Dec. 2028 shaving eleven years off the life of the loan!  That also reduces the total interest paid to 66% of the original loan amount.  That would only take $6000 of my free cash flow to accomlish.  Sweet!

College Savings

The last topic is also somewhat of a debate (not as hotly debated though).  We both agree that we want to provide for our children’s education.  The debatable part is how much and to what limit.

We both come from slightly different educational paths but are both college graduates.  My degree took me through four different schools and I sampled both public and private as well as four year university and two year community college.  Her path consisted of two degrees; one from a private university and one from a public university.

My current leaning is to do my best to fund an education from an in-state public school.  Ideally, they can get some credits at a two year school and then move to the bigger school to complete their degree focus.  I have 9-10 years for the first and 13-14 for the second to work on it and I’m estimating around $15k/year which would take $60k for each child under ideal conditions.  I know this is probably going to go up, but I have to start somewhere.

Not counting for investment gains and assuming I’m starting from scratch, I need to put away $6000 per year for the first child and $4600 for the second.  We will also be asking grandparents to contribute to this goal going forward.

Which Way to Head

Well, what would you do?  I’ve obviously come up with more options that the $30k worth of cash flow that I’m freeing up next year.  I’m also assuming that nothing major happens anytime soon to cause a large unexpected expense.  It’s a lot to think about.



Put a little bit towards each or focus on one area more than others?  Let me know your thoughts.


August 2016 Progress

We’re Packing Five Months of Finance…

Into a single post.  I’ll probably switch to doing these quarterly now for reasons that I’ll get to in a bit.  Let’s just say it’ll be fine.

There’s been a lot of financial goodness since the March update.  At the end of March, we were down to three outstanding debts:  mortgage, car loan, and personal loan (credit card balance transfer).

As of today, we only have the mortgage!  Hooray!  Of course, this has had a couple of mental side effects.  First, the Debt Paydown Projection spreadsheet is getting a little boring.  I’m not saying this is a bad thing, but it’s no longer occupying a constantly opened browser tab.

Second, I’ve been in debt payoff mode for the past two years and that has been my main focus.  Now I think it’s time to shift gears into asset building and figuring out what my actual Financial Independence numbers are and the timeline to reach them.  New goal!

Notable Events

April, May, June, and July were pretty much business as usual.  I made the regular payments on outstanding balances.  Nothing to see here.  The real magic happened in August.

ESPP – My ESPP shares were purchased on July 31 and I sold them on August 1.  This was a great period for ESPP.  There was an approximate $34 difference between the purchase price and my sale price which resulted in an 85% gain on the six month period.  I took home around $14k which went straight towards payments.

Bonus – Due to some extra effort (read super long hours and extra travel) at the end of 2015, I was awarded 110% of my bonus for the period.  This yielded around $10k after taxes.

I used the additional income to make an $8k payment to the car loan (Gone!) and a $5800 payment to the personal loan (Gone!).  The rest went into savings, investments, and a new puppy (I know, I know).

All that being said, here’s where we are now.

Current Goal Status:
Financial goals:
  • Reduce overall outstanding debt (including mortgage) by 15%.
    1. Debt reduction for the period went from 7.56%  to 16.08% which puts us on track for a 16.84% overall reduction for the year.  Beautifully sitting above the 15% target.
  • Make contributions to investments (taxable and retirement) of 15% of salary.
    1. We have contributed 12.06% of our income to investment accounts including 401k, 529, ESPP, and Brokerage.
    2. This number dropped a bit from last month due to the large influx from the ESPP sale and bonus.
    3. I’m currently working on analyzing the additional free cash flow to decide where I want to allocate it.
  • Eliminate outstanding credit card debt.
    1. Outstanding balances eliminated in Feb.
    2. No interest accrued on revolving balance this period.
  • Eliminate remaining student loan debt.
    1. We were able to eliminate this balance with our income tax refund.  No more student debt!
  • Make a contribution to an IRA.
    1. No progress here… yet!
  • Generate revenue from a new income stream.
    1. No progress here… yet!
Expense Goals

Expense goals in Feb were not much better than January.  Still, it was a little better:

  • Meet the $800 per month grocery budget
    1. The only month this worked was June.  The rest of the months have been over $1000 which is where I’m now setting the budget.  It’s just more realistic (due to a number of factors).
  • Reduce dining out to $400 per month (2015 – $600)
    1. April was actually mostly on track with $433 for the month.  The other months have averaged around $900.  I’ve updated the budget on this one to $800/month.  A little depressing, but also realistic given the current situation.
  • Reduce entertainment/alcohol to $250 per month (2015 – $435)
    1. Ummm… Also not happening.  Budget adjusted to $600/month.  This includes babysitting expenses.
Personal Goals:
  • Meditate at least three days a week
    1. I fell off the wagon after our Appalachian Trail hike in June.  Goal for September is to get back to a routine.  Summer totally blew up my routine.
  • Take walks at least three days a week
    1. The only time this has happened have been on the travel weeks for work.  Also on the list of things to get back to now that the weather is getting nicer (Really, nobody wants to go out walking around Atlanta in the middle of summer).
  • Spend at least seven days camping
    1. Done!  Spent a week on trail in June as well as the annual camp Alumni weekend.  Looking forward to more this Fall.
  • Go kayaking at least one time
    1. Almost!  We rented a ducky and went down the Nantahala river the day after we got finished with the AT section.  It was a close second and I got to hear the voice of the river so I’m content until I can convince one of my old paddling buddies to buy another boat.
  • Take one family vacation
    1. St. Augustine was amazing, but April seems so long ago.  I may need to add ‘take one personal vacation’ as a goal too.
Net Worth Update Q2

net worth Q2


  • Up 2.98% in Q2
  • Up 3.92% since Q2
  • Up 10.58% year-to-date


  • Down 1.36% in Q2
  • Down 8.38% since Q2
  • Down 1.36% year-to-date

Total Net Worth

  • Change of +7.31% for Q2
  • Change of +15.21% since Q2
  • Change of +44.70% year-to-date!
  • Since Jan 1. 2015, Net Worth has more than doubled at 106.82% increase (counting the assumed value of the house)!

net worth graph

August Summary

August was a great month for financial progress.  There have been a few domestic challenges over the course of the summer, so I’m glad for school to be back in session and for getting back into the routine for a bit.

I’ve got a few upcoming home repair challenges where I need to figure out a good plan so that we don’t undo the progress that we’ve made.  I have a few ideas that I’ll be running by the community in the near future.

Over the next month I plan to keep the blog moving with more personal posts as opposed to mostly finance oriented.  I’ve got a few ideas that I hope will be well received.  Until then, everyone take care and #getoutside.



The Taxes are Done, Dude

Filed Away

Another tax season has come and gone for the Canoe Dock household.  I filed a couple of weeks ago and the refund check cleared this past Friday.  I always get a little paranoid when I click the submit button and worry that I’ve goofed something up.  Our Next Life had a great post about emotional responses to taxes.

shutterstock_45292546We Got a Refund

The good news is that we were able to claim some of the daycare expenses since my wife worked some in 2015.  This helped put a little more back in our pockets.  I thought about claiming my home office since I work from home, but thought better of it since I’ve read that it can be a red flag for audits and since I occasionally goof off and work on personal projects in here.

The bad news (and I used to think this was good news) is that we got a large refund of approx. $6500 from Federal and $1700 from State.  In the past, we would have been overjoyed to receive what was perceived to be a windfall and would have immediately made plans for a vacation or project.  Now, I have a much better understanding that I have overpaid on my taxes and could have put the free cash flow to much better use and potentially have reduced some interest accrual.

This year, I anticipated the refund and already had a plan for the money.

How We Used the Refund

First and foremost, I allocated 70% of it to debt reduction and knocked out the last student loan with a $5500 payment!  Boom, no more student debt.  That loan has been with my wife since 2001 from her first degree.  It was from a larger private school so it hung around longer than her second degree which we paid off a couple of years ago.  This frees up $125/month in cash flow.

Second, we put around $1000 toward furniture in the living room.  This is something that my wife has been wanting to do for a long time (have at least one “adult” room in the house) and it did a lot for mental health to complete the room.  I console myself with the fact that the win was bigger than the extra expense.

Finally, we tucked away around $1500 into the savings account in anticipation of our beach trip in April.  I don’t plan on spending that much on the trip since the housing is already paid and we only need to worry about driving, meals, and tourism.  It’s very nice to know that the trip expenses are covered.  The leftover $200 went to the investment account.

What Needs to Change

Obviously, I’ve learned a lot about personal finance in the last year and I believe that I need to optimize my W-4 to reduce the amount of taxes being withheld.  There shouldn’t be a huge difference in income this year, so I plan to adjust it based on that projection so that we receive little to no refund.  I wouldn’t even mind if I had to pay a little.

For now, I’m looking forward to the extra positive cash flow each month as well as getting the garden set.  I can almost taste the fresh tomatoes!




Spreadsheet 101 – Debt Pay-down Projection

Class in Session

I’ll be the first to admit that there are several aspects of life where I really let my nerd show.  Personal finance has rapidly become one of those and I especially enjoy formulating and applying spreadsheets to the tasks of managing finances.

Here and there I will do a post about a particular spreadsheet that I’ve found useful and describe how I put it together and why.  Also, for those that subscriber to the blog (I promise not to fill up your inbox!), you will get an email with links to template versions of the spreadsheets that I use.

The Original

The first spreadsheet that I did for my personal finance journey was one that I originally call ‘Financial Projection’.  This was a little bit of a misleading title since it was a bit more focused on tracking outstanding debts and projecting the year-end balances on those debts.

I’ve made some enhancements over the past couple of years, but I still use this sheet today.

The Layout

The spreadsheet contains multiple sheets with one sheet representing each year.

Each sheet uses the columns to represent months in the year.  There are fourteen columns for data.  The first data column at the beginning of the sheet shows the previous year-end balances for each debt.  The last columns shows the year-end balances for the current year.

Month Columns

At the top of the sheet there are some rows for meta-data.  The top row shows the month and the row below it contains the number of days in that month.  The only update made here is for February on leap years.

The next two rows show the total outstanding debt at the beginning of the month and the percentage of debt that has been paid down so far this year.

Total Debt Percent

These are sums based on the next set of rows which contain the details for each outstanding debt.

The Debt Section

Each outstanding debt in the spreadsheet consists of five rows.  I used the top row to show the projected balance for the beginning of the month (I have noticed that there are sometimes slight variances between my projected balance and the statement balance but I haven’t spent any time tracking down the difference).

The next row contains the statement balance for that month.  This is a value that I manually enter when I go to pay the bill.

The third row is for the payment amount.  Here is where I manually record the amount of money put toward the debt.

The fourth column contains the daily interest rate for the debt.  Not all loans calculate interest daily, but this is used to give me a rough idea of how much money I’m losing by having the debt each month.

The daily interest rate is used to calculate the amount of interest accrued for the month.  This can be a rather eye-opening figure for some items.

Finally, I subtract the payment amount from the statement balance and add back the accrued interest.  This is the value that gets put in the next month’s projected balance box.

Debt Example

Putting it Together

Once I have all of my debts added to the sheet, I use the statement balance from each debt and add them all together to arrive at the total outstanding debt value at the top of the sheet.

The percentage of reduction sheet is calculated by dividing that month’s total debt by the beginning of the year total debt and then subtracting the result from 1.

Since the calculations are all cascading and update when the row values are changed, I am able to project my year-end total outstanding debt and year-end debt reduction percentage.


I’ve thought about adding some fancy graphs for a more visual look at the data, but I haven’t gotten motivated to do it yet.  Besides, I also have the Personal Capital dashboard for visual reference.

It really helped me to see how much progress I was making and the amount of interest that each debt was costing me.  Hopefully a tool like this will help you too.  If you’d like a copy of the template, subscribe to the blog.



It’s Almost ESPP Time

Every Six Months

At the end of January and August of each year, my attention is brought back to the company Employee Stock Purchase Plan.  I’ve gotten my email reminders that the window is open to make any adjustments for the next period.

It also makes me excited because the last period vests on the 31st and shares are purchased on my behalf with the amount that I’ve contributed.  Cool!

What is ESPP?

Here’s the definition from Investopedia for anyone who isn’t familiar with an ESPP:

DEFINITION of ‘Employee Stock Purchase Plan – ESPP’

A company-run program in which participating employees can purchase company shares at a discounted price. Employees contribute to the plan through payroll deductions, which build up between the offering date and the purchase date. At the purchase date, the company uses the accumulated funds to purchase shares in the company on behalf of the participating employees. The amount of the discount depends on the specific plan but can be as much as 15% lower than the market price.
Read more: Employee Stock Purchase Plan (ESPP) Definition

Why I Like It

My company’s plan does use a 15% discount on the purchase price of the stock.  It also selects the purchase price from either the first day of the period or the last day of the period, whichever is lower.

That means that I can sell the shares on the day they are available in my account and make around 15% profit for a six month investment at minimum!  Those returns are really great.  Yes, I will pay short term capital gains on the profit (difference between purchase price and sale price) but I’m still getting better returns than most investment options.  Remember, this is for a six month period.  That makes for a 32.25% annualized return.

Now, if the purchase price from the beginning of the period is used and the current price is higher, returns will also be higher.


Let’s say, for the sake of example, that my company’s stock price at the beginning of the last period was $75 and is currently around $40 (It’s been a tough market for a lot of stocks the past nine months).

So, my purchase price this go around will be $40 minus the 15% discount which gives me $34.  Let’s also assume that I’ve contributed $3400 this period.  I will be purchasing 100 shares at $34.  The next day when me shares are available, the stock is still sitting at $40 and I sell immediately making $600 profit (minus brokerage fees)!

If the situation had been reversed and the period had started at $40 and ended at $75, I would still be buying 100 shares with my $3400 since we select the lowest of the two prices and discount it.  Now, however, I’m selling at $75 for a $4100 profit!!

Potential Downside

Now, one of the drawbacks can occur if you decide to hold your shares.  Let’s say $75 was the purchased price after discount and you held.  Now the stock moves down to $40.  It may or may not ever recover and you have taken a loss on the position.

My personal belief is to sell the shares immediately if the value of the purchased shares is greater than 1% of my overall investment portfolio.  I want to be diversified and not holding a large percentage of company stock.

If the holdings are less than 1% of my portfolio, maybe I would hold for a bit if I believe strongly in the direction of the company.  Who knows, I haven’t gotten there yet.  Besides, I have debt to eliminate!

How I’m Using My ESPP

In the past, I’ve used the gains from the ESPP investment to go toward debt reduction.  Then I take the amount of the original investment and roll it back into my long term investment account to reallocate.

Since I am trying to pay down debt and I haven’t been accruing any interest on credit cards, I’m actually contributing more to my ESPP than I am to my 401k.  I know most finance gurus may argue against this, but it’s a short term approach and I will be increasing my 401k and IRA contribution once the consumer debt and smaller loans are gone.

This time around, I may actually take the amount that I contributed and also apply it to debt reduction.  This would effectively reduce the amount that I contributed to investments in 2015 since I would basically be making a withdrawal to do so, but it might be worth it to see those debt balances disappear.


It took me several years to figure out the best approach for leveraging ESPP.  At my last company, I just held it all until we need to make a downpayment on the house (some of the shares were underwater as I described above).

Now, with the sell immediately plan, I feel that I can take full advantage of this powerful tool.  In fact, I just increased my contribution to 8% which should maximize the amount that I can contribute this year.

Like a good friend once said, ‘never turn down free money’



Considering a Balance Transfer

Food for Thought

As I mentioned previously in my December report, I have a balance on credit card with a 0% interest introductory offer that expires on Jan. 22.  A bit of background is here in my flashback post to some items that lead up to the blog.  I thought this would be a good time to write a post about one’s options in such a situation.

Option 1 – Transfer to another 0% intro card offer

This would be my preferred option if I can find one with 0% intro and a $0 transfer fee.  According to Nerd Wallet, it looks like the only option is a Chase Slate, which I already have since the 2014 transfers.  Since I’m already an account holder I would pay a 3% transfer fee which lines up with all of the other offers.  That would cost me $215.40 in transfer fees.

The only option we may have would be for my wife to apply for the Chase Slate and put the card in her name only.  Her score is also in good shape and she hasn’t applied for anything since March of last year.  Since we’ve been in aggressive pay-down mode, we also have a low credit utilization.

 Option 2 – Transfer to personal loan

This is an option that I haven’t explored fully and honestly it’s because I don’t believe we’ll go this route.  For due diligence, it’s here since it is technically a viable option.

I’ve received several of the pre-qualified mail offers from local banks and most appear to be offering unsecured personal loans at around 5.99%.  There’s probably a loan application fee associate with this and I would end up paying around $40 a month in interest.

There are also several sites such as Lending Club and SoFi where I’m sure we could get a competitive offer over the banks.  However, I would still be paying interest on the balance each month.

Option 3 – Do Nothing!

As crazy as it may sounds, I may do nothing.  The reason that I’m thinking along these lines is due to a couple of extra income items coming up in Feb.

First up is ESPP purchase on January 31.  Based on the spreadsheet that I use to track it, I’m estimating around $1200 return on the six month investment.  My current plan for ESPP is to use the gains to pay down debt and then to roll the base investment amount back into my investment account.  The base principal was counted in last year’s total invested cash, so I really don’t want to cut into money that has already been counted as invested.

Good thing the second event is our first half bonus.  This should infuse an additional $9000 into our cash flow.  Normally I don’t like to count on money that hasn’t hit yet since this value could be adjust based on company year-end results.  I’m fairly confident we’ll still get enough to clear the entire balance.

Are There More?

I’m sure there are options here that I haven’t considered.  I am by no means an expert when it comes to this type of thing, but I’m learning.  I will say that no matter what happens, I can’t wait to get rid of this balance.

What other ideas would you consider?


Drawing a Picture – Part 2

The next part of the picture is just as important, if not more so, as the balance sheet.  It wasn’t until early this year that the concept really clicked with me.  Sure, I had used a budget for years but this put things in a new perspective.

Cash Flow

The cash flow statement is the simple picture of the amount of money moving in to your finances (income) versus the amount moving out (expenses).

First we list our income for the month with one type or source per line and add them up.  That gives us Gross Income.

Then we take all of our expenses and list them with one category or source per line and add them.

Finally we subtract the expenses total from gross income and we arrive at our Net Income for the month.  If this number is negative, it means we spent more money than we made.  Warning!  If the number is positive, then we’ve made money for the month.  If we have positive cash flow we should look at how we’re going to put the surplus to work.

Always have a plan for allocating surplus cash.  Otherwise, it can disappear.  For example, right now my plan is to put any surplus cash to work paying down outstanding debt.

A Note on Credit Cards

It can be especially easy to spend more than you make with credit cards.  They’re easily available and credit limits can creep up beyond what you can handle.

Before I looked at my cash flow, I didn’t realize that I was falling farther into the whole because I was always able to make more than my minimum payment each month.  What I wasn’t seeing was the fact that I put more on the card that month than I paid.  Floating along like this for five or six years with regular credit limit raises led to quite a deep hole.  At the worst of it, I think we had around $28k on cards.  All generating interest!

Looking at the Categories

Now that I look at all of my expenses each month by category, it’s much easier for me to see what I can do to improve my situation.  I can now see if we’re spending too much and where we need to cut back.  Of course, some expenses are fixed.  I actually break my expense list down into two sections: fixed expenses (mortgage, loans) and variable expenses (groceries, restaurants, fuel).

The Canvas

I like to use spreadsheets for most of these tasks.  Google Sheets is awesome because it lets me access my data from anywhere without having to install software.  There are also some handy Sheet Templates for budgets and cash flow.  You could also track your cash flow with online tools such as Personal Capital or Mint.

Good luck and keep an eye on those expenses!





Drawing a Picture – Part 1

Last week I laid out what it takes to get a plan together.  Let’s start breaking it down and getting a little more detailed about each piece. I don’t want to be overwhelming, so we’ll focus on one topic per post.

The Balance Sheet

Why in the world would a household need a balance sheet?  That’s something for businesses.  Well, need may not be the correct word.  Want may be more appropriate in this case.  I want to see what I have that’s working for me and what’s costing me money.  Having a reference handy each month keeps me up to date.

Balance sheets are quite simple.  It’s a method of tracking our assets and liabilities.  Now, these two concepts were something I was never taught growing up.  I had a vague idea that an asset was something you owned that had value, like a house.  Liabilities were also foreign to me.  I thought of that as simply debts owed.

I think about it a little differently now.  It’s still pretty simple, but I have a clearer understanding.


These are the things we own that can be used to generate income.  For example, I could list a piece of jewelry as an asset since it can be sold to generate income.  However, that’s not the best type of asset to have.  I want to generate regular income from assets so I look to investments such as stocks, bonds, rental properties, or a even business.  These types of assets can be grown over time and potentially generate enough income to cover my cost of living.


Those debts or obligations we owe that cost money every month are liabilities.   Loans and credit cards are probably the most common.

Adding it Up

So all we have to do now is take the total of our liabilities and subtract it from the total of our assets and bingo… Net Worth.  Easy Peasy.  There are some good templates for this in Google Sheets.

*The Home as an Asset

There’s a lot of talk about home ownership being a major investment.  In my case, I consider it more of a liability since I still have a mortgage on it and it costs me money every month from maintenance costs.  We bought late in 2009 and our estimated value has only come above what we paid in the last couple of months.  If I calculate all of the interest paid on the loan (and ignore maintenance costs), I’m still about $40k in the red if I sold at today’s estimated value.  That’s a terrible return on investment for the time held.  Of course, it’s not a loss until you sell 🙂




Architecting the Future

The other day I was thinking about this blog and it occurred to me that it’s all well and good for me to be posting monthly progress updates and tracking how I’m doing, but what does that do for you?  On the surface, it helps to show you that it’s possible to come from behind and start making progress.  I want to show you how I set myself up to succeed.  Let’s get started.

State the Problem

In most engineering problem solving exercises, we start by defining the problem.  If we don’t have a clear idea of what it is that we’re trying to solve, then we’ll never have a way to measure if we’re successful.  We don’t have to start with a lot of detail at this point.  Let’s just establish a good high level statement.

For me, it would look something like this: “I am a 40 year old engineer with a good salary, a wife, and two kids.  We are a single income family.  We have a mortgage, car loan, student loan, and some credit card debt.  We contribute to 401k, but other than that don’t save much.  It often feels like we are living paycheck to paycheck.”

That’s a nice concise statement about the current situation.  Now we are centered in our situation and can move on to the next step.

Draw a Picture

Getting a visual representation of the situation can be very helpful.  In the case of personal finance, we’re not really talking about literal pictures but we do need to gather as much data about our situation and lay it out in an easily viewable manner.

There are tools that businesses use to view their financial situation and I believe we can adopt the same for ourselves.  A budget is nice, but it shouldn’t be our only tool.  Let’s take a look at building a balance sheet and a cash flow sheet.  Google Sheets has some nice templates for these and I will cover each in more detail in following posts.

For now, we’ll just establish what each one is and what it can do for you.  The balance sheet is a list of your assets and liabilities or quite simply the things you own that have value (assets) and the things you own that cost money (liabilities)

The cash flow sheet will show your income and expense for a period of time.  I track it on a monthly basis.  Where budgets establish how much you should spend on each category for the month, cash flow will show you how much you did spend.  It’s important to know both.

There are also online tools available that will help you aggregate all of this data and give you visual representations.  I currently like to use Personal Capital for this.  You can set up your account there and link it to all of your relevant financial accounts.

List the Requirements

The requirements document lists all of the goals for the project.  I like to think of it as a checklist that I can go down and when everything is marked off, I’m done.  Sometimes the requirements change mid-project and we need to adjust.  That’s OK.  In project management terms, I feel like we should take a more agile approach to this anyway.

I started my list with the longest term goal at the top.  It looked something like this:

  • In ten years, when I’m 50, I’d like to be financially independent.
  • In five years, I’d like to be able to step down a notch to less stressful work
  • For 2015, I want to accomplish the following:
    • Reduce overall debt by 10%
    • Invest 10% of my earnings
    • Reduce the amount of credit card interest paid to $0

It’s a simple start.  I like that.  Sometimes if we make things too complex or start with too may requirements, the project will feel overwhelming and we’ll never get started.  Start small and build over time.

Design a Solution

Here is the not-so-tricky tricky part.  We have a problem.  We have a picture of our current conditions.  We have some requirements for the solution.  How do we solve the problem?

I think there are a lot of approaches that could be employed here.  There are really only two options to consider:  Make more money and have less expense.  Of course, there are a lot of ways to go about those two things but it really is just that simple.

There are a ton of other blogs with great ideas for both sides of the equation, so I won’t get into that here but maybe I will in some later posts.

It’s All So Much

This may be the longest blog post I’ve ever written.  The long and the short of it is this:  Understand your situation, determine what you want to achieve, then formulate a plan for getting there.




2015 Mid-Year Update

So, I have to be better about posting regularly.  It’s been over a month.  I bet you see that a lot.

I wanted to get an update out about how we’re doing mid-year compared to the goals I set out earlier.  I’ve been keeping track of my monthly cash flow for the past three months and back filled it for the first quarter.

Here are the financial goals and our corresponding status:

  • Reduce overall outstanding debt (including mortgage) by 10%.
    1. At the end of June, my overall debt reduction is 6.68%
    2. Based on interest calculations and assumption of sustained payment amounts, we’re on track for 9.66% reduction by year end
  • Make contributions to investments (taxable and retirement) of 10% of salary.
    1. So far our combined saving in investment accounts is 10.83% of income.  This includes 401k, IRA, ESPP.
    2. I got a small raise on July 1st and increased my ESPP contribution by another 2% to balance the addition to the paycheck.
  • Eliminate any monthly interest payments due to credit cards.
    1. We paid $348 in interest in Q1 which was residual to the last account that held a balance.  It was paid off in February
    2. We paid 0$ in interest in Q2!  This is the first time in my adult life that I haven’t paid credit card interest!  Crazy that I let it go this long.

I also want to note that June was our lowest expense month of the year so far even with an unexpected $636 dental bill.  This was accomplished primarily through limiting dining out and being more careful about grocery planning.