Monthly Update: January 2008(-$53,907.61, -$6,272.46)
By the numbers we are off to a rocky start in 2008. The $6000+ drop in our net worth is the largest in the past 13 months.
About half of this loss was due to the falling market but the other half was due to the interest from my consolidated student loans for 2007 finally being capitalized.
Fundamentally our household is in good shape and should be in good position to weather a possible recession.
Here are our numbers from January:
Guidance for January:
All of our Credit Card Debt is in the form of 0% balance transfers The banking community has allowed up to borrow this money which I have placed in a FDIC insured online savings account, pocketing the interest earned. This money makes up the bulk of our cash savings. Our true cash savings is only $23,735.25 of the $87,253.25 listed.
Our Investment accounts all fell in step with the market for the month of January. Our project for this year is to take this motley mix of funds and develop a more diversified, lower cost portfolio. If this year does indeed become a recession we will have the opportunity to “buy low” into some new positions.
Once again I am waiting until I do our taxes to decide if it makes sense to invest in a Traditional IRA for 2007. By waiting until tax time last year, I managed to buy into a rather high market which has currently resulted in a slight loss. However, I still need to lose an additional $600 for this to have been the wrong decision.
I have continued to keep our vehicle listed as an asset and will continue to do so until we drive it into the ground. I will not list any additional vehicles or material goods in the future because the true value of these items are difficult to accurately assess.
In my attempt to revalue our vehicle for 2008, the Kelly Blue Book value actually Increased (likely due to low miles) which I find hard to believe. I decided to just keep the value where it is until it shows a definite decline.
I finally received my quarterly statement for my consolidated school loans which capitalized the interest for 2007. I am undecided if it makes financial sense to be paying off this interest to keep it from capitalizing. I haven’t calculated it but in essence that additional $4000 is going to cost me an additional $120/year for the next 30 years. It is too late for 2007 but it will be an option to consider for 2008 once I figure out the present and future values, etc….
I remain undecided about what to do with my Federal school loan. The interest rate remains fixed at 5% which is currently the highest interest rate of all our debt. With interest rates on my savings falling, I will wait to see how much of a tax benefit I can derive from the interest paid on this loan. If there is a minimum benefit and the economy continues to sputter along, we may allocate some capital from our savings to rid ourselves of this debt, similar to what we did last year.
Our day to day finances continue to be a challenge. My wife has decided to remain part time with the birth of our first child which has constrained our monthly cash flow. We are approaching this as a challenge and an opportunity to squeeze the excess out of our spending(due to necessity) so that in the future we will be able to use these gains to increase our savings.
Remember, focus on the process, form good habits and the results will follow!
