Monthly Update: March 2008(-$53,167.23, +$653.86)
We have reached the end of a rough 1st quarter to 2008. We are still well below our net worth peak of -$45,237.37 in November of 2007 due to multiple factors.
This was to be expected after our family navigated the expensive holiday season and added a new family member to boot!
Voluntarily cutting your family income by 50% in the middle of a recession isn’t normally viewed as the best way to get ahead financially. However it appears like we are pulling it off and I believe that we will be able to get away with it for a couple of reasons:
1. This will not be a permanent drop in income for our family. In 3 short months I will be moving on to the next stage of my training and starting a one year Fellowship. Although my monthly salary should stay about the same, my work hours should decline somewhat and I should be able to work a little overtime.
2. The change has allowed my wife to become a more active participant in our family’s financial story. Since she is no longer able to “just work a little more overtime” to pay for a splurge here and there, she has made it a personal challenge to decrease our family’s expenses so that we can still maintain some slight growth in our net worth.
Here are the results for March:
1.Cash and Savings: As I mentioned in my Savings percentage post last month. Our savings will likely continue to see-saw throughout this year.
I refuse to return to my old habits of being penny wise but pound foolish, so we are keeping a little more slush in our checking accounts to cover our expenses each month. Once we have finished paying the bills and we are sure we won’t need the cash, we then send it to savings. With the interest rates on cash accounts falling, the incentive to maximize our cash returns isn’t there.
2. Investment Accounts: Most of our investment accounts suffered a slight decline in March. I have begun to educate myself more in this arena and hope to make some changes here over the next 2 years that will result in a more balanced portfolio.
Although I did manage to max out my contribution to an IRA for 2006 and 2007, I did so with only a rudimentary knowlege of portfolio management. As I become more knowledgable and opinionated I hope to offer some useful insights.
3. Credit Card Debt: We paid only the minimums again this month. This debt is entirely in the form of 0% balance transfers and actually makes up the majority of our cash savings.
It is costing us nothing to keep this balance on our books and is earning a dwindling but respectable cash flow each month. The return was much more attractive 6 short months ago, but it has been an easy way to earn an extra couple thousand dollars.
4. Student Loans: My wife and I continue to chip away at our educational debt. I have to admit that it is frustrating to see the balances fall so slowly. On the positive side, we did recieve a small tax benefit for the interest we paid over the past year.
While 2 out of 3 of our loans are in current repayment, we will not bear the full brunt of this debt until this fall when I begin making payments on my $114,000 loan.
In summary, March was an ordinary month in the life of a young middle class family in America.
We miss being able to place $3000 cash into savings each month but this year will help us appreciate just how hard it is for most Americans to make large financial changes quickly.
