Last Quarter Cash Flow Changes

I’ve been overzealous in my desire to save and invest more this year!

My plan was to max out my both my 401k and my Roth IRA, but with a twist. The idea was to use my employer’s ESPP to save for my Roth IRA (and this has been successfully done), but also to take more out of my paycheck for my 401k contribution, the thought being that I would max my 401k contributions so that we could breeze though Christmas since my 401k contributions would be finished in November. Unfortunately, that’s not going to happen, and that is all part of financial planning. I underestimated my expenses and overestimated my income (slightly) and now it’s time to make some end of year cash flow changes. Luckily, I control the dials on my financial engines, and all I have to do is make a few small adjustments to put myself back on a track that is realistic. Below are those changes!

Cash Flow Changes

I now plan on back off the amount I’m saving for my 401k Contributions by 1 or 2 percent. This alone will make an instant and dramatic impact. Since I was shooting to get my 401k maximum paid off in November, this really won’t affect me other than make Christmas a bit tighter.
I already kicked up my withholdings for taxes at the beginning of the year. This is an easy dial to adjust, I reduced the amount by $25 and that move freed up an addition $50 a month. Not a huge number, but it counts.
The most important one is my ESPP. I’ve saved enough from it to cover my Roth IRA, so now I’ll be able to transfer the amount from my ESPP saving into my checking account to cover the rest of the year, and the bills next year in January for Christmas 2013. Originally, I had hoped to use this money for investments, but it obvious that the original path is not going to happen now.

Cash Flow Thoughts For Next Year

My basic plan is that I’m going to throttle my 401k contribution percentage down by 3% to 5% less than what I’m currently saving. This will make a big difference I believe. Then midyear next year, I’ll reevaluate how I’m doing and then maybe adjust the amount up if all is going better than I believed or do whatever is needed to make life for my family good.

On the ESPP front, I will continue to use it as a forced savings account for both my Roth IRA, and then later for investments or more than likely for basic living expenses since this is what I have to do this year.

I think the above cash flow changes should put me back on track to free up the flow of money for the rest of the year. If it doesn’t, then I’ll adjust my budget again next month.

Bests,

Don

Financial Planning Isn’t Really A One Size Fits All Model

by Money Reasons

There isn’t a “One Size Fits All” model for financial planning.

Credit Cards

I love credit cards, no wait, I love reward credit cards! But this is my one exception where I deviate from the norm with respect to my friends and their spending habits.

I have a few friends that have gone bankrupt (in 1 case a few times) and so I will never say “I love credit cards” to them. I don’t want them to think that it’s okay to spend so easily. We have to know our limitations and weaknesses.

However, for me, credit cards are a wonderful discount on my purchases. Sometimes, I use the reward points to splurge and buy a nice gift that I would have had to spend money on.

Mortgage Pre-Payment

I took a path that I know isn’t considered the best for most, but it was the best for me. You see, I pre-paid and them totally paid off my mortgage early. I know that from a mathematical perspective it makes more sense to put that extra money in investments. But I couldn’t stand the debt hanging over my head, and I doubt I would have consistently put the extra money into investments, thus defeating the plan.

I very proud of my accomplishment with my house, and if I had to do it all over, I’m pretty sure I would have done it exactly the same. I especially like that fact that the money that I don’t have to pay anymore is like getting a 2nd job in many ways, especially with respect to cash flow!

While mathematically it makes sense to put the extra money into investments, missing in the formula is the human element. The equation is mathematical but the human element takes away some of the straight math properties and adds emotion and impulse buying elements. Shoot, I consider myself good with money, and even I sometimes have problems controlling my spending, especially when it some to my kids!

Investments

I tend to invest in stocks, but most of my money is in the mutual funds that are included within my 401(k) plan at work.

In my stock dividend “Lunch Experiment“, I run a high beta investment portfolio. This isn’t advisable and I’m only running such a portfolio because the money was money that I would have spent. I don’t advise anyone to follow such a risky portfolio, but it’s still fun to play with!

Conclusion

So what I’m really trying to convey is that there isn’t a single generic “one size fits all” type of model to follow when it comes to financial planning or advice. Perhaps start with one of the three financial advisors and then customize it after you find one that mostly fits your goals. Personally, I’ve always liked David Bach with just a slight hint of Robert Kiyosaki.

-MR

Did you like this Article? Then please subscribe to my RSS feed so you can check out new articles when they become available. You will help this blog grow by doing so! Thanks!

10 Ways To Improve Your Chances To Become Rich

by Money Reasons

Honestly, Are you trying to become rich?

I’ll admit there is more that I could do to try to breach the point where my passive income exceeds my expenses, but I choose not to.

Although I’m frugal, I’m quite sure that I could run an even tighter financial ship!

Below is a quick list of ways that I could improve my chances to become rich:

I could use budgets and do extreme couponing to whittle my consumption expenses down much lower!
I could try to get more free stuff via giveaways online. Free stuff is great and believe it or not, it’s out there with some work.
I could create a budget to identify where my weaknesses are and plan to fix them accordingly!
I could get another job by working during a second shift period. This would have a huge impact on my savings game since my first job covers all of my living expenses. This means I could pocket almost all of my earnings from the second job.
I could try to expand my hobby activities into other forms of social media. This could practically double my hobby income.
I could create a goals spreadsheet to track my saving goals and keep me on track… This is more important than it sounds! Feedback is a great thing!
I could create an investing goal to track my investments performance. This could help determine if I should start investing more into index ETFs etc…
I could borrow tools/things from family, neighbors and friends more. Why buy a sidewalk edger when I only use it once a year?
I could do a better job of reducing my taxes, a Roth IRA is a great vehicle to reduce taxes on dividends from stocks, etc.
I could do a better job of reducing my gas expenses, treat driving as a real expense instead of just ignoring it.

There are plenty other ways that I could improve my chances of becoming rich some day. Surprisingly, I now realize that I”m only putting in about half the effort that I should be putting into getting rich…

-MR