Tag Archives: networth

Why I Want to Be Rich / What Rich Means to Me

There is a growing discontent in this country about the difference in wealth between the super rich, and the rest of us. Forget semi-rich, middle class, and the poor. It’s them against the rest of us. I want to be one of them.

Unlike other personal finance bloggers that write about debt, I write about my middle class life and my dreams of wealth. It’s not like I’d buy Gucci underwear if I was a millionaire… I’d just love to have life free of financial burden. What is the dollar figure on that? $1M isn’t enough. $5M might be enough. $10M in networth would probably be the point where I would feel rich.

I’d spend some of it on myself, sure, but if I were rich…

  • I’d love to buy my friends exciting, meaningful presents. Like the time I bought my friend a dishwasher for her kitchen that she couldn’t afford.
  • To help friends out of debt, especially the ones who are in educational debt because they weren’t as fortunate as me.
  • I’d take my friends on vacation to some beautiful resort, and make memories worth more than the cost of the trip.
  • I’d donate to charities I believe in.
  • I’d start an anti-bullying organization
  • I’d invest in my art, I’d go to school for painting, I wouldn’t waste away my years in art school worried about what is going to happen after I graduate.
  • I’d have a family — maybe three kids — and I’d raise them in an upper middle class community. I wouldn’t spoil them, but they’d be able to have the same middle class luxuries that I grew up with — classes and clubs, occasional vacations, the ability to explore their passions.
  • I’d pay my parents back for my undergraduate tuition
  • I’d buy my parents a special trip to Europe that my dad could take given his poor medical condition, and difficultly walking
  • I’d buy a large vacation home where I could have my family members come yearly to see each other.
  • I’d start my own company (prob need more than $10M for that!)
  • I would probably end up giving most of it away when I die, but I’d make sure that I could give to the people who deserve it while I’m alive.

If I were rich, I wouldn’t want anyone to know. But I’d be less afraid of what the future holds. I wouldn’t ask myself whether I should have kids because of my bipolar disorder, afraid that I’d lose a job and not have enough money to keep a house or maintain a reasonable lifestyle. I’ve always dreamt of being wealthy. I feel like, in a way, I have many of the tools to get there. I clearly need to start my own company, to find the right ADD medication to help me focus, to find the right psychologist to get me out of my head for long enough to succeed.

Life is short. You can be happy on a $30k paycheck and you can be happy on a $1M paycheck. I want freedom. Financial freedom. Every year is another lottery ticket. Every year is another chance. But I’m running out of chances. Sure, I’m still young… gah, I’ll be 28 next month… it just feels like I need to find wealth before I turn 30, 31 or 32. That’s when I really have to start making a family, if I’m going to. That’s when I’ll want to be able to work part time and be in my children’s lives. That’s when I run out of this time called youth to win, and win big. If it wealth were so far out of reach, that would be one thing, but somehow I’ve managed to put myself on a path where it’s possible. There are still a lot of unknowns. Still a lot of needing to focus my mind to impress, fighting my anxiety to be known, believing in myself, letting go of guilt for privilege, and kicking some major ass.

I don’t even know this person I’ve become. Six years ago I was on the verge of suicide, applying for hundreds of thousands of jobs, unable to get even an entry level position. Then one opportunity after another made its way against the tide of possibility, and each failure opened up a new door with a brighter tunnel to walk through, and somehow I’ve gotten where I am today. Some of it I’ve faked, some of it I deserve, some of it is sheer luck. And any day I could fall. Living with bipolar (II), it feels like everyday I’m running on the edge of a cliff. It’s thrilling, it’s exhilarating the rush of defying gravity, and yet I know one of these days I will trip and fall yet again, and have to climb all the way back up. The trick is to never stop climbing, and better yet, to run fast enough that your feet barely touch the ground, to run so fast you’re practically flying and no one knows can figure out how to stop you, because the moment you look like you’re about to hurl yourself over that cliff, you’ve landed on an even bigger success, and even bigger improbability, and you just keep going.

 

 

September Networth: $77,434

Will I or won’t I hit my goal this year of a $100k networth? It’s possible. I’m at around $77.4k right now.

I need to be extremely frugal over the next four months to hit my goal.

As far as income goes, I’m expecting:

Potential September Income
Project A: $10000 pre-tax this month
Project B: owed $1600 + potential income of $3200 (pre-tax)
Project C: owed $300 (pre-tax)
Total: $14000 pre-tax… ~$9000 after tax.
I’ll prob spend $2000 this month on rent, food, insurance, gas, health, etc.

So if I can do +$7000 this month I’ll be at $84k.
That leaves $16k that I need to make in 3 months between Oct & Dec, or $5.3k per month after tax.
It’s possible for Project #C I will start a $5k-$10k per month contract for 1 month. That would help a lot! Project B will likely pay around $3200 pre-tax for part-time, though it’s not guaranteed. Project A is likely ending this month.
I plan to donate 10% of any income above $100k that I earn and 15% of all income above $120k, if I happen to earn that much, 25% of all income over $150k. It’s not much, but I like the idea of donating a portion of income I earn over $100k.

Follow Up to: Tips for Making More Money Long-Term for 20 Somethings

A few days ago, I wrote a post about how to make more money over your entire life. The trick? Believe you “need” more money than you do now and approach your life’s choices based on that need… then save the difference in what you get vs. what you actually need. Always live below your means. Ok, this isn’t revolutionary advice, but I got some interesting comments from my readers, and I wanted to respond.

Anonymous #1, from Kentucky, said “I like the idea behind this advice. I also agree to an extent. On the other hand, it’s not just career choice that will determine the amount that you make, but geographic location as well. A $120,000 per year job to you is more like $60,000 per year here.”

Meanwhile…

Anonymous #2 said “that was the most ridiculous thing I’ve ever read! …No offense, but you are still a kid and have a lot to learn. Don’t get me wrong, you are way ahead of most other 20-somethings (not hard to do in this day & age, though!), but be careful about advice you are giving (or taking). Also – you could reach your $100K goal MUCH easier if you moved to a place with a lower cost of living.”

While one commenter loved my advice and the other hated it, both had a similar comment on how my choice to live in California makes it more difficult for me to reach my financial goals. I disagree.

I’ve lived in many different parts of the country through my life, though perhaps never the places where the lifestyle is extremely cheap. But I’m not sure how much a move would save me, unless I moved back home and lived with my parents.

My rent right now is $630. With utilities that adds up to maybe $700 a month. Granted, in Detroit, according to Craigslist ads, I could get similar room in a 3br shared apartment for around $350 a month. I don’t know Detroit so can’t compare my nice neighborhood to the offerings on CL, but let’s just say the rents for a room are half what I’m paying now.

Everyone seems to think living in California is impossibly expensive. It’s not. It IS expensive if you want to buy a house here. Gas is a little higher than in the rest of the country. State tax is higher than some other states. Ok, it’s not the cheapest place to live. But there are also a lot of opportunities for work here, especially in the areas where it costs more to live. So salaries do, to an extent, compensate for the difference. As my first commenter said, $60k in Tennessee is maybe equal to $120k in California. I’m not sure I agree with that math, but there’s obviously some truth in it. I COULD move to a cheaper place, make less money, spend less on rent, and save the same amount. But I would have a very hard time finding a job in my industry outside of this area. If you’re in an industry you can work in anywhere, then by all means, live somewhere more affordable. That doesn’t change my argument that you should always think you need more money than you do, and that this thinking will help you earn more in the long run.

Now, commenter #2, who has worked as a hiring manager, made a good point. He/she said that once a candidate for a job refused to take the job unless given $5k more than the offer. Eventually, the company hired someone else. OK, I never said “be stupid.” If you really want a job, are unemployed, and have no other options (if you “walk” will you be unemployed for another six months? Or are there other opportunities on the table) then take the job. My logic still works, though. If you think you need $x more per year, then you might get a side job, or seek out freelance income to meet your goals. You don’t NEED to make the extra money through your day job. It doesn’t hurt to push a little in negotiating but always be realistic. I took a big risk during my negotiations for my current job and it paid off. I was really nervous that it wouldn’t, and I got lucky. I also knew that I was by far the top candidate for the role and my company really wanted to hire me. I also did not get what I asked for, but I quickly accepted a realistic offer that was still much higher than I was making at my previous job.

In comparison, I look at friends of mine in their 20s who are living at home or living in cheap apartments and thinking that they only need to make enough to cover life month to month. The fact is that your future salary is largely determined by what you make before it (not always, but having a strong salary history helps.) If you spend your 20s making a smaller income because you do not see a reason to strive for more earnings, then you will be at a disadvantage in your 30s. Again, I’m not saying this works for every field… some fields have set salaries. You can still make extra money. If you’re fortunate enough to not be in debt in your 20s, take advantage of this and save as much as you can. The best way to save more is to make more. That’s the math I believe in.

Commenter #2 also asked “Do you have a net worth goal you are aiming for by the time you are 30? Don’t you think NET WORTH is a better goal than just “savings?” I keep track of mine yearly. I just looked back to what it was when I was 30. I did NOT have $100K in the bank then, but the net worth was $170K.”

I am not sure what factors into Net Worth to be honest. Right now I’d say my “Net Worth” is my bank account… that is, the combination of my savings, Roth IRA, stocks, CDs, and other investment accounts. I don’t own a home (again, that’s one of the things that is too expensive for me, living in California) but I own a used car (it’s worth maybe $2k, but I don’t bother including that in my networth because I’ll use it until it stops working) and a few other gadgets and things that I don’t count.

So, commenter #2, what was that extra $70k including for your net worth at 30? Did that include a house? That makes complete sense, especially since you have a family. Since I’m single and could move to a job in another city at any moment, it doesn’t make sense for me to own. So my whole Net Worth IS my bank accounts.

Thanks for all your thoughtful comments!

My Net Worth Post 2008 Taxes

My networth definitely improved in the past year, despite the massive losses in the stock market. Now that my taxes are paid, my networth stands at $29,082.11 not counting my piece-o-crap car.

I started recording my networth on June 21, 2007. At that time, I had $25.7k. That was also the year I was very unwise with my finances, before I got myself in check. By 10/8/2008 my networth was just $13.9k. Granted, I was over estimating on my taxes for 2008, but my spending habits had yet to improve in order to have my networth return to the state it was at before I spent too much money on travel and other things.

This year, my income should increase (as long as I can keep my job all year) which means I have no excuse to let my networth drop. In fact, I’m setting some pretty high goals for myself this year (which are largely dependent on if and how quickly the stock market recovers, but I can still save smartly and do well.)

I’d really like to save $20k this year, so that my networth by April 15, 2010 is $49k. Is that do-able? I probably would need to cut out all my extra expenses such as voice lessons. I was thinking of calling it quits on those in July since they cost $160 a month. But I also wanted to start taking some other courses that were more in line with my future grad school plans, and those cost even more. So I go back and forth on whether I should really focus on increasing my networth (so I can pay for most of grad school up front) or if I should just spend it on classes now so I can get into a good grad school. Hmm. And the question remains, do I even really want to go to grad school? I’m still not clear on this.

I did some quick calculations and to meet my goal I need to take in approx $300 extra post-tax per month through freelance projects (do-able with current blogging gig, where I can make $600 a month pre-tax, as long as that lasts) and I can spend, at most, $1600 per month. That should be do-able, right? I’ve been spending quite a bit more than that per month, but I’m going to see if I can cut costs and get down to that $1600 per month target. Will track my progress on here. Wish me luck! (oh, and I am not going to count April because I’m already way over due to some spring shopping and my boyfriend’s birthday gift. This is starting today, the new, really frugal me.)

**my average monthly spending for from March 2008 to March 2009 was $2279.30
So I’ll need to whack off another $679 per month to meet my goals.

Mint.com and My Year-Over-Year Progress

I’m the first to admit that I fail when it comes to acing the test on smart shopper and saver. Over the past two years I’ve grown wiser and more careful with my purchases, but I’ll splurge more often than not.

That’s why it’s especially rewarding to use the Mint.com trends tool to compare my spending habits month and, even more importantly, year to year.

Using the tends tool, I can easily see how much I spent in any 12 month period.

From June 2007 to June 2008, I spent $37,455. That was when I was making about $35k for the whole year, mind you.

In the past 12 months, from Jan of 2008 to the end of Jan of 2009, I’ve spent $30,523. My income has gone up and my spending has dropped over $7k. I am very proud of this and hope I can continue on my not-so-frugal living within my means path.

Looking at 2008, I spent $29,916 total. The biggest expense over this year was “home,” with $10,553 going to rent and moving expenses.

2008 Spending Chart

Home: $10,553
($879 a month)

Shopping: $4,633
($386 a month)

Food: $2,734
($228 a mont)

Auto/Gas: $2,211
($184 a month)

Entertainment: $1,969
($164 a month)

Bills: $1,737
($144.75 a month)

Gifts: $331
($27 a month)

Business Services(?): $399
($33 a month)

Education: $560
($46 a month)

Travel: $1269
($106 a month)

Health & Fitness: $1,660
($138 a month)

Fees: $238
($20 a month)

Uncategorized: $1,048

Hello 2009

I just opened up my Google Doc spreadsheet tracking my various accounts and realized that my 2007-2008 sheet is officially complete. Even though my spending habits weren’t perfect last year, it was the first year of my life where I tracked my finances, and can learn from my mistakes.

There were moments when I spent foolishly in 2008, which is why my overall networth has gone down (not to mention all my stocks taking a nosedive with the market) – but I resolve to be smart about my spending in 2009.

If I can keep a steady job, there is no reason that I can’t save $10 – $20k in one year (including $5k for my Roth IRA). My rent costs are low (finally), I’m working a job where I can wear jeans and a t-shirt, so I don’t need to spend on fancy clothes, and really my only major expenses should be to visit my family back east about twice a year (or more, since my dad has cancer and won’t be around much longer.) But even with a few trips back east, I should really be able to save.

2009 is largely depending on whether my current position will turn full time or not. If not, there’s a chance that not means I’m out of a job. I should be finding out about that this month. I’m slightly worried, though at the moment the whole situation is looking promising.

I really want 2009 to be a stable year financially and emotionally. I’d like to take all my urges to spend and instead use those to be healthy… to go for a bike ride, or to play tennis with my boyfriend. I always spend the most when I’m going through a depressive phase, and I’m hoping the depression is over and done with. I’m 25 now and I sort of have my life together. It’s pretty crazy to say that, but it’s true. Finally.

May Spending Report, May 9

This month I am making a few purchases for my “free” trip to Israel, so my budget is a little off. I will make up for this by being really frugal with my budget and trying to underspend it once I get back from my trip.

Next month is going to be difficult because I am missing two to three weeks of work for my trip, and that’s unpaid time off. Which is fine, I just need to be careful to be really frugal next month. Luckily, my parents will probably feed me while I’m home, and while in Israel the trip provides some meals. So if I can get away with just paying my fixed costs in June, I can afford to take the trip. Granted, the trip is free, so this is a frugal vacation by proxy. Can’t complain about that!

————————-
FIXED COSTS: $1420
BEAUTY: $20
ENTERTAINMENT: $37
FOOD: $40
TRANSPORT: $82
SHOPPING: $201
INVESTMENT: $250
————————–
$2050 / [$2400 budget for month]

(($350 left for May))

Still need to…

*go food shopping (approx $80)
*get water shoes for trip ($60?)
*haircut ($70)
*get bathing suit? ($90)
——————————
Still to spend: $300 (put any extra in vacation fund!)

—————————
FIXED COSTS: $1420
Rent: $1050
Phone: $55
Cable: $72
Health Insurance: $129
Gym: $27
Car Insurance: $87
—————————-

Beauty
$20 (eyebrow wax)

Entertainment /Hobbies
$15 (camera fix)
$22 (theater ticket)

Food [*still have to do food shopping for May]
$23.99 (dinner for two)
$10.24 (dinner)
$6 (dinner)

Transportation
$5 (Bart fare)
$66.21 (Gas)
$3 (bart Fare)
$5 (bart fare)
$2.25 (caltrain)

Shopping
$148 (dress for trip)
$53 (shirt)

Roth IRA [investments]
$200

Prosper [Investments]
$50

Ides of April Spending Check-In

I’m trying to be frugal this month. I owe so much money for 2007 taxes and estimated taxes. My boyfriend is helping out a bit in that he’s paying for a higher percentage of our “dining out” expenses. Without further ado… here’s my expense breakdown from April 1 – April 15.


Total Spending: $1907.16

Fixed Expenses: $1218.33
$1050 Rent
$87.34 Car Insurance
$27 Gym
$53.99 Phone

To Be Reimbursed: $120
$120 Parking Permit

Taxes (not including federal): $311.90
$260 Estimated State Taxes
$2 State Taxes 2007
$49.90 tax cut online

Investing: $12
$12 last Sharebuilder fee for a while

Gas: $126.48
$64.29 Gas Filler up.
$62.19 Gas Filler up.

Food / Drugstore: $118.45
$5.33  Safeway
$9.28  Longs Drugs
$8.65 Walgreens
$26.84 Dining out for two
$21.54 Longs drugs
$12.07 Supermarket
$23.49 Eating Out for Two
$11.28 supermarket

How to Afford My Quarterly Taxes

I assume that I’m going to owe $6132 in quarterly taxes (state and federal) in… 14 days.

(AHH!)

I just transfered an extra $1000 into my ING for Taxes account, which now adds up to $5125.56

So I’m short $1006.

That means budgeting this month needs to be extra, extra tight. And I might have to dip into my liquid CD to pay my estimated quarterly tax.

—-

April “Spending” Money $2410

Fixed Costs = $1422.28
————–
$71.33 — Cable Bill
$129 — Health Insurance
$87.33 — Car Insurance
$57.62 — Phone Bill
$1050 — Rent
$27 — Gym Bill

Credit Card Debt: $882
to pay this month $500
———————————

$1922.28

———-

$487.72 left

Food? Taxes? Gas?

——–

The Good News…

Still Owed for this month: $1325

($400 for marketing copy
$525 for marketing article
$400 reimbursement)
[[+487.72]]

(TOTAL: $1752.72)

If I get paid all of this in time…

$1300 to taxes
$200 to food
$100 to Roth IRA
$152.72 Stays in Checking

————————————–

Why am I so short? I shouldn’t be this short, but it will take me until the end of April to earn all the money I need to pay for my Jan – April estimated taxes. I could just pay less than I’m supposed to and hope that it all works out in the end. This isn’t entirely a stupid thing to do because I think based on last year’s taxes I could undershoot what I’m going to have to pay this year and still be penalty free. But I’d rather keep on top of things.

Also, none of this takes into consideration the fact that I have to pay to deal with 2007 taxes.

What have I done, oh what have I done????

Estimated Tax Worksheet – could it be any more complicated? (Don’t Answer That)

Ok, going by the estimated tax worksheet, perhaps I owe a different amount for this quarter.

1. Adjusted gross income you expect in 2008:

(Adjusted gross income. Use your 2007 tax return and instructions as a guide to figuring out the adjusted gross income you expect in 2008. see Expected AGI — Line 1 in chapter 2 of Pub. 505 — “Your expected AGI for 2008 (line 1) is your expected total income minus your expected adjustments to income”)

Let’s just say $66,000 and forget any adjustments I might take.

2. Estimated total of itemized deductions: no idea

3. Subtract Line 2 from Line 1: $66,000

4. Exceptions: Multiply $3,500 by the number of personal exceptions = $0?

5. Subtract line 4 from line 3 = $66,000

6. Tax =
Figure your tax on amount on line 5 by using the 2008 Tax Rate Schedules on page 5. *If you have qualified dividends or a net capital gain, or expect to claim the foreign earned income exclusion or housing exlucsion, see “pub 505” to figure the tax.

  • 10% on income between $0 and $8,025
  • 15% on the income between $8,025 and $32,550; plus $802.50
  • 25% on the income between $32,550 and $78,850; plus $4,481.25 = $12843.755
  • 28% on the income between $78,850 and $164,550; plus $16,056.25
  • 33% on the income between $164,550 and $357,700; plus $40,052.25
  • 35% on the income over $357,700; plus $103,791.75

7. Alternative minimum tax from Form 6251: (this AMT confuses me to no end so for now I’m going to pretend it doesn’t exist and hope it doesn’t effect me.

What is the AMT? The AMT came into being with the Tax Reform Act of 1969. Its purpose was to target a small number of high-income taxpayers who could claim so many deductions they owed little or no income tax. A growing number of middle-income taxpayers are discovering they are subject to the AMT.

8. Add lines 6 & 7. Add to this amount any other taxes you expect to include in the total on Form 1040, line 44, or Form 1040A, line 28 = $12843.755

9. Credits (not not include any income tax withholding on this line): huh?

10. Subtract line 9 from line 8. If zero or less, enter 0 = $12843.755.

11. Self employment tax. Estimate of 2008 net earnings from self employment. (if $102,00 or less, multiply the amount by 15.3% — Caution: If you also have wages subject to
social security tax, see Pub. 505 to figure the amount to enter) = $10,098

12. Other taxes (see instructions below): let’s just say none.

13a. Add lines 10 through 12: $10,098
b. earned income credit (forms 4136, 8801 (line 27) and 8885) – None (you have to earn less than $17k for this.)
c. total 2008 estimated tax. Subtract line 13b from line 13a. If zero or less, enter 0 = $22,941.755

14a. multiply line 13c by 90% (unless you’re a farmer or a fisherman, then it’s 66.5%) = $20,647.58
b. enter the tax shown on your 2007 tax return (110% of that amount if you are not a farmer or a fisherman, and the adjusted gross income shown on that return is $150k or more) = no idea yet
c. required annual payment ot avoid a penalty. Enter the smaller of line 14a or 14b = $20,647.58

15. Income tax withheld and estimated to be withheld during 2008: none.

16a. subtract line 15 from line 14c:
Is the result zero or less?
Yes — stop here. you don’t have to pay anything.
No – go to line 16b…

16b: subtract line 15 from line 13c
is the result less than $1000
yes – stop. no money needed.
no – go to line 17 to figure your required payment

17. if the first payment you are required to make is due april 15, enter 1/4 of line 16a:
$20,647.58 / 4 = $5161.89

(but this doesn’t at all include state taxes. I wonder if there is a separate quarterly estimated tax payment for that.)