Tuesday, January 25, 2011

The State of Our Union

I love money.

Not in the greedy, Scrooge McDuck kind of way. I love to count it and track it and see where it goes. I have spreadsheets to show me where all of our money has gone since right after we got married. It's a sickness from which I have no desire to be cured.

Every now and then, I add up the value of our assets and debts to see where we are financially. I've decided to do so annually (maybe even semi-annually) to track our progress and make sure we are moving forward. This numbers is negative, due largely to the fact that the value of our home has dropped about $100,000 since we bought it. Writing that out makes me throw up in my mouth a little.

We made quite a bit of progress last year though. After the emergency that was 2009, we rebuilt our emergency saving account to a comfortable amount. We more than doubled the value of our retirement accounts (the up turn in the market definitely helped with that.) We started making payments on Dan's student loans again (since he is back in school for his masters degree, we deferred them in 2009 when he was laid off). The only negative was the fact that we financed part of the purchase of my SUV we bought last year.

What good does it do to add these numbers up? Why is this a valuable use of my time? First of all, because it is interesting information for me. It also helps us plan for our future spending & savings and helps us allocate any money we have left over.

We are going to start savings for Liam's future this year. I'm planning on an entire post later though.

We have a lot of vacation plans in the works that we will begin saving for this year. Dan's family has a reunion at a lake house every other summer, which will occur this year. They are also planning a big ski trip in Utah in the winter of 2012/2013. That will be a pricey trip, so we are going to start putting money away for it this year. Dan and I also have a dream vacation of going to the Olympics in Brazil in 2016. That will be a very expensive trip, so we will start saving for it now and only have to put a little away each month.

Dan will upgrade his car in the next few years, so we will start saving now so that we can pay cash for his next car instead of taking out a loan.

We have decided to start paying extra toward the principle on our mortgage. It isn't very much, but it will decrease the life of our loan by almost 5 years and save us over $50,000 in interest. We decided to pay extra on the mortgage instead of my SUV or Dan's student loans because it has the highest effective interest rate (the interest rate once you take into account the tax breaks of paying interest on a mortgage) and because we are underwater on our home. Paying it down will save us the most money in interest and allow us to have more options. When Dan was laid off, we had to rent the house out at a loss instead of selling it. I want selling it to be a viable option again to give us flexibility.

There are aspects that we cannot control: Will the the values of our investments go up or down? Will the value of our house rise or continue to fall? If nothing goes terribly wrong, our efforts should result in a positive net worth by the end of this year. It will be a happy day in spreadsheet land for sure.

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