Saturday, March 11, 2006

Back to Basics

Gosh, all this intrepid reportage has distracted me from the financial navel-gazing this site promises to provide! So here's the dirt on February. Not that there is dirt in my navel. Or lint. Or rings or belly-dancing jewelry, for that matter. And it's an innie.

Net worth at end of February: $268,002

I changed my 401k contributions a bit, so after taxes & deductions, my pay came to $3,924.75

My expenses for the month totaled $2,502.58, not counting payroll deductions and taxes.
A few selected categories:
Rent is still $850
Telephone: $83.77, which is under budget
Dining: $528.24, not bad, as my budget is $650
Entertainment very high at $172.50 due to the Broadway show
Clothing: $9.00 -- there was my trip to Century 21 but I also returned a parka that I had bought.

The only other areas that came to much were travel and gifts, for my trip to my niece's birthday party, and my accountant's fee.

The bottom line for the month's cash flow was only $1,233.02 because of my $1,100 loss when I sold GM. My investment accounts didn't do very well during the month, but my net worth still ended up increasing by $2,359.

If I do a little FV calculation based on a starting value of $268,000, adding $1400 a month, and a 6% annual interest rate compounded monthly, I'd have over $3 million to retire on 30 years from now. Obviously I am not going to save this much every month, and I'm not going to get that return on my entire net worth, and this doesn't take into account a million other factors, but it's kind of a cheery little calculation nonetheless.

3 comments:

Apollo said...

I spent the morning catching up on your blog. Seems the real estate market is a core theme in your blog. You've got me rooting for you. Hope you can find a nice condo for your living pleasure. I know you've analyzed and worked the numbers. No valuable tips here but just some food for thought.

1. Assume for a moment rent is defined as "living cost" or annual taxes paid for a roof over your head.
2. Assuming property tax, insurance, and maintenance fee for a condo is equal to your current rent, then conder point #3.
3. Assuming #2, the difference between your interest rate and property appreciation is your equity savings. If the mortgage rate is 5% and the property appreciated 11%, then your socking away 6% annually in equity appreciation. Granted who knows how or what your property appreciation will be, but based on past trends in your area it could be significantly higher somewhere between 12% to 20%.
4. Buying proprety is also partly an emotional purchase. You get the benefit of enjoyment in living in a home that you own.
5. Hypothically assuming you purchased property for 100% cash, I believe it would still be difficult to find a combined cost of taxes, insurance, and maintenance fee "living cost" to be less then or equal to $850.
6. If a $200,000 property doubles in 5 years to $400,000, and your "living cost" is 1,400 monthly , the total "living cost" difference is $33,000. That means you still gained $167,000 in property equity. That comes out to somewhere between 14% to 16% annual gains. (rough estimate)
7. If you use a loan, just subtract the loan rate net of tax rate for deductions from the 15% projected gains. So if the mortgage rate is 6%, your net rate after tax deduction is about 4.2% assuming your in the 30% tax bracket. Then you net property gain would come out to about 10.8%.
8. The assumptions are property value doubles in 5 years. Property tax, insurance, and maintenance is about $1,400 monthly. The mortgage rate is about 6%.
9. Provided above you get the benefit of living in nice home that you own and increace you equity value by about 10.8% annually. I noticed that your current investments are conservative and probably around 5% to 6%.

Well I hopy I didn't throughly confuse you. Just trying to help if you can call it that. It's just some food for thought. Best of luck on your house hunting.

mti said...

Madame X: Question about the phone bill. My phone bill has been between $14 - $21 on any month plus $10 for cell phone and I am always curious on why some people's phone bills are so incredibly high. My long distance is anywhere from $0.14 to $8 (we use powernetglobal) and was wondering what extras you have with your phone and whether DSL/Dial up is included in the phone bill. My apologies if its too personal of a question.

Thanks.

Madame X said...

Hi Nippy-- I posted about teh phone details but it was a long time ago-- it is because I have a lot of international long distance calls. My local service is about $21 a month, and cell service around $40. I don't have any extras like call waiting, etc. and I count my dial-up internet separately. I use a phone card for most of my international calls that makes them around 4 cents a minute, but sometimes I just use my AT&T plan that gives me international calls for 10 cents a minute for a $2 monthly fee.