Money Beagle

2009 is upon us and it is that time where we start setting out goals.  This is the first time I’ve ever publicly stated goals for the entire year, so I may skip around a bit.  I’ll try, though to keep it organized.

Balance Sheet Goals:

• Property - My goals here assume that we pay our normal mortgage payment, which is in our control. The thing that is out of our control is that I’m assuming that our property value remains relatively stable.  Hopefully the prices in our neighborhood don’t continue double digit percentage falls this year!
• Autos - I am assuming that the overall value of our cars goes up, but that we take on a loan.  This is assuming that we sell my car, and purchase a used automobile to accommodate the baby.  Neither of our cars are very ‘family friendly’   I’m looking at getting something modest and taking on a very small loan, but it’d be nice to not have to take one at all!
• Mutual Funds - With everything going on this year, we probably will not invest in non-retirement mutual funds.  We do hold some, and I’m hoping for a 10% increase in the value, which would mean that the market recovers this year.  Let’s keep our fingers crossed.
• Long Term Savings - We hold cash reserves for emergency fund as well as bigger expenses we expect to pay for in the next several years.  I’m hoping that this remains stable (i.e. no big emergencies)
• Retirement - I’m hoping that the value of our retirement account goes up about 30% this year.  That would follow the expected 10% market recovery this year, as well as several other things.  First, I’m assuming that I will become fully vested in my company match 401(k), which should happen due to the company being sold last year.  Second, I’m assuming that I can contribute 8-10% of my salary and realize the full 6% company match.

If we manage all this and things work out favorably in the market, this would increase our net worth by about 20% this year.  This is what I was averaging in years past until the free fall in stock and real estate in 2007 and 2008.  It’d be nice to get on the ‘right path’ again.

Personal Goals:

• Continue my quest to level out our monthly expenses
• Make a successful adjustment from a two-income household to a one-income household as my wife will not be working following the birth of our first child
• Don’t freak out when the expenses hit for the baby!  I took my first walk through of Babies R Us this week, which was my wife’s way of easing me into it!
• Maximize our rewards for normal spending.  We have a Citi Dividends card which pays us 2% for grocery and gas purchases, and 1% for everything else.  We also signed up yesterday for our bank reward program, which gives points for using our debit card.  I’d like to make sure we’re maximizing our rewards as the year goes on.
• Reduce student loan payments by 30-40%.  If we can hit this number, then the higher end loan that my wife has will be mostly paid off.  This would be awesome!
• Refinance the mortgage - We are currently paying 5.875% for a 30-year mortgage.  This is a good rate, but I think that rates will be below 5% before long to where a re-finance might make sense.  It’d be nice to reduce our interest obligation.
• Begin saving for major house expenses - Our house is about 10 years old.  I know that we’re getting a few years away from routine tasks that cost a good deal of money.  I expect a new hot water system will be needed within 3 years, a new roof within 5 years, new windows within 7, a new furnace within 10, a new deck and driveway within 12 years.  I’d like to begin saving for those now rather than figure out how to pay for them as they come up.

All in all, it will be a very interesting year with a lot of changes.  I will look forward to updating throughout the year as well as looking back at the end of the year to see how we did.

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First, I’d like to thank ‘Where Are We Now’ for including my post about the next steps the government should take in the 34th Money Hacks Carnival, and for doing a great job on the carnival this past week.

With that being said, I received a check for $2,700 today. I knew it was coming but I’m debating what to do with the money. I had stock invested in a company that was acquired in a cash transaction purchase. Essentially what that means is that the purchasing company pays a certain cash price per share for the outstanding shares of the company that they are acquiring. The alternative, which is also very common, would be where the purchasing company swaps stock, in which case I would have had the option to own stock in the buying company.

Because they did a stock transaction, I had no choice and today received a check for my shares, which totaled $2,700. I have a few options on what we’ve considered doing with this since we received word that the check would be coming:

1. Re-invest the money into the purchasing company - Basically this would accomplish what a stock swap purchase would have.
2. Re-invest into the stock market through our brokerage account - In a way, the timing of this couldn’t have been better. The purchase price was agreed upon about 4 months ago, and thus the share price was locked. I’m convinced that the share price of my shares would have been pummelled during the downturn, and they’d be worth a lot less than $2,700. In this case, one could make an argument that this would be good to re-invest in the stock market in some fashion.
3. Re-invest into the stock market through our Roth 401(k) retirement account - We have a good chunk set aside for retirement, but not as much as I’d like, so retirement investing could never hurt.
4. Use the money to pay off debt (student loans) - We’ve been focusing our attention on paying down my wife’s outstanding student loan balance. I had been considering selling the stock anyways even before the buyout was announced, as it hadn’t been a very well performing stock. This would be a good chunk of the student loan balance taken out at once.

I’m curious as to what anybody might think. We’re leaning toward paying the student loan down, as we’ve been concentrating efforts on reducing our debt load. Still, I’d be interested to hear if anybody has any other advice.

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An MSNBC.com article outlined how one Michigan company makes it mandatory for employees to get one-on-one financial planning.

The company mandates up to an hour of money education as a way to help its workers become more knowledgeable about the firm’s 401(k) plan, and also learn about debt management, college savings, and other personal finance topics.

Some might argue that this is ‘none of the employers business’ but I think it’s a great idea.  The paragraph above touches on three points: retirement, debt, and savings.  Let’s briefly look at each of these.

• Retirement - According to a Bankrate survey, only 28 percent of workers feel that they’re prepared for their eventual retirement.  Hmm, so it seems at least 72 percent of workers could instantly benefit from some help.
• Debt - According to another Bankrate fact sheet, over half of Americans don’t pay their credit card balance off monthly.  When you figure that many credit cards charge interest rates of nearly 20% (or more), this is taking a big chunk of money away from people.
• Savings - As a nation, we have been hovering around (or below) a negative savings rate, which means simply that we spend more than we earn.  This can’t go on forever, and it’s a big reason why we are seeing some of the messes in the mortgage and credit industries.

I think that this benefits the employee, and it also benefits the employer.  Think of it this way, if an employee is facing any one of the situations above, chances are they spend time having to deal with it, or there is stress that impacts their job performance.  If an employer sponsored financial adviser can help reduce that burden (and the associated stress), it not only helps the employee gain better control of their finances, it helps the employer gain a more productive worker.  Everyone wins!