The following is a staff writer post from MikeS. He is a married father of 2. So, with the cat, he ranks number 5 in the house. He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.
Just for fun, I decided to compare my budget today; to the budget I had in place 5-years ago. This exercise isn’t something that I do on a regular basis. It was prompted by a discussion I had with a coworker. She is in the process of buying a house and that got me to thinking back on saving and buying my first house. As I have said before, I have made decent progress over the past several years in managing my finances better. How much better you might ask? Let’s take a look.
Five years ago, I had been with my current company for about 5 months. My salary at the time was $79,000 a year. Having a dependable income was precisely why I had left my previous job 5 months earlier. The old job was commission based and I wasn’t a very good salesman. Today, my annual salary is $95,000 a year and this year I received a bonus of $20,000. So, I have managed to increase my income quite a bit over the last 5 years. I wish I could say that this was deliberate on my part, but I can’t. All I’ve done is simply work hard and changed positions internally when necessary. I will say that I was surprised that my net take-home pay has not changed as dramatically in those 5 years. Back in 2009 my monthly take-home was $4,776. That is after taxes and benefits. Today, my take-home is $5,267. That is a difference of only $491 a month. Where is the rest of it you might ask? The rest of it is being saved. Back in 2009 I was still trying to dig out of the hole that I had placed myself in, so I was not contributing much, if anything, to my 401k. Today, I am contributing 7%; my employer is contributing 8%. I am also maxing out my HSA account at $6,550. That means I am saving over $12,000 a year. That’s how you dig out of the hole.
No surprise, I had very little in the way of savings 5 years ago. The best I could find for my bank savings and brokerage account were the year-end balances. I had $3,300 in cash savings and $200 in the brokerage account. Today, I have just over $26,000 in the bank and about $5,000 in the brokerage account. The 401k balance is just as dramatic. I was able to find the balance from April 2009, it was $407. I had contributed for one month and then had stopped in order to eliminate my debt. Today, my balance is just over $41,000. I have become much more disciplined in my contributions and trying to increase my contribution whenever possible.
As I said, I was still digging out of a hole 5 years ago. My net worth at the time was about -$18,000 or so. I had credit card debt payments at the time of $400 a month and student loan payments of $140 a month, along with a car payment and mortgage. Today, I just have the car payment and mortgage. Both the car and mortgage have such low interest rates, that I have no desire to pay them early. My net worth today is over $123,000. One of the most challenging things was learning how to get rid of student loan debt.
I still can’t believe the progress that I have been able to make in just 5 years. Certainly, the increased salary has made life a lot easier, but discipline was also needed and a change in mindset. My wife and I had to change our thinking on wants versus needs. We had spent too much on wants in the past. We were tired of playing catch up. By taking advantage of the increasing salary and saving more, we have built up a larger safety net. The unexpected car repair or tax bill, no longer puts us back in the hole. We plan for major purchases and save the money ahead of time. This has allowed us to make the progress over the last 5 years. I’m curious to see what kind of progress I can make in the next 5 years.