How Are We Doing?

This is Kay. PJ may give you an update in another post later, but he just started a new job and needs to focus on that for now. I'm not sure I'm back to regular posting yet, but tidying up old blog entries made me think an update was due.

Our book's focus is far more towards the basics of budgeting, but it is one of those things that pays off over time, so I think my financial progress is relevant to that. The tag can help you find previous budgets for comparison. I may focus in a bit on the first step for this post, because I didn't post as planned for a few years and may need to talk about how I got here.

First our basic budgeting steps:

Step 1: How much money do I have, and where is it?
Step 2: What is my regular income?
Step 3: What are my regular bills?
Step 4: What other expenses do I have?
Step 5: How much should I save?
Step 6: Do the numbers add up?

Going to focus in on Step 1 today, because the last one of these I did was in 2017 and I want to talk about why I've moved money around the way I have.  I use my personal finances for transparency and as an example.  That does not mean I'm saying you do exactly as I do, only hoping it may spark some ideas and share information.

My Feb 2017 numbers:

Checking/EF: $1822.04
HSA: $3074.19
Business Investment: $3993.57 (total capital investment) [$1500 (easily accessible), $500-800 approx. (assets that could be liquidated), the rest is mostly intangibles]
Savings: $600.02
Roth IRA: $2105.82

My April 2025 numbers:

Checking: $1335.20
Savings/EF: $2051.79
Brokerage/Money Market/EF 2: $5,313 (total capital investment)
Municipal Money Market: $404.36
Brokerage/Investments: $1021.70 (estimated value)
Cash HSA: $1778.54
Investment HSA: $4437.55 (estimated value)
Business Investment: $5,150.21 [$1431.99 (easily accessible), $500-800 approx. (assets that could be liquidated), the rest is mostly intangibles]
Roth IRA: $29,591.70 (estimated value)
403b (Retirement): $3,260.24 (estimated value)

Checking:

In 2017, I had my Emergency Fund (EF) and my "checking" together in a money market account because I wrote very few checks and paid cash for most everything else, so it was an interest bearing account.  I think Money Market accounts may have gotten more restrictive, but also my habits have changed.  I pay for more things with my debit card now.  I think I opened the checking account when I got the apartment on my own because I had more bills I was paying directly (as opposed to giving my roommate money to pay the bill).

In checking, I try to keep minimum balance + 1 to 2 months expenses.  Normally that's about $1000 for me these days, and I have a little extra in there for an ebay sale I did for my dad (waiting for the 30 day return/refund period to pass before declaring the sale final).  Usually I treat $1000 as my minimum balance (I think the bank minimum is $500), but I keep that padding in there so little dips from miscalculations don't hit me with extra fees.

Emergency Fund:

An Emergency Fund is generally about 6-months living expenses.  Mine is split in two for a couple reasons.  The first is that my actual expenses are fairly low right now because I live with family and still use my grandfather's old car, so while I still have some expenses like gas, toiletries, etc. 6-months would not much of a fund.  So my I based my emergency fund goal on 6-months living expenses if I did not have family support.  I could maybe do without the car, but 6-months based on the cost of local 1 bedroom apartment (assuming no roommate) plus food and estimated utilities added up to about $7000.  I was with a bank that I liked but they merged with another bank, and now they will randomly drop my money market interest rate down to .001% with no warning.  They'll bump it up again if you go into a branch and ask for a better rate, but you shouldn't have to do that.  I'd switch banks completely, but my family opened a shared account (while dealing with the house fire recovery) and it's proven very useful for moving money around for share bills.  Fidelity's SPAXX money market was getting 4.99% interest for a while which is pretty good for a Money Market.  So I move $5000 over to Fidelity... I did consider moving the whole amount, but the downside of the Fidelity account is that's not FDIC insured, so while it's very unlikely to lose money, it is possible.  So I left $2000 in the more secure account with a lower interest rate, and moved $5000 over to take advantage of the higher interest rate.

Brokerage:

In 2023, I decided to experiment with investing with the goal of building an income stream.  A professional author I knew talked about investing his royalties, and I was starting to see some wisdom in that for an author/artist because our income is notoriously unstable.  Aslo Jay Leno has always talked about having 2 jobs and living off the income of one while investing the other.  I still think it's wise to start with savings and build up an emergency fund first.  And for most people, you should max out your retirement contributions before worrying about additional investing because IRAs and 401ks get tax advantage.

But I wanted to build up an income stream that would kick in before my 60s.  I started with a $100 desposit.  Since then I've added $10 from each biweekly paycheck of my part time job (and some odd amounts from birthday money and things like that), and reinvesting the interest and dividends from the SPAXX account and other investments.  While I was still getting a 4.99% return I was seeing about $20 a month in interest from the SPAXX money market.  I did play around with penny stock for a little while, but I've determined I don't enjoy day trading.  Most of my brokerage investments are bond index funds that cover different areas of the market and a couple total market index funds (stock/growth centered) and a multi asset fund (mix of stocks and bonds).  The main appeal of the bond funds I've found is that they payout monthly.  Most other index funds tend to pay out once or twice a year.

I'm spread out over 12 funds... hoping to sell off most of the penny stocks without a loss at this point, but I don't have high amounts in any of them (like $1-$5)...  I'm also gradually increasing the amount of liquid savings I have in the money market, while it's no longer getting 4.99% return, it's still much higher than my bank account interest.  I have this planned out with a chart, but I'm not experienced enough with this to suggest other people do what I do.  But I like how it's building.

Municipal Money Market:

I don't really think of this particular fund as my money.  I use it for money I earn on "family" yardsale and ebay items.  Before the housefire I had saved up enough to buy the family a new couch.  My current goal is to save up for a riding mower.  Currently my dad like to cut the grass for exercise, but he's in his 80s.  But this is also a fund I put money into when I can't think of something to buy them for a birthday or Christmas and let it build until I find something I think my parents would really enjoy.  I also dipped into it a little for yardwork items at my brother's house... family stuff.  Anyway I bring it up, because I moved the account out of the bank and into this particularly money market because it's tax exempt.  So a bit of an experiment for me, but something you might check out if you're getting into investing.

HSA:

In 2009, I opened an Health Savings Account, which is another tax advantaged account.  Now you can only contribute to an HSA when you have HDHP (high deductible heath plan), which I don't always have, when I do I try save aggressively in my HSA.  It's been a life line during uninsured periods, but I had been using the account specifically to save up for lasik and clear dental aligners.  So over thirteen years I had built up $6647.33 in the account.

In 2022, I learned that I could invest part of that money.  Long story short Fidelity has far more investment options than HSA bank but didn't work as well for my cash needs.  I split so I had about $3800 in the investment account and the rest in the account cash to avoid a minimum balance fee.  I've kept putting cash into the cash account and built up enough to start my clear aligners.  While dental insurance got me discount, I paid a significant amount on those and had some other medical bills brought my balance down.  But that's what that account is for, covering what insurance won't on medical bills.

I've got that money spread across 16 index funds...but this account is a bit more retirement focused, though not fully.  Most of those funds are date targeted retirement funds with staggered dates.  I don't plan to ever fully retire, but probability is that my medical bills will increase as I age.  So this is my effort balance out my stock/bond ratio.  10 of the funds are staggered 2025 to 2070 (furthest out I could get).

I don't think I'd suggest that for everyone, but where you may consider date staggering if you're unsure your retirement age.  I'm helping a young friend set up her retirement account, and like me she just plans to work until she can't.  She turns 60 is 2047.   So we set her up with 5 date targeted funds, 2050, 2055, 2060, 2065, 2070.  What those funds do for her is automatically shift her investments from stocks to bonds and cash to be stabler as she hits retirement age.

IRA:

I can't remember exactly when I opened my Roth IRA... lost a lot of records in the fire, but looks like I move it from a saving account at my bank to an investment account at Fidelity in 2019.  I had a full time job in 2018 & 2019 was out of work in 2020 due to the fire/pandemic and got a significant amount from insurance which let me max out my 2021 and 2022 contribution.  I've been pretty regularly contributing a $100/mo since then.  Looks like all together I deposited $21,809.29.  I've gotten remarkably return on investment so far, this is partly because I had a large bond mature around the time the market crashed in 2022 and then was able to put that in stock indexes which then recovered.

Anyway, compound interest does add up, usually not quite that quickly.  My general investment philosophy is based on "The Lazy Person's Guide to Investing" by Paul B. Farrell... while the details are likely a bit dated, I think it's a good introduction to a lot of ideas and terms.

One part of the book that is dated is you can start investing for much smaller amounts than you could in 2006.  Fidelity has a $10 minimum vs. the $2000+ when I first looked into noload funds.  The technology has changed so the fees are lower or easier to avoid and investing is far more accessible to small accounts than it was 20 years ago.

403b:

A 403b is s type of retirement account similar to a 401k.  I did not pick it.  I had a job at a church run daycare, and they automatically matched 1% if my income and put in the account, which was a very nice bonus.  It seems I worked that job March of 2018-January of 2020.  My employer put in a total of $2103.98, and the rest is interest and growth.  Unlike my Roth, this is a tax deferred account, so whenever I do take money from it, it will be taxed.  But since it didn't come out of my paycheck, I'm not complaining.  I *could* roll this over to my Roth IRA, but I'm holding off for a few reasons.  The first is I could get hit with extra taxes now since Roths work differently.  The second is I'm working for the same employer in a different position and if I go back to full time in the future, it may be help to have the same account.  Third, while I think I know what I'm doing, it's kind of nice having some money that someone else is managing at a different institution.  So it's kind of a back up to my back up. I may revisit that idea, but for now it seems to be doing well, so I'm inclined to leave it alone.

Business:

My personal money has been able to grow mainly because I've been able to keep my expenses down and prioritize savings for the past few years.  My poor business has been neglected and isn't doing as hot.  That number going up just means I had to sink more personal money in to keep afloat... Since the business is still active and could potentially make money, then it's an investment and not a true loss yet.  Long story short, I spent 2018-2019 doing a year long project that was effectively destroyed by the fire along with a bunch of business records, so I've been keeping afloat with 2 childcare clients and one of them has effectively age out of needing me on a regular basis.  Down to 1 steady client who doesn't really pay enough to cover my full salary plus tax each month.  I knew I had a loss last year, but did not realize how bad it was until I did my taxes.  Yipes.  However, the pandemic shut downs are over, and I have time to pay attention to business again.  So I'm tidying up my web presence and relearning programs and preparing new products for launch on the publishing side.  Not quite ready to throw in the towel, but definitely need to change tactics and get revenue up.

This post is already very long, so more on that in future posts.