I’m about to get started on this year’s tax adventure. I sometimes long for the days I could fill out the 1040-EZ and be done. Now, with three businesses, an additional rental property, and various other taxable transactions, we usually end up with about a 20 page federal return, not including the partnership return for our real estate LLC. Thankfully, I also use personal financial management software, so I keep track of income and expenses throughout the year which helps tremendously at tax time. Here’s hoping we don’t end up with a huge bill!
Hello Everyone and Happy New Year!!! May 2015 be as good or better than 2014 for all of you…
As I have mentioned in the past, I am a huge fan of personal finance management software. My personal choice is an application called MoneyDance and I love it. One of the features I love most is the customized reports and detailed graphs that I can create. I have so many customized reports I can break down our finances in dozens of different ways. One of my favorites is taking a look at year end to see how things went.
So, without further ado, here is a look at our 2014. The table below shows a break down of our account balances on 1/1/2014 vs. 1/1/2015 with the gain/loss listed in the right column. I have grouped these into the various assets/liabilities that I track on our Net Worth Tracker page.
Some observations:
- Nice to see the Pension Plan add $5000 to the kitty. I’ve mentioned it before, but this is a nice little benefit of working for the corporate machine. Now that I have 10 years of service time, my pay credits has increased to 4%. Long story short, this has slowly built up to the point where I now get over $5000 added each year. I can cash this in once I leave either as a lump sum (with higher taxes) or over some period of time (with lower taxes). Let’s worry about that later and for now we’ll just watch it do it’s thing.
- My Roth IRA has made almost all of it’s gains ($11k) since 10/2 based on my reports. I noticed that when I updated the Net Worth Tracker page today that it was at $58k on 10/2 and now at $70k. This is due to a speculative buy I made on a bio/pharma stock that has returned something like 325%. I bought 650 shares at something like $7 and it took off to over $35. I sold off enough to get back my initial $5k investment and still have 500 shares in my portfolio. Fun times when it works…
- My Work 401k, which I consider to be the bedrock of our portfolio, is performing quite nicely. I’ve cut back my contributions this year which was EXTREMELY odd for me. I have MAXED my 401k contributions from day ONE. I fell in love with compound math the summer before my first real job and that changed everything (I remember it like yesterday). I was amazed at how much of a difference it made if you started investing at 20 vs. 30 or 40 or, heaven forbid, 50. At that moment I decided I would do all I could to max out my 401k contributions from the start. This year we decided to divert some of that cash to other interests as our 401k is pretty hefty now. Even with that, the total increased nearly $50k which is fantastic in my book.
- Mrs. PFL did good work with her SEP and Roth IRA’s. We complement the aforementioned “bedrock” with our IRA’s and between the two of us we have a tidy little sum. I let her manage it but we try to make sure it fills in a need such as an International Fund or Small Cap. Just enough to try and keep us diversified.
- Overall we were able to reduce our debts (credit cards, HELOC, Mortgages) by $30k. We did a bit of repair on our primary house that really prohibited us from knocking this down even more (and why our HELOC increased). I expect in 2015 we should be able to really take a good chunk of this out as it’s our primary focus. We use the rental incomes and any left over cash to knock this down. The one thing about compound math is that it also applies to interest and thus can work against you. Plus I really really really dislike debt (Ala Dave Ramsey).
- The value of our assets, which is primarily our house and our rental units, can be a bit subjective. I try to update these based on various metrics. For our primary residence we use tax assessments and we review real estate transactions within our area and I tweak it once or twice a year. For the condo, the neighbors sold their unit this year so we have a good baseline for that. The new rental unit is the biggest gainer as we put a lot of time (and 2013 debt) to fix these up and get them rented. Ultimately the goal is to eliminate the debt on these and have them generate monthly income allowing us to truly achieve Paycheck-Free Living!!
So what do you think? Not a bad 2014 if I do say so myself. This is why I am trying to stick it out at my corporate job as long as I can. If we can grease this wheel a little bit more and eliminate our bigger debts, our dream may become true. The nice thing right now is that we are able to do all these cool things (Sugar Bowl, Hawaii) and still make progress.
| Account | As of: 01/01/2014 | As of: 01/01/2015 | Gain/Loss |
| Bank Accounts Total | $20,471.06 | $18,435.69 | ($2,035.37) |
| Pension Plan | $32,411.36 | $37,466.43 | $5,055.07 |
| Investments - Total | $632,741.43 | $715,236.79 | $82,495.36 |
| E*TRADE Investment | $32,805.07 | $32,928.74 | $123.67 |
| Roth IRA (Mr PFL) | $58,832.98 | $70,037.96 | $11,204.98 |
| ESPP (Mr PFL) | $8,878.08 | $9,692.91 | $814.83 |
| Work 401k (Mr PFL) | $392,069.09 | $440,856.19 | $48,787.10 |
| 529 Plan | $2,565.06 | $2,730.86 | $165.80 |
| Roth IRA (Mrs PFL) | $34,563.59 | $39,789.36 | $5,225.77 |
| SEP IRA (Mrs PFL) | $59,004.20 | $70,326.34 | $11,322.14 |
| Precious Metal - Total | $11,612.00 | $11,408.00 | ($204.00) |
| Assets - Total | $894,422.96 | $1,001,675.00 | $107,252.04 |
| Primary Residence | $480,000.00 | $500,000.00 | $20,000.00 |
| Condo – Rental 1 | $331,000.00 | $338,000.00 | $7,000.00 |
| BD – Rental 2-7 | $61,833.00 | $126,000.00 | $64,167.00 |
| Auto/Misc Assets | $8,000.00 | $8,000.00 | $0.00 |
| Other Rental 8 | $13,589.96 | $29,675.00 | $16,085.04 |
| Credit Cards - Total | ($110,780.98) | ($109,016.02) | $1,764.96 |
| Business Credit Cards | ($16,960.11) | ($11,034.20) | $5,925.91 |
| Personal Credit Cards | ($4,965.24) | ($4,942.88) | $22.36 |
| HELOC Loan | ($58,855.63) | ($62,486.84) | ($3,631.21) |
| HELOC Loan | ($30,000.00) | ($30,000.00) | $0.00 |
| Loans - Total | ($545,256.99) | ($518,218.46) | $27,038.53 |
| Primary Mortgage | ($329,332.36) | ($321,183.64) | $8,148.72 |
| Condo Mortgage | ($99,999.99) | ($89,039.57) | $10,960.42 |
| Personal Loan | ($26,833.28) | ($24,195.25) | $2,638.03 |
| Student Loan | ($89,091.36) | ($83,800.00) | $5,291.36 |
Total |
$891,597.48 |
$1,108,113.00 |
$216,515.52 |
If you are serious about tracking your finances you almost certainly need to invest in a Personal Finance Management software (PFM). I started using PFM in the late 90’s however I lost a number of years due to some technical issues so my official records start in 2002. Originally, I used Microsoft Money and had a difficult time due to how it was setup and my ever growing set of accounts. I won’t bore you with the details but let’s just say I was not a big fan of how it works and had a lot of headaches with it. At the time though (late 90’s) it was either Microsoft Money or Quicken and they both had limitations. Nonetheless, I made it work and started tracking everything up until 2002 when my PC hard drive decided to die and as a result I lost the license key to my Microsoft Money software. Not the data mind you, I lost the stupid license key to “activate” the software when you purchase software from Microsoft. When I tried to reinstall the application I couldn’t “activate” the software because I lost the key. I had purchased the license several years before all of this and Microsoft stopped supporting Money right at this time…. so that meant I couldn’t purchase a new license anymore and I couldn’t figure out a way to get my existing version of Microsoft Money to activate. Thus, I became a free agent in search of a new PFM.
I did the usual searches that we all do and read all the reviews. In 2002 there were more options hitting the internet so the choice expanded beyond Quicken which I gave a long look. Ultimately, I decided to try my luck with MoneyDance and I couldn’t be happier. At the time I had a net worth of about $70k and 75% of that was my 401k. The rest was a personal brokerage account I had on eTrade with $2500 split across 4 stocks I purchased in March of 2002 and then ~$20k in cash. The $20k was used as my down payment on the Condo which I purchased at in March of 2002 for $239k. So it all came together in 2002 as I converted to MoneyDance and really started the journey to Paycheck-Free Living!!
Since that time I have tracked almost every transaction over the last 12 plus years. With the advent of debit cards being accepted EVERYWHERE, the level of tracking is ridiculous as well. I have it down to a science now and spend about 10 minutes every other week updating the data. MoneyDance let’s you customize just about everything and so I can see all my income and expenses, my assets and liabilities, my net worth, investment performance, reminders, budgets, and on and on. I have several customized reports covering just about anything you can think of from Net Worth to Investment Performance to Asset Allocations. It even works great for our side business (rentals) as it allows me to categorize all those transactions separately.
I could go on and on about the power of Personal Finance Management software… and I am sure I will in the future. I can’t say enough about how much it helps me make sound financial decisions. On top that it really provides proof to me that if you keep doing the right things, maxing out your 401k from day one, paying down debt, balancing your portfolio, and diversifying your assets, that it does work!! I see that when I run a net worth report or when I look at 2008 and how we managed to eke out ahead. It gives me motivation to keep at it because Paycheck-Free Living is on the horizon.
With the recent ups and downs of the stock market, I got to wondering how the performance of our investments compare to the overall market. I track all of our finances using an application called MoneyDance and I am a huge fan of personal finance management software in general. I have kept track of my own finances since 2002 and added Mrs. PFL along the way. The best part of MoneyDance is the ability to run reports and with the time I have put into managing the data I can easily do comparisons. So this morning I decided to take a look how the DJIA (Dow Jones Industrial Average) performed as compared to our various stock investments for 2014.
First a couple (randomish) thoughts…
- The DJIA in just the last month has been CRAZY!! By my quick analysis.. the DJIA closed at a high of 17,280 on Sept. 19th, dropped to 16,117 at the close on Oct. 16th and then peaked again just this week by closing at 17,391 on Oct. 31. That is some volatility.
- Our stock investments are comprised of several different portfolio’s. I basically manage these and more can be found on my Assets Explained post. For a quick recap, our investments consist of my 401k, my Roth IRA, my ESPP (employee stock purchases), my personal brokerage account, Mrs. PFL Roth IRA, her SEP IRA, and her 529 account.
- Because I use MoneyDance I can easily see how all of my assets are split across all of these. I can tell my market cap size (large cap, small cap, etc), by type (individual stocks, mutual funds, ETF’s), by portfolio (401k, SEP, Roth) and I can look at all of this by individual accounts.
- Any graph that involves my 401k tend to have big jumps and big drops. The reason for this is due to the fact that those assets are only purchased the 1st and 15th of each month when I get my paycheck. That means the prices for those assets are only updated when these transactions occur and because my 401k is by far the biggest piece of the investment pie, when the market drops/rises over two weeks it looks more like one big drop/jump on the 401k.
So here are the results as shown in graph form. I find this to be pretty interesting myself but I am a nerd. It looks like we are fairly well diversified if I do say so myself. I also like to see that even with those big dips it seems to continue trudging it’s way forward.