Friday, June 13, 2008

Millionaire in the Making

I’m a huge fan of the Millionaire in the Making stories that CNN Money publishes. Ashley from Wide Open Wallet and I decided to swap financial data and write each other’s Millionaire in the Makings stories. You can view my story written by Ashley at her blog Wide Open Wallet, below is her story.

Millionaires in the Making:

Ashley and her Dear Husband (DH)

Ages: Ashley 31, DH 42
Occupations: SAHM and Telecommunications Installer
Salary: Approximately $91,000 combined
Home and Land Value: $110,000 estimated equity
Retirement: $17,200
Cash on Hand: Approx $20,000
Monthly Expenses: $4,000 - $5,000
Debt: $34,732 outside of mortgage

Ashley started her blog, Wide Open Wallet, because she wanted an outlet to share her financial views since according to Ashley her friends grew tired of listening to her talk about personal finance. So you know this couple has to have their head on straight when it comes to money.

The couple has two young children, a girl and a boy. Ashley’s DH works in telecommunication as a telephone system installer and she stays home with the children. Ashley plans to eventually return to work after their youngest goes back to school but that won’t be for a few more years. However, she had tried a few part time jobs such as elder care but it’s not really worked out for the time and energy involved.

Currently the household earns around $91,000 a year. This is great considering the household expenses are between $4,000 and $5,000 each month. They have minimum debt out side of their mortgage. Their total non-mortgage debt is $34,732, which is comprised mainly of car loans.

The couple bought their current home in 2004 for $184,000. The home is in a great location in Arizona and has appreciated in value since purchasing. Currently the house is appraised at over $250,000 despite the current housing crisis.

Unfortunately, the couple got a late start saving for retirement. Currently DH has $2,700 in an IRA and is contributing $100 a month. Ashley has a retirement plan that’s currently valued at $14,500 and is saving $50 a month towards her retirement.

The couple’s financial goals include providing for their children and one day retiring.

Future Millionaire’s Take

With their current savings and home value Mom and her DH are well on their way to becoming millionaires – it’s just a matter of when. Calculating a modest return of 7% they will become millionaires in 43 years.

But the even bigger question for this couple will be “Is a Million Dollars Enough for Retirement?” This is a big question for Mom and her DH that needs to be investigated. I recommend they review their current spending and determine which expenses they will still have in retirement and any future expenses, including medical, they might have. Then develop an approximate monthly budget for retirement and add at least a 10% safety net. This will give Ashley and her DH a goal amount and can adjust their savings accordingly. Then determine what monthly contribution is needed to reach this goal. One can determine this by using Bankrate’s calculator for saving goal.

While they are starting to work towards their retirement goal Ashley and her DH should tackle some other financial objectives. Priority number one should be building up their emergency fund to have between 8 – 12 months of living expenses. Even at their bare minimum expenses of $4,000 they only have 5 months and that includes liquidating all sources of cash on hand, not just their emergency fund. The other piece of securing their emergency fund is to make sure it’s earning some money, put it in a high yield Money Market or On-line savings account where they still have easy access but are gaining some interest at the same time.

Ashley and her DH should also look into starting to plan for their kid’s college. As young as their children are who knows if Daughter or Son will go to college but by starting to save for them now will save their children from the burden of working full time while in college or having to take out student loans. (I fully support kids being responsible for a portion of their education, it will make them value it more but if possible it’s nice if parents are able to help them out). The best way to start saving for their children’s college expenses is via a state 529 plan. This allows for tax exempt dollars to be saved and grow to be used towards college expenses much like a 401k except you’re not taxed on the money at the time of withdraw if its used for college expenses. If they are not sure if Daughter or Son will attend college they can still save because they can change the beneficiary to another qualifying family member at any time in order to keep the account going and avoid taking non-qualified withdrawals when the original beneficiary doesn't need those funds. And even if all else fails 529 Federal law only imposed a 10% penalty on the earnings from this plan.

Once their Emergency Fund contains between 8-12 months of living expenses and college savings has been started for their children Mom and her DH should look into accelerating their debt pay off and then establish a future car savings account so that any future car purchases can be paid in full and avoid paying interest. After that Ashley and her DH should just focus on enjoying a good financial future.

All in all Ashley and her DH are right on track to be Millionaires in the Making.

Monday, June 9, 2008

Monday Money's Funny -- Too Happy to be Rich

One of the regular features on my blog is "Monday's Money Funny" which are humorous (at least to me) articles/jokes/just about anything that I've discovered over the weekend when I catch up on all my on line reading that spark a need for knowledge. For example the previous Monday Money Funny was a not so Funny Money Funny about being unable to Afford the Mortgage.

This week's Monday Money Funny is from CNN Money. Its an article called What to be Rich? Don't get to Happy.

Below are highlights from the article, click here to read the article in full:

"Diener and his colleagues used data from the World Values Survey, which measures the happiness of respondents on a scale of 1 to 10 (with 10 the happiest). They found that income did indeed increase along with happiness but not at the very top. The 10s earned significantly less than the 8s and the 9s. The latter were also more likely to have gone to college, have engaged in the political process and have saved money."

For those of you too happy to get rich here's a few resources to help you still get rich. (PS Teach me to be that happy!)

Business Week's Advice for How to Get a Raise at Work Ieke's Top Ten Saving Money Tips

Stay tuned for next week's Monday's Money Funny. If you run across any Money Funnies please email them to me at and if I use them I will give you credit and link to your blog.

Sunday, June 8, 2008

Weekend Round Up

I had a lovely weekend. We celebrated my mom's Birthday and I baked a storm. I spend all of Saturday in the kitchen but it was well worth it to see my mom so appreciative. So times in life the best presents are the ones that are of your time and energy.

Now for some highlights from this week in the PF Blogger World:

Our Four Pence Worth's Penelope Pince posted Simple Solutions to Staying out of Debt.
Kristy from Master Your Card posted about the Modern "Necessities" that Drain your Cash. (Althought I have to say I love my cable TV)
Girls Just Wanna have Fund's Ginger provide a great link for the Ultimate Graduation Resource List. Good luck to all of your recent Graduates!
Mom @ Wide Open Wallet posted about the Opportunity Cost of Having a Baby. Its very interesting read for any one especially a career woman.
No Debt Plan's Kevin post about Portion Control and your Finances. I'm always worried about portion control for food and finances as a Marathon Runner and as a Future Millionaire.
Living Almost Large posted Food Inflation. No wonder my grocery bill keeps going up.
And Seb from Pinching Copper with is humorously truthful posted posted the death of the SUV with rising gas prices.

Subscribe To Recieve Email Updates of Saving Savy