Tuesday, March 9, 2021

Monthly Cash Flow Plan (Example)

Dear, dear Reader:

How have you been?

I thought I'd do something new today and post a Monthly Cash Flow Plan Example.

Here goes:

Pre-TaxPost-Tax
Monthly Take Home PayN/A2358.32
Charity1
Saving (Emergency)20
Saving (Retirement - Pre-tax)1625
Saving (Retirement Match)514.75
Saving (Custodial)5
Housing (Mortgage)1309.97
Housing (Bank Fee)3
Housing (Real Estate Taxes)0Included
Housing (Maintenance)0Mr. ItF
Housing (Repairs)69.62
Housing (Association Dues)0N/A
Housing (Supers Holiday Tip)0Mr. ItF
Utilities (Electricty)0Mr. ItF
Utilities (Gas)0Mr. ItF
Utilities (Water)0Mr. ItF
Utilities (Trash)0N/A
Utilities (Phone)39.43
Utilities (Internet)0Mr. ItF
Utilities (Cable/Netflix/Hulu/Amazon Prime)0Mr. ItF
Food (Groceries)226.3
Food (Restaurants)163.94
Food (Fast Food)106.55
Food (Snacks)89.99
Food (Alcohol)8.48
Clothing (Adults)25.96
Clothing (Children)0Not yet
Clothing (Cleaning/Laundry)0Mr. ItF
Transportation (Gas and Oil)0N/A
Transportation (Repairs and Tires)0N/A
Transportation (License and Taxes)0N/A
Transportation (Car Replacement)0N/A
Transportation (Mass Transit)127Typically $127 pre-tax but with working from home it's not being taken out
Transportation (Taxis/Lyft)107.21Increased due to COVID.
Medical/Health (Medications)76.39
$229.17 gets taken out pre-tax every month, and I just split it between prescriptions, doctor bills and dentist evenly. Optometrist should also be included but I don't think I went last year. I try to get vitamins prescribed where possible.
Medical/Health (Doctor Bills)76.39
Medical/Health (Dentist)76.39
Medical/Health (Optometrist)0
Medical/Health (Vitamins)0
Medical/Health (Gym)40.23This is $22.98 for me and $10.45 for Mr. ItF, Additionally, there is a $40.76 annual fee for each of us
Medical/Health (Miscellaneous)1.98This is a rough estimate. I'm actually not sure what this is spent on.
Insurance (Life)28.67This is $15.86 for me and $12.81 for Mr. ItF
Insurance (Lawyer Option)16.5
Insurance (Health)363
Insurance (Dental)56
Insurance (Vision)14.12
Insurance (Homeowner/Renter)0Mr. ItF
Insurance (Auto)0N/A
Insurance (Disability)4.59
Insurance (Identity Theft)0I got this free somehow.
Insurance (Long-Term Care)0We researched this and it was incredibly expensive.
Personal (Child Care/Sitter)0We haven't budgeted for this yet.
Personal (Toiletries/Grooming)7.93
Personal (Cosmetics/Hair Care)0I place this under "Toiletries/Grooming"
Personal (Education/Tuition)0Surprisingly I didn't spend any money on this last year.
Personal (Books/Supplies)0I place this under "Education/Tuition"
Personal (Child Support)0None, luckily.
Personal (Alimony)0None, luckily.
Personal (Subscriptions)0We have some but I put them under the appropriate categories.
Personal (Organization Dues)0None (fortunately?)
Personal (Gifts)190.76
Personal (Anniversaries)7
Personal (Holidays)31.94
Personal (Replace Furniture)0I place this under "Housing - Repairs"
Personal (Pocket Money - His)0Mr. ItF takes care of his own.
Personal (Pocket Money - Hers)0I don't budget any for myself. Like Ari says, "I want it, I got it"
Personal (Baby Supplies)0We luckily haven't had to buy any yet.
Personal (Pet Supplies)0Sadly no pet currently.
Personal (Electronics)22.2
Personal (Music/Technology)0I place this under "Electronics"
Personal (Miscellaneous)0I don't have a "Miscellaneous" currently just for Personal
Recreation (Entertainment)52.2
Recreation (Vacation/Travel)474.25I think we usually spend more than this, but because of COVID, we travelled less.
Recreation (Travel Insurance)42.43See COVID note above.
Debts (Credit Card Renewal Fee)13.33I pay a yearly credit card fee instead of having an APR.
Debts (Car Payment)0No car (luckily?)
Debts (Credit Card)0I pay off the credit card in full every month
Debts (Student Loan)0I paid off my student loan.
Debts (Medical)0I paid off my medical debts (thank goodness)
Business (Business Expenses)5.92
Total Spent per Month in 2020 (Roughly)3116.38
Amount over each month:758.06
Amount over for the year:9096.72

I've included some categories I don't personally use in case you find them helpful when compiling your own Monthly Cash Flow Plan.

Long story short, I really overspent in 2020! Luckily I had some buffer so I could, but something has got to give. I've really got to cut back!

Probably the most obvious place I could cut back is "Travel" and "Food". I know I've been spending a lot on Food lately. It's a real weakness of mine.

Hope you enjoyed this post. 

I've got another post planned but not sure when I'll be able to put it together since I've got a few different projects going on right now.

Warmly,

Into the FIRE










Thursday, January 14, 2021

Should I put money into my Roth IRA or begin a Traditional IRA?

 Good evening Dear Reader (or morning as the case may be where you are!),

The Mad FIentist (whom I greatly admire) does an excellent write-up in this post ( https://www.madfientist.com/how-to-access-retirement-funds-early/ ) detailed exactly why you should invest in a Traditional IRA rather than a Roth IRA.

Alas, this post was not written back when I opened my Roth IRA (I would hazard a guess that was in 2005 or 2006), nor was I aware of FIRE back then.

As such, I have constantly been asking myself. Do I continue investing in my Roth IRA or should I begin a Traditional IRA (better late than never, am I right)?

After considering this for about a year, and (finally!) this year I think I am eligible for a Traditional IRA, I sat down and did some simple math using this online calculator: https://www.nerdwallet.com/banking/calculator/compound-interest-calculator .

And, here is a table with the results:

VehicleCurrent InvestmentAdditional InvestmentGrowth after 8 yearsGrowth after 20 years
Roth IRA (TD)50548.05069611112492
Trad IRA (Schwab)06000826313353

I note the different brokerages because were I to open a Traditional IRA, I would open it with Schwab as I primarily invest in SWPPX currently. Therefore, the amount in the Roth has $16.95x4 subtracted from the maximum I can contribute in 2021 ($6000). This is assuming I would split the $6000 up into 4 equal payments to invest in the stock market at intervals as regular as I can make them to take advantage of dollar cost averaging. Of course, I might just dump the whole amount in at one time depending on how the stock market is doing at that time.

Well, my inkling that adding $5932.2 to my existing amount in SWPPX would compound in interest resulting in much larger gains than starting from scratch this year proved correct. I would have a whopping $19,000+ increase than if I opened a traditional IRA.

I checked growth after 8 years and after 20 years since it isn't clear yet if we'll retire in 8 or 20 years. As I've mentioned previously, if I retire in 20 years, I'll be able to take advantage of special gap medical insurance for my husband and myself.

These numbers don't include any additional investments past this year (2021) since I wasn't sure how many more years I'd qualify to deposit in the Traditional IRA (another reason why putting the money in the Roth might make more sense).

So as another pair of bloggers I admire say, math'ing shit up works every time (Millennial Revolution! You should check out their blog too, you may enjoy it - if you don't subscribe to them already :) ).

UPDATE: Jan 17, 2021, 8:20 PM EST.

Well, this is embarrassing. I went through the scenario above with a good friend and they explained the growth would be the same no matter what I invested in.

Actually, the money in the traditional grows a little more due to the fact that you aren't paying fees if I open a traditional with Schwab.

See the new calculations below:

VehicleCurrent InvestmentAdditional InvestmentGrowth after 8 yearsGrowth after 20 years
Roth IRA (TD)50548.05069611112492
Trad IRA (Schwab)06000826313353
Roth IRA (no additional contributions)44615.8506144099289
Sum of Trad IRA + Roth IRA (no additional)44615.85600069703112642

So, looks like I'll be opening a traditional in 2021! It would also be good to note that it will be more of a hassle if I do traditional then a Roth conversion ladder, but even if I decide not to do a conversion ladder, per the MadFIentist, you will get more money in the long run even if you decide to do the penalty.

Well. Even the best of us can make mistakes. 

I wish you a very pleasant evening,

Into the FIRE