End Of December and 2008 Financial Status

I had a nice relaxing holiday break, minus the wedding and new years party towards the end, and I hope you all did as well. I suppose now it’s time to get back to the grind of working, tutoring and blogging. In the near future, I will be posting my 2009 goals, which will include both financial and non-financial goals. For now, here’s my standard financial status summary for the end of December, which is also my end of 2008 summary.

Cash

My available cash was the only asset to decrease for December. This is because my three months of 0% interest on my American Express ran out. This means I had to pay for my TV and three months of gas and food. Also, this month had my first mortgage payment. Combining these major payments with only two work pay days (January will consist of three) and not cashing my tutoring paycheck, and my cash assets decreased slightly.

Stock Market

December was the first month with an increase in my stock market assets since August. It is important to remember that I haven’t made any contributions to the stock market so far in 2008, so all of the monthly increases and decreases are due solely to stock prices. I will contribute towards 2008 retirement savings before the tax filing deadline, but that’s more for my upcoming goals post. In the end, it’s a good feeling to see my stock assets increase in value, however, I’m not confident they are going to continue rising.

Over the course of the year, I’ve lost between 29% of my stock assets, I feel very fortunate that I was not heavily invested in the stock market, but I plan on investing soon to take advantage of the coming uptick.

Liabilities

I made my standard car payment this month and my first mortgage payment. It’s rather depressing that only $214.63 of my mortgage payment went towards principal. This makes me really want to make an extra payment every month so that I can build equity more quickly.

Net Worth

My net worth increased ever so slightly in December as a result of an increase in the stock market, which is the exact opposite of the recent trend. I was able to decrease my liabilities by more than the decrease in assets to increase my net worth by 0.2%. Obviously, I’d like to see my net worth increase by more than 0.2% every month, but due to the extreme circumstances I will take what I can get.

Over the course of the year I was able to increase my net worth by 189%!!! I increased my net worth from $30,898.77 at the beginning of 2008 to $89,232.39 at the end of 2008. I’m very happy with my net worth increase, especially since it was all due to hard earned money and a buying real estate with built in value. In the future I am hoping my earnings will continue to boost my net worth, however, I would like to see stock market investments begin to take over as the catalyst for my net worth growth. Here’s to 2009!

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End Of November Financial Status

I hope everybody had a wonderful Thanksgiving vacation. I’m not too happy about having to go back to five day work weeks, but Christmas break is right around the corner. As for my end of November financial status, I have yet to make a mortgage payment so that hasn’t changed much. Also, I had to finally pay for the second half of my bedroom set. Without further ado, here’s my standard financial status summary.

Cash

As I’m sure is the case with everybody else, my cash was the only asset to increase over the past month. I’m pretty happy with the increase as I had a very substantial credit card payment this month as a result of the paying for the second half of my bedroom set. Also, I have yet to receive my November tutoring check. I’m hoping to be paid tomorrow and it has been a very busy tutoring month.

Stock Market

November was another bad month for the stock market. Once again I am fortunate to not hold a large amount of money in the stock market. I hope to be introducing a large sum in the next few months to take advantage of the discounted stock prices. I’m want to make some good money on the rebound.

Liabilities

My first mortgage payment is scheduled for December 15th. For this reason, my condo liability has not decreased. I made my 18th car payment to decrease my total liabilities by a very small 0.1%. I also have a few major purchases on 0% credit cards that will be paid in the next few months, however, I decided not to record them as liabilities as my laziness factor dominated correct accounting.

Net Worth

I am pleased to have once again increased my net worth in November by 1.6%. I am looking forward to reaching the $100,000 milestone in the upcoming months.

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End Of October Financial Status

My financial status update will be a little different this month as I added a major asset and liability during the month of October. For this reason my standard percent change column is not very useful. I decided the best way to compare the changes for the month was to post the October and September numbers side-by-side.

Cash

I decided to combine all of my savings accounts and checking accounts into one category called cash. I did this because over the past month I’ve added two new ING accounts and my money market account is completely drained after my down payment. I plan on opening more accounts in the near future so this is a change that confuses my financial status for the October update, but it will be better in the long run.

Stock Market

The stock market is still dragging a few of my assets down. I was fortunate to have most of my assets in cash due to the down payment on my condo. My Target stock (Schwab) dropped 10.1%, my Roth IRA dropped 13.1% and my mutual fund dropped 11.4%. I have not contributed to retirement accounts so far in 2008, but not because of the poor performance of the stock market. All of my savings have gone towards either my down payment or furnishing my condo. Between now and the income tax deadline for 2008, I will be trying to maximize my retirement contributions. I plan on taking advantage of purchasing stocks at a discount.

Condo

The major change in my financial status is the addition of my condo to the asset section and my mortgage to the liability section. The value of my condo was assessed by my lender prior to my purchase. Fortunately, the valuation was greater than my purchase price. Before I make my first payment on December 1st, I will have to decide if I want to make extra payments every month to pay down the principal. I will be blogging about this in future posts.

Net Worth

For a second straight month, my assets in the stock market took a hit. Due to the built in value of my condo, I was able to increase my net worth by a huge 10.9%. I’m extremely happy with the increases every month in my net worth. These monthly updates motivate me to continue saving and keep me honest.

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The Anatomy of My Credit Score

Two weeks ago Equifax was offering a free credit score for the first 10,000 applicants. Fortunately for me I was able to take advantage of this offer. It was very interesting to see my credit score as I was closing on my condo that same week. Equifax calculated my credit score to be 723 and put me into the “Good” score.

Equifax Scores and Classifications

Equifax scores range from 300 to 850. My score of 723 puts me above 50% of US consumers. Equifax has five categories to classify your credit: bad, not good, good, very good and great. Bad ranges from 300-559, not good ranges from 560-659, good ranges from 660-724, very good ranges from 725-759 and great ranges from 760-850. Looks like I just missed having a very good credit score by two points.

Factors Affecting my Score

There are four categories that Equifax looks at when determining a credit score. These four categories are amount of debt, amount of new credit, payment history and length of credit history. I was rated as good in the amount of debt category, very good in the amount of new credit category, great in the payment history category and not good in the length of credit history.

Factors Hurting my Score

The following factors are hurting my score with the first factor having the greatest negative impact.

• Short Credit History – This factor measures both the age of the longest account and the average age of all accounts. The age of my longest account is 5 years and 11 months. The average age for the longest account of high credit scores is 19 years. The average age of my accounts is 3 years. The average age for high credit scores is between 6 and 12 years. The negative impact of my short credit history will only diminish if I continue to make payments on time.
• Recently Been Looking for Credit – This factor measures how many hard credit pulls were performed on your behave over the past 12 months. Apparently, people who are actively seeking credit are riskier to lenders. I had 2 credit inquiries over the past 12 months. 72% of high credit scores did not have any credit inquiries in the past 12 months.
• No Recent Activity on Revolving Accounts – This factor looks at the activity on revolving credit accounts such as credit cards. People who demonstrate the responsible use of revolving credit are less risky. I don’t really understand this ding on my credit score as I have two open credit cards that I use regularly. I have one closed credit card. I also have a car loan, which I have paid on time for over two years. Either something is wrong on my report or I don’t fully understand the definition of recent activity on revolving accounts.

Factors Helping my Score

The following factors are helping my score with the first factor having the greatest positive impact..

• No Missed Payments on Credit Accounts – This factor is pretty self-explanatory. If you make your payments on time you are less risky. I have 0 missed payments on my account. 93% of high scorers have no missed payments at all. Those who do have missed payments missed the last payment nearly 4 years ago on average.
• Low Balance on Revolving Accounts – This factor evaluates how much of your available credit you use. I have $226 on my revolving accounts, which is interesting because I just recently purchased a new lcd tv and it was definitely more than $226. The average balance for high scorers is $2,300, which seems like a lot.
• Moderate Number of Credit Cards – This factor looks at the total number of open and closed credit cards. I have 3 total accounts on my credit history. The average number of accounts for high scorers is 4 to 5. I disagree that the total number of credit cards should be a factor in determining credit score. Does it really matter how many cards you have as long as you keep the total balance low and pay it off every month? Also, why does it matter how many closed accounts you have?

How Lenders View my Credit Score

According to Equifax, my credit score of 723 leaves me with a risk rate of 5%. The higher the credit score, the lower the risk rate. The risk rate is also defined as a delinquency rate. Equifax defines the delinquency rate is defined as the percentage of borrowers who reach 90 days past due or worse on any credit account over a two year period. The following chart shows how the delinquency rate varies with credit score.

Conclusion

I was very lucky to stumble on a free copy of my credit score. Overall, I am very happy with Equifax’s presentation and explanation of my credit score. I don’t necessarily agree that the activity of my revolving credit accounts has been low and if I hadn’t already received my loan I might question the accuracy of that factor. Also, I completely disagree that closed credit card accounts factor into a credit score. Similarly, if closed credit card accounts factor into a credit score, why don’t paid off loans? I have completely paid off a hefty school loan and it is not reflected in my credit score. In the end, I would recommend getting a copy of your credit score if you are taking out a loan for a large purchase in order to maximize your score.

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End of September Financial Status

It has been a very hectic few days trying to schedule my closing and moving on the same day. Starting this week, everything I thought I had set up to go smoothly has hit a snag. I’ve been running around trying to fax and e-mail verifying documents for my lender, even though I’m borrowing significantly less than the dollar amount I had been pre-approved for. Also, the mover for my bedroom set called and scheduled my delivery for the time period I will be closing. It has been a very hectic week, and I will be glad when I can just relax in my condo. Anyways, I suppose I’ll get right into my end of September financial report.

Cash

As of right now, cash is my most valuable asset. With the economy as it is, my cash is the only reason I’m allowed to take out a mortgage. Without a 20% down payment my loan would not have been approved, despite having already been pre-approved back in December. Also, cash is the only asset that increased my net worth this month. As with the previous end of month financial reports, I’ve been socking away every bit of income I can get my hands on. I was able to increase my cash assets by $4,062.79, which puts me above the threshold for what I have to bring to the table at my condo closing.

Stock Market

The sinking stock market has finally taken a toll on my stock portfolio. I lost a total of $1,732.31 between my IRA, mutual fund and Target stock. I don’t have much of my net worth in the stock market because I have been saving for a down payment. I am fortunate to have most of my assets in cash as the stock market has dropped severely this month. I will try to take advantage of the discounted stock prices once I start investing in retirement accounts for 2008 between now and the income tax due date.

Net Worth

Even though my assets in the stock market took a hit this month, I was able to increase my net worth by 3.7% this month. My strong position in cash has made this possible. I am not trying to time the market and I am not in fear of the stock market, I just kept my assets in a money market fund with an upcoming down payment. I am looking for my net worth to get a huge boost next month, as my condo has a lot of built in value with discounted lights and various credits from the builder.

End of August Financial Status

I hope everybody had a great Labor Day weekend. I always enjoy a good three day weekend. Despite not having any plans for this weekend as late as Thursday prior to the weekend, other than my standard softball game Friday night, I managed to fill up my weekend with movies, boating trips and a birthday party. I had a great weekend and it let me re-charge my brain, although I would have liked to do more reading this weekend. Labor day marked the beginning of September, which means it’s time for my end of August financial report.

CD and MMA

The biggest change in my financial status was the closing of my 3-month CD with Countrywide. My CD matured on August 8th. Since I am using this money for my condo down payment on October 3rd, I decided to put the money in my MMA where I can easily write checks from and still obtain a respectable 2.7% return. The increase in my MMA is almost solely from the CD transfer.

Schwab, Roth IRA, Mutual Fund

All three of my accounts holding equities/funds increased as the market rebounded slightly in August. My Schwab, which containes only Target stock, increased 14.5% as Target made a strong push towards the end of the month. I can only hope that it breaks through the $55 plateau that it oscillated around at the beginning of the year. My IRA and mutual fund accounts only made minimal gains, although I’ll take minimal gains over any kind of loss.

Car Value

I decided that I didn’t want to re-value my car every month. Instead I will do it every quarter or half-year or so. I just don’t know how realistic it is to re-value it every month and I’m kind of lazy.

Net Worth

I was able to increase my net worth by $4,434.54 this month, which is about $1,800 more than last month. Most of this is due to the lack of a rent payment. I’m also not paying for groceries or utilities. Also, my gas usage is down as my commute to work is shorter. My net worth should be slightly higher as I have yet to receive my self-employed payment for the month of August, which will contain part of my July payment as well. As of this post I have enough cash on hand to cover my down payment, closing costs and 3-month assessment slush fund, which is pretty exciting.

End of July Financial Status

Car Value

This is my first end of month report of my financial status. I recently blogged about my financial journey from the end of college to June of 2008. I’ve made a few changes to my reporting methods. I actually looked up the current Kelley blue book value for my car, which was significantly lower than what I had estimated. I didn’t include this major value adjustment as a change from the last month so I didn’t skew my percent change.

Car Loan

I also modified how I’ve been tabulating my car loan liability. Originally I had been taking the value I was paying off each month and subtracting it from the original car loan value. I switched to a method that involves dividing the original loan by 48 for the total number of payments I will be making. I then subtracted this new value for each payment made. This is still not a 100% accurate representation of my liability since I pay more principal with each successive payment and I pay less interest with each successive payment.

Checking Account

My checking account sustained a minor loss, but this is mostly due to my account management methods. Every paycheck from my 9 to 5 is direct deposited into my checking account. I deposit my roommate’s portion of utilities and rent, as well as my self-employed paychecks into the checking account as they are received. I then transfer funds into my MMA leaving $2,000 in my checking account to pay bills. My checking account value at the end of a month can be anywhere between $2,000 to slightly above.

Market Investments

The market continued to lose my money for the month of July. I’m not sweating it too much, but I was planning on using my Target stock (Schwab) as part of my down payment. It doesn’t make sense to sell my stock with the market so low. I’m hoping to be able to scrape together enough to cover my down payment without using my stock.

MMA

My MMA is where the most significant increase occurred. This is as planned because I didn’t make any contributions to a retirement fund, since everything is going towards my down payment. The MMA increase is not as significant as I would like, however, I had some pretty unusual costs this month. I bought a bedroom set for my new place, which cost $2,800 (although I only paid half of it this month). I did get it for half off as it was a floor model at a Bassett that was closing. Additionally, I stood up in a buddy’s wedding this month. I had to rent a tux and hotel room. The bachelor party was right before the wedding and that got a little pricey.

Net Worth

I was only able to increase my net worth by $2,613.32 in July, but I should be able to increase that value over the next two months. School is starting back up and I will be spending more time tutoring, which translates into more money starting in September. Also, I moved home at the end of July until my condo is finished in early October. I will save money by not having rent, utilities or groceries to pay.

The Personal Finance Start-Up Blog Begins

I’m going to start my financial history in June of 2006, the summer I graduated from college. I had just moved home with my parents (rent-free) and was interning as a research engineer until I found a permanent job. The following table shows my financial status as of June 2006. My savings account consisted of money from summer internships during my college years. My checking account was the remainder from my various college jobs and non-financially responsible escapades. The taxable Schwab account consists of Target Stock and came from my Grandma as a high school graduation present. As described on the about page, my parents drilled the idea of paying off credit card balances in full every month. The only liability to my name at this point was my student loan. I didn’t pay off my college loan since the interest rate didn’t kick in until February of 2007.

June 2006 Financial Status

At the end of 2006 I had increased my net worth from $7,015.09 to $22,478.25. My savings account saw a decrease in value as I used part of it for a down payment for a NEW car in July. As soon as I drove off the lot the car lost enough value that I will probably buy my next car as a factory certified pre-owned car. I was able to get 3.9% financing so all is not lost. I took my best guess as to the value of my car at the end of 2006, but I do not have an exact value. I began working for my current employer in August of 2006, which yielded a pretty substantial boost in my income, which can be seen in the checking account boost. In November of 2006 I moved out of my parents house with a high school buddy, which was well worth it despite decreasing my saving ability. Finally I loaned $1,000 to my sister interest free so she could enjoy life while working part time in graduate school.

End of Year 2006 Financial Status

By the end of June 2007 my Net Worth had grown to $38,810.51. A few major changes occurred during the first six months of 2007. I closed my savings account and transferred the remainder into my checking account. The savings account interest rate was only 0.50% APY, which made the savings account pretty pointless. I paid off my student loans from my checking account at the end of February before they started accruing interest. I invested $5,000 in a Target Date Retirement Fund Roth IRA through Vanguard ($4,000 for 2006 and $1,000 for 2007). I invested $5,000 total into the Roth IRA since it was the minimum amount to prevent paying unnecessary fees. Finally, I gained control over a Vanguard US Growth Fund that my Aunt/Godmother had been putting money in throughout my childhood.

June 2007 Financial Status

The following six months again produced some significant changes in assets and a significant investment goal was created. My checking account significantly decreased in value as I transferred most of the money to a CapitalOne money market rewards account. When I opened the MMA, I searched around for high interest rate savings accounts. I decided upon the CapitalOne MMA since it had an APY in the 4s and I earned rewards based on my monthly average account value. These rewards combined with my CapitalOne No Hassle Miles card rewards have already allowed me to travel to Boston for free! I try to keep about $2,000 in my checking account to pay bills.

At the end of July I moved to a cheaper apartment with a one year lease and began searching for condos. I just hated the idea of throwing away hard earned money on rent and I really liked the idea of tax deductions and home equity. Additionally, I HATE moving. In December I signed for a condo that is going to be completed in October of 2008 and started saving every penny I could find and living as frugally as possible. In November I had started tutoring high school students in math and science as a self-employed contractor in anticipation of saving for a condo.

End of Year 2007 Financial Status

The first half of 2008 was a hardcore effort to reach my 20% down payment goal to prevent paying private mortgage insurance. Savings account interest rates dropped around the nation, including my MMA to 2.7% APY. I opened a CD with Countrywide at 4.75% with $20,000. The only other major change in the asset category is my earnest money. I had to put down 5% down as earnest money do lock in my condo. This 5% is applied towards my 20% downpayment, however, they will only put it in an account that earns 0.5% APY, which is ridiculous. How difficult is it to put the earnest money in a FDIC insured CD or MMA?

June 2008 Financial Status

At any rate this first post is a great example for why I’m starting this blog. It has already forced me to go over financial information that I would have previously barely looked at. It’s beneficial to calculate net worth periodically to see how much your savings efforts are really paying off. It’s pretty easy to see that picking up a second job and moving to a cheaper apartment really helped my down payment saving efforts. I’m planning on posting my financial status at the end/beginning of every month to keep myself accountable in my savings goals. I hope you enjoyed reading about the beginnings of my financial career.