Category — Net Worth

MoneyMonk left a comment on my latest Monthly Net worth Statement post asking how I have debt with a six-figure salary. Coincidentally, MSN just posted a nice piece on a couple who just gets by with an annual salary of $400,000 (tip: don’t have kids). It’s the same with anyone who has debt in any income bracket. We have (or had in my case) more expenses than income and either voluntarily or not, we had to compensate with credit cards or loans.

I didn’t always have a six-figure income. It’s only been a couple of years. In the 10 years prior, my average income was $47,000 or so. This takes into account three periods of unemployment in those 10 years, so my net worth statement back then looked really sad. To survive and keep my modest house, I did have to rely heavily on credit cards and a home equity loan. I amassed the bulk of  my credit card debt during this period. While my income is much higher now, my expenses have not remained the same level.

I work on Wall Street which is two hours away from my house depending on traffic. With the amount of hours I work (60-83 hours a week), I need to stay near the city or risk driving off the road snoozing during my 2 hour commute home. So I rent a small 12′ x 10′ room in New Jersey during the week. So along with my mortgage payment every month, my living expenses (excluding utilities) are now more than 43% of my net monthly income. I did have someone renting out half my home, but he moved out last month after being unemployed for 3 months. There went 15% of my monthly net income out the door. I don’t feel like selling my house in the current environment and losing the equity (excluding my original down payment) I have left. All other expenses have been cut down to the bone. I even cancelled Comcast cable completely on Friday.

FreeMoneyFinance suggests that we (those only getting by with large incomes) move to a lower cost-of-living city. Uh, I live in a small farming town on the border of a suburban area of Philadelphia. Any lower and I’d live in Valley Forge National Park among the deer and foxes. He suggests finding a job in the lower cost-of-living area with a 50% reduction in pay. If I could find a job here, it would have a starting salary of about $45,000 (even with over 13 years experience). That amounts to a 64% reduction in pay, but I would save some money from not needing to rent a room during the week. From my earlier statement, the job market here is not stable and very limited, so unemployment would have to be factored into the $45,000, not to mention it would be mathematically impossible to contribute to a 401(k) plan given my expenses and aggressively paying off my debt.

Accepting the offer for my Wall Street job was a no-brainer. I’m sacrificing my happiness and probably my short-term health, but it is the best chance I have to attack my debt load in the timeline I set. Sure, if I had a six-figure income nearby my low cost-of-living area home, I’d be clicking my heels while whistling Dixie, but I’m afraid even if the economy recovers, this won’t be likely. So I hope I answered your question MoneyMonk.

The shortest month of 2009 has been the sweetest. Most of the new cash this month was due to the tax refund of over $5,200 and the final installment of the retention bonus. There was a huge increase the amount of sales through my eBay store, but it’s not the sales number that counts, but the actual profit after all expenses. Eh, not so much, but I’ll take it. My consulting business has accounts receivable, which I did not include in my net worth this month. Hopefully, the check will get here for next month’s tally. Last, but not least, are my Amazon payments ($1.09), winnings from contests ($5), and my gambling winnings ($185). A big decrease in income came from my tenant moving out, but I am saving on some utilities and maintenance costs. I’m still hoping for our regular annual bonus from my Wall Street job, which is usually paid out in March. Fingers crossed!

My credit card debt could have been lowered more, but I decided to keep my emergency fund at $5,000. Kelley Blue Book keeps changing the resale value of my car, or I was missing one of the features in my vehicle when I ran the report the last time. That value increased a little. My Zillow home value is different than my Domania home value, but with the last sale of a comparable home in my development being closer to the Zillow home value, I’ll use that number from now on. That accounts for the increase in my home value, not any home improvements.

Everything seems to be on the right track. I hope to have more eBay sales as Spring arrives, as well as the opportunity for more inventory purchases at lower prices due to the economy. My mastermind group is deciding on which of the two ideas to invest in/work on. Hopefully, the income stream from that will trickle in soon. May March bring you good fortune!

Not a bad start to 2009. I increased my income this month with some side work and a retention bonus from my full time job. I used that to pay off more than the minimum payments for my 6 credit cards. My car did depreciate a tiny bit, but I do like my NetWorthIQ details – an increase of 103% in net worth. That’s probably not sustainable, but I’ll take it as long as I can get it.

I did stop contributing to my 401(k) and IRA after I received my end of year company match distribution. I know I am missing out on my company match, but from the way things are looking, I don’t think we’ll make it until the distribution to my account in March. Besides, the equity market won’t see a bull market until the end of 2010, so I’d be parking the 401(k) in a CD any way. I really want to attack my credit card debt, so I want every penny in my arsenal. Literally, I have my next full coin jar to cash in with Coinstar sitting in the car.

I suggest you start your own NetWorthIQ account. It takes me just 30 minutes a month to keep track of my finances and I have a full-time job, 2 side businesses to run, rental property, and this blog. I also use Flexo’s method of net worth tracking. Check out his monthly statements here.

I just signed up with NetWorthIQ and set up my public profile. Pretty sad, eh. Surprisingly, I’m not upside down on my house or my car. My home value has fallen about 7% from the high ‘comps’ in my development. That’s the least of my problems. The key figure is the $52,624 in credit card debt. I racked up at least $20,000 worth since I got my Wall Street job. I was living it up like my co-workers when times were good. Well, times are bad now…really bad. I lost my way, but I will find my way out of the abyss. Our firm laid off 40% of the staff in December, so I may need to change my blog title to ‘Broke Ex-Wall Streeter’ in the near future, but for now I’m full steam ahead in debt attack mode. I will keep you updated on my net worth on a month-end basis.

Get your own free NetWorthIQ account here