It is hard to believe that 2014 is one-sixth over already. Thankfully, I have already made good on one of my annual resolutions and goals — the biggest of which is getting to bed earlier, getting up earlier, and managing my time more efficiently. The Rescue Time site has helped a lot with the time management. In particular, the daily timer tells me how many hours of productive time I’ve had that day, and it keeps me on track with my daily productivity goal.
This month, I plan to accomplish another one of my goals: Contribute to our 2013 Roth IRAs. The goal is to contribute the maximum amount, $11,000, which would be a stretch for us to accomplish this month. But it’s not impossible. We could do it one of two ways: (1) Sell one or two of our software products, which will boost our income this month anywhere from $3,000 to $15,000. (2) Dump our Emergency Fund into our IRAs. I project that our E Fund will have just shy of $10,000 in it by the end of the month, but it is possible for me to hustle a little bit more and bump it up to $11,000.
You may raise your eyebrows at the prospect of dumping an Emergency Fund into a retirement account, which may seem unwise given that many personal finance experts recommend having an Emergency Fund. However, we are only six weeks away from losing our opportunity to make our 2013 contribution to our Roth IRAs, and if we ever have a true emergency, we can withdraw the principal without penalty. In that sense, our Roth IRAs will be our new Emergency Fund. And it will take a true Emergency (with that capital “E”!) for me to withdraw from it. That, or a home down payment. But that’s a whole ‘nother blog post!
As they say on Marketplace, “Let’s do the numbers”:
March 2014 Financial Picture
Cash: -$1,882. One downside to freelancing is having irregular pay periods. My paychecks for last month’s work haven’t cleared our bank account yet. Otherwise, we would have broken even this month. (Fulfilling Goal #1 for the month!)
Credit Cards: -$1,230. Although I usually ignore this number because we pay it off each month, it does indicate that our spending decreased over the last month. Yay!
Loans: -$610. That’s right, folks: A $1,300 per month payment translates into $610 in principal reduction.
Investments: +$9,327. This is partly due to the market bouncing back after a January slump and us consolidating $4,500 from an errant Roth IRA into the Vanguard Roth IRA, so it can make us more money. I love the VTSAX fund at Vanguard and would put everything in it if I could.
Net Worth: +$9,285. I love an increase in net worth as much as anyone else, but I don’t think I can take credit for this — it’s mostly due to tracking a previously untracked Roth IRA and a bump in the markets. Although I don’t control the markets, I do control where my money is when the market goes up. So, in that sense I can take credit for the increase. Here’s hoping it keeps going up!
Progress on February Goals:
- Make ends meet with my income: SUCCESS! I was able to earn my keep by working a lot more hours for the attorney who offered me a job last week and earning $50 from Amazon — thank you, readers! In fact, I earned a little extra. That little extra will get dumped into a Roth IRA at the end of this month.
- Make one sale in our small business: FAIL! We have been in serious negotiations with one business all month, but the sale hasn’t happened yet. There is a lot of back and forth with closing a deal on our software product.
- Complete my basic will drafting training: FAIL! There is no excuse for this. But, at least with the salaried job, I can take the training during work hours.
- Buy malpractice insurance: N/A. I will probably take the salaried job, so I don’t need independent malpractice insurance.
March Goals:
- Make ends meet with my income. This should be fairly straightforward if I’m on salary. We haven’t worked out the details of the salaried job quite yet, but I anticipate going on salary by the end of the month.
- Finalize the IRA transfers. I started the IRA transfer process in January, but it is taking an unbelievably long time, with multiple sets of paperwork going back and forth. One out of three are done. Hopefully March will be the month when we have all of our retirement ducks in a row.
- File and pay our taxes. You will see a $7,000 drop in our net worth after we empty out our tax savings account. That’s why I have procrastinated on this one.
- Make our 2013 Roth IRA contribution. On April 15th, we will forever lose our opportunity to make our 2013 contributions. Because we can always withdraw the principal if need be, I usually push it until the last minute each year before deciding that, yes, we should dump our savings into our Roth IRAs. It helps to know that we’re not letting go of it for 30 years; that if something does come up, we will have the money to pay for it if we really need to. Then, after making the contribution, the money really feels untouchable and we work to build up our savings account as though the Roth IRA funds aren’t there.
What are your financial goals for March? How did you do on your February financial goals?
Do you need to put the full $11,000 into the IRA? Or could you put in half so you have cash on hand for emergencies (or toward a downpayment?)
Personal finance bloggers will probably slam us for this, but we plan to use our IRA principal for our down payment. So, we’ll still aim for $11k in there and if we find the right house, we’ll withdraw it for the down payment.
I was somewhat slammed by pf bloggers when I mentioned using some of my IRA for a down payment. Maybe not a slam, but a gentle slap…haha. I don’t necessarily see anything wrong with it depending on your situation. I haven’t been maxing out my IRA…and instead put the excess in a “high yield” savings account (high yield is anything close to 1%!!). So instead, why not put it in an IRA? The only problem is that some people might see that as “raiding” your retirement account. But I can mentally separate that money as something I allotted for house savings. Anyways, congrats on the new job. I’ve always been interested in estate planning too. Good luck on developing that side of your practice.
Exactly — if the money is sitting there and I wouldn’t have made the contribution otherwise, I might as well put it to use. If we end up not needing it for a down payment, I’d be pissed if I didn’t put it in the IRA when I had the chance.
So it sounds like you are taking the job? I’m sure that’s full of mixed emotions, but I bet it will be a positive thing. I’d go ahead with the roth. One thing that is really hard this year is actually putting money in the new solo 401k that I set up. Before it just came out of my paycheck, but now that I actually have to send it myself, it’s a bit harder, but I am determined to put as much as we can in this year to minimize taxes.
Yup! I decided to take the job because he is so supportive of me developing my estate planning practice, so if that starts going strong, he would be happy to see me exit with a successful business.
I don’t know where February went, it all happened so fast! I wasn’t able max out my ROTH last year and considered trying to do it before the deadline for 2013, but now that I’m planning a trip to Europe for next month, I’m going to be enjoying some of my retirement now instead 😉
Haha! That’s one way to look at it!
I’d put half of your emergency fund into the Roth. My husband and I love our Roth’s. We’ve been contributing, since they first came out and were just talking this morning about how well they are doing. When my husband retires he can still contribute as long as I have earned income that at least matches our contributions.
I also have to stress keeping money in the emergency fund. My mom who is retired doesn’t have one. Her car died this year and she had to take money out of her annuity to buy a new one. Now of course she owes money on her taxes and is scrambling to come up with that. Never a good situation.
Oh no! You’re right — I’m not sure what we would do if a car broke down to the point where it didn’t make sense to fix it.
I should totally check out Rescue Time website, it sounds so cool! Good job on your net worth increase, it’s always great when the market goes up! Good luck with your March goals and congrats on a job offer!
Thanks!