Money Progress

I’ve already started working on my 2009 tax return.  I’m pretty sure I will get a sizable refund this year so I am anxious to get it done.  Unfortunately I can’t make too much progress yet since I am still waiting on most of my tax forms.

As the forms do come in, I have been adding them to my return.  Since I used TaxAct for 2008, it was natural for me to check them out again to use this year.  When I went to their site I thought I would go ahead and review my 2008 return to refresh my memory about all the data I had to enter last year.  I was a little disappointed to find that I could no longer access my 2008 tax return on the website.  Instead I found out that I would have to pay a $12.95 fee to do so.

Looking back at some old emails, it turns out that they did warn me this would happen.  They even offered me a discounted rate of $7.95 for the data archive service.   They also told me I should print the return for my records.  Luckily I did save a PDF copy of my return, so I do have it, but it just isn’t as easy to review as their online system.

In the end, though of course I would like to be able to view my data for free, it seems fair what TaxAct is doing, especially given ample warning and a previous discounted offer.  I guess when I first saw this however I had forgotten all about this issue and I would have been out some money I didn’t plan on if I hadn’t saved the return myself.  When companies like Google will save 7 gigabytes of data for free, I kind-of expected my tax return to be saved for free since it is probably only a few kilobytes of data.  You might say that Google pays for it via advertising and data mining, but it appears that TaxAct will also share “aggregated statistical data” with other parties, and I’m sure that provides some value for them.  So while they are performing a free service for me, they have my data to share with others and word of mouth advertising from me too!

After looking at the other major options for filing a tax return online such as TurboTax, H&R Block At Home, and TaxSlayer, it still seems like TaxAct is the best option for me.  It is the only one who offers a free federal return that includes all the tax forms in a very well done package.  Once again since I am in Texas I have no state return to file, but they offer a good rate for that too in comparison with others.

And now back to the original point of this post.  Make sure to save your tax return in some form that you know you can always access after it is done!  Print it out or save it on your computer and back it up.  I am normally firmly in the camp of e-statements and paperless, online everything.  However this example of my data no longer being freely available means I need to be sure to rely on my own records rather than online sources.  This includes financial account records as well!  This post about the vanishing of a $60k Roth IRA at Vanguard scares me just a bit!  It looks like the situation will be resolved and the account will be recovered but it is taking quite a while.  It is certainly in my near future plans to make sure I have some recent statements and account numbers for all of my larger accounts.

It has been a while since I have spent enough time working with my finances to write here about it.  The great thing though is that tools I’ve set up have automatically been keeping track of things for me.  I’ve mentioned before that I use Yodlee MoneyCenter to track my net worth and it is still doing so very nicely.

In my previous post about how to feel good about saving money I posted a screenshot from Yodlee with my net worth chart.  I’m doing so again here so that I can both have a personal record and to show you that while it is useful it does have limitations.  Take a look at the chart in the previously mentioned post and then look at the one here.  At a glance, they look surprisingly similar!  If you don’t look at the numbers or dates, they are not very different at all.

Now when you do look at the scales you can see that I have about nine months of new data in this chart and that my net worth has about doubled in that time period.  Yodlee has faithfully kept track of this for me by automatically updating the balances and transactions in all of my accounts over this time period.  The problem is that I’m stuck comparing charts like these two to try and compare my overall financial progress.  I can not view more than twelve months of data at a time, nor can I view data that is older than last year.

I said this chart was how I became interested in tracking my financial progress, and it is also why I’ve become interested in improving the process because of its limitations.  I obviously need to make my own charts that will show me the complete picture for all of the data that I have.

Since my last post and this one, the similar online financial tool Mint has also added a new net worth chart.  It looks extremely similar to Yodlee but it is a bit fancier.  They allow you to select more flexible time periods than Yodlee, which addresses one issue.  However you may notice that the Mint chart below has different data than my Yodlee charts.  This is because I have not had all my accounts on Mint as long as I have had them on Yodlee.

So while both Yodlee and Mint are very helpful tools, I think automatic solutions like this will always have some limitations.  It is clear that I’m going to need to spend time organizing my financial data so that I can create my own charts that will give me a clearer picture of my financial progress.  Jonathan over at My Money Blog has created his own charts and he accomplishes this very nicely.  It is one of my goals to do the same and I will share my results here so that hopefully I can help others in this process as well.

This post has been featured in the 85th edition of the Money Hacks carnival over at Dough Roller.  Go check it out!

I’ve been included in the Carnival of Pecuniary Delights! One of the unique features of this carnival is that it allows older posts to be included, where most carnivals require recent ones. This is a good thing, especially for blogs like this one which hasn’t been updated in a while

Everyone knows that saving money tends to be a bit less glamorous than spending it.  When you spend money, you know what you’re getting.  There is a certainty to it and a concrete object or service that you receive in return.  What do you get for saving money? Well, you get to keep what you already had!  You keep a few extra green pieces of paper in your pocket or you get to watch a black and white number that represents your savings account increase slowly over time.

Doesn’t that sound exciting???!

I didn’t think so.

Ok so how can I feel good about saving money instead of spending it, you might ask.  Maybe you’re going to tell me that I should have a goal that I am saving up for.  I should save up money for a few months to buy that computer I’m wanting instead of just putting it on my credit card today.

Well, that is a good step, and sound advice, but I don’t think it is enough.  All you are doing in that case is saving money now just to spend shortly thereafter.  Sure, the purpose of money is to trade it for useful things, but holding on to it for a longer period of time has some pretty great rewards.  The question is, how can we try and motivate ourselves to save for this payoff that is far in the future?

I think one answer to the question is this, monitor your progress.  It is a simple concept, but I think a very powerful one.  If you do not keep track of your progress, you can start to question the purpose of saving.  If you log into your bank account online and just see a few numbers that represent your money, it doesn’t have much meaning.  You probably don’t care all that much when this number goes up or down.  If you don’t really keep track of all your money, you don’t know if you are making good decisions or bad ones.

This chart is how I became interested in tracking my financial progress.  I hardly knew what ”net worth” was, but I stumbled upon it as I was using Yodlee MoneyCenter.  It was tracking the total balance of all my bank, investment, and credit accounts for me over time.  Since then I now check it all the time.  I probably look at it too much, but I do think it is a very good tool for monitoring your finances.  This particular chart is far from perfect, and it has some inaccuracies, but it clearly let me know how I was doing.

It feels really good to see that line go up.  I know if I save more money each month, I will do even better.  I can see when I spend too much money and do not make much progress.  If I never charted my finances, I don’t think I would care nearly as much about them and my savings would suffer as a result.  I would spend money without knowing how it impacts my total financial position.

Tracking your net worth is the first step, but I think there are even better ways to track your financial progress.  For some financial situations it wouldn’t make sense to track your net worth, but it would be beneficial to track your spending in a similar fashion.  Learning about these methods and even creating new ones will be a central theme on Money Progress.  If you are as interested in tracking your finances and making progress as I am, feel free to subscribe to my blog here or in the top right of the page to get updates when I post more.

Update!

This post was included in the 169th Festival of Frugality at Remodeling This Life!  Go check it out!

I haven’t mentioned this yet, but I am working two jobs at the moment.  I have my standard full time position and I also recently started doing some work on the side for hourly pay.  Unfortunately my full time job that is supposed to be just forty hours a week has been the one consuming my free time recently, to the neglect of both my second job and the other things I would like to do with my time (such as writing here.)

This has gotten me thinking again about the “cost” of working for income.  The balance between making money and the time it takes to do so is one of the classic battles in modern life.  Growing up I’ve always thought that I valued free time over money.  One of my goals was to be able to get a well paying job that wasn’t too demanding on me and that allowed me to have a lot of time left over for myself.  I thought I only desired a certain amount of money to be happy and that my real happiness would come from spending time doing the things I liked rather than working.

I’m not sure if my viewpoint has changed or not since I have started working.  By starting the second job I am certainly sacrificing more of my time for money.  At the same time, my average hourly pay actually increases the more I work the second job since it pays more per hour (not counting benefits.)  One caveat is that I have not spent too much time examining the tax implications of the increased income, which is something that I need to do.  As my income increases, a higher overall percentage of it will be taxed, which may actually lower my average hourly pay (especially considering I have to pay self employment taxes on my new income.)

Money isn’t the only reason that I decided to pick up the second job.  It is in a field that I’m very interested in at the moment and it also puts me one step closer to having a more independent income.  Another consideration is job security.  The management at my primary company is not very open and I really have no good way to judge how safe my full time job really is.  It could be just fine and I could be here for many years, but I also wouldn’t be surprised if they decided to let me go tomorrow.  Having a second income to fall back on makes me feel much better when I see news about layoffs every day.

This post is meandering off course but I am going to continue and see where it leads me.  I just mentioned that job security is something I consider worth sacrificing some of my time for.  “Job security” is actually very nebulous though and what it really means is having an income stream, or money that comes in every month for me to live on.  The reason this is important is because without this income stream, I could only live for a limited amount of time before I would run out of money.  I’ve been saving my money in an effort to extend this amount of time and right now I think I could live for at least a year without any major changes or dipping into retirement funds.

Most people’s goal is to eventually extend that period of time that they could live without a job until the day they die, a.k.a. retirement.  What this means is that I am sacrificing my free time now in an effort to create more free time in the future.  This may seem like common sense and nothing new, but this is something that we should probably all spend a bit of time thinking about rather than just doing as others do.  Instead working more now to save for retirement, perhaps I should be balanced and enjoy more free time now.

Anyways, I will stop rambling on and attempt to summarize.  It seems like what I really need to do is to come up with some solid financial goals that I want to work towards.  I need to really think about why I trade my time for money and what I want to get out of it.  One of my goals will probably be to better combine the time I spend working with the time I spend doing the things I enjoy.  If these are one and the same then that is a huge problem solved!  This post offers more questions than answers but I will make it a point to come back and try to answer these questions for myself.

Update!

This post has been featured in the 196th Carnival of Personal Finance at Green Panda Treehouse!  New visitors may be interested in reading my recent post on how to feel good about saving money.  It highlights one of the main themes of this site which is tracking your financial progress.  If you are interested in further updates, please subscribe here!

I’ve been included in my very first blog carnival!  I really appreciate the inclusion and would like to thank FMF over at Free Money Finance for his hard work.  Here is a link to the Carnival!

If you found this site from the carnival it’s great to have you here!  You might notice that there isn’t much to read yet, but feel free to subscribe on the right so you’ll know when I add more!

Last year I used TurboTax Online to do my taxes.  They have a free edition that works well if you have a simple tax return.  I used them out of habit from helping my mother who uses the boxed TurboTax edition every year.  I was surprised that it was just as easy to use and as graphically friendly as what I was used to with the boxed copy.

This year my return is a bit more complex.  As I mentioned in my last post, I’ve had some losses in the stock market this year, some of which were in non-retirement accounts.  This means I get to claim short term capital gains losses!  Such a claim requires filling out a Schedule D form, which the TurboTax free edition doesn’t support.

As I was looking around for a fully functional free alternative I found TaxACT.  They have a free version that you can use online just like TurboTax, but that supports all the tax forms rather than a limited subset.  You have to put up with quite a few prompts to update to one of their paid versions but they are easy enough to skip by.  Overall the quality seems very similar to TurboTax.

I actually started my return with them a month or two ago but I couldn’t complete it as I had to wait for some straggling tax documents to come in the mail.  I logged back in last night to finish and ended up filing my return.  The whole process probably took me about two hours (including the time I spent a few months ago.)  Most of that time was just me tracking down my tax documents from various banks and investments.

As a result of filing I’ve now got an email in my inbox that says to expect my tax refund to be deposited into my account within 2-3 weeks!  The funny thing is that the money the government will be sending me isn’t really a tax refund, it’s my 2008 economic stimulus payment.  They mailed the checks based on 2007 returns, but I did not qualify then.  Since I do qualify based on my 2008 return, I now get the money.  Without it, I would have actually owed taxes since I try to keep my paycheck withholdings to a minimum so that I’m not overpaying taxes during the year.

There are probably other good alternatives out there besides TaxACT, but I felt like posting because it was a very painless and free process!  If you know of other free options that have full functionality and are easy to use, let me know!

You may have noticed that I didn’t mention anything about state income taxes.  This is because I live in the great state of Texas!  If you live in an inferior state (just kidding… you know us proud Texans) then you might have to do some more research on whether or not TaxACT’s state offerings are a good deal.  It looks like the cheapest you can get away with on their site is $14.

And now for one last snippet.  Did you know that only seven states don’t have an income tax?  I was very surprised when I looked it up.  I would have thought it was split more evenly.  I probably wouldn’t be so surprised if I grew up in a state with income tax, however.

The recent downturn in the economy has caused many people to question their investments, including myself.  Here is a short summary of my background.  I graduated from university with a bachelor’s degree just over a year ago.  Since then, I have been in the “working world” getting paid a salary for my work week, just like many others.  Thanks to graduating with no debt and keeping my living expenses low, I was able to start investing some money within just a few months of working full-time.  In hindsight I wouldn’t have started investing so early, but that is what I did.

I started a 401k and also fully funded a Roth IRA for 2007 since I had enough income as an intern for that year.  By September I also fully funded my Roth IRA for 2008.  All in all, I had invested $12,000+ in a fairly short amount of time.  Most of this money was in stocks, as is suggested for someone my age who is investing for retirement.  I also “diversified” by investing $3,000 in Vanguard’s Total International Stock Index in a non-retirement account.

We all know what happened next, the stock market dropped severely.  Here are a few pictures to illustrate.  The first is from Yodlee MoneyCenter and the second from Vanguard.

The large jump in the Roth IRA just before the crash is a 401k rollover from changing jobs and a transfer from my non-retirement account.

On October 10th I decided I didn’t want to risk losing more than I already had and I transferred 90% of my Roth IRA from the Vanguard Target Retirement 2050 fund to their money market fund.  Since then I have added to the risk by adding some bonds to the mix.

This type of investment change is exactly what most experts and advisers would say not to do.  I just bought high and sold low!  Well, it was at this point that I decided my cash savings was not sufficient enough to have this much money invested in stocks.  One of the reasons I was so aggressive in contributing to the Roth IRA is because I knew I could always withdraw the contributions tax-free if I had an emergency and really needed the money.

Since the crash, the only money I’ve invested in stocks has been in my 401k.  You might notice that the curve on the purple line that represents this above is getting a bit flatter.  That is because I’ve been steadily lowering my contribution percentage to the 401k.  I have decided that I would much rather have cash in savings rather than money invested in anything with a large downside risk at the moment.

The reason for my new found desire for a large cash savings is two fold.  First, I think that an emergency fund with 12 months of living expenses is probably not a bad idea.  With unemployment climbing it seems fairly reasonable to have a fund of this size rather than the more commonly suggested 3 months or 6 months.  My other justification for hoarding cash is actually representative of my new investment strategy.

This new investment strategy is the thought that perhaps I should be investing in myself instead of others. I’ll expand on this more in future posts, but it is a thought that has been guiding many of my recent decisions.  The traditional thinking might be that putting away money early for my retirement in stocks and bonds is investing in myself and my future.  However, that doesn’t ring entirely true.  I am investing for my future in this way, but I am actually investing my money in hopes that others will make financial progress and increase their value.  In that sense, I am not investing in myself.

I have not decided to do anything radical, but this thought will shape my investments in the future.  I plan on continuing traditional investments in stocks and bonds once I decide I have enough of an emergency fund, but probably in a reduced capacity.  Therefore on this site I will write some about these traditional investment methods, but I am also very interested in exploring alternatives.  Right now the main alternative I am considering is saving money to invest in a business of my own, rather than investing in other people’s businesses.

Feel free to post any thoughts in a comment below!

I spend so much time reading other finance blogs that I figured I might as well start my own.  I don’t have any grand plan yet, just going to see what comes to mind to write about.  One thing I intend on doing is to track my net worth in great detail to show the progress of my financial life, hence the name of the blog!

I may get started with some random entries on whatever comes to mind or responses to other blogs that inspire me to write.