As the year draws to a close, The Lady in the Black grades her financial achievements (and failures) over the past 12 months. Spoiler alert: It’s not straight A’s but it ain’t too shabby either.
The Lady’s 2017 Financial Report Card
As I’ve said before, this blog was started as a way for me to document my financial journey (and hopefully inspire others along the way.) Yesterday, as I was sorting some paperwork, it occurred to me that I have accomplished so much this year. And as my fellow blogger friend, Ms Li z from Ms Liz Money Matters, says:
Too often we move to the next goal and forget to celebrate!
In an attempt to both celebrate AND provide a balanced perspective, I’ve included what I feel are objective grades on my biggest financial initiatives this past year.
Automated My Finances
When I first started getting serious about improving my financial situation, my dream was to “not have to worry about paying bills.” By that I meant both having an adequate amount of funds to cover my expenses but also the removal of the actual process of physically paying bills. I hated worrying about checking account balances, bouncing checks, writing checks, paying bills online. I hated it. A lot. It brought stress and worry every day. After years and years of it, I was conditioned to think money was bad.
The best thing I did EVER for myself was to automate my finances. I hesitated for a long time, thinking I’d somehow mess up and create a bigger mess. But finally I just did it. I sat with my bills, mapped out monthly deadlines, amounts, etc. and programmed everything to be on auto pay. In figuring out how to pay my bills, I also figured out how to auto-deposit savings.
Later in the year, I translated my process into what’s called a visual money map. It’s a good exercise to help you figure out where you money is going and how it gets there.
My automated process isn’t perfect but it’s freaking amazing. It’s allowed me to feel more positive about my money. And that positive attitude is the real key to any success I’ve had this past year.
Opened a Private HSA
As a freelance employee, I’m forced to buy my own medical insurance. Yes, it sucks but what sucks worse is having to pay premiums AND deductibles. I discovered there is such a thing as a private HSA. It’s the same dang thing as many employer-sponsored programs offer, I just have to pay for it myself. But that’s cool because it comes with sweet tax advantages.
In January, I started contributing $200 a month into the HSA. I grade myself only at a B- because I probably should have maxed out the account for the highest tax benefits. (I believe the maximum contribution for a family is $6,750 and I end up with $2,400 in contributions.) However, the $200/month was more than adequate in covering my daughter and my medical expenses for the year.
I gotta say, it’s pretty cool knowing that if my kid or I get sick that we don’t have to worry about money. We just worry about getting well.
Purchased Life Insurance
While I do have one small life insurance policy that I’ve had for 30 years, I was woefully underinsured.
In January 2017, I purchased a “whole life paid-up at age 65” policy. My financial planner suggested this as I was declined a disability insurance policy. Initially, I balked at the pricey monthly premium and was tempted to cancel it many times in favor of using the funds elsewhere.
However, this is truly a long-term play. While the $148,000 of life insurance is comforting in case The Lady kicks the bucket early, it’s the dividends and cash surrender value that are truly attractive. Extrapolating out to 20 years, they guarantee a surrender value of $85,500 and dividends COULD reach as much as $25,000. This is pretty groovy seeing that I have so very little saved for retirement.
Paid Off Foreclosure Debt
Late summer 2016, I negotiated a settlement with Wells Fargo to eliminate $30,000 of foreclosure debt that had been written off. Bad debt doesn’t just evaporate (well, actually it does after 7 years) and it was sitting there like a crushing weight of shame on my credit report.
I’ve got red in my ledger. Now I need to wipe it out.
I knew I’d never truly be able to have a solid credit score until I did something about it. The “something” I decided to do was settle and pay it off as aggressively as I could. My monthly payment was steep and I honestly don’t know how I did it for 12 months. But I did and I’m super proud that I paid that debt.
As a point of fact, I do have another $5,000 charge off debt left to tackle but that smaller amount doesn’t warrant the same level of concern that the $30,000 did.
Applied for Auto Refinance
Due to the fact my credit score was crap when I purchased my Prius in June 2016, my interest rate is crazy stupid. At first, I didn’t think much about it. I could afford the monthly payment and was thrilled at having a car (after living nearly a year without one.) However, that interest rate began to bug me more and more.
My financial planner told me to wait until my credit score got to 640 and then apply for a refinance. And so I did. Only, the reaction wasn’t the “of course, Lady let us help you out unconditionally” I was hoping for. The credit union wanted me to clean up the remainder of my charge off debt. Ugh.
I’m glad I had the gumption to apply. I’m ashamed to admit I haven’t done anything else to pursue this re-finance. I could have put a plan to pay off that charge off debt. I could have applied elsewhere. Instead, I took the lazy way out and am throwing a bit more a month towards payments, hoping to pay it off sooner and save interest that way.
What can I say? I’m slacking on this one and I know it.
Opened a Retirement Account
I was reluctant to start an retirement account for fear that the IRS would catch wind of it and get pissed since I owe them for back taxes. But I couldn’t let fear hold me back any longer. In truth, it was (and still is) very embarrassing to be 47 and have only $5,000 set aside for retirement.
So, based on my financial planner’s advice, I opened a backdoor ROTH IRA and deposited $950 of “found” money. I also initiated a recurring auto-deposit contribution of $200/month. This all sounds great until I tell you that I didn’t do any of this until late November.
While I’m glad I made the move, and is true with most things, I regret not doing it sooner. I also realize $200/month won’t max me out for next year.
I need to get serious about retirement plans and STAT. I gotta bring this grade up.
Speaking of “not doing it sooner”, I wish I had had the guts to start investing younger.
However, I need to cut myself a break. First, I was never interested as I was treading in survival mode for so long. Next, I didn’t really understand what investing was. I thought it was all day trading and “buy low, sell high.” Lastly, I didn’t have access to encouragement and advice from the personal finance community.
I placed my first investment (ETFs) in mid-June through the STASH app and caught the investing bug immediately. (If you aren’t sure what an ETF is or why it kicks ass, check this article by my financial mentor, Feminist Financier.) By mid-August, I had opened a brokerage account and purchased my first individual stocks. Since then, I have steadily increased my recurring contributions into STASH (went from $25/week to $50/week). My portfolio now has 10 individual company stocks and 17 ETFs.
As I hadn’t planned on investing, I didn’t have a goal. However, my current portfolio value is at $4,178. I think that’s pretty outstanding.
Since I knew diddly-squat about investing, I didn’t even know what a dividend was.
And then I read a few articles. Namely, this one by my tall friend, Tall Investing, really helped me understand what was what. Admittedly, my initial dividends didn’t total much, I knew that I should probably track them. And, I’m so glad I did. Not only is it fun, it’s another visual and positive reinforcement of my decision to invest.
Again, I had no goals in this area but I’m pretty stoked to report a cumulative divided total for 2017 of $25.58.
Remember, that’s $25 in free money. And not only that, I elected to re-invest any dividends via a DRIP program. That means that that $25 went to purchase more investments. I didn’t have to do anything. It’s like my stocks are buying themselves. Dividends are awesome.
Underestimated Impact of Fees on Investing Returns
So, $6.95 doesn’t seem like much money. And it’s not. However, like anything money-related, lots of little can add up to a lot.
During my initial investing “enthusiasm”, I made some pretty dumb decisions. The worst, I believe, was not really understanding the impact of that $6.95 commission fee on my potential return. For example, buying 1 share of an $11 stock with a $6.95 fee was pretty stupid. Even if the market stays as strong as it has been, it would take over 3 years to make that fee back. Dumb, dumb, dumb.
I should have done my homework a bit more. As a result of these noob investing mistakes, my portfolio’s unrealized adjusted gain percentage is in the negative; -1.42%. That means that although many of my investments have made money, they still haven’t made enough to cover the cost of the commission/trading fees.
I chalk this math bumbling up to a lesson learned. I remind myself that making some mistakes early on is inevitable.
Plus, with only 6 months under my belt, I can’t really assume a huge return anyway. I’m in it for the long haul. I do now tend toward no-fee ETFs or, if I feel strongly about a commission purchase, I try to offset the impact of the fee by buying more shares.
Adjusted Past Year’s Tax Return
Perhaps one of the most financially smart things I did in 2017 was to re-file my federal and state tax returns for 2011. I owed a HUGE amount for that year due to the fact that I never filed. Oh, they will file for you but only based on what they know. There were many excuses for my not filing, primarily a messy divorce and the fact I lost the supporting forms and documentation. Early in January 2017 (when sorting through old file boxes of paperwork), I found the missing paperwork and rushed off to my tax pro to file.
Finding that paperwork and filing that return knocked about $22,000 off my tax debt.
I also had other assorted tax issues and took a hard look at them in July of this past year. I came up with a plan and worked the plan. And it worked. I cleaned up a good chunk of my tax mess…although not all of it.
Improved Credit Score
In order to improve my credit score, I needed to increase my available credit limit.
You see I’ve only ever had a secured credit card with a $200 limit since swearing credit cards off as the devil. Once the secured card took off the shackles, converted it to an unsecured account, and raised my limit to $1,200, I was encouraged enough to open 2 additional accounts; a Shell fuel card and a Toys R’ Us credit card. Since they increase my available credit limit but don’t tempt me to use them much, they are a good rebuilding credit strategy for me.
Other improvements to my credit score can be credited to paying off a significant amount of charge off debt and having another big chunk of charge-off debt roll off due to the 7-year expiration limit.
My current score of 682 is still short of my goal of 750.
Paid Estimated Tax Payments For Tax Year 2017
Once I decided to grow a spine and deal with my tax situation head on, I knew I had to stop the vicious cycle I’d gotten myself into. I also knew I was essentially breaking the law by not paying estimated taxes. (I’m a freelancer.) So, I started saving toward estimated taxes for 2017.
Since I only came to this revelation/courage mid-year, I knew there would be no way to pay the full $15,000 that was estimated. However, I did surprise myself a bit that I did pay 75% of that figure by year’s end. I’m hoping by April’s tax filing deadline, I’ll have paid the full $15,000.
If God is good, my tax bill will be covered by this amount. If God is more in a “you don’t get off that easy, missy” mood, at least I’ll be ahead $15,000.
Again, the lesson learned is don’t wait. Tackle your financial weaknesses head on and save aggressively. My Achilles heel is my tax mess. If I can make it there, I can make it anywhere!
In 2016, I did a great job of saving in advance of a summer vacation. It was an awesome and empowering feeling to not go into debt for a vacation. For 2017, I did manage two week-long vacations and one weekend getaway without incurring debt. However, I can’t say it’s because I intentionally saved for them. In fact, I wasn’t very diligent on this point this year.
I felt a bit of mom guilt in that I didn’t even plan a mini-getaway for my daughter for winter break.
Next year, I want to take a 2-week vacation, complete with rental car and rental property. Remember, for me, it’s not just covering the cost of vacation expense and fun money but also the loss of income for the time spent not working. If you get paid vacation time, cherish it. That benefit is a sweet-ass perk that shouldn’t be taken for granted.
I can and will do better.
Opened College Fund
My kid is 9 and before the beginning of this year, I hadn’t saved a penny toward her college education. Beginning in January, I designated a Capital 360 savings account for her college fund and auto-deposited $120/month.
Then, at year’s end, not 100% confident in what I should do with those funds, I transferred them in an Ally high-yield 5-year certificate of deposit.
I’m glad I saved something aside for her. I’m really glad I locked it away so I couldn’t touch it. (I was afraid I might get crazy and plow it into the stock market.) I am sorry though that I haven’t made further strides in educating myself on the various options for these funds. I know there are plenty. However, I do feel I have sometime to research what’s right for me.
Missed Tax Filing Deadline
With my ongoing tax mess, you’d think I’d prioritize filing my taxes on time. And I did. I was all set to file 1 day before the deadline until I was told the preparation fee I owed. It was unexpected and expensive. I was scheduled to leave on vacation that same day and couldn’t afford to pay the fee to file. In short, I f’d up big time.
I did manage to file an extension but extensions only apply to the filing of paperwork, not the payment. So yet again, I’m dinged with late payment fees and interest. (I did manage to roll the balance due into my current installment agreement and uped my monthly installment payment by $100 to help speed the pay off process.)
All in all, I HAVE to get better at this tax stuff. I know there’s more to my failures in this area that logistics. There’s something emotional going on here that I obviously need to clean up. If I didn’t know myself better, I’d think it was self-sabotage. But, nawwwww. No one does that, right?
Improved Net Worth
Starting in late August, I standardized how I track my net worth. While this is just one measurement to track your financial status, I’ll admit it might be my favorite. In the past, I was myopically focused on reducing my debt. That sounds good but, truthfully, it’s not exactly emotionally rewarding. By tracking both my liabilities AND my assets, I was able to see a more balanced perspective on my personal finances.
In fact, I was SHOCKED to see that my assets were nearing $40,000. For a woman that had nearly nothing less than 2 years ago, that’s pretty impressive. Now, I’m going to be pushing HARD to get to positive net worth in 2018.
Some of you reading this might believe this is all possible in one year but I assure you it is. However, I will admit to 3 advantages I have had over the past year. And two of which you can have as well…and at anytime.
First, I do have a financial planner. We first contacted years ago and I felt I wasn’t in a financial stage to benefit from her services. However, once I finally admitted that I needed professional help and my original thought process was backassward, I engaged her about my life goals. Working with her has shown me two very important things; one, it’s ok not to know everything yourself and, two, your financial planner won’t fix anything you can’t fix yourself. While I’m grateful for her advice and access to financial products (life insurances, IRAs, etc.) it is MY WORK that has lead to my achievements. You can get a financial planner’s help, too.
Second, I have a high-paying gig. I’m extremely lucky to have happened upon a well-paying, recurring freelance gig. As a senior writer in a niche specialty in southern California, my hourly wage is generous. I understand very well that having a heavy and relatively consistent influx of cash has allowed such rapid financial improvement. Not everyone can claim such a benefit. This gig won’t make me “rich” but it’s helping me toward my goals. If you can make more, do it.
Third, I have the benefit of being part of the personal finance blogging community. Since joining Twitter in May of this year, I’ve been exposed to more financial lessons in 7 months than I have in my entire life combined. It’s a bit overwhelming at times but anyone can access this wealth of information. I’d suggest visiting Rockstar Finance, a personal finance blogger’s home away from home. Use the directory to find a blogger whose story and voice resonates with you and subscribe to their site so you don’t miss a thing.
Within the span of one calendar year, The Lady in the Black has managed to do more for her financial attitude and outlook than she thought possible. Her report card is pretty impressive but not without it’s flaws and failures. Any effort to improve one’s personal finances is inherently fraught with challenges. And that’s OK. In fact, that’s great.
Because what is life without obstacles? Smooth sailing? Not for me, thank you. I’m more of a powerboat kinda gal.
Happy New Year to all my friends and followers. Take a moment to celebrate your personal successes this past year. And toast to a new start, a new year, and another chance to kick ass.