Thursday, March 30, 2006

How we plan to increase our networth by $86,000 in 2006

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I just went through and updated my numbers and had to lower my estimate based on new information. Specifically, I'll need to fund the insurance premiums for the term policies that will replace the variable policies upfront (right now). This will accelerate an $8,000 expense through my cash flow, unfortunately. However, over the next 2-3 years I expect to recover the expense from the lower premiums and improved investment performance (due to significantly lower expenses).

Based on comments to my last post, I think it would be helpful if I explained how we intend to increase our networth by $100k n 2006.

These plans are a bit aggressive, but not more aggressive than we had in the past. The 6.5% for investment returns seems to be inline with projections I've read year to date. The 4.5% interest is what I'm currently receiving.

I will be restructuring my operating accounts in the hopes of boosting their interest rates from 0.x% to closer to 2%. We'll see if I can make it happen.

Three important factors that can make significant changes:
  1. We may have to pay for an expensive health issue as mentioned yesterday. This could cost us $15,000 - $45,000.
  2. I plan on changing jobs which should increase our savings rate (provided I can handle the obligations from #1 above).
  3. No suprises with the new house (hahaha).

Into Cash Accounts $12,000
Debt reduction $24,400
College savings $10,250
Traditional IRAs $16,000 (contributions made this year for 2005 and 2006)
401ks $30,000
total $92,650

Investment Results

proj june value $343,600
rate of return 6.5%
return $22,300

Interest Earnings

proj june balance $85,000
rate 4.5%
earnings $3,825.00

Extraordinary Expenses

Closing Costs $ 3,000 (for new home)
Insurance Convert $10,000 (fees for converting variable policies to cash and replacing with term)
Insurance fees $ 8,000 (fees to cover first years term insurance in advance)
Home set-up $ 8,000 (new home related expenses)
Children $ 3,000 (child-related expenses)

Total Extra $32,000

Networth Growth $86,775

Also, please note that we have already incurred some of the expenses and have already achieved some of the savings goals.

Have a great Thursday,
Making Our Way

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