As you can imagine, cash flow is a bit tight with the second house. I've had to pay careful attention to our cash flow. Recent changes have made great improvements, but my operating cash has diminished, so attention to detail is critical.
One thing I decided to do was understand the impact of my pay increase on future paychecks, but unfortunately, I have several deductions, like a 401k contribution that muddy the water, as I've accelerated the rate of contribution and it will be satisfied soon.
What to do? I searched the web and found at dinky town this wonderful payroll calculator / paycheck calculator. Now keep in mind the results are only an estimate, but it's fairly accurate.
I tested it against several pay stubs and the results generally came out within $20.00 of the actual result.
One thing to be sure to do is make sure you represent the correct pay period; i.e. are you paid bi-weekly, bi-monthly, weekly, etc....
Another imprortant tip is to make sure you factor in any pre-tax and post-tax deductions. For example, I pay disability premiums post-tax to ensure the benefits are tax free.
The good news is that I should have about 30% more after tax cash per payroll for my pay checks. It could make a significant improvement in our cash flow. However, we also have to keep in mind that my wife will be eligible for her 401k - I'm a bit concerned as to how well it will be managed.
Her contributions would come out at a rate of $3,100 a month - ouch (assuming an August start). I'll have to model the impact on cash flow due to:
a. decreased federal income tax
b. at some point we'll stop paying the social security portion of FICA once we've satisfied the limit
If we're lucky the decreased income tax and reduced social security payments may balance each other out.
Of course there are always unplanned expenses. I have a nasty feeling our roofers didn't do the best job and some money will be spent on fixing it (or sueing them).
I just entered advanced transactions in through part of August 2008 using the new estimated payroll numbers for my paycheck, while holding my wife's constant. I learned that I'll have a series of negative checking account balances (periodic drops) running from April through June with the worst being about -$2700. By July, however, the numbers even out and my cashflow is positive. I'm hoping it holds going forward - it looks like it will. This is potentially wonderful news.
Homework assignments are:
1. Figure out how to increase checking account balance by $3000
2. While continuing to pay off credit card debt $8700
3. Factoring in money for over seas trip (personal) in May (I only hae $1000 budgetted) but might be able to use frequent flyer miles
4. Investigate refinancing mortgage - looks skeptical, my mortgages are at 6.5% and 6.0% - too low to make a difference with current rates
5. Decide what to do with car coming off of lease
I'll try to follow-up in a few weeks to see how accurate the payroll calculator actually was.