Monday, January 07, 2008

Why I Sucked in 2007

I've been debt-free except for the mortgage, and yeah, it was nice.

Debt-wise, all we have now is our mortgage and the loan on our '06 Honda. My plan is to have the auto loan gone this year, and to do it before the warranty expires (December). As of January's payment, we owe less than $10k on it, and the way my website income's been going (knock on wood), I should be able to have the loan gone by summer or early fall.

To be honest, retiring that loan is more a mental thing than a financial one. I don't feel much different now (with the car payment) than I did back in 2005 (with a paid-for 1995 Honda and no debt other than the mortgage).

Why might this be? I suspect it's a function of now having significant website income. Which, at this point, is all gravy.

It's funny: My associate ExcelGeek (spreadsheet creator extraordinaire) and I occasionally talk about being "exceptions to the rule," and there's some validity to that. Neither of us have any revolving plastic debt. Our Freedom Accounts are doing their thing. We have decent Emergency Funds behind us.

But here's the honesty: For my part, I've allowed my after-tax web income to amble out the door instead of directing it to savings or investments. As I look back, the amount of STUFF we bought last year was nuts.

At the top of the HIGH PRICE TAG list was a new Carrier central heat/air system ($6k out the door), which would've been necessary at some point. But the old system hadn't yet fallen on its face entirely; who knows how much longer it would've sufficed? I don't.

But I know this: To have to buy a new system when your old one completely dies, and outside it's either 10 degrees or 110 degrees ... well, that's not a situation I want any part of. I didn't want it then, and I don't want it now. So I consider this big expense to be a valid one.

However, let's examine the list of other items bought by our web income:

  1. 42" plasma TV.

  2. Dyson vacuum.

  3. Wii game system.

  4. Honda lawn mower.

  5. New home-theater speakers ($1k).

  6. Laptop for my wife (it was coming eventually, regardless) and Office 2007.

  7. New over-the-range microwave (though the old one was 27 years old and barely functional on its best days).

  8. Weekend getaway to Dallas (first "vacation" in years).

  9. LOTS more eating out. (See also #7 above.)

  10. Bigger Xmas spending than ever before.

  11. New breaker panel and wiring upgrades to our house.

  12. Assorted other stuff that doesn't come back to me just now.

Given all that spending, for 2007, our net worth — into which I do not factor STUFF other than cars and house — increased by a mere 13 percent. Big whoop, right?

Sure, I'm throwing 10 percent into my 401k, but you know how much I put in my daughter's 529? A few hundred bucks.

Into mine or my wife's IRAs or Roth IRAs? Zero.

Into our Emergency Fund? Ha. It's about where it was at the start of 2007. Which is NOT at $15k. (That's what I'm aiming for. Pretty sucky "aiming," yes?)

The point is that I flat-out flopped at controlling spending in 2007. When I look back at my total income, and what my bank accounts have to show for it right now, I might as well be Your Average American Consumer.

If it came thru the door, it got spent.

I let the extra money (way more "extra" than what I've ever had before) get the best of me.

I have to reverse that in 2008. I have to get back on track. The car loan has to disappear, for one thing. It's costing me a smidge more than what my savings now earn after taxes, so it becomes Household Enemy #1.

For all that I'd like to believe about being an "exception" to the American Consumer Rule, in reality, I was WAY more Typical Consumer in 2007 than I care to admit.

Did I incur new debt? Nope.

Did savings increase? Yes. But not by much. And really, it increased only because of my automatic 401k contributions.


For all my talk about discipline, I absolutely dropped the ball in 2007.

So You Gonna Do Something About It?

Yes. Early in 2007, I got away from using my monthly Spending Plan. Instead, I simply relied on Quicken to track where my money was going. I have enough money coming in, I thought. Whatever we spend, it'll be covered just fine.

It was covered, all right — by money that I should've directed to other things. Think savings. Think auto loan.

This is why (to borrow a phrase from Total Money Makeover) Spending Plans are so important for dorks like me: Either you tell your money what to do, or it leaves.

So, starting yesterday:

1. Our household monthly Spending Plan is back in force.

And that's not all. There's a new addition to our refrigerator door:

2. Clear. Written. Goals.

I've always kept goals in a Notepad file on my laptop. Well ... no. Really, it's been more like a To-Do List. Time for a change of gameplan, methinks.

Any other thoughts or ideas? I've got the increased income, at least for now.

I just have to get my income to work for me like it did before it went and got bigger.

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— Posted by Michael @ 9:11 AM


We're in exactly the same boat. I realized that last year we concentrated on making money more than saving it (came in at about 15% after-tax savings).

I guess it's human psychology, when things are going well, we relax and start living the "good life". It takes a certain amount of restraint to not let it all go to your head.


Note to self:

1. Start personal finance blog.
2. ...
3. Profit!

In all seriousness, I am completely jealous of you. I never took a real look at my financial situation and understood how dire it was until last year when my now-fiance moved in with me. We're now discussing not having a wedding next year in order to pay down our debt ($10,000 in credit cards, two car loans, both with student loans...yikes).

I love your website. I'm sure you understand, though, that you are in the minority of Americans in your security and that we could all wish to have "dropped the ball" like you did!


That's a great summary.

I'm in a similar situation. Right now I don't have any debt besides the house and I don't feel that much different than when I did have a car payment. It seems that money went somewhere else.

I'm sort of in a situation like you, that I have a home-based business that is bringing in substantial income right now. I don't count on it to live but I do take all the home office deduction, milage that I'm entitled to.

Last year I did mangage to buy this house, which cost me about $10K out of my pocket with no new debt incurred. I managed to have about $14K in liquid asset savings. I also managed to get in the black with my business by about $3000.

All in all I feel it's been a great year. I want 2008 to be even better. I figured I earned about $20+K in commissions and have about $6K to show for it right now. I did buy some stuff like a new mutifunction printer, and went on a company trip that cost several thousand. I'm planning on keeping even more money this year. I want to be able to buy a new car in 09 with cash. This will be a $20K or so purchase.

Thanks for your blog I'm glad you are making money with it.


Hi Michael,
I've been reading your blog for a long time. I would definitely say you are not the average American consumer who doesn't think before they spend. You have done amazing things with your financial life. I also dropped the ball somewhat on saving after tax money and curtailing spending. I will do better in 2008.


Wow… I just had a wicked flashback. As the infamous Yogi Berra once said (the ball player, not the cartoon character), “This is like Déjà vu all over again.” Isn’t it amazingly easy to come up with a bazillion ways to justify our overspending and a sense of entitlement?

Less than a decade ago, my wife and I were pretty much living paycheck to paycheck. Sure, we made decent money, but we simply bought whatever our little pea brains, er, hearts desired, and whenever we felt like it. And we felt like it a lot. Emergency Savings? Huh? We had our credit cards to bail us out of a jam, right? Freedom Account? What the heck is that? We live paycheck to paycheck and you want us to put money aside for irregular or unexpected expenses? (duh, we have our credit cards for that, remember?) Retirement fund? We wish! (We learned later that a wishbone is a lot different than a backbone.)

On the plus side, we were very good at tracking our spending in Quicken – we had no problems watching our money come in and go out like the tide. What we lacked was a Spending Plan sprinkled with some short, mid and long-term savings goals. I won’t bore your readers with the details, but our light-bulb moment happened after we bought three books by Mary Hunt: Debt-Proof Living, Debt-Proof Your Marriage, and Live Your Life for Half the Price without Sacrificing the Life your Love ( We’ve read a lot of other books since then, but applying the ideas from these three completely changed the way we thought about money… and headed me into a [Shameless Plug Warning] spreadsheet-writing frenzy, most of which can be found on this website (thank you Michael).

What a difference a few short years have made. We still use Quicken. The only debt we have is our mortgage. Our Emergency Savings is fully funded and standing by (nearly double our initial 10k goal). We are enjoying the ebb and flow of a wonderful Freedom Account (15 sub-account categories 45% funded for the year). We have two short/mid range savings funds (monthly car payments to us for our next new-to-us-late-model vehicles); a few CD’s (certificates of deposit); and last but not least, a couple of long-term investment funds and 401k’s (we’re playing catch-up for a lot of happy spending stupid years.)

In summary, we stepped WAY back from the edge. Our plan is mapped out and we’re running on auto-pilot (sort of boring but nice). We have piece of mind, and no arguments over bills or money in, I dunno, 8 years? Knowing what we know now that we didn’t know then… tons. Will we still slip occasionally? Likely. Slip far? Not likely.

I can tell from your blog, Michael, that you pretty much feel the same way. Keep up the great work on your website, buddy... it has been a real blessing to us. Looking forward to hearing your great 2008 success story! Talk to you soon and God bless.

Anonymous ExcelGeek
, at 6:24 PM, January 07, 2008  

@ re:money: Yeah. I saw the dollars rolling in, I guess, and figured they'd take care of themselves. Wrong. Restraint is exactly what I needed.

@ Matt: Heck, as little as a few years ago, I'd have been jealous of me, too. I had no idea -- NONE -- that I could write, be creative, and make nice money at this. Although, if I broke down my web income on a per-hour basis, I bet it'd be pretty low. Late nights, every night ... you know?

We were in your shoes not long ago. Plan your way forward and you'll be just fine.

@ Michael: "It seems that money went somewhere else." Don't I know it. Oh ... and buying a car with cash is a big goal of mine, too!

@ Amy: Thanks for the kind words. I don't know about "amazing," but I'll take it. I guess. :)

@ ExcelGeek: You and I share a great admiration for Mary Hunt and her work. I wonder what Mary would have to say to me now? Probably wouldn't be pretty!


That is a nice amount of web income if you were able to purchase all those things. You may not have saved alot of it but you did not take on any new debt and your savings still increased. I say you had a good year. I would love to be able to make that kind of income on my blog.


I'd like to buy a 42-inch plasma with money from my blog. As it is, I'd need to borrow $2.50 to buy a McDonalds lunch!

** Comments Closed on this Post **

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]


Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]