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My Financial Ratios

February 6th, 2007 at 06:59 am

I read on www.moneysmartlife.com about the 5 financial ratios you should know to keep you on track.

Out of curiosity I did 3 of the calculations to see where I stand. The calculates below do not use my DH's data since we have seperate accounts/bill responsibilities.

1. Liquidity Ratio=Liquid Assets/Monthly Income. Target: 3-6 months.
Mine calculated to 1.23. Yikes - i guess I am the defination of living paycheck to paycheck Smile Of couse I would like to think that if something did happen to my job, some of my monthly expenses (like daycare) would be less or nothing.

2. Savings Ratio=Savings per year/Annual Gross Income. Target 8/25% depending on age.
My savings ratio calculated to 5.26%. I am hoping to somehow save an additional 1,420 this year to raise my percentage to the minimum 8%. Once I get my car paid off I should be able to put a little more in savings. Also once the girls get out of daycare in a few years I should be able to save a much higher percentage.

3. Debt to income ratio=Annual Debt payment/Annual gross income. Target is less than 30%.
Mine is only 12% (I don't pay the mortgage). However if you calculate in my daycare bill (which feels like debt) it is over 37%.

Here is the article if you want to read it:
http://www.moneysmartlife.com/2007/01/31/stop-comparing-your-finances-with-others-five-financial-ratios-to-keep-you-on-track

Month End - Budget Figures

January 31st, 2007 at 02:09 pm

Month end is finaly here! I have actually been looking forward to looking at my budget figures since I have been following the budget all month long (yes I am nerdy).

I have been trying to use the pearbudget to track my budget. It has been a little of an adjustment since before I was trying to budget by payperiod (every two weeks) instead of for the entire month. I have had to add a few additional spreadsheets to the workbook to track other items like the breakdown of my savings account, but otherwise I think it is working pretty good.

January Stats:
My income exceeded my expenses by 38.10, which I was pretty pleased about since I did got over in a few of my categories.

I went over in my 'Household' category by $60, but I still have over $50 cash in my bilfold, so I am not going to stress about that one too much.

My low point in my checking account was just over $500. Hopefully that will get larger as I go.

I paid an extra $260 to my car loan (Yea!).

No money went to savings this month, but I didn't expect it to since I am focusing on my car loan right now.


Credit Report and Score

January 24th, 2007 at 12:24 pm

Last night I went to www.annualcreditreport.com to get my free credit report - I believe it has been 2 years since I have actually looked at one. I selected Equifax for the report (no specific reason - just random).

The site said I could get my score for just under $8 - I didn't really plan on getting my score, but I figured $8 was worth a piece of mind.

I haven't fully dug into the report yet - just skimmed a few items, but here were some things I noticed and some thoughts.

1. My credit score is 789 - Excellent rating. At first I was pissed for wasting the $8 when my score is good, but now I am glad I did it. Since I am a numbers person, my score makes me think - Why not 800? Should I try to improve it? Does it really matter if it is already "excellent"?

2. The name displayed on my report is my last name on my first marriage. I thought that was very strange - That marriage only lasted 1 year and I changed my name back to my maiden name once the divorce was over. I haven't used that name on anything since 1998.

3. I have 16 revolving accounts listed on the report. YIKES! most of them were opened for a 1 time charge for a discount or some other promotion. I will definately think twice about doing this in the future.

4. Negative factors affecting my score.
a. The time since your most recent account opening is very recent. This is probalby true - no arguements.
b. You have no recent revolving balance information being reported. If I am reading this correctly - since I do not have any credit card balances - it negatively affects my score? hmmm... I don't think I am going to work on this one.
c. You have a relatively high number of consumer finance company accounts being reported. I agree - I probably need to close a lot of these accounts, but will closing them also negatively affect my score? I thought I read somewhere that it would.
d. The length of time your accounts have been establised is relatively short. I have two credit cards and one business card account - all of them I have opened in the last year or two. These will be the ones I keep "open".

This next year since I am buckling down to pay off my car loan I do not want to use credit cards at all - only pay for items I have the money for. Is that wise? Should I use them occasionally?

I plan on digging into the report more the next few days - just by glancing at the report it seems a little confusing.

My other gripe about the credit report thing is why can I only have one free copy a year? This is information about ME. I should be able to access it (with out paying) whenever I want. And why is the score such a secret? This is something that affects what kind of interest rates I qualify for - why should I have to pay to receive my own score?


Car Loans - they don't make it easy to payoff early...

January 9th, 2007 at 02:05 pm

I have my car loan through ford credit. From day 1 it has been set up to be automatically deducted from my account (like almost all my bills are). I don't have to worry about paying late, hunting down a stamp or anything.

This car loan is my next debt to tackle. I logged on to the ford credit website to find out how to make extra payments - can I do it online, or what address to send it to. I couldn't find exactly what I was looking for so I sent an email to customer service. They replied that the only way to make extra payments is to stop my automatic deductions and make payments manually. What I wanted to do is keep my regular payment and when I had extra money in my budget to put it towards the loan. Now I have to remember to do my regular monthly payment each month. I guess I should be happy I can at least do this online.

The debt snowball is beginning to roll

January 3rd, 2007 at 09:34 am

The last two weeks I have:

Paid off my school loan - $630
Paid off the little bit of christmas I charged from internet shopping - $200
Paid off my medical bill - $368

Now I should be able to concentrate on my car loan. I have about $6,000 left to pay. I am hoping to have it paid off by September by paying an extra $300 a month. This will pay off the loan a year early. I did a spreadsheet on how much I will save by paying off early and unfortunately it is only about $100 (I should have started this 3 years ago...), but I guess just having the debt gone is the most important at this point.

On another note - I have not spent any money (other than bills, debt payments...) in 2007! Yea!

Baby Step #1 - Completed

December 27th, 2006 at 11:15 am

I have started reading Dave Ramsey's Total Money Makeover this past week and I think I am going to give it a try.

Step #1 involved making a budget and saving $1000 in a small emergency fund.

I had already started working on a budget the past few months. This morning I did a little tweaking to it to make sure every dollar is accounted for (this is what he recommends). I have a little wiggle room in some of the categories so if something unplanned for comes up I should still be OK.

I also already have about $2000 in a savings account. I plan on taking $1000 of that and put it into a new savings account so it will be seperate from the rest of my money. I have already setup an account for irreguar bills (registration, insurance...). I am thinking of setting up a third for Christmas/Birthdays... how many savings account does a person need? Maybe I will just use my exising account at my credit union for this.

The next chapter I am going to read is about snowballing debt - which I pretty much know the concept of anyway. When doing my budget I realized I will be able to put more towards debt than I originally thought I would. So maybe this won't take as long as I had thought.

Also today I went online and paid my credit cards for the few christmas presents I purchased online. I wanted to start 2007 with nothing on my CCs and keep it that way.

I also took the leap and paid off my school loan - just over $600. I recieved a little extra money for christmas through presents and my xmas bonus so I just decided to go for it.

I am on my way!