I am Cash Poor
No surprise here - as I suggested when I was setting my 2006 goals, I knew I was going to be spending a lot of cash this year. A quick glance at my August net worth readily reveals I now have negative net cash (Cash - CC Balances).
I stretched and put 20% down on the new property I purchased; last month I bought an engagement ring; and for the 2nd half of 2006 I am on a temporary assignment in New York (basically doubling my living expenses). All of these things have sucked the cash out of my balance sheet and I am now very cash poor.
Yes, this cash situation is a bit manufactured by me. I stretched to put 20% down on the property I purchased using all the cash (and then some with short term financing on an equity line) I had available at the time.
The good news in all this is I don't think I am going to have any liquidity problems. I have 2 outstanding 0% balance transfers totally nearly $40k, and a HELOC on my 1st property to cover any short term situations. If I plan correctly, I should be able to adjust my spending for long enough to recover my cash position.
However, the bad news is I am currently short $7,500 when you look at my available cash and the amounts owed on my outstanding balance transfers (ignoring offsetting assets such as stocks in taxable brokerage accounts). In addition, things will probably get worse before they start to get better.
Now that I am engaged, a wedding (and all the expenses that come with it) is looming in the background. I have some outstanding repairs that need to be done in the short term on my new property (est $2.5k) and a remodel project I am planning for the 1st half of 2007 (est $4k). All of these major expenses are going to have me in a tight situation for a long period of time.
| Current Net Cash (Available cash - 0%BTs) | -$7,500 |
| Repairs to New Property (Sept 2006) | -$2,500 |
| Remodel Project (Mar 2007) | -$4,000 |
| Wedding (Fall 2007?) | -$??,???k |
| -------------------------------------------- | ------------ |
| Net Total | [A very tight cash situation] |
It would be easy enough to just slow down my retirement contributions or stock investments to raise additional cash to help me get though this. However, I see this as an opportunity to challenge myself to control expenses, maintain my current savings routines, and recover my cash position. My goal has got to be to have as little or no impact on my current savings routines as possible. If I can get through this without significant impact to my savings/retirement contributions I believe this will be a huge win and could result in significant progress in my financial goals.
Comments (7)
I still had your old URL in my bookmarks; I've put a comment up there, don't want to duplicate.
Posted by Matt | September 14, 2006 5:13 PM
Be careful of the 0% balance transfers. I've drawn out about $40k on these over the past year, and never used it for consumption (Roth contributions, etc.) and always had a solid plan for paying them off. However, I have about $12k of offers expiring next month, and I want to pay the things off, and not roll them over. They sneak up on you, even if you know exactly what you're getting in to. If I had it to do over, I would immediately put the money in a CD so that I couldn't touch it; in my Emigrant account it was to accessible.
Posted by CPA1287 | September 14, 2006 8:52 PM
I think you are probably going to be OK.
Posted by Stefanie | September 14, 2006 11:18 PM
And if the housing market takes a really deep dive next year, you may find yourself underwater on your new property. You'll have to decide if you want to take a chance on a short rebound or bail. If you choose rebound, you'll need cash to carry you through.
Posted by Jojo | September 15, 2006 3:41 AM
I am not worried about the real estate market - I am planning on holding this houses forever.
Posted by 2 million | September 15, 2006 9:23 AM
Real estate investment for the long haul is never a bad investment.
Who cares about the 40K in 0%. If you can't pay it off, roll it over into a few more 0% CCs.
I hope you can keep your wedding expenses LOW!... spending a lot of money on that is money going into a hole, just like a wedding ring. If possible have a super small wedding, and just one big party later on for everyone or something and don't get a real wedding ring.
Posted by Ray | September 19, 2006 1:36 PM
You might want to take the "k" out of your wedding numbers - -7,500k is 7.5M! ;P
Posted by Bret | February 6, 2007 5:52 PM