How I fully funded my Roth IRA

For the past three years, contributing the maximum to my Roth IRA has been one of my financial goals. This is one half of my annual retirement investments, which also includes my work-sponsored 401(k) with a 3% match. My Roth IRA account resides with T. Rowe Price and is comprised of three index funds. Not only have I given the full contribution for the last three years, I am looking to fully fund my Roth IRA within the same calendar year rather than using the grace period until tax day the following year. How did I do this?

I do my taxes at the beginning of February so I can quickly get any money I am owed back from the government. This year, due to my itemized deductions as well as tax credit for four energy-efficient window replacements, I received a larger-than-expected refund from the federal government and approximately the same amount back from the state as I have for the last two years. Combined, this money was able to finish funding my 2009 Roth IRA, fully contribute to my 2010 Roth IRA (based on the amounts automatically invested each month) and still have a bit left to fund other savings goals. This is not a typical situation for me, but meant that I did not have to increase my monthly Roth IRA contributions to fully fund the account for 2010. This is the first time since I opened my Roth IRA that I was able to contribute the maximum amount in a calendar year.

As a result, I opened a third bond index fund to complement my extended market index and my international index funds. I want to keep a diversified portfolio and feel that adding a small amount of bonds to my investment choices would be beneficial. This is less than 10% of my Roth IRA and and even smaller fraction of my total retirement investments so for someone in her late 30s, I am not going too conservative.

At this point, I am looking forward to my 2011 Roth IRA which hopefully, will have an increase in the maximum contribution amount. It has been stuck at $5,000 for the last two years. If my tax refund is similar to this year's amount, I should also be able to fully fund my Roth IRA and contribute to my savings goals as well.

Have you opened a Roth IRA and have you made the maximum contribution?

Deciding how to allocate my pay increase

I have just received my newest paycheck with the added 1.9% merit increase. While this number is not impressive, I had been wondering if my new iPhone was my merit increase for 2009. I even thought that maybe I would not see an increase. My boss assures me that the number is not based on my performance but on guidelines from the company. I told her I was happy to see an increase and appreciated what she could give me.

Still nearly 2% means a little more in my paycheck that needs to be distributed. My main financial goal is to increase my contribution to my Roth IRA. To me, my Roth IRA is hedging my bets that taxes will go up in the future when I need to withdraw the money. Since the money is tax-exempt and my 401(k) and rollover IRA are tax-deferred, I think of the Roth IRA making up for the money lost to taxes when withdrawn from my tax-deferred accounts.

However, with the small increase in my salary, I need to figure out how to distribute the addition to my paycheck. It breaks down as follows:

• 90% of my raise goes to Roth IRA contributions bringing my monthly investment to $390.


• 5% of this new money will be a monthly transfer into my future computer fund.


• 2% of the raise goes to my charity savings account once a month.


• 2% of the paycheck increase goes to my farm savings account once monthly.


• the remainder disappears into my checkbook as a small hedge against paycheck fluctuations.

All the money is going to savings accounts and my allocation for spending remains unchanged. Lifestyle inflation is not a good thing especially as I suspect my lifestyle change from suburb and good salary to country existence with fewer job opportunities will drastically decrease my income and ability to spend. My future plans make it even more important to save now so I have more money to buffer me for the future whether I make the transition to the country in three years or five.

Have you decided what to do with your (potential) pay increase?

Brief overview of Roth IRAs

As you can tell, I am a big advocate of investing in the Roth IRA retirement vehicle. Recently, I was talking with a friend of mine and she mentioned that she should finally invest in one. However, until we were talking for a few minutes about Roth IRAs and when contributions could be made and how to invest, I did not realize she thought that all retirement vehicles meant that the money was tied up until at least 59.5 years of age. When she realized there were ways to withdraw money from the Roth IRA prior to retirement, she became greatly interested in what a Roth IRA could do for her.

Accounts like 401(k)s, 403(b)s and traditional IRA (individual retirement accounts) are tax-deferred. That means money iscontributed to the account before taxes are paid. That is why your end of the year tax statement, your W2, can show less money than your gross income because the money was put directly into the tax-deferred retirement account before taxes were calculated. Using tax-deferred accounts is one way to reduce your AIG, adjusted gross income, on which your federal and state taxes are based.

Roth IRAs are different; they are tax-exempt. While the money put into the account has already been taxed and does not decrease your taxable income, when withdrawn after retirement, no taxes are paid on the earnings. Furthermore, if you are not retirement age, you can withdraw your contributions without penalty. I believe the five-tax-year rule applies to contribution withdrawals, but this is one way to help fund schooling or a buying a first home. Leaving all your money in the Roth IRA account earns more dividends; however, this account type is flexible enough to give you options for pulling out the money if needed sooner than 59.5 years of age.

Roth IRAs are subject to contributions limits ($5,000 for 2009), income limits for single and married taxpayers, and do have penalties when contributions and earnings are taken out without following the allowed withdrawals terms. However, you can put in money for 2008 and 2009 years right now until April 15 to get one year closer to the five-tax-year "magic" number without waiting five calendar years. For more information on Roth IRAs, visit the Motley Fool. I have given a brief overview and the Web site has more details and examples to explain the various points.

Roth IRAs can be invested in anything from mutual funds to money market accounts and certificates of deposit. My Roth IRA is through T. Rowe Price and is composed of two index funds. My investment strategy is risky but I am hoping for greater rewards when I need the money. In the end, I contribute to both tax-deferred and tax-exempt retirement accounts. I put more than enough to get my employer's match for the 401(k)--I love free money!--and have made it a priority to fully fund my Roth IRA even if it takes me 14 months instead of the 12 calendar months. Consider the best strategy for you and weigh how each of these account types (tax-exempt and tax-deferred) will work for your retirement.

Quarterly update on my 2009 financial goals

At the beginning of the year, I stated what my financial goals were for 2009. Basically, they came down to saving and funding my Roth IRA. Plus I wanted to share a quick update of my net worth.

Net worth: Up 4.8% from January 1. I did not expect to be typing positive movement for this measurement. However, I am still below the mark set when I started monitoring my end-of-month net worth October 31, 2007. The mortgage keeps going down, my savings accounts keep going up and if the volatility in the markets has calmed somewhat, my investments will hold and even gain some value.

1. Fully fund my 2009 Roth IRA with $5,000.
My 2009 contributions have me 16.5% to my goal. I have increased my monthly contributions through changing my deductions and the stimulus plan adjusting the federal tax tables. I will find out later this month if a merit increase will occur or not.

2. Save $2,500 for purchase of a newer vehicle.
I am doing well on this goal. So far this year, I have contributed $827 to this account. My automatic transfers brought me to $429. The rest was excess from the gasoline allocation (split between my gas hedge fund and my car savings), a refund, bonuses from work, and selling a couple items on craigslist. While I am uncertain if this pace can be maintained through the year, I am pleased that I am one third of the way to my goal.

3. End the year with $1,500 in my farm savings account.
I started out with $415 in this account January 1 and have added $330 to give me $745. The recent bonus really helped bump up this amount, but I have also made adding funds to this account a monthly deposit.

4. Accumulate $800 toward buying a new computer
This is a new goal, but has become more important to me as the technology and operating systems I have are bogged down by the newer web servers I need to connect with. On January 1, I had $262 in this account; my current total is $482, a significant fraction of my goal. I am pleased this number is moving higher. While both my computers work just fine, by 2010, they will be nine years old (G4 Quicksilver Tower) and five years old (iBook G4). This will eventually be an issue of access on the web and compatibility with software. I want to be able to purchase the MacBook Pro without compromising my other savings goals.

Where did this money come from?

Well, my most recent paycheck had a solicited and unsolicited addition to my salary. The solicited one was a small bonus paid by my company. The unsolicited one was the federal government trying to get me to simulate the economy. The difficulty is trying to decipher how much was the bonus and how much was the stimulus money. This is important as the money from each source is designated for a different purpose.

As I have discussed before, the stimulus money would help fund my Roth IRA for 2009. This is an ongoing stimulus that decreases the amount of federal tax I am paying to encourage me to spend a bit more than I normally do. I hope my index mutual funds appreciate it.

The bonus money would be added to my car savings account and the leftovers added to either my found money account (likely for a future computer purchase) or my farm savings account. After some calculations comparing my most recent check with the previous, I came up with a number for my bonus and used that to pad my car and farm savings accounts. The remainder was the economic stimulus money and was added into the spreadsheet for my Roth IRA funds. The next paycheck should confirm whether my calculations were accurate or not.

Now, how my taxes will fare next year, that is another question. Have any American readers seen the effects of the Obama stimulus plan in your own paycheck?

An early bonus

My recent payroll check had a small surprise in it: my extra exemption came through. To be honest, I was surprised my withholding had already been adjusted as I submitted the paperwork only a week before the end of my pay period, but there it was--a little extra money. In the end, one extra exemption meant $22 more in my paycheck. I had estimated I would receive about $20 so I was pleased to see my estimate was close to reality.

As I discussed in my earlier post, I planned on using the extra money toward my Roth IRA. However, I chose to use only $21 per paycheck for a Roth IRA contribution. Based on my biweekly check and monthly contributions, this number worked out better than $20 or $22. The extra $2 per month is added to my farm account. As of writing this post, I had just changed my automatic index fund contributions to reflect the new contribution levels. Based on the number of checks I have remaining in this year, that means I contribute an extra $462 to my Roth IRA for 2009.

I am closer to fully funding my Roth IRA, which performed better than my 401(k) this month, without removing money from savings accounts. Getting closer to achieving one of the financial goals I set for myself is rewarding.

Planning for my share of the economic stimulus package

The only thing that seems directly applicable to me from the economic stimulus package is the $400 tax credit that will be dispersed via my paycheck. Sure, if my state uses some of the money it receives on road work, my car's tires and suspension will be happy, but most of the plans apply to people in circumstances that do not affect my current situation. I am thankful that I can calculate how to best use the stimulus money for my own benefit.

While $400 is not a lot, it will be given to individual taxpayers over a long period of time. It is easy enough to spend an extra $35 or so a month. It is just one more night eating out that month, a few extra treats at the grocery store, a nice mix of songs, movies and TV shows from the iTunes Store, one more tank of gasoline or a nice shirt on sale.

However, my priorities this year are on saving money. Specifically, completely funding my Roth IRA for the third year in a row, saving for a newer car and putting money toward my dream of a small farm in the country. In light of my previous post, I am planning on adding the stimulus money to my Roth IRA funding.

I estimate between the extra money from my change in payroll withholding and the stimulus funding, I will fall short of funding my Roth IRA by ~$800. Assuming no other financial disruptions, this means the smallest shortfall since I have tried to fully fund a Roth IRA. If I do get a merit increase this year, I am hoping I can fully fund my Roth IRA in the span of a single calendar year rather than needing additional time as in the last two years.

While I am counting my money before it is in my hands, I found having a plan to handle windfall money allows me to deal with it more gracefully and more appropriately than being blindsided with unexpected money. Keeping my money usage in line with my goals helps me fund my future and move plans closer to fruition.

What will you be doing with your $400 or $800 economic stimulus?

Getting my 2009 tax refund now

With my 2008 Roth IRA fully funded with about 20% of the money coming from my federal and state tax refunds, I decided that I would rather have more of my money now to fund the Roth IRA than give it to the government. The tax refund I received this year was the result of three deductions for payroll tax purposes. I just submitted paperwork to increase the number of W4 withholding to four to keep more of my own money.

What are my plans for this money?
Since I used the tax refund to contribute to my Roth IRA, I will use the increase in net pay to add to my monthly contributions to my Roth IRA. I have been planning on increasing my monthly contributions each time I receive a merit increase. However, with the economy, I have decided rather than counting on a pay raise, I will just have to live with the income I have. With a change in withholding, I can give my Roth IRA a boost and if I receive a pay raise, then I can contribute even more toward my Roth IRA.

I estimate that I should add ~$700 to my Roth IRA contribution this year by changing my payroll withholding.

What are the drawbacks of doing this?
If tax laws change, I may owe more than I anticipated for 2009. My quick calculations based on my 2008 tax returns indicate that I should owe the federal government somewhere between $0-$200, depending on my itemized deductions and credits. Despite decreasing the amount of money withheld, it does not affect my state income tax much at all. Therefore, I anticipate that my state tax refund for 2009 should cover the cost of any federal taxes I owe with a small amount leftover.

If the tax brackets change or I earn more than I did in 2008 or any number of financial or life changes, I might regret changing my withholding. Frankly, I will have to see what happens when I figure my 2009 taxes next year.

My strategy is to get more money in my pocket now for a planned Roth IRA contribution rather than loaning it to the federal government interest-free. I earned it and I would like to put my money to work for me. Are you changing the amount withheld from your payroll check based on your tax refund?

My 2008 Roth IRA is fully funded!

For the second year in a row, I get to cheer "I fully funded my Roth IRA!" One of my five goals for 2008 was to fully fund my Roth IRA. As I noted earlier this year, I fell short of funding during the calendar year. I believed my tax refund would cover most of the remaining amount and I was right. When I completed my federal and state taxes, I was looking at a refund of $1,040. With a contribution of $126 in savings, I would fund the last portion of my 2008 Roth IRA.

I was thrilled to get my money so quickly. Since I filed electronically, I received my state refund six days later and my federal refund seven days later although the amount was noted as nine days after filing. Then I transferred the money from my savings account to my checking, chose to make 2008 contributions to my Roth IRA index funds and waited for the transaction to go through.

My T. Rowe Price Account has two index funds. I allocated $718 to the Extended Equity Market Index Fund (PEXMX) and $448 to the International Equity Index Fund (PIEQX). Hopefully, I will buy my shares on a day without a market rally but volatility is the nature of the stock market.

Now I can focus on my 2009 contributions and how I will achieve fully funding my Roth IRA for a third year.

Taxes done!

I just finished filing my 2008 taxes. As I did in the last year, I took advantage of free electronic filing of my 1040 form via TaxAct. My state has its own electronic filing site. My federal form took one hour to fill out and my state about 45 minutes. Total time invested: 2.5 hours. Much of that extra time was due to the changes in my state's electronic filing method, which included downloading third-party software and getting it to play nice on my iBook. All tax-relevant paperwork was filed in one location throughout 2008 and 2009 so it took me a few minutes to pull out the various envelopes and sheets to confirm I had all the papers I needed for filing.

I am my mother's daughter because I save all my tax paperwork in a single slot in my multicompartment file folder. Since I needed to refer to my 2007 tax forms to deal with my 2007 state tax refund, this file folder kept my earlier tax forms handy. Even with electronic filing of my taxes, I print out a paper copy of my forms and place the sheets in my file folder for easy reference and a backup to the electronic forms.

While tax refund was not as large as last year, my combined state and federal refund will be over $1,000. All of this money will go to fund my Roth IRA as a 2008 contribution. However, I am still over $100 short of the $5,000 maximum contribution limit so I will pull some money from my savings account fully fund my Roth IRA for 2008.

I received less money back from the government compared to 2007 for one large reason: the energy tax credit expired. In 2007, I put in a new energy-efficient picture window in my living room for which I could take a tax credit. Since that program lapsed at the end of 2007, the new windows I installed in 2008 had no effect on my income tax bill. However, the program has been reinstalled for 2009 so I am looking forward to the credit on when I file this year's taxes since I plan on replacing the remaining four single-pane windows on my home.

Looking at my 2008 tax form compared to 2007, I had less mortgage interest to deduct (more money going toward principle!), more interest income and a higher AGI (Adjusted Gross Income). I donated more cash to charity, but had no noncash donations. This year I may not give as much cash as 2008, but I will likely have more noncash donations to add to my itemized deductions in light of my desire to declutter. Since I did get a refund from the US government, I plan on adjusting my withholding so I get more money in my pocket now rather than giving the feds a tax-free loan.

I am one of those people who enjoys filing her taxes as soon as possible. I get it done, pay what I owe or get any refunds quickly and use my money to forward my financial goals. If you are getting a tax refund, how are you using it? If you owe the government, will it be easy to pay them the money?

Analyzing my net worth for October 2008

I do not mean to depress you, but I have done my financial analysis for the month of October and now have enough data to compare year to year. Since I started calculating my net worth October 22, 2007, this is the lowest my net worth has been. So much for my goal to reach a net worth of $100,000 by the end of 2008.
October 2008 net worth -9.5%
11/1/07 to 11/1/08 net worth -7%

Extreme stock market volatility
I purchased some stock in February 2008 when the Dow dipped into the 11,300 range and thought I did well for myself. Well, October saw lows in 8,000s from highs of about 10,000. While October ended with the markets up, I will not be holding my breath that my stock values will return from their nearly 40% plunge. My 401(k), rollover IRA and Roth IRA all had a nice downward trajectory that ended up pushing my net worth down 9.5%.

Savings and cash
I keep saving money, but not enough to fill the hole from the stock market. In all cash categories (except the cash kept on hand), the amount of money is up. With gas prices easing at the pump, I can put more money back in savings and build a small cushion of gas cash for extra travel or sudden price jumps before I need to change my spending plan.

I have no predictions about the end of the year and what my account will look like. While my cash position could have been even stronger, I am in stockpiling mode so I did not have the same cash cushion in my spending plan as last month. With my focus on what I need to get done around my house, I did not seek a second job and am unlikely to find one between now and the end of November. I expect a small bonus with my next check, but I also plan a shopping trip for myself this month. We will see how this affects my totals when the month ends.

Analyzing my net worth for September 2008

Well, no surprise--my net worth took a hit. Like all of you that have invested in the stock market especially mutual funds, I have lost value in my 401(k) and Roth IRA. In fact, I lost nearly 4% of my net worth compared to August 2008 and nearly all the decrease was due to stock market fluctuations.

Not to belabor the point, but here is the breakdown:

Stock market volatility
The whole stock market is too reactionary to be anything but wild. September had the biggest one day drop in points, 777 points from the Dow, and only had a few days left in the month to make it up. With the overall market behavior, my mutual fund portfolio reflected the downward trend of the stock market. I have nearly 30 years to gain back these losses and I will likely need all the time I can get. Investing in mutual funds is a gamble and September reminded me that yes, it can not only go down, but can do it in a dramatic fashion.

Savings and cash
I gained some here, but not enough to counter the retirement fund losses. I bolstered my Emigrant Direct high yield savings account with another $400 and moved $1,500 I was saving for the replacement car into a 12-month CD at ING Direct, giving me a 4% APY. Any interest gains I can make, I will take! Future plans include boosting CD funds when they mature and adding a new CD to the mix so I have one maturing each month. These are not a true ladder, but three 3-month CDs staggered to give me higher interest than my savings account, but make them a bit more accessible. In addition, I saved almost $37 from my spending plan to add to my savings accounts and hope to add more in the next few months.

My losses are probably greater than I know now. My rollover IRA probably took a hit in September as well, but will not get the statement until October. I want to focus on my level of savings and bolster my cash position as much as possible. While I am far from panic mode over the Wall Street/bailout controversy, I feel it prudent to be more conservative in my spending. A possible second job is being considered and hoping I can save more money toward future dreams as well as present considerations.

Analyzing my net worth for May 2008

Yes, it is the beginning of a new month and thus, I reflect on the finances of the previous one. When I did my final calculation, I was surprised at the gain during May. I had a net worth gain of 2.61%, the highest I had seen since February 2008. How did I fare so much better than the last few months?

Economic stimulus e-check
As a single person with my AGI, I received $600 as an electronic deposit. Most of it ($500) was used to open a T. Rowe Price international index fund as part of my Roth IRA. Another $50 was deposited in my car savings fund and the remainder is available for spending. This was unexpected money I used to further my retirement fund and future car purchase. Both of these allocations and the currently unspent $50 all add to the amount of money on hand that are part of my assets.

Quarterly or annual statements
Since some of my retirement funds are in a rollover IRA or a pension plan, I receive the statements either quarterly or yearly. This means the change affects my net worth calculation only occasionally. Since I received my statements for the IRA and pension plan last month, the greatest effect is when the number changes. For the next few months, the IRA numbers will be unchanged and minimize any negative effect on my bottom line. The pension plan, while a positive increase, will only be reported once a year.

This is also true for my home assessment. This changes only once a year and is the number I use as the value of my home. The decrease had the greatest effect last month and will not change in my calculations until April 2009.

Cash reserves
The money I have in checking, savings, and CDs did decrease as I paid for some replacement windows and other house-related items. However, despite this decrease in available money, I did come out with an overall increase in my assets (0.11%). A greater share of my savings is in higher yielding savings accounts and CDs so I receive 2.5-3% APY versus 0.5% APY. I have a one-year CD at a 5.25% rate that is due in June, the last of the good rates we enjoyed such a short time ago.

Retirement accounts
Excluding the assessed worth of my house, my retirement funds have the most money in my portfolio. With my increased contributions to my Roth IRA, the extra $500 contribution from my stimulus check and the continued 10% contribution to my 401(k) plus modest market gains, I was able to counteract the decrease in my cash position.

I had a net worth gain of ~$2,400 from the month before, surprising despite my small increase in asset value. I continue to plug away at my mortgage with a small $42 additional payment to principle, and this will make incremental decreases to my mortgage. If these gains and contributions keep up, I will likely meet my $100,000 net worth goal before December 31, 2008.

Update on my financial goals for 2008

Like many who blog about finances, I set up five financial goals on January 1, 2008. My first update in March was a mixed bag of results. How have I progressed so far this year?

1. To reach a net worth of six figures ($100,000).
For the first four months of 2008, my net worth increased 5.2%, bringing me to just over $89,000. This is a greater increase than seen earlier this year, reflecting the market improvements in the last month or two plus the additional cash investments made to my Roth IRA. I am also putting as much additional money into my car savings account as I am feeling the pressure of a looming car purchase. These actions in addition to the passive interest income help inch my net worth higher. I am feeling more optimistic about reaching this goal, but only the end of year will tell if I can gain another $11,000 to hit my mark.

2. To have $15,000 in liquid savings for emergency expenses.
The number has decreased slightly from the last update to $11,100. This is primarily due to a large unexpected car repair bill. Additional money will be withdrawn from the house savings account and charity but are not currently reflected in the total, due to being paid for by credit card. However, I am still confident I can meet this goal by December 31, 2008 even with larger home improvements on the horizon. Bonuses and other unexpected money will help bolster my savings, helping to keep me on track to this goal.

3. To have $500 in my "found money" account.
My current balance is $289 and change that should be closer to $294 by the time a deposit goes through. I also used some of this money to pay for a seminar on wills and other important documents so the gross amount is closer to $328. I am more than halfway to this goal, but with the bulk of my extra money going into my car savings account, I am uncertain if I truly will reach to my goal. However, I continue to add little bits of money and the balance is continuing to accrue interest at 3% APY.

4. To increase my contributions to my Roth IRA to $3,000.
With my raise, my monthly contributions have increased by over $90 to my Roth IRA. For 2008, I already have added $1,700 to the Roth account, with another $500 pending from my yet-to-be-received tax rebate. My future contributions will add another $2,000 so I am well on my way to to exceed this goal. For the rest of the year, I will modify this goal to read:
4. To fully fund Roth IRA for 2008 at $5,500. This is a big challenge that I will carry into next year since I can add funds through April 15, 2009 for 2008.

5. To generate $2,000 from an alternative income source.
My only current alternative income is from selling unwanted items. My gross income is $453.79, which is more than I anticipated, but my net income is only $316.24. Darn ebay and PayPal fees (and shipping)! I am still debating about what I can do to boost my alternative income totals, but nothing has been pursued, much less implemented.

Overall, I think this assessment looks good, more promising than earlier in the year. I really need to work on my alternative income and start trying various ideas I have jotted down to see if I can generate income other than just selling my unwanted things.

Do you feel economically stimulated?

Well, I had a nice surprise in my savings account this morning--an extra $600 that was not there yesterday afternoon. Yes, the federal government decided to give me money to spend. As a single taxpayer, I was eligible to receive $600 and the full amount was deposited into my savings account. So, what will I do with this money?

The current setup in my T. Rowe Price Roth IRA account is all my shares are in the Extended Equity Market Index fund (PEXMEX). This is a nice fund for me to invest in, but I am exposed only to domestic funds. Therefore, I decided with $500 of the extra money I received, I would begin investing in the International Equity Index fund (PIEQX) as well. My portfolio would then have international and domestic stock fund exposure, giving me more diversity in my investments. Since I am also increasing my Roth IRA contributions, I can divide the monthly contributions between the two funds with a small decrease in the contribution to the Extended Equity Market Index fund. I am very excited about this change and thrilled to be getting closer to fully funding my Roth IRA for 2008.

With my replacement car fund receiving more money each month and my determination to send as much extra money as I can to increase my numbers, I chose to add another $50 to this account from the economic stimulus check. I will likely have two or three years before I have to replace my 11-year-old car, but I am trying to save as much as I can if circumstances change. Retirement account funding was my first priority with this extra money, but the auto savings account reminded me I needed to give it a boost as well.

Finally, I am allowing myself to spend the remaining $50 as I choose. Purchases I am considering: getting my feather pillows restuffed or using the money to host a party at my home. I have not done the latter in a while and it would be fun to gather my friends together and enjoy the outdoors now that spring is really here. The $50 also leaves me room to be more spontaneous that my monthly budgeting does not really allow me.

Have you gotten your money electronically and how are you planning on using it?

Analyzing my net worth for April 2008

I was surprised that my net worth goes up with all the volatility in the stock market and the rumblings in the economy. Still, I was pleased to find in April, I increased my net worth by 1.5% from the previous month. This was greater than I expected with the various pressures on my money.

An unexpected car repair
Emergency funds are for just such an event and I was glad I could pay for this without issue. Still, losing over $1,400 in my liquid assets is no fun--and not the direction I want my savings to go.

Revised home assessment
Yes, I received one of these in the mail and the number went down 1.5%. The assessed value did not go down as much as it could have since I did do a window replacement, but it was not enough to counterbalance the market trends.

The stock market and its effects on my retirement funds
While my 401k and Roth IRA gained in value above the contributions made, my rollover IRA lost value. Since the rollover IRA was a front-load fund, I was not happy to see the low numbers. Since this news was from the first quarter of 2008, the loss may moderate and I may end the year ahead. Time will tell.

In addition, I received a statement from a university pension fund. Since I worked for a state university for 2.5 years, there is money invested in my name. I have let the money sit in the account as the fund is well-managed. In fact, I gained nearly $1,000 in value from the year before. This was as of January 1, 2008, the date of the statement, but an impressive number since the account gained 11.6% in value.

I am happy to see my net worth go up, but I expect May will not look as good. I have spent a lot on gardening supplies and home improvement, and the bill comes due this month. However, I will likely stay on a positive trend unless the stock market heads on a downward trend.

How I will manage my increased income

No, I do not have a new income stream. I am still clueless when it comes to alternative income, old boy-band records for sale on ebay notwithstanding. Frankly, there is only so much stuff I can sell either locally or on ebay and then what? Today I am discussing the merit increase I will receive starting with my first paycheck this month. In my company, the average increase is ~3% so I was glad my supervisor rewarded me with 4% salary increase. What does a person trying fund her Roth IRA and save money for a new car do? Calculate how much the raise will translate to net income increase and figure out what to do with the money.

Ironically, in doing this calculation, I found an error in how I was calculating my Roth IRA contribution in 2007. When I took 6% of my gross salary and then calculated the net number, I used a percentage that included not only taxes but my 401(k) contribution, fees for disability, medical and dental insurance as well as my F.S.A. I lost just over 1% of my possible contribution to this error. However, I corrected it for the new calculation and it looks like I can contribute ~7.5% of my gross income to my Roth IRA. After calculating taxes, I will contribute just over $3,100 per year. This is a 150% increase over the year before and brings me closer to making the maximum $5,000 contribution for 2008. Since I already have an extra $500 in the account this year and my tax rebate check will give me another $500 to add to the account, my planned Roth contributions are over $4,000. After figuring my 2008 taxes, I will likely have another $500 to add to the fund bringing me close to the maximum. These numbers make me think I can max out my Roth IRA two years in a row, pending no big financial blow up.

Between a share of the money I was contributing to a charity organization through work (I just reached my contribution goal) and my raise, I will be able to contribute an extra $10 every paycheck toward purchasing a new car. This is an important goal for me and every little bit brings me closer to buying a newer car without financing.

According to my calculations, there are still a few dollars left from my raise and they will be added to my prescription/medical copay allocation and my cat care fund. My cats are 14 and 12 so the expenses (visits, food, medication) add up quickly. They are fairly healthy, but I have been dealing with some chronic issues that are not easily resolved and office visits are not cheap.

These plans do not involve lifestyle increases. In fact, my net savings will increase to 34% of my annual income without further changes to my spending plan. This is good news for increasing savings as a percent of my income, but still a ways to go to reach the 40% savings rate at which I would like to be.

Analysis of my net worth for March 2008

I was surprised at my numbers in March. The volatility of the stock market made me fear I would have a losing month overall since a good portion of my net worth is determined by the mutual funds in which I have my retirement invested. In the end, my net worth increased 1.16%. This is not a dramatic increase and certainly not as good as February, but a few factors helped me stay positive in March.

Cashed out term life insurance
I have term life insurance through work for three times my salary so I thought having a separate policy was unnecessary. Other than my cats, I have no dependents so the need for this insurance is reduced. The future may show this was a poor choice, but I think investing in my Roth IRA was important. As a result, the cash value allowed me to fully fund my Roth IRA for 2007 and still had money to contribute in 2008. My purchases in the index fund that comprises my Roth IRA were also made when the market had some of its worst days in March. I did not time the market at all, but knew that I would get good value over the long term with the mostly downward volatility the stock market has been experiencing.

Gained some value in the stock market by the end of the month
My 401(k) has not been performing very well and while March was not an exception, I did come out higher than I started the month. A gain of $800 does not seem much, but since it is more than my contribution for that month, I will take it. This is where I hope the dollar-cost averaging will show its strength in a few years when I imagine the market will have gained value relative to my purchase price.

Added a few extra dollars toward my mortgage principle
My escrow fell from the year before so more of the money I allocated for paying my mortgage goes to principle. I doubt I will contribute a whole extra payment over the year, but I am happy another $7 that will decrease my principle. Again, I am starting my third year of a 30-year mortgage so interest is quite a bit of my payment, but every dollar counts, working to decrease my debt. I will take an extra 0.01% more of my mortgage paid!

Received interest income
Despite the lower rates even on the high-yield savings accounts, I still have interest compounding on top of interest and the additional contributions. This interest is money I did not have before and I will take it! It is a small bit of passive income and at today's inflation and interest rates, not keeping me above inflation, but is slowing my money's erosion.

April will be an interesting month. I have a large car repair bill and the purchase of replacement windows that will draw down my cash reserves. While the windows will add value to my home, it is no longer liquid and involves a long-term investment that I may not fully realize. Since the no-spending vow is a bit iffy right now, I do not know if the extra saved money will be exist or not. Stay tuned for next month's analysis!

My Roth IRA is fully funded

For the first time since I opened my Roth IRA in March 2001 as a contribution for 2000, I have contributed the maximum to the account. Granted it is $4,000 for 2007, but I am proud of making it to this point. I managed to get to this point by making monthly contributions as well as using lump sums from tax refunds and the term life insurance cash out.

When my Roth IRA was first opened, it was during the tech stock bust, and my financial advisor suggested a Oppenheimer blend fund. I contributed $500 followed by a $200 contribution in 2001 and promptly lost half the value of the mutual fund. One of the finance seminars I attended at my credit union explained the various retirement vehicles including a Roth IRA. I considered it a way to get me closer to buying my own home as well as a retirement fund. However, $700 does not go far and I neglected my Roth IRA after the two contributions. By the time the fund came near the value I initially contributed (@ mid year 2006), I was tired of the small gains the fund made and the fees that would mitigate the gain.

In looking at my options, I read about index funds, what they are and why financial experts of various stripes recommended them. This sounded interesting and I decided I wanted to move my Roth IRA money into an index fund. Oppenheimer did not have any index funds so I had to look for a new option. My new financial advisor said I had to pursue the index fund option myself rather than having him take care of the money transfer. My 401(k) plan was with Fidelity, but I wanted to have some variety so I looked for other fund family options. Vanguard had a steep initial investment of $3,000. Since my Roth IRA was only worth $700, this was a problem. I chose T. Rowe Price since I could open with $1,000 as long as I invested at least $50 a month. So I rolled my Oppenheimer blend fund into the T. Rowe Price Equity Index 500. I managed to break even December 31, 2007. This meant my shares purchased over nine months were worth what I had contributed over the year.

With my lump-sum contributions to my Roth IRA giving me my first maximum contribution year, I have crossed the threshold of over $5,000 in my T. Rowe Price account. This means I can shed half the fees being charged to my account because my balance was less than $5,000. This means more of my money can grow.

I also wanted have a broader portfolio so I decided to convert my T. Rowe Price Equity Index 500 to the T. Rowe Price Extended Equity Market Index , a new index fund. It was probably not the best move to make after two lump sum investments and a 0.5% penalty for shares owned less than 90 days, but it is done. The new fund has an expense ratio of 0.4%, less than managed funds but a bit more than similar Vanguard funds. However, the difference was not enough to drive me to Vanguard so I will likely keep my Roth IRA with T. Rowe Price.

My next Roth IRA goals are to 1) contribute the maximum for 2008, which is $5,000, and 2) consider broadening my market exposure even further by purchasing an international index fund. The first goal will need more contributions than I am currently making and the second will require some research for the best plan. I will have to see how things go this year and what sort of tax refund I get as that is a substantial share of the money that funds my Roth IRA. I am confident that since I fully funded my Roth IRA once, I can do it again!