Just a Quick Monday Morning Reminder: I’m Here to Help!

It doesn’t really have anything to do with this post, but what a cool looking building! Apparently it’s in Hong Kong. Image courtesy of Jean-Marc Buytaert

Good morning! When I started this blog, my general goal was to provide information to the widest possible audience that would help people to improve their finances and live better lives in general. Looking back after almost a year of posting, I’m pretty happy with the material I’ve put out there. But I’m always looking for ways to improve. In my day to day life, I regularly advise people on various matters. It has occurred to me that some of these conversations would likely be valuable to more people than just the ones directly involved. That got me thinking. And I realized I’m going to need some help…from you.

I’d like to add an interactive element to this blog. It could take almost any form. But in general, I’d like to offer my advice on virtually anything anyone could use it on. Yes, my primary area of expertise is finance. But if you read my blog regularly, you know I’m also pretty knowledgeable about a wide range of other issues.  

So if you have a problem with your finances, or with any other aspect of your life, I’d like you to email me at admin@healthwealthpower.com. Tell me the situation in whatever level of detail you’d like to provide and ask whatever questions you want to. I’ll do my best to answer the question and hopefully it will be helpful to you. The only thing I ask in return is that you let me post the question and my answer on this blog in case it could be of value to anyone else as well. I promise not to reveal your real name or any details that could possibly identify you. If it makes you feel better, you don’t even have to tell me your name in the first place! You have nothing to lose so why not give it a shot?

My hope is that together, we can make this a better resource. Have a great day!

My Recent Car Episode and How I Could Have Wasted A Lot of Money on Nothing

The engine bay where my diagnosis journey started. The battery and one of the fuse boxes are in the back left compartment.

A couple months ago, I replaced my car with a nicer, newer one. Unfortunately, cars can have issues at any time – even early in life. And on one recent morning, when I went out to the garage, my car wouldn’t start. In fact, the dash wouldn’t even light up. The battery was 100% dead. Thankfully, I have AAA, so I was able to get someone out there within about half an hour to jump it.

As anyone who has bought a battery for a late model car already knows, batteries die all the time now. In a typical example of “progress” in action, what had been a $50 purchase that would last roughly a decade is now an often $150+ purchase that lasts about three years. The warranty period, of course, has adjusted to reflect this new reality and in my experience, batteries tend to survive just barely long enough to surpass it. The culprit, of course, is our obsession with putting more and more electronic crap in cars, including a significant amount that continues to draw when the car is turned off. Today’s batteries are actually much more powerful than the ones that used to cost so much less, but the demands on them are also much greater.

Anyway, I priced out batteries while I was waiting for AAA to show up and determined that NTB had the best offering for my car. Once the car had been jump started, I drove straight there. It was less than a ten minute drive, but interestingly enough, by the time I got there, the battery tested perfectly fine. It was still a little low, but it had more than enough juice to start the car. I discussed this with the manager, who ultimately advised me to test it again after driving a further distance I had planned for that day. He suspected that it may be the alternator. In the over 250k miles of driving I’ve done in my still relatively young life, I’ve never once had an alternator fail. And I would have been rather surprised to see it happen on a five year old car with well under 50k miles, but testing is free and my AAA membership would have taken care of me again if the battery died again, so I went on my way.

I drove around for the rest of the day without incident. Of course, this only deepened the mystery of how the battery had died. But that very evening, I had a lucky break that led me to the answer. I happened to leave something in the car after I had closed the garage so I went back out to get it. To my surprise, when the door was open, I discovered that the headlights were still on. Like any modern luxury car, my car has automatic headlights. So while the battery mystery was immediately solved, it also gave way to another one. Why weren’t the headlights turning off?

When trying to diagnose any car problem, you want to start with the simplest possible explanation. In the case of an electrical problem, that means checking any potentially applicable fuses, which I immediately did. But none of them were bad. So I was back to square one, although at least for the moment I knew I could keep the battery from dying by turning the headlights on and off manually. But I had a lot of other stuff that had to get done so I moved on from the car situation for the night.

The next morning, I thought more about the car as I sat in the sauna. I had realized something had been different for a few days, but I couldn’t put my finger on what. But in thinking about the automatic headlights not turning off, I realized what it was. The dome lights, which are inexplicably non LED and incredibly dim to begin with in this car, had not been coming on. And that’s when it came to me. The automatic headlights were working fine. The issue was that the car didn’t know the doors were being opened and closed! When I thought about it, the automatic adjusting windows, which open slightly when the doors are opened and then close when the doors are closed again, hadn’t been functioning normally either. Clearly I had found the problem. But how to fix it?

First, I went back to the fuses again, this time looking for any door specific ones. But again, none were bad. So I started looking very closely at the doors, checking to see if any wires looked damaged, etc. Everything looked ok. But there was one thing slightly – and I mean SLIGHTLY – out of place. This little guy.

Literally one screw that holds this thing on being slightly loose was causing all of these problems!

It was just slightly loose when I touched it. I didn’t know what it was, but I figured it had to be related to the door somehow due to its location in the door jamb. I tightened it up and VOILA! Suddenly everything worked correctly again. Apparently, the little thing is a sensor that compresses when the door is opened and decompresses when it is closed. And apparently it is very sensitive. So what lessons are there in this experience?

First and most importantly, don’t make assumptions with cars. There are way too many mechanics out there who will just start replacing parts that might solve the problem rather than first finding the exact diagnosis. This can be simple inexperience, but it can also be more sinister. After all, the more work they do, and the more marked up parts they replace, the more money they make. And there is really no way of holding them accountable for doing that aside from not coming back. Had I taken that approach in this case, I would have replaced a perfectly good battery for about $150 and been no better off than when I started. Then, when that didn’t work, I may even have replaced an alternator for considerably more than that. Thankfully, most auto parts stores are happy to help you with testing and even some advice, as the friendly folks at NTB were in my case.

Second, know your car and pay attention to it. While I am no electrician, had I been more observant, I could still have solved this pretty easily. I would have noticed the dome lights not coming on and the automatic adjusting windows not adjusting. At that point, I would already have known what the problem was and could have skipped straight to the last step of the process I just finished describing. Sadly, with as much as I have going on in my life, someone in a clown suit could probably be riding a giraffe through the parking lot of my apartment complex as I walked out to the garage and I’d say there’s at least a decent chance I wouldn’t notice anything unusual. In today’s world, I’m guessing I’m not alone in that.

Third, even in a world of incredibly complex cars with numerous computer modules and miles of wiring, the simplest solution is usually the right one. Yes, a bad battery would have been an easy explanation in this case – but not the correct one. That was in doubt as soon as I got to the auto parts store. In the end, it turned out to be a part so simple that cars have probably had them for as long as they’ve had dome lights that turn off when the doors open. And it wasn’t even bad – just slightly loose.

Sharpening the Saw – Possibly Covey’s Most Underrated Habit

Believe it or not, this tranquil scene of water and mist is on a little trail at a rest area only a hundred or so feet from a major highway between Houston and Dallas. Spots like this offer a great opportunity for travelers like me to “sharpen the saw,” if only for a few minutes.

Happy Monday! If you haven’t read The 7 Habits of Highly Effective People by Stephen Covey, I highly recommend it. Most likely, it will either help to explain some of the trends you’re seeing in your life or it will give you some ideas that will improve that life dramatically if you implement them. Simply put, it’s an absolute classic in the world of self help, success oriented books. I could easily write posts about every one of the habits and how they’ve helped me, but right now I feel compelled to write about the very last one: sharpening the saw.

The reason I want to write about this concept is that although last week was pretty rough, today, I feel better than I have in a while heading into a new one. What did I do this weekend that brought this about? Yes, I did some work on both of my side businesses (I’m working on a brand new second one; I’m sure I’ll talk more about that as it progresses), this blog, and my W2 job. But mostly, I sharpened the saw. What does that entail? Instead of focusing on production, you focus on doing the things that support it.

In my case, I got some fresh air while playing tennis, did my usual weekend cardio, cleaned up my apartment, read, drank delicious coffee, talked to some good friends, made and enjoyed some delicious food, watched some quality football (unfortunately the Packers won, but at least it was a good game), and just generally relaxed and recharged. None of this is revolutionary stuff, and none of it will directly result in anything measurable. But that’s not the point.

The point is that on a Monday morning, I feel energized and ready to attack my workout and get my week going. As always, there are plenty of challenges ahead. Plenty of things I would rather not do, or even think about. But take away that weekend I had, and rather than feeling ready to take all of it on, I’m feeling run down and nowhere near in the right frame of mind. So that’s about it for today. When you get a chance in your life, I encourage you to sharpen your own saw.

Here’s to an awesome start to the week for all of us!

Watch Out for this 401k Trap Later in the Year

A very amateur picture of the mighty Jerry Dome, where the Cowboys would be crushing the hapless Giants tonight if not for it being an away game

Happy Monday, Folks! Today’s post is not going to apply to everyone. The problem I’m going to address falls into the category of “good problems to have.” However, if it does affect you, it will cost you money if you don’t address it. The post applies to folks who A) max out their 401k contributions, and B) have variable income – commissions, bonuses, etc. For those who don’t fall into both of those categories, don’t feel bad and don’t underestimate what can happen in your life either. This is only the third year this information has applied to me and the year before the first, I never would have seen it coming. This method may seem complex, but it is actually really simple once you understand the concept.

In most employer sponsored 401k plans, employers match some percentage of your contributions. The most common one I’ve seen is 3% if you contribute 6% of your salary, or simply 3% of your salary to keep things simple. Some are more generous than that, and many are less so. But let’s use that for the sake of our example. Let’s say you have a set $100k a year salary and want to max out your contributions for 2019. Since the limit is $19k this year, you would simply need to contribute 19% of your salary, which would both easily cover the 6% requirement to get the entire match and hit the contribution limit exactly by the end of the year. If you did that, you would contribute $19k, your employer would contribute an additional $3k, and your total would come to $22k. Bueno!

But what if your income varies depending on performance and other factors? Herein lies the problem. If you anticipate your income will end up being roughly $100k, you want to max out your contributions for the year, and you subsequently set them at 19% and forget it, one of two things is very likely to happen. Either you’re going to undershoot and leave tax shelter on the table (every dollar you contribute to a 401k reduces your tax liability) or you’re going to overshoot and lose out on some of your potential employer contribution money.

Here are some examples to illustrate the point. Let’s say you end up making $80k. At the end of the year, you will have contributed $15,200, missing out on $3800 of tax shelter. You can multiply your top marginal tax rate by that number to determine how much that will wind up costing you. But regardless, ouch! Now the opposite scenario. Instead of making $100k, you wind up making $120k. You would have contributed more than the maximum $19k at some point, except that whatever company administrates your plan is likely to simply cut off your contributions when you hit the limit. So instead, you would have finished making your $19k in contributions for the year at some point before the end of the year. It’s good to be early, right? Not in this case. Unless your employer “trues up” the match at the end of the year, which I doubt most do, you would have left $600 in employer match on the table. Why? Barring the “true up” exception, an employer matches check for check. In other words, you wouldn’t be getting any match for the $20k you had left to earn after you made the first $100k and had subsequently contributed 19k. Once again, ouch!

So how do I avoid either of these scenarios? I make adjustments throughout the year. At the beginning of the year, I set my contribution percentage as if I were only going to make my base salary. In other words, it is much higher than it will be by the end of the year, but if I don’t make a single dollar in bonus compensation throughout the year, I will still max out my 401k. Then, each time I get a bonus, I calculate how much I have left to contribute for the rest of the year, divide it by the amount of base salary I have left to make, and make the result my new contribution percentage. Admittedly, this is a conservative method. But that’s the way I prefer to operate.

You can modify this system to your liking, and you may have to if your base salary is a relatively small percentage of your total annual income. It just requires a little “guess and check.” For example, if your base salary is $40k and your total annual bonus is typically in the high five figures, you’re not going to start the year contributing 47.5% of your salary. Not only would that make for some very lean times until you got your first bonus, but it would also very likely cause you to eat up way too much of your $19k way too quickly, thus eventually defeating the purpose of the entire exercise once you couldn’t contribute a large enough percentage to get the full employer match without going over the annual limit. So in a situation like that, I would probably just estimate, start out contributing around 15-20%, and adjust as needed to stay on pace.

But one nice side advantage of doing things my way is that as the year goes on, the paychecks get bigger. In my case, the result is that I tend to do more of my after tax investing later in the year since I have more cash coming in the door. But regardless of how you do this, the important thing is that you not leave money on the table – either with your employer, or with the bad guys. I know this may seem like overkill to some of you to save what will likely amount to less than $1k a year, but this is a finance blog. And besides, no one knows what the future holds. When you’re at retirement age, you just might need that money and besides, it will almost certainly have grown considerably by then. Plus, although this took a lot of words to explain, it only takes me maybe fifteen minutes total of calculating and making adjustments throughout the year, so in my opinion, it is well worth doing. Have a wonderful week and go Cowboys!