Happy Friday! You may have noticed I didn’t post on Wednesday this week as I had planned to. That’s because I haven’t had as much time available as usual, which isn’t much anyway (more on that in a minute), because I spent a few days of this week test driving cars and ultimately buying one. With that fiasco behind me, I will return to regular posting again next week. And I will post about that experience and some new things I learned about car buying in the coming weeks.
That said, going forward, I’m going to be posting twice a week instead of three times. My plan is to do it on Monday every week and then again one other day. I may try out different ones over time and choose a particular one to stick to if I notice it working better than the other possibilities. I am enjoying what I’m doing with this blog and I’m certainly going to follow through on my commitment to see it through for at least one full year. However, my life has gotten significantly busier over the last several months. Please note that I’m not complaining; I choose how I spend my time according to my goals and desires. But I’ve been struggling to keep up lately and finally I’ve had to accept that it’s because of simple math.
My job has evolved and now involves significantly more time and travel than it had earlier this year. I figure I’m putting in 60-70 hours a week now – roughly 10-12 hours per weekday and about that many total over a typical weekend. I’m doing my best to dedicate adequate time to my new hobby of learning to fly, which involves attending ground school once a week, reading every day, watching videos, and of course the flying lessons themselves. That’s about another 10 hours a week. My 10 hours a week in the gym (including time spent in the sauna after some of my workouts) are non-negotiable and I feel that’s the bare minimum I’d like to spend there. I spend about twenty minutes a day working on learning Spanish and at least maintaining my current level in German, which adds roughly 2 hours a week. For those keeping score at home, that’s 82-92 hours per week that are already accounted for on what I consider to be essential activities. Given that it takes me about 9 hours to attain my goal of 7.5 hours of sleep on a good night and that sleep is crucial to health so also non-negotiable, that leaves me with 13 to 23 hours per week to do literally anything I haven’t already mentioned – social activities, writing for this blog, you name it.
Simply put, I’m scraping the upper limits of what is possible for me without making sacrifices I believe would hurt me in the long run. I’m passionate about everything I’m doing and I don’t want to give any of it up. But that only leaves me with two options. One, I can find ways to be more efficient. That pursuit is already a regular part of my life and unfortunately, while I’m obviously not 100% efficient, I don’t think there is a lot to be gained in that area either. Two, I can make some cuts. There are occasionally opportunities to ease back on the work time, although that’s already accounted for in the range I used. Aside from that, any savings has to come from much smaller sources and thus, in much smaller amounts. And to add up to a meaningful difference, there need to be several of those small amounts which means nothing non-essential can be held sacred. Each post I write for this blog takes roughly an hour. And while I’m enjoying doing it, I’ve decided to re-purpose one of those three hours. I will give it a try and see how it goes for a while and adjust as necessary from there.
Is this a lengthy explanation? Sure. But in addition to wanting to explain why I’m doing what I’m doing, I thought tallying up my weekly hours was an interesting exercise that might inspire someone to try something similar and figure out something imporant. Have a great Friday and weekend, Everyone!
Happy Tuesday, folks! I hope you enjoyed your Labor Day. As for me, I made a point of NOT laboring and instead, I enjoyed some relaxation time. I’ve been going very hard lately so I was due for some. Anyway, today I’m going to talk about medical expenses. Over 2017 and 2018, I spent an average of $900 in this category. Keep in mind that I don’t include health insurance in this number since I already accounted for it in my insurance category. Most of the spending that brought that average up was in 2018 when I spent months in physical therapy working through a herniated disc in my back. I’m very lucky to have good insurance, but that $50 copay per appointment still added up over time. I also sprained my ankle, making it a very unlucky health year for me. I’ve decided to write this particular post in list form for a change of pace. So here are my tips for saving on medical expenses, in no particular order (although the first one is definitely the most important and you can probably already guess what it is).
“An ounce of prevention is worth a pound of
There is no better way to save on medical expenses than to avoid getting sick. This means investing time, effort, and occasionally money consistently. There is a reason this is one of the first posts I wrote on this blog. In a good year, I spend little or nothing in this potentially very dangerous category. And that is no accident.
Understand how your insurance and the medical
billing system works and mitigate things as much as possible.
Learn about how deductibles, copays,
out of pocket max, etc operate and pay attention to them. Occasionally you can
do yourself a favor here. For example, if you need something done and the timing
is flexible, you haven’t met your deductible yet this year, and you’re close to
the end of the year, wait until next year. That way, you’re giving yourself a
better chance to meet next year’s deductible rather than simply throwing the
spending away on this year’s, which you won’t meet anyway.
Make sure you know something is
covered BEFORE you get the service done. As a young lad of nineteen, I had my
wisdom teeth removed, foolishly assuming my insurance would cover it. Later,
when a bill for a few thousand dollars showed up, I ultimately learned that it
did not – at least not in the particular way I had it done. I don’t remember
the details now. But as a kid that age, that was a tough financial hit. More on
Also, understand that medical
billing is a very inexact science and that it’s done by humans, who do make
mistakes. Pay attention to what’s on your bill and if something doesn’t look
right, call and find out what’s going on. You will definitely encounter some of
the “it’s them, not us” game between doctor’s offices and your health insurer,
but every now and again, you can get something resolved and avoid paying for
something you shouldn’t have to. Plus, in the process, you will gain a valuable
understanding of a system that intimidates a ton of people.
Use your life experience to your advantage
and apply what I call the 1-2 week rule.
Back in the days when insurance
that covered basically everything was commonplace, I would go to the doctor for
basically anything that came up – a minor rash, a cold that lasted a little
longer than usual, a strange pain in my knee, etc. But somewhere along the
line, I noticed a pattern. More often than not, the outcome seemed to be “give
it a week or two and come back if it hasn’t improved.” And those doctors
usually knew what they were doing since in most cases, no return visit was
necessary. Fast forward to today, when many people have to pay at least $25 for
an office visit and some have to pay the entire cost, and my approach has evolved.
As long as something doesn’t seem serious (I use a combination of feel, past
experience, and Dr Google to make that determination), I just self impose that week
or two. Whatever the issue is, it almost always goes away – no copay necessary.
If you don’t have insurance, there are work
Most service providers have a cash
price, and if you don’t have insurance, you should ask for it. From what I’ve
heard, there is some leeway, especially if you’re going to pay up front. And here
is a gem on the prescription side: www.goodrx.com.
If you’re not familiar with it, give it a try and thank me later. I have no
clue how it works, but somehow it does. I’ve even successfully used it when I
had minimalist insurance through a very cheap employer that had a deductible on
prescription coverage. One other thing. Remember my wisdom teeth mishap from
earlier? I didn’t have a few thousand bucks laying around back then. But the
doctor’s office was happy to set up a payment plan for me and six painful
months later, the lesson had been paid for in full. They didn’t even charge
interest, which I thought was very decent of them. From what I’ve heard, this willingness
to set up no cost payment plans is common practice.
As usual, Costco can help.
If you haven’t heard, Costco’s
Kirkland Signature brand is both awesome and incredibly cheap. Since moving to
Texas, I suddenly have allergy issues in the spring and the fall. It’s just one
of those things. But their nasal spray works wonders for me – and costs about
the same for five bottles (enough to get me through probably a decade or so) as
the name brand does for one. And this is just one of many, many examples. I would
go so far as to say that area of the store is the most underrated of all. Oh.
And with most regular household stuff like ibuprofen or that allergy medication
I just mentioned, you can pretty much ignore the expiration dates. Sure, the
effectiveness may go down slightly over time, but not to a noticeable degree in
my experience. I have an entire bathroom closet full of expired stuff that always
gets the job done when needed.
There is only one magic bullet
with medical expenses: prevention. And it isn’t actually magic; it requires
work and discipline. Beyond that, anything else is going to cost money. But
there are ways to keep things from getting out of hand. Hopefully there is an
idea or two in this post that will help you. I hope your short week is off to a
great start and I’ll be back with my regularly scheduled Wednesday post tomorrow.
Happy Friday! This is the follow up post to Wednesday’s. In that one, I talked about the downsides to having a high paying job. Today, I’m going to end the week on a positive note by talking about the opposite. It may seem a little ridiculous to write a post about reasons someone would want a high paying job. But I’m going to try to stay away from the obvious and go into the aspects someone who hasn’t had the experience might not think of. Let’s get this going.
You will face huge challenges that will force
you to grow in ways you may never have otherwise.
I’m talking about great big,
existential challenges here. As in how do I make something happen over an
extended period of time that my employer claims to want (and bases my pay and
continued employment on) but seems to do everything in its power to prevent
from happening? This may sound like a negative, and on its face, it is. But nothing
worth having comes easily. In this case, you’re stepping up to face some things
that have the potential to break you, and often will come close to doing just
that. However, if you’re up to the challenge, you will come away with something
far better than money. In my mind, there is no greater reward than going into
every subsequent life experience being able to look back at the incredible
things you’ve been able to accomplish against the odds and knowing that there
is very little on this planet that can stop you when you’re at your best.
You will learn how to deal with people more
effectively than you ever would have thought possible.
We’ve all met those difficult
people in life. You know, the ones that make you wish you never had to interact
with them in any way. The ones who have you thinking “his poor wife!” The
higher you rise in your career, the more difficult personalities you’re going
to encounter. The upper echelons, at least in the business world, are mostly
populated by people who were just too stubborn of assholes to allow anyone to
stop them from getting there. The egos are enormous and manipulation, bullying,
threatening, belittling, etc are all everyday tactics. These are people who don’t
have to worry about HR since they often own their own companies or are the most
powerful people in them if they don’t. Avoiding these people is not an option. And
neither is failing to get results while dealing with them. For a while, you
will hate it. Then, one day, you will wake up and realize that there is almost
nothing left in this world that can intimidate you. The hotter the fire, the tougher
the resulting metal that was forged in it.
You will make tons of powerful friends.
When I started out in my career,
networking was always a dirty word in my mind. This was mostly because I knew
very few people who could do anything for me, which made it feel like all I
could do was beg for help. Not a fun feeling. But once you’re in the club of
people who eat, sleep, and breathe work, most of your interactions are with
people who control all kinds of different decisions – both within your company
and in others. Just like in any other job, you naturally make friends, and
enemies, in the process of your day to day activities. And suddenly, networking
You, yourself, will become powerful.
Most of us spent at least the first
several years of our careers feeling trapped in dead end situations. In my
case, no matter how hard I worked, it didn’t seem like it made any difference. But
over time, if you’re highly capable and you work hard, it does. And one day,
probably sooner than you would have expected, you find yourself in a position
where almost everything you do makes a difference. And while that comes with a
ton of risk and responsibility, it’s also a pretty nice feeling at times to
look at a situation and realize that you made it happen through sheer force of
You will enjoy yourself at work – at least
some of the time.
One of the reasons I ultimately
decided not to go to law school is that law is an incredibly competitive
industry where about half the people simply don’t make it and eighty hour work
weeks are pretty much the norm. At the time, I couldn’t fathom working that
much or that hard. But fast forward less than a decade and here I am working in
the incredibly competitive finance industry, where a high percentage of people don’t
make it and I’m basically working most of the time I’m awake. If you’re not
already in it, that may sound like a nightmare. It certainly did to me. But
somewhere along the line, I think I realized that I could either have a
mediocre, unsatisfying career or I could put everything I had into a good one. Sometimes
people manage to find that sweet spot in between the two, but those situations
are pretty rare and typically don’t last. Our economy is just too competitive
now and where there is inefficiency, it will usually be discovered and destroyed
– one way or another. Going “all in” is the only option I found that allowed me
to truly make an impact. And in that way, I feel I gained something rather than
lost it. Instead of spending forty hours a week doing something that feels
pointless and barely pays the bills, I’m spending significantly more hours than
that, but I’m doing meaningful work and the bills are not a concern at all. Of
course, that last part also has a lot to do with keeping lifestyle inflation in
check. Don’t ever forget that you can outspend any income.
When you become valuable to a company, the
way it spends money on and around you changes.
I still remember when I was booking my first flight in my current job. I was talking to my then new boss about a couple of possible options. One was cheaper than the other, but involved a layover. “Don’t forget the value of your time,” he told me. And it’s true. If you think about what the company pays me in a typical hour, it doesn’t make sense for me to spend a significant part of my day sitting at some airport in Detroit or some other God forsaken hellhole because the airfare was a hundred bucks cheaper. And it doesn’t stop there. Customers need to be entertained and the only rule I was ever given was to “use your judgment.” Lunches, dinners, football games, golf outings, etc are regular parts of my working life now. My recent college graduate self wouldn’t have believed the expense reports I routinely turn in today. Obviously, I do try to keep things within reason. After all, we’re running a business. But even with the company and the industry going through a very difficult time, no one has suggested cutting these kinds of expenses. They understand that if that needs to happen, we may as well just close the doors because if we don’t make our customers feel great about doing business with us, someone else will.
I think that in a lot of areas of
life, you really do get what you put in. A high paying job is definitely not
for everyone, because you will have no choice but to make it your top priority
in everything you do. I went into that and several other drawbacks in Wednesday’s
post because I think it is very important to understand the reality of what you’re
getting into. But if you’re willing to pay the very high cost, a high paying
job will at least give you a lot back in return. I don’t know how long I will
dedicate my life to working this way. But the good news is that as time goes
on, because of the work I’ve already done and the way I’ve managed my money, I should
have an ever widening range of options available to me. Have a wonderful weekend!
I don’t want to send the wrong message. I’ve chosen the path I’m on, I take full responsibility for it, and knowing what I know now, there is a good chance I would still do it again. But if you’re frustrated with your income, I want to pull back the curtain and give you a taste of what it really costs to make six figures and up. I don’t want to trivialize your situation. I spent years of my life in circumstances of scarcity to the point where I still struggle with strange personality quirks that are probably rooted in those experiences. I don’t want to go back there. So in the interest of presenting both sides as fairly as I can, I’m going to write a second post to follow this one called “Why You Want to Make the Big Bucks.” But today, we’re looking at why you wouldn’t want to. Here are my reasons, in no particular order.
You will have very few friends at work.
Sure, people might act friendly to
your face. But nothing happens in a vacuum these days. They may not know the
exact amount you make, but they know it’s a lot more than they do. And jealousy
can definitely make people treat you differently. You may even have people
trying to take you out in an attempt to get what you have for themselves. Additionally,
in order to survive in a very high income position, you have to do unpopular
things. If you’re in management, you will have to fire people, you will have to
tell people NO all the time, and you will have to choose between options that
seem terrible to everyone below you while ignoring the options they prefer
because they simply aren’t feasible. If you’re in sales, you will have to fight
for your deals. Hard. You can do all you want to try to maintain a relationship
with an office employee. But when he is standing between you and payday, you’re
going to roll over him or go over his head. If you don’t, you not only won’t
make money, but you’ll eventually be fired for lack of production. Having more
power may appear to give you more options. But once you have it, you realize
that those options are limited by factors people on the outside rarely see.
You will have a difficult time knowing if you
have friends at all.
I have some wealthy friends who you
would never think have more money than anyone else. If you were to meet one of
them in a day to day situation, you’d see someone driving a normal car, wearing
normal clothes, living in a normal house, etc. This isn’t just an effort to
save money, or even to live modestly out of personal preference. It’s also an
effort to hide. Lottery winners and sports heroes often don’t have that option
and that is one reason so many of them wind up broke. They’re human beings just
like anyone else, and they want to have normal relationships in their lives.
But bad actors know that and they work their way in, taking advantage of any
trust that is placed in them. Of course, there is a big difference between
Adrian Peterson, who everyone knows has (or had) tens of millions to his name,
and someone who has a mere one or two million in the bank. But the concept
works similarly for both. Is that new girlfriend with you because she likes you
and enjoys spending time with you, or is it because she can smell a payday if
she can only get herself married, pregnant, etc? You want to trust her. But it
is very difficult to know if you should. Often you won’t find out for sure
until it’s too late.
You will have a huge target on your back.
Like most companies in our
industry, my employer has been under serious financial stress recently. Cost
cutting has become necessary. And guess what? Firing highly compensated
employees is a much quicker method of accomplishing that than firing low or
average paid ones. I’m not saying people in the latter group will never lose
their jobs. But if you make a lot of money and you’re not an elite level
performer, you’re definitely the low hanging fruit. Even some of our most
successful sales people are feeling the heat now.
You will be in high demand…until you’re not.
I wrote about how a lot fewer people than you think make big money just last week. That means that especially within a particular industry, most people near the top will at least be aware of each other. If you’re fired, word will get out quickly along with all sorts of rumors and theories about why it happened. If you want to move to a different company, you will probably wind up working with people you know from the past. This can be either a good thing or a bad thing. But in a world where even the nicest people have to do some pretty ugly things to get to the top, it is bad more often than it’s good. And if you lose your job as a result of your industry tanking, it’s going to be very difficult to find another one because the other companies that could best utilize your skillset probably aren’t hiring. There are plenty of those people in my life right now, whether they’ve been fired or are just at the point where they feel a switch is their best option.
You will be expected to give absolutely
everything you have and it will never be enough.
There is no clocking out when you
make six figures. You can’t really even go on vacation. You would basically
just be working from home, except from a different place. If you have a family,
friends, or other personal commitments, they will come second more often than
not. The other option is to find another job. And remember, you’re a highly
compensated employee. So when you succeed, well, of course you did. That’s what
we pay you for and frankly, you still should have somehow done better. And when
you don’t, you’re crucified – whether it was a result of factors under your
control or not. Simply put, you’re paid to win, that’s expected, and anything
less is a failure even if you did the best job you possibly could have.
You will make a lot less money than you
Political pandering aside, the
reality is that unless you’re part of a small fraction of the top 1% of income
earners, you don’t have access to most of the accounting tricks that allow the
truly rich to avoid some of their tax liability. And even if you are, the
numbers don’t lie. In 2016, the top 1% of income earners made just shy of 20%
of income in the US, but paid nearly 40% of the taxes. For the top 10% of
earners, those numbers were about 50% and 70%, respectively. Meanwhile, the
bottom 50% made almost 12% of the income, but paid only 3% of the taxes. Keep
in mind that these statistics are just for federal income taxes. Making a lot
of money is very expensive just about anywhere the government is involved. Long
story short, the more you make on paper, the less of your income is actually
When people talk about money, they tend to focus on the
benefits and ignore most of the costs. The grass is always greener on the other
side of the fence, as they say, but things are never quite as easy or wonderful
when you make the effort to put yourself in someone else’s shoes and view them
objectively. Like I said at the beginning of the post, my personal verdict is
that I’ll take the money – at least for now. But everything has its cost.
Plenty of people would be capable of making very high incomes, but they choose
not to make the sacrifices required. And that’s fine – perhaps even admirable.
There are definitely more important things in life than money and the higher
you go on the income ladder, the less of any of them you tend to have. The most
effective decisions in life are made when all costs and benefits are factored
in. If I’ve given you a window into the costs of something very few people
actually get to personally experience, then I accomplished my goal with this
post. And it isn’t all bad by any means. Stay tuned…
Happy Monday, ya’ll! I decided to take a break from my Annual Expenses series of posts as the concept was feeling a little stale. I’ll probably pick it back up next week. But for today, I want to tell you about a recent purchase, give you a general update, and do one other thing I had said I would but forgot about until now. Let’s get to it!
Over the last year or so, I’ve noticed a trend where “deals”
pop up when I’m looking at my online accounts with different banks. Usually,
it’s in the form of “spend x dollars at a particular store, get a y dollar
reward.” I haven’t messed with them until now because I’ve been busy, the
offers usually didn’t apply to anything I particularly wanted to buy, and the
dollar amounts didn’t entice me to do things differently. But recently, I saw
one with American Express that changed all that: spend $25 at an office supply
store, get a $5 reward. Toner cartridges for my printer cost way more than that
and I have to replace them every pretty routinely, so I went to the local
Office Depot. The cartridge I needed seemed a little pricier than usual at $90,
so I checked online. The first option I saw was $60 – and interestingly enough,
it was at Officedepot.com! I asked one of the clerks if they would price match
their website, it turned out they would, and just like that, I had saved $30.
Tack on the $5 from the good people at American Express and the cartridge was
The lessons here are pretty obvious, but bear repeating as a
reminder. First, keep your eyes open for easy opportunities. It took me less
than thirty seconds to read over the Amex offer, come up with a plan to take
advantage of it, and click it. Second, a price is not set in stone. It was a
little shocking in this case that Office Depot’s brick and mortar location was
substantially more expensive than its website (and no, the online price did not
say it was a “sale price”), but even when it’s someone else’s website, a lot of
stores will price match now since if they don’t, they will probably fall victim
to “showrooming.” Third, regardless of the situation, it never hurts to ask and
you can’t get what you don’t ask for. ‘Nuff said.
My current career situation could be described as “frustrated
and angry, but opportunistic.” In the throes of panic mode, my employer is
making life incredibly difficult for those of us out in the field with a
seemingly impossible double standard. Their words say “we want tons and tons of
business.” Their actions say “we’re not going to let you do any business unless
we absolutely have to.” And some other actions have already made it clear that
“if you don’t do tons and tons of business, you’re fired.” It seems
infuriatingly disingenuous, particularly when you consider that numerous
firings have already happened and not one of the people left employed appears
to be safe. But then you remember that these management guys are likely facing
similarly impossible double standards that have been set by the guys above them
and the whole thing just kind of becomes a shared nightmare for all.
The only thing that’s certain is that it’s time to put up or
shut up. As a result, I’ve been busting ass like never before and thankfully,
succeeding like never before in spite of terrible market conditions. In fact,
not only have I become one of the higher performers in the entire country, but
of the handful of people who have been hired in my division over the last five
years or so, I’m literally the only one left standing. I’m damn proud of that,
even as I feel for those who didn’t make it. There are two ways to look at this
situation. Sure, it’s difficult and in many cases unfair. But life hasn’t been
fair since the kid in preschool took the toy from you without asking, you
pushed him, and the teacher only saw the second part. Or even before that when
one kid was born into almost unimaginable wealth and opportunity in the US by
world standards, while another was born into almost guaranteed poverty.
Bottom line, there is opportunity in everything, even when
things look extremely bleak. I do my share of bitching, no doubt. I need to
work on not letting things phase me as much. But at the end of the day, I’m the
guy who’s out there in all out attack mode when many others are retreating. I
may go down swinging anyway, but that’s virtually guaranteed if I don’t try. In
the mean time, I’m making more money than ever and building on what had already
been a pretty promising career. This terrible period could be the one that
takes me from pretty successful to extremely successful. Someone has to come
out on top, right? As many people who have gone on to give the best
performances of their lives have said, why not me, why not now?
Like it or not, few entities have more data on us and our finances than the credit bureaus. We can either waste our time being angry about that, which will change nothing, or we can use the opportunity to indulge our inner data geeks and glean some valuable insights. Recently, someone from Experian emailed me about a post on their blog. It is a comparison of mortgage debt held by different generations and since typing the word “millennial” is basically page view gold, it of course approaches the topic from that perspective. I think the data is presented in some pretty interesting ways. Of course, if you go to their blog, they’re hoping you will click on something else and buy something. But the post is free. And full disclosure, I’m not getting anything from linking to it other than to help a fellow blogger out. Check it out here.
That’s all for today, folks. Have a great Monday and an even
Happy Friday everyone! Here is the conclusion of Wednesday’s post.
Now let’s look at the high end. A six figure salary is yesterday’s news since everyone has one now, right? Wrong. An annual income of $100k puts you in about the 90th percentile as an individual or the 75th as a household. Keep in mind, we are back to US only numbers now. And I want you to see how steep things get from there. Want to be in the top 5% of earners? That’s about $150k. And that top 1% that is always being demonized by the media? Roughly $300k. Not nearly as much as you thought, I’ll wager. And that means everyone making any amount larger than $300k is in an increasingly smaller fraction of the top 1%. There really aren’t that many of these people.
Not quite the common perception, is it? The distortion is
caused by free and easy credit. Fifty years ago, if you were driving a Corvette,
it meant something. Today, you see them everywhere because any idiot with some
combination of a halfway decent income and a halfway decent credit score can
buy one brand new. You don’t necessarily even need both of those to qualify
anymore. Subprime auto loans are starting to blow up now that the recession is
most likely in progress, but they’ve been handing the damn things out like
candy on Halloween over the last several years.
The point is this: appearances mean nothing. Zilch. Most
people have been so busy maxing out their credit to show off how successful and
important they are for so long that they didn’t even notice when what they were
doing ceased to mean ANYTHING. Women, here’s a special PSA for you. That guy
driving the fancy car might be the hyper successful whatever that he claims to
be. But more likely than not, the story is a lot more ordinary than that and
he’s either borrowing Daddy’s car or he’s just maxed out his credit to sell you
something a little different. It’s called peacocking and it’s extremely common
– and a fairly logical response to a phenomenon called hypergamy. Women don’t
usually do it because most men don’t care about the finances/career success of
the women they date. They put on makeup and get breast implants to make
themselves more marketable. But that is a whole different topic for another
When I was growing up, there was a very exclusive
subdivision in our area where every single house was a million plus and living
there almost seemed to make you a celebrity. And in fact, there were some
living in there, even in lowly Wisconsin. A certain Green Bay Packer who once
got in the wrong hot tub and suffered some pretty serious consequences for it
was among them. Anyway, this was one small suburb of Milwaukee, Wisconsin.
Today I realize there aren’t enough jobs within fifty miles of that subdivision
that pay $300k or more for someone holding one to have been living in every one
of those houses, let alone every similar house in all the other similar “rich
people” enclaves in the metro area. Most of these people that I thought were
living fairy tale lives were in fact living in financial prisons they
themselves had built. I don’t need to know every one of their personal
stories. The statistics make what I just said an undeniable fact.
There is a wonderful book called The Millionaire Next Door
that I highly recommend to everyone. It goes into detail on this very thing and
I still remember specific parts of it to this day that just blew me away. The
summarizing message is that now that almost anyone can appear to be wealthy, it
has obscured the fact that most people who are actually wealthy don’t care very
much about appearances. The lesson? If you want to actually BE wealthy, you’re
pretty unlikely to get there by trying to LOOK wealthy. In fact, spending
everything you have on trying to keep up appearances will almost guarantee that
you will never actually have much of anything.
This is a seemingly obvious concept. But everywhere you
look, style is being valued more highly than the actual substance it supposedly
represents. Most of what you see is fool’s gold. And bringing it back full
circle, don’t let these peacockers fool you. Live your life reasonably and be
happy. Remember that a very tiny percentage of the people who have ever lived
on this earth have had things as good as you do. This is whether you make $30k
a year or a million or anywhere in between. Perspective is incredibly valuable.
It’s easy to lose it in a culture like ours where results are often valued more
than the principles and the processes that produced them. But fight back
against that. It’s only a feeling. The facts are much more relevant to your
success or failure in life. And I want every one of my readers to have the
In this crazy world we live in, everywhere you look, someone is showing off their wealth. Million dollar houses, hundred thousand dollar cars, exotic vacations, you name it – these things are all so commonplace that we barely even notice them anymore. Social media has only amplified this trend, with millions of people taking to the internet to post snapshots of their lives that have been carefully curated to show them only in the best light possible. Especially if you live a pretty typical life, and even if you don’t, you can be forgiven for getting the sinking feeling that you’re being left in the dust – especially financially. And that’s exactly the feeling I want to challenge today.
I’m going to use cold, hard facts – statistics in this case
– to do it. When you’re looking at statistics, it’s important to make sure you
understand the context. In the case of income statistics, you can start by
ignoring average (or mean) and going straight to median. Why? Average income
numbers are pulled way up by the highest earners. Median income is a much more
accurate concept of what is “normal.” For example, the average household income
in the United States is over $70k a year, while the median is roughly $60k. And
that brings me to my next point. Household income seems to be the most commonly
reported. And that’s fine. But if you’re a single person household like me, an
individual income number is a better means of making an “apples to apples”
comparison. And in this case, the median individual income is only a little
north of $30k a year, while the median household is nearly double that at $60k.
You can also drill down deeper using all sorts of other factors. The Bureau of
Labor and Statistics (BLS) collects tons of data and it is freely available to
Now that we’re starting from a realistic point, we can begin doing some comparisons. if you live in the United States, or any of numerous other countries with modern economies, you are already better off than a stunning percentage of people in the world. There is a really interesting website called Global Rich List that aims to bring awareness to poverty around the world. If you enter the $30k figure from above (again, this is someone dead in the middle here in the US), you find that this seemingly small income would put you in the top 1.23% of people worldwide. The federal poverty level in the US is roughly $12k a year for one person. But even a person making that little is in the top 14.5% worldwide. And roughly that same percent (14) of the US population lives at or below the poverty line. So if you live here, the odds are overwhelmingly likely that you have more to be thankful for than you might think. You could do the same type of analysis with net worth numbers instead of income and get similar results.
This is without even getting into a historical discussion.
If you started making comparisons with all the people who have ever lived on
earth, you’d be looking at almost infinitesimally tiny fractions of a percent
of people who have lived as well as even the poorest among us today. And that’s
without even factoring in all the technological advances humanity has made. For
example, air conditioning was invented in 1902, which means that before then,
even royalty didn’t have it. Airplanes were invented the very next year, so the
nobility of the past couldn’t travel anywhere nearly as fast as we can. And
don’t even get me started on being able to hold the knowledge of the entire
world in one’s hand. Before the printing press was invented in 1455, books
themselves were very rare because they had to be copied by hand. But today you
can carry thousands of them in your pocket – and they’re updated automatically
as knowledge progresses!
Happy Monday, ya’ll! Here is the latest post in my Annual Expenses series. If you didn’t see the introduction post that summarizes all of my expenses, you can check it out here. I’ve been going into detail on one category each Monday. Over 2017 and 2018, I spent an average of $3000 per year on insurance. To be honest, this category makes me sick since I don’t like betting against myself and have literally never received even close to what I’ve paid in premiums. Not one single year. There is a lot to discuss on this since it includes three subcategories: auto, homeowner/renter, and health/dental. And it is a highly variable expense category since insurance is based on personal factors. But I believe a minimal annual expense would be about $2000. And this is a great topic to go into since my annual auto/renter policy renews in early October and I’m going to be shopping around to try to get just a little bit closer to a reasonable amount – if that is even possible anymore.
I’ll start with health insurance since it is the most
important. I’m very fortunate to have a solid plan through my employer that has
a very low required contribution of less than $1000 total per year – and that’s
pretax. Our dental insurance is less generous and as a result, I even went
without it one year. But dentist appointments seem to be much more expensive
than they are in the Midwest – about $300 on average versus about half that – so
I got back on it. Anyway, admittedly, my minimum annual insurance number above
requires an employee friendly setup because if I didn’t have that, it appears I
would be paying about $4k total per year for fairly minimal individual health
coverage. However, I would then have the advantage of being eligible to
contribute to an HSA (health savings account), assuming I chose the right plan.
An HSA is the add on you want. A FSA (flexible spending account) is only useful
for those who have medical expenses that are both high AND predictable. Unlike
an HSA, which is basically a bank account you own (but can only use for medical
expenses), a FSA is a tax advantaged, but “use it or lose it” account. So only
contribute what you KNOW you will spend or you could easily lose money instead
of saving any.
The key with health insurance is really to stay as healthy as possible. It’s not going to be cheap no matter what you do, but if you have high medical costs, it’s going to be a lot worse. This is one of the reasons I said investing in your health is the best investment you could possibly make in one of my very first posts on this blog. This is also one of those areas where you’re going to pay through the nose for having kids, but that’s a whole other topic. Long story short on health insurance, go through your employer if they offer a decent plan and live the healthiest life you can so you can use it as little as possible. Frankly, if this industry doesn’t see dramatic changes over the next decade or so, this country is going to be bankrupt. So I don’t know how in depth it even pays to go into this. It is simply going to be a moving target for a while.
On auto insurance, I’m paying a bit over $1500 a year for a
single vehicle, which makes me sick given that I paid just over half that much
for two in Wisconsin (and not much more than that for three when I was
married). But you only have to spend a day on Houston’s roads to see that the
drivers here more than justify that difference. Dallas, San Antonio, and Austin
haven’t been much better in my experience, so it’s possible that sky high insurance
costs are simply a Texas thing and a well justified one at that. Anyway, nearly
half of that is for collision, which you should only have if your vehicle is
objectively worth at least $10k in my opinion, and the rest is for liability,
comprehensive, and so forth. I have a 100/300 policy and I’m actually likely to
increase that and add umbrella coverage in the near future since as my net
worth skyrockets, so does my potential loss if I somehow hit one of these
aristocrats who drive $400k Bentleys in an area with roads that are about one
step above a war zone. And it wouldn’t even need to be a car that expensive.
Sending someone to the hospital could cost far more than that very quickly,
especially if they sue. And if it’s major, that’s probably more likely than
not. It’s a calculation you need to make for yourself. If the vast majority of
your assets are in retirement assets, which are typically protected in the
event of bankruptcy, then you can probably afford to gamble a little by having
the state minimum level of required liability coverage. However, if the
opposite is true, then you’re probably going to have to pay for higher coverage
limits as I do and be thankful that it’s necessary.
As far as saving on auto insurance, there are at least some
things you can do. First and foremost, have good credit and a clean driving
record. If you get a ticket, fight it. The ticket itself may only cost a
hundred or two, but the increased insurance premiums could cost more than that
on an annual basis for five years or more. Some states are better than others
for this. I know people in states where they’ve been able to lawyer up and get
out of anything and everything up to and including alcohol related stuff. In
other states, it’s not even worth trying. Do your research and find out which
your state is and act accordingly.
Definitely shop around with your policy. The rule of thumb
is to do it every other year, but with as much as I’m paying, I’m doing it
every single year until further notice. Loyalty definitely doesn’t seem to be
rewarded at all as most insurers raise your rates each and every year now.
About the only exception I’m aware of is USAA. If you are eligible to do
business with them, thank your lucky stars and do so! I’ve heard nothing but
good things. I’ve also heard good things about Amica, although every time I’ve
gotten a quote from them it’s been way out of the ballpark so who knows. But
most insurance companies are the same basic “charge sky high premiums, then
forget your wallet when it comes time to pay the bill” scams operations.
At least by shopping around, you know you’re not getting
totally screwed. Ask for the longest term you can get (usually it’s either a
year or six months) since if you don’t, you’re effectively financing your annual
premium and the interest rate is not low. Also, you can raise your deductibles
to the max. Usually it’s only $1000 though, which limits the premium difference
it makes. My attitude is that most accidents involve replacing a bumper, which
is going to cost about $1000. I’m not going to make a claim and send my
premiums into the stratosphere so the insurance company will hem and haw and
finally grudgingly pay out five hundred bucks. No thanks. So I’d be paying the
first thousand regardless in the event of a serious accident.
That’s another thing to keep in mind with insurance. Don’t
make a claim if you don’t have to. Much like with buying extended warranties,
you are extremely unlikely to come out ahead in the long run. If you do, you’re
one of the lucky (although also extremely unlucky in another way of thinking)
few. Think about it. If the insurance company (and warranties are sold by them
as well) pays out more than it takes in, it goes out of business. So in most
cases, you’re going to have to fight for every dollar. If the scope of the
situation gets big, make sure the insurance company knows you will involve an
attorney if you need to. And don’t be afraid to follow through with that
either. Someone needs to keep the bastards honest.
I saved the least important type of insurance for last, at
least if you’re a renter. Most renters insurance I’ve ever had has included
roughly $30k for personal property, which is enough for almost any apartment
dweller, and has cost about a hundred bucks a year – yes, even in the insurance
hell that is Houston. Usually I just get it as an add on with whatever auto
insurance company I’m going with that year. Of course, it is much more
significant if you are getting homeowners insurance since you’re insuring the
exterior of the building as well. And if you live in a hurricane area like
Houston, suck it up and pay for the flood insurance. In case you haven’t been
paying attention for many years now, new storms “make history” on a very
regular basis. Don’t assume you are safe just because the flooding didn’t reach
your area in the past. People have literally lost their homes for doing exactly
If it hasn’t come through in the tone of this post, I
fucking hate insurance. It is one of the only industries besides politics that
makes finance look ethically upstanding. I get that there are problem customers
like in anything else, but for the vast majority of us, this is going to amount
to decades and decades of donating money to for profit entities. But if you
keep an eye on them, both when making sure you’re paying a competitive premium,
and when actually making claims, you can at least keep the bleeding from
turning into hemorrhaging.
I know I’ve been a little quiet. If I were Elon Musk, I would tell you I’m currently in “production hell.” However, I’m not an eccentric billionaire doing all I can to change the world. I’m just your garden variety finance guy working as hard as I can to mitigate the damage of the early, but already devastating stages of our latest and long overdue recession while also trying to somehow continue to find and close new business, run my growing side business, continue my flying lessons, and do what I can to be there for some very dear friends who are going through some difficult times in their lives. These are all such high priorities that I’m not willing to compromise on any of them. So it has been all I can do to keep up this week and I’ve chosen to let this blog slip over losing sleep or letting my workout schedule be affected.
However, I’m going to do all I can to get back on top of everything this weekend and free up some time to get back to my regular posting schedule next week. For anyone who has been following my blog, I appreciate your interest and patience during this chaotic time. I’ve committed myself to keeping this blog going for at least a full year and I have no intention of going back on that. See ya’ll soon!
Happy Monday, ya’ll! Here is the latest post in my Annual Expenses series. If you didn’t see the introduction post that summarizes all of my expenses, you can check it out here. I’ve been going into detail on one category each Monday. Over 2017 and 2018, I spent an average of $12,600 per year on my housing expenses. Please note that this only includes rent – not utilities, maintenance (I pay zero since I rent), or any other associated expenses. And that is actually trending upwards. This is the largest annual expense for most people and I’ve made tons of financial progress over the years by being very conservative with it. I still am in some ways, but I’ve definitely moved a significant distance along the cost/quality spectrum in 2018 and 2019.
What does that look like? For the last two years, I’ve lived
in what I’d call medium-high end luxury apartment complexes. But I’ve also had
one bedroom apartments, as much to maintain the more minimalist lifestyle I’ve
learned I prefer as it is to save money. It’s hard to buy too much crap you don’t
need when you only have 700 square feet to put it in. So I avoid clutter but
also get to enjoy premium features in my unit, beautiful landscaping, great
amenities, and a safe, quiet location. But even in the relatively reasonable
Houston market, I’m spending more than I was in most of 2017 in the Milwaukee
suburbs, which skewed the average down.
This year, I’ll have spent over $15k when all is said and done.
I’ve allowed this form of lifestyle inflation to happen because I genuinely
enjoy where I’m living and because it is still at an extremely manageable level
relative to my total income. The conventional wisdom is to spend a maximum of 30%
of your gross income on rent. My preference is no more than 10%, and grudgingly
15% if you’re paying a mortgage instead of renting (more on that later). I
acknowledge this would be much more difficult with an income at or below the
average range. But there are ways to do it, and without compromising on
essentials like safety. And that is why I said I believe this expense can be reasonably
kept to $6-10k.
How? For starters, by viewing things from a more traditional
perspective. As individuals in today’s world, we are more isolated than at any
previous time in the short history of our species. Only a few generations ago,
someone living alone as I do was not only fairly rare, but seen as pretty
unfortunate and even embarrassing. I think humanity has lost a lot in the
process of abandoning our collectivist roots. And I say that as a man you can probably
correctly guess is a pretty strong fiscal conservative. Long story short, live
with someone. It requires careful relationship management, particularly if you
choose to live with a romantic partner, but it can be done. I believe there are
likely psychological advantages, even for someone like me who doesn’t need to
do things that way for financial reasons. And with two (or more) people kicking
in, it’s pretty easy to keep your annual rent expense below $10k in all but the
most ridiculous markets, like New York City or San Francisco.
From there, follow the same process I always talk about. Think about what your needs truly are. If you don’t have a fancy car, you probably don’t need to pay more for a place with a garage. If you aren’t going to use a fancy resort style pool area, a gym, a spa, etc, very often, don’t rent somewhere where you’re paying for those things. If you want to be a hardcore personal finance warrior like the legendary MMM, consider paying more to be close enough to work to walk, bike, etc, and see if you can cut car ownership, the second largest expense for most people, out of your life entirely for a year or two. If you don’t care about hardwood floors and granite countertops, well, I think you get the idea.
What if you own your home instead of renting? Theoretically,
it should be cheaper then, since with renting you’re paying for someone else to
do all the maintenance as well as to have the option to leave on short notice.
But in the reality of today’s hyper-inflated housing market, that’s often not
the case. So my first advice in this area is not to buy something overpriced. Mark
my words, eventually, even the mighty US housing market is going to get a dose
of painful reality. Those who have been patient will be the beneficiaries when
it finally happens. However, there is an argument for building equity (just don’t
overestimate this factor or try to have any financial discussion whatsoever
with your average real estate agent, who is desperate enough to say anything
and knows/cares very little about economics or your financial well being),
having a more permanent situation, fewer neighbors in close proximity, etc. So
to allow for that value, which is certainly real in some cases, I would sign
off on paying up to 15% of your income on a mortgage – preferably with a twenty
year max term so you aren’t paying a fortune in interest or buying way more
than you can truly afford. If you can’t do that, buy a less expensive house,
rent another year, or look into renting out a room in the house. There are
always options; never forget that.
Keeping your housing expenses well in check really only requires
thinking a little bit outside of the box. Just because other people do things a
certain way, that doesn’t mean you have to follow suit. There are way, way too
many people out there who are “house poor” – in other words, their finances are
unnecessarily constrained because they are paying way too much for their
residence. P.S. If you want to live in Silicon Valley, ask yourself if you can
get a job there that will pay you several times what a job in a reasonable housing
market will. Keep in mind that the higher the income, the greater the
diminishing return effect due to higher marginal tax rates. And spoiler alert,
unless you’re a CEO or something pretty close to that, and you couldn’t get
that kind of job anywhere else, the answer is going to be no.