The FIRE movement is everywhere these days and at times it seems like every possible related topic has been covered. But somehow, I haven’t seen a lot of discussion of the topic I want to cover today. As a finance guy, I’m all too familiar with how taxes work. When I was younger, that was one of the reasons I wasn’t too keen on getting a high paying, high commitment job – although I eventually found myself in one anyway. What my younger self saw, and what will ultimately lead to my much earlier than average exit from such a situation, is that there is a diminishing return effect. And that is especially true when you consider that in most cases, making more money requires working more hours. Those hours are literally the building blocks that make up our lives.
The more you make, the more of your money is taken away. It can
seem fairly innocuous when you’re working forty hours a week and making an
income somewhere in the average realm. In fact, all things considered, many
people are breaking even or even getting more than they put in to begin with.
But someone has to pay the bills, and if you’re working closer to eighty hours
a week and making six figures (or more), that someone is you. For some folks,
the reality is that when all taxes are considered, about half the money they
earn is gone before they ever see it. So in another way of looking at the
situation, they’re working twice as much, but only being paid for half the
Why would anyone take that deal? Sure, some people are
workaholics. Some truly love what they’re doing to such an extent that they
would be doing it even if it paid nothing. But for the vast majority of us, we
do it because we want the money because we have expensive lifestyles to pay
for. But what good is an expensive lifestyle if you’re spending well over half
your waking hours working? What good is it if you don’t even get paid for a lot
of those hours when all is said and done?
The cheaper your lifestyle, the less you have to work for
free. Let’s say you only spend about $20k a year, as my ex-wife and I did when
we were first out of school and clinging to the student lifestyle for a little
longer so we could pay off our student loans quickly. If all you needed was
$20k a year, you could work a job paying just a little more than that and live
very nearly tax free (actually, you would almost certainly be getting back more
than you paid in). In another way of speaking, your income efficiency would be
at or around 100%. If you could tolerate that lifestyle, there would be an
incredible upside in terms of having to invest very little in it. But now let’s
say you spend $50k a year, which is actually still below average for United
States households I believe. There’s no way you’re going to make that much
without paying taxes. So your income efficiency goes down and your lifestyle
costs you more of your life. And the trend continues until you’re well into the
six figures and your income efficiency gets to be as low as roughly 50%. It can
go even lower than that in places like California. And lifestyles tend to be a
tad expensive there too, so it’s no surprise that those people are fleeing to
Texas in droves.
It pays to keep your lifestyle expenses as under control as
possible – quite literally. And remember, to the extent that more money
correlates to more hours worked, you are literally paying for your lifestyle by
working more hours (in other words, giving away part of your life) for free.
This brings me back to the title of the post. How much of your life will you
spend working for free? The foundation of the answer is in the cost of your
So next time you’re considering spending money on something,
you may want to try framing the question this way. Would this purchase bring
enough value into my life to compensate me for spending even more of it working
for free than I am now? In some cases, the answer is going to be yes. Most of
us have decided that being able to drive where we want, when we want, in a safe
and reliable vehicle, is worth it. But you have to decide where to draw the line.
Most of us aren’t driving Ferraris, for example. Today my suggestion is that
you take the portion of your life you are literally giving away into account as
you make these decisions. You only get so many hours before your time is up.
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 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 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.
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.
Happy Monday, everyone! 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 $700 per year on household expenses. For me, this category includes supplies that get used up like paper towels and toothpaste but it also includes items I use around the house that will be around a while but aren’t expensive enough to be considered long term assets. Examples would be small tools or a coffee maker. I think I could keep this category at around $300 a year if I were really careful about it. There isn’t any huge secret to saving money in this category. Just buy quality when it makes sense, cheap stuff when it doesn’t matter, combine those two when possible, and don’t be wasteful.
When I bought that coffee maker, I bought a nice, but very affordable stainless steel setup that will likely last me a long time. Before that, I had a simple, but effective $20 Mr Coffee version that may have outlasted me if I hadn’t given it away. Do your research before you buy. With coffee makers, for example, it really doesn’t pay to spend a ton of money on a complex, fancy machine, because the longevity tends to be terrible. On the other hand, you definitely get what you pay for with pots and pans and a high quality set will work much better and last you much longer than a cheap one. Note, I said high quality, not high priced. Spending more will typically get you better quality, but there is a diminishing return effect at a certain point. A little bit of research will show you where that point is.
Buying in bulk helps a lot with consumables. I’m a huge Costco fan and it doesn’t matter one bit that I’m a one man household. Paper towels, dish soap, toothpaste, deodorant, and tons of other items aren’t going to go bad before I can use them and I probably save hundreds of dollars a year buying them in bulk at Costco. Of course, Costco isn’t just for buying in bulk and I’ve talked a lot about that on this blog previously.
What’s better than buying in bulk? How about not buying at
all? A package of microfiber towels probably costs about the same as a bulk
package of paper towels and can do almost all the same things. But the difference
is that when the job is done, the microfiber towels can be washed and reused. I
haven’t bought any more paper towels since I learned that trick since I rarely
even use them anymore. And there are probably other ways that concept can be
applied that I haven’t even thought of.
Finally, pay attention to what you’re doing. Little things
add up over the course of a year. Soap is a great example. You don’t need to
come anywhere close to filling the designated soap hole (Is there a name for
that? I even googled it and couldn’t find anything) in a dishwasher all the way
up for your dishes to get clean. Maybe 10-20% max is plenty. Right there, you
could spend 5-10 times what is necessary on dishwasher soap and get absolutely
nothing additional for it. Same goes for laundry detergent. Remember who puts
the lines on the cap and how often they would like to have you coming back to
buy more of their product. Healthy hair doesn’t need to be washed every day or
anywhere close. Are you noticing the trend here? Figuring out the difference
between necessity and convention with everything in your house can amount to a
lot of money saved, particularly if more than one person lives in it.
This is kind of a boring category, but if you optimize it,
you can still find ways to save hundreds of dollars per year versus if you don’t.
And that is a quick description of how I keep my household expenses under
control. Have a great week, ya’ll!
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” – Wilkins Micawber in David Copperfield, by Charles Dickens
Lately I’ve noticed a new trend in the media that I would
like to address. In most areas of life, it is generally accepted that you have
to walk before you can run. You don’t just walk into the gym one day, throw
four plates on each side of the bar, and start deadlifting it repeatedly. You
have to start with a much more manageable amount of weight and train your body
to handle more and more through sustained effort over time. And 405 is more
than many people will ever deadlift in their lives so there is the crucial
element of being realistic as well.
But with personal finance, there seems to be a backlash
against that concept. If anyone dares to repeat the totally valid, if tired,
advice that people replace $5 coffee drinks with $.10 ones they can make at
home and enjoy just as much, they’re met with ridicule or even the vicious
personal attacks that have sadly become commonplace in a world where so many
people seem to in an ongoing competition to be more outraged by seemingly
innocuous things than anyone else. Chase Bank, a bank I have mixed feelings
about at best, was crucified for posting simple, actionable advice of that sort
– advice that could help a lot of struggling people. And its CEO, again, a man
I have very mixed feelings about, has become a political punching bag for some
people who appear to have made it to adulthood without learning basic economics
at any point along the way.
The theme of these attacks seems to be that people in
general don’t make enough money, so giving them any financial advice that
doesn’t involve being paid more money (by someone else) is condescending and
insulting. In other words, it’s all someone else’s fault. It’s time for a
reality check. No one on this earth is entitled to anything. And no, this is
not political. I have to say that because the word “entitled” has been infused
with bullshit political implications to such an extent that its mere utterance
has become almost a war cry. In most of the world, people live in a reality
where if they themselves don’t make something happen, it won’t. The fact that
we live in the relative comfort of an incredibly prosperous place where life is
incredibly easy does not change this reality. We’re all adults here. The days
of someone else being responsible for us should have ended long ago.
If you want something, you have to earn it. If you want
someone to pay you a lot of money, you have to give them a reason to do so.
This typically involves using the infrastructure and resources of their
existing business to make them more money, some of which can subsequently be
paid to you. And outside of some very lucky folks, no one is exempt from this.
If the board of directors didn’t think Jamie Dimon was creating more value than
what he is being paid, I can assure you they would not be paying it to him.
If you don’t accept that concept, it’s going to be very
difficult for you to have a successful career. Even if you start your own
business, which is very difficult to do without experience, capital, or both, I
can’t see a path to prosperity for you if you don’t believe everything has to
be earned. It is imperative that many of us stop blaming our problems on others
and start taking an honest look in the mirror and changing the things that are
holding us back. It’s the only way anything is going to improve.
To that end, no, if you’re living paycheck to paycheck, you
can’t afford a $5 cup of coffee. Even a few of those per week could cause you
to pay a bill late and fall into a cycle of paying interest, late fees, etc,
that could become very difficult to get out of. And it doesn’t stop with the
paycheck to paycheck crowd. I very rarely buy a $5 cup of coffee. It is simply
too easy to enjoy not just drinking great coffee, but making it, at home – and
at quite literally 2% of the cost. This isn’t to say I never get coffee from a
coffee shop, because I occasionally do. But usually I’m meeting with a
customer, a friend, a date, etc, and the coffee itself isn’t the real reason
I’m there. Buying the coffee is just an expense I have to incur in order to
spend time in a particular place for a particular purpose. I’m already wealthier
than most people and I’m only in my early thirties, but I didn’t get here by
ignoring reality. In fact, I doubt almost anyone who is highly successful got
there by enjoying luxuries before they could afford them. The only way to
change reality is by first accepting it.
This is so much more than just coffee. No one is literally
saying that cutting out a coffee shop habit is going to make you a millionaire.
It is just an example of a very important concept that can be applied to many
different areas. The same applies to a restaurant meal, which if made even a
once a week routine, could easily turn into a $100 per month premium over
equivalent food that could be made and eaten at home. I’ve seen people using
Uber when they could drive to the same places and turning $10 worth of parking
and gas into a $50 round trip in the process. Again, even at once a week, this
costs over $100 a month over and above what it would cost to get the exact same
thing done. It all adds up – and usually pretty quickly.
I think most of the outcry over this very valid and
legitimate advice amounts to some bad actors trying to score points by telling
people they don’t actually have to deal with reality. It’s easy to make people
feel good telling them things like that. But it does them absolutely no favors.
Some people see a $5 cup of coffee, a $15 restaurant bill, etc, and don’t
realize what they represent. These are examples of doing things in wildly
inefficient ways and especially when you’re first starting out, expenses like
these can be the inches that make up the difference between winning and losing.
How important are the inches? Just look at the quote I
opened the post with. If you spend less than you earn over a sustained period of
time, even by just a little, you will build assets and life will get easier. If
you spend more than you earn, you’re doing the exact opposite. The average
person in this country has roughly $10k of credit card debt. Most of them
didn’t rack that up overnight. It usually happens when someone is living at or
close to the edge and gets hit with the inevitable unexpected expenses. If they
can’t cover them with either excess income or savings, then the only option is
to borrow. Too many people turn to credit cards, one of the worst forms of
borrowing. It’s so easy. Almost anyone who can fog a mirror can get a credit
card. And if you just pay a little bit each month towards the ever increasing
balance, you can have pretty much whatever you want.
But there is always a cost. In this case, it is that as the
interest grows, it becomes an expense of its own that does nothing for you and
increases each month unless you pay down the principal. Instead of living on
the edge, you’re now beyond it and gradually burying yourself deeper and deeper.
It doesn’t seem like a big deal at first. But over time, the situation will not
only get more and more difficult to dig out of; it will deprive you of
opportunities you won’t even know you’re missing out on. Those opportunities
come in many different forms, but the theme is the same. If you have money, you
can use it to make more. The more you have, the easier life gets. That, in
essence, is the American Dream – work, save, invest, prosper. What a tragedy
that marketing departments, and another kind of enablers with political
motivations, successfully turn so many people away from it before they even
know what they’re passing on by taking the path of least resistance.
But those people don’t control you. Only one person on this
earth does. You get to choose where you get your information, how you process
it, and how to proceed from there. This is both a privilege and a
responsibility, so take it seriously. The quality of your life depends on it.
If anyone is trying to feed you sugar – something that tastes sweet in the
short term but seems just a little too good to be true, ignore them. The
sweetness is gone as soon as you swallow; but the fat ass you’ll develop over
time is going to be with you much longer than that. Whether we’re talking about
food or finance, you want to be taking advice from the same people: the ones
who give you the tough love that doesn’t feel so good in the moment, but keeps
you on the path of true progress. They’re usually the same people who are
succeeding in their own lives – and these days, sometimes being demonized for
that very success. They can help you get there as well. In fact, paying it forward
is something many of them enjoy doing very much. But in order to benefit, you
have to ignore the yes men (and women) who peddle easy answers that never
deliver results. And then you have to listen to the proper advice and work your
ass off carrying it out.
At the end of the day, it’s about who you want to be. Mr Micawber was a tragic character in David Copperfield. He realized his folly, but not until it was too late. Don’t let that happen to you. You can join the masses of lazy people telling lies, pointing fingers, and bitching because they haven’t been handed the results they want in life. Or, you can admit you don’t know what you don’t know (there is power in that, NOT shame), learn what it takes to actually succeed, and then get to work. The latter will get you results. The former will keep you from getting any further than you already have. Reject that. Learn, grow, and live a better life. It all starts with taking responsibility for yourself.
Happy Monday, everyone! 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 $2800 on gas. This is largely because I drive a ton for work and for my other business activities. However, if I drove a typical number of miles in a year, I believe I could reasonably cut this expense down to about $1200. Are you spending more than that? Here are some ways you can improve the situation, form most effective to least.
1. Drive a fuel efficient
Yes, this one is pretty obvious. But it’s the biggest reason
most people overspend on gas. How many pickup truck owners do you know who do
almost nothing but drive to work in them? How many SUV owners do you know who
rarely have more than one or two passengers? These people are spending a
fortune owning these vehicles – in many more ways than simply filling their gas
tanks. I’ve been without my truck for almost two years now and guess what? I’ve
managed to find ways to get by without it in most cases and when that hasn’t
been possible, well, that’s why Uhaul and their ilk exist. Even some home improvement
stores have trucks available to rent now. Renting a truck even ten times a year
is much, much cheaper than owning one. So my advice is to think long and hard
about why you’re driving what you are and whether you really need a vehicle
that size. If you can’t get at least 30mpg on the highway and there isn’t a
very good, consistent reason for it, you’re wasting a lot of money. In my case,
I get roughly 30mpg on AVERAGE and drive a car with just shy of 300hp.
Automotive technology has come a long way and compromise isn’t nearly as
painful as it was years ago.
2. Keep your driving
There are lots of ways to do this. Carpool, combine multiple
trips into single ones with multiple stops, skip going to things you didn’t
really want to do anyway, etc.
3. Maintain your
There is a good chance a poorly maintained vehicle will get correspondingly poor gas mileage. This is one way that a fair portion of your maintenance costs will literally pay for themselves. And that’s not to mention the money you’ll save in depreciation since a car that’s maintained ages more gracefully and is worth more money. Here is a post I wrote about basic vehicle maintenance.
4. Drive gently. If
you’re adventurous, try some hypermiling techniques.
I’m not going to go into the extreme stuff here, although
you should know there are people who can get literally double the EPA rating
out of some cars. You can improve your gas mileage quite a bit just by accelerating
gently, maintaining a good following distance, minimizing brake use (which is
strongly related to following distance), etc. Driving your car like you’re on
an imaginary race track isn’t going to save you much time anyway since you will
still have to deal with the same (often horribly timed) stoplights and idiots
going the speed limit in the left lane that everyone else does. And besides,
any time saved will get eaten up pretty quickly when some revenue generator
asshole traffic cop lights you up or you get into an accident. Driving
aggressively really isn’t worth it and it has a devastating effect on your gas
5. Buy the cheapest
gas you can find.
I wrote a post with some more tips about this recently so
check it out here if you missed it. Gas is the ultimate commodity item and yes,
provided you’re doing an apples to apples comparison in terms of octane rating,
it’s the same no matter what station you buy it from. I can’t believe how many
people swear by the opposite. If you don’t believe me, drive by your local
distribution center (likely in the middle of nowhere) and check out how many
different logos are on the sides of the tankers – which are all lined up to be
loaded with the EXACT SAME GAS.
6. Use credit card
rewards to your advantage.
There are multiple credit cards that pay 3% on gas.
Additionally, “category cards” like Chase Freedom occasionally pay 5%. This is
free money, people. But if you don’t want it, no problem. That’s just more for
7. Go to your
furthest away destination first.
While you’re planning your multiple errand trip after
reading point number two above, consider this. Cars run most efficiently when
they’re fully warmed up and this takes some time, depending on your climate.
This is why if you live in a place with hellish winters, your winter gas
mileage is substantially worse than in the summer time; it takes cars longer to
warm up. Anyway, if you drive to your first destination a few miles away, then
a few more miles, then a few more, etc, and turn your car off each time, it may
never get fully warmed up and you may be losing tons of gas mileage. Contrast
this with driving twenty miles to the furthest destination, completely warming
up your engine in the process, then making your way back towards home. You want
to be driving the highest possible percentage of your miles with your car
running as efficiently as possible. Another way to plan out your trips is to
avoid rush hour like the plague. Stop and go driving is bad for both your gas
mileage and your car’s longevity. Few of us live in a perfect world, but most
of us still have some options available that can make a big difference with
things like this.
8. Regardless of
climate, DO NOT leave your car “warming up” in your driveway.
I don’t know what they were doing thirty years ago because I’m
not that damn old. But I do know that today’s cars are designed to run right
away and also that idling is bad for them and should be kept to a minimum. I
know it gets inhumanely cold in some places – for example, Wisconsin. But if
you punish your car for that by leaving it sitting idling, you’re going to take
a ton of life out of it in the long term and waste a ton of gas in the short.
My job involves a lot of driving. How much? Over the last three years of doing it, I’ve put on well over 100k miles. So I know a thing or two about this stuff. Today I’m going to throw out some random tips that I use to make life on the road a little safer, more efficient, and generally better.
Take care of your
vehicle and it will take care of you.
This is an easy one. I’ve written about basic maintenance before. Whether you do it yourself or you have it done at a shop you trust, make sure it gets done.
I’ve read about hypermiling techniques that allow people to
get some pretty insane gas mileage. A lot of it isn’t necessarily practical for
every day driving but the most important concept is; drive gently. Accelerate
gradually, maintain plenty of following distance, and avoid abrupt braking. Not
only will you save gas, your car will last longer and you will be much less
likely to get into an accident. This can easily save you thousands of dollars over
the life of a car.
Google Maps is pretty
I don’t even use the in car GPS systems anymore because
Google Maps is way better. In addition to basic navigation, it allows you to
search for gas stations and see many of their prices on the fly. It doesn’t
have prices for every station, but it at least gives you a good idea of what
area you’re likely to find the best prices in. And for anyone who doesn’t know,
no matter where you buy your gas, it is exactly the same stuff. I talk to oil
industry people all the time and that has been confirmed time and time again.
So this is a commodity item and that means price wins.
But my favorite Google Maps feature is definitely the speed
trap notifications. It isn’t a perfect system, but it is more effective than a
traditional radar/laser detector in my opinion for two reasons. One, the range
is much better. You can see speed traps miles away on the map. Two, there are
far fewer false positives – a huge problem with even the best detectors. But
the system is only as good as the data it has so please, let’s all be good
citizens and put the word out whenever a revenue generation agent police
officer is spotted trying to ruin someone’s day. Disclaimer: I support police
most of the time and believe they provide a valuable service. But in this
particular area, I believe Google is providing a much more valuable service
than they are. To report a speed trap, click the little plus button on the
right side of the screen in Google Maps. We need as many people doing this as
I tried an app called
Upside and well, not everything works out.
The app supposedly pays a rebate whenever you buy gas. But
you have to take a picture of your receipt every time and that’s a pain – even if
the pump isn’t out of receipt paper, which is often the case. And in my
experience, after the teaser rate on the first fill up, it was almost always
one cent per gallon. Also, usually only the more expensive gas stations in the
area were available on the app. A one cent per gallon rebate isn’t worth much
if you’re paying ten cents more per gallon to begin with. There was also a
restaurant option available that paid much better, but the selection was atrocious.
I did, however, use that to buy enough chicken sandwiches at Burger King, which
are surprisingly decent now, to get over the $10 cash out threshold and make
the whole thing at least pay off a little.
As usual, Costco
If you can get your gas there, you will likely save at least
ten cents a gallon versus the next cheapest station in the area.
Speaking of gas, if
you’re getting less than 3% back on it, you’re leaving money on the table.
AAA is a pretty worthwhile
service if you drive long distances often.
Peace of mind is worth a lot when you’re in a strange place.
If something happens, it’s nice to know you’re a phone call away from getting
help and that in many cases, you won’t even have to pay for it. In a lot of
places, especially in the more rural areas, the tow truck business is quite a
racket. With AAA, even if you do end up having to pay, you will at least be
dealing with one of the more reputable options in the area (or at least one
that likely doesn’t want to risk losing its AAA business by pissing off
customers) without having to do the research on your own.
If Discount Tire is
available where you live, you’d be a fool not to buy your tires from them. And
yes, I know that my favorite store sells tires. Even Costco isn’t the best at
These guys have the tire business down to a science. They
have great selection, the best prices, and great service. They check/correct
your pressure whenever you want and free rotation is included with your tires.
But the best part is their warranty. 99% of the time I am not a warranty
advocate. But Discount Tire is an exception. For about twenty bucks a tire,
they will repair or replace any tire you have any issue with during the
warranty period. This is all fresh in my mind because on a recent trip to the
oil country, it was so hot that one of my tires exploded as I was driving.
Thankfully, I wasn’t far from the nearest town when it happened. I did have to
wait a day for the specific tire I had to get there (to be fair, they did have
another option available, but I didn’t want mismatched tires so I opted to
wait), but given how far out in the middle of nowhere oil country is, that was
actually impressive in my opinion. And rather than having to pay $200+ for a
replacement tire (high performance, 18 inch, low profile tires are expensive
anywhere you go; Discount Tire’s price is still easily the best), I only had to
pay the twenty bucks to renew the warranty on the tire that was being replaced
for free. With tire prices being what they are these days, and with roads being
as bad as they are in many places, this warranty is a no brainer and has
already paid off more than double for me with about half the life of the three
remaining tires left to go.
Have a great Wednesday, folks! And be safe out there!
Happy Monday, everyone! 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 $2100 on fun activities. This is really a category I could cut down as much as necessary if I had to. Like most of my spending categories, I don’t have a particular target in mind; I simply make sure that if I’m spending money on something, there is a good reason.
This category includes most of what I spend on dating. And
the reason I’m able to spend so little in that normally very expensive area is
that over the years, I’ve learned that trying to impress women by spending
money has consistently gotten me exactly the opposite of the outcome I was
looking for. Yes, I should have known this long before I did, but I had that
same single mother upbringing that has proven so disastrous to a huge portion
of my generation and it has taken a ton of constant, ongoing work to deprogram
the many erroneous lessons I didn’t even realize I was learning over the years.
I’m not trying to disparage the efforts of my mother or any other single mother,
many of which are nothing short of Herculean. However, from my own life and
from observing our society at large, it appears painfully obvious to me that a
boy needs a strong, consistent father figure in his life and if there isn’t one,
he is likely to make more than a few missteps in the process of figuring things
out on his own. But that topic could be an entire series of posts all by itself.
For now, I’ll just say that trying to buy your way into a woman’s heart (or
into any other part of her) is not an effective method.
Anyway, if I want to have fun, I have fun. But here is the
important point. In my life, almost everything has a purpose. So with the free
time I have available, I want to enjoy myself but I also want to better myself
in at least some way in the process. For example, a lot of my “fun” activities
are physical activities like weight lifting, tennis, basketball, swimming,
hiking, etc. Most of these benefit my health and fitness level, benefit my mind
as I improve a skill set, and also happen to cost me little or no money. I also
enjoy reading, cooking, volunteering, and learning to fix things like cars,
electronics, plumbing, and so forth. I’ve found that personal growth is what
makes me happy and thus, I tend to have fun while learning and increasing my
capabilities in various areas. In general, if you can find ways to enjoy
yourself while also creating value, you will be able to have fun without
spending much money.
Even most social interaction doesn’t have to be expensive.
Sure, I go out for drinks, to museums, and various other attractions like most
people do. But those tend to be more special occasion activities and with most
of my friends, our most common activities are hanging out, grilling, going to
the beach, playing some pool, etc. We will occasionally have a roller coaster
day that will cost us each a hundred bucks or so or go to a football game and
drop more than that. But these are every now and again type activities and as a
result, they are special treats when we do them. Contrast that with the people
who spray money like a fire hose everywhere they go and then go home to worry
about how they’re going to pay their bills. Are they having any more fun than
my friends and I are? I doubt it. Spending money can be required for particular
activities, but it isn’t required for meaningful interaction. It’s all about
deciding what is really important to you – the activity itself or the people
you’re doing it with. If you have the right people involved, it really doesn’t
matter what the activity is.
It’s important to have fun in your life. That I will not
dispute. But spending a lot of money usually isn’t what gets you there. It’s
all about figuring out what you truly enjoy and making that the focus. And if
your focus is on spending money, you’re going to live a very stressful life
because you can outspend absolutely any income. In my experience, stress is
pretty near the opposite of fun.