The Easy Way to Drive a Great Car (Or Truck) and Pay a Fraction of What Most People Do

I bought this car five years old, with about 30k miles on it, and in great condition. By the time I’m done with it, I anticipate an annual depreciation cost of right around $2k a year – well under half what most people spend on comparable cars.

We’ve done it! We’ve reached the last of my Annual Expenses posts and we’ve gotten through them all with just a few grains of sand left in the 2019 hourglass. I plan to do an aggregated, “year in review” style post that will pull together the highlights so be on the lookout for that in the coming weeks. My last expense category is vehicle depreciation and I spent an average of $2100 on it over 2017 and 2018. I believe a “bare minimum” budget number would be about $500.

When people talk about deciding between buying a new car or keeping the old one around a while longer, you will often hear phrases like “this one is paid off” or “I don’t want to have a car payment again.” Those statements come from a cashflow oriented viewpoint. But I prefer what one of my customers, a lifetime wheeler and dealer, likes to say: “You make money when you buy, not when you sell.” In reality, that “paid off” car still costs actual money each month, cash or not.

This expense is called depreciation. For a simple example, let’s say you purchase a car for $35k, roughly the average new car price today. You drive it for five years and then sell it for $15k. Your depreciation cost was $20k over the life of the car or $4k per year, regardless of your monthly note payment or when you paid it off.

So how can you reduce this expense? Exploit the depreciation curve, which starts out very steep but flattens quickly. Almost any car is going to lose roughly half of its value in the first five years. But most cars will only have 50-75k miles on them at that point and a good, well maintained one can go 100k or more relatively trouble free miles from there. This is reflected by the fact that the average car in the US is nearly twelve years old. The secret is out and that is the only reason the depreciation curve isn’t even steeper from the outset.

But it still makes sense to follow this principle and you can do it with two simple rules. One, only buy cars that are about five years old. That way, you will always pay half price at most. Two, only buy cars that have been taken care of well. If you aren’t personally mechanically inclined, insist on having someone who is inspect any car before you buy it. It shouldn’t cost you more than a hundred bucks or so, which is nothing compared to repairing even a single major issue if you wind up buying “someone else’s problem.” By following these two rules, you can buy almost any car within reason for $20k or less and run it long enough to keep your annual depreciation expense at $3k – or less.

But what if you want or need to keep the number much lower than that? It’s going to require more shopping around and more know how, but it can be done. You’re looking for something later in the depreciation curve, likely priced around $5k or less. In that price range, you’re going to be looking for higher mileage cars (100k+), cars that start out priced lower than most, or cars that depreciate faster than most. I would avoid that last category altogether, since there tends to be a good reason cars depreciate faster than average. Chrysler products, for example, are widely known to be unreliable. You’re not looking to lower your depreciation expense by simply increasing your maintenance expenses.

Instead, I would look for quality, high mileage cars in exceptional condition. They are out there and they don’t sell for all that much since most people aren’t willing to take chances on them and they are very difficult to get financed. One trick is to look for signs of mostly highway mileage, which puts a lot less wear and tear on a car than city mileage does. There are plenty of good guides on how to do this online, like this one. In this price range, inspecting the car thoroughly is crucial. Here is an excellent place to start learning how to do it, although if you’re uncomfortable with it, it’s well worth it to bring someone who is.

The payoff? If you buy a quality used car for $5k or less, it has already depreciated close to as much as it’s going to and you have a great chance of keeping your depreciation expense at $500 a year or even less. When I was a young lad, I bought my first handful of cars on the extreme end of the depreciation curve, all for less than $1k. In most cases, I drove them for about a year and ultimately sold them for within a few hundred dollars of what I had originally paid. I don’t need to do that today and I like to have something a little fancier to drive around in, but it’s nice to know I could if I needed to.

That’s about all for now. I provided links to a couple of great videos in this post. As for this blog, I wrote about which car brands are the best and worst here and about basic maintenance here. And the nice thing about the internet is that there is a whole universe of information out there at your disposal. If you don’t know much about cars, I recommend browsing around and doing some research until that has changed. The more effort you put in and the more you know, the better a position you will be in to score a huge win on your next car. Have a great Monday and a Merry Christmas!

How I Was Able to Create a Small Raise For 2020 Out of Nothing

Just a few more tricks like this, and I, too, can show the world how successful I am by spending hundreds of thousands of dollars (and tens of thousands more per year on an ongoing basis) on something someone will probably go out of their way to hit with their door in a parking lot somewhere

Happy Friday! I know most of you are in a hurry to get work over with and go home, so let’s get right into this. Recently, my employer’s HR department sent out the dreaded annual insurance email – you know, the one where they tell us how much more we will be paying for coverage in the new year and how much worse said coverage will be. To some extent, I’m lucky and thankful to be joking because at least with the health insurance, our coverage is actually relatively excellent and the company makes a very serious commitment to keeping our contributions towards the premiums very reasonable for what we’re getting. But nonetheless, we do pay at least a little bit more for less every year, just like at every other company I’ve worked for over the last several years. What can I say? Combining government and healthcare was a very, very poor decision some power hungry, vote buying politicians made a long time ago and we’re all going to continue paying for it until someone with very big balls comes along and fixes that mistake.  

Anyway, this year, the health insurance only changed to a different insurer while the coverages and premium contribution stayed about the same. That’s a win in my book. But for whatever reason, the company has never had a great dental insurance option. This year, the deduction stayed the same: $20 per pay period ($40 per month). However, the $100 “lifetime” deductible we had with last year’s insurer turned into a $100 deductible without the lifetime language with this year’s. In my mind, $580 is too much to be paying for two dentist appointments a year and even in the unlikely circumstances I would need anything more than those two appointments, the insurance has the same stingy $1500 cap as last year’s.

So this year, I decided to do some checking and see if I could improve the situation. And boy, was I surprised. When I called my dentist’s office to find out how much appointments cost, it quickly became apparent that I had struck a nerve. She described a dystopian clusterfuck that basically involves providers getting screwed by the same insurers that are screwing the patients on the other side, much like health insurance. It sounds crazy, but by my not having insurance, my dentist can literally charge me less money AND make more.

How much? The standard annual protocol is one cleaning/exam/x-ray appointment and one cleaning/exam appointment. And the costs? $80 for a cleaning, $42 for an exam, and $46 for x-rays. In other words, for the $580 I paid last year, I was getting the equivalent of $290 worth of appointments. That means I was paying $290 to insure against the chance of incurring up to $1210 in additional costs. And keep in mind that if there were additional costs above $1500, I would have been paying for them anyway. And the last time I had a non-routine dentist appointment? Probably when I had my wisdom teeth removed about fifteen years ago. To sum it up, I’ve been getting robbed for however long I’ve been paying anywhere close to this much for dental insurance.

But wait, I can hear you saying. I won’t save a full $290 since the $480 in premiums would have been tax exempt, thus costing me closer to $300. And that’s true, but I’ve got it covered. In conjunction with declining the dental insurance for 2020, I also began contributing $30 a month to an FSA (flexible spending account), which is also tax exempt. Mind you that I don’t like FSAs since they are “use it or lose it” money. But in this case, I know I will use $360. $290 of it can go to the dentist appointments I just mentioned (yes, dentist appointments are FSA eligible). The rest is spoken for by a regular prescription I have. So while I will lose a tiny bit of tax shield, it will only be to the tune of $120 a year or roughly $50 in actual dollars. In the end, I will be saving about $240 in 2020 thanks to getting rid of my ripoff dental insurance.

The brilliant part? Anyone can do this kind of thing. I absolutely don’t recommend doing it with health insurance, as that would be unacceptably risky. But in the case of dental insurance that would only cover a max of $1500 a year, it’s a pretty solid win. And if you’re lucky enough to pay a lower tax rate than I do, all other things being equal, you save even more than I am. This is why I’m not terribly concerned about inflation. I can almost always find little ways to cut expenses without losing any value whatsoever. This tiny adjustment saves me close to 1% of my annual spending by itself! With just a few more like it, I will easily recoup the 2-3% inflation is likely to take away. Brilliant. Have a wonderful weekend!

Don’t Be A Lifestyle Slave and You Will Be Much Happier

Being fully present while observing this beautiful sunset doesn’t cost a penny. Image courtesy of Jean-Marc Buytaert

The Matrix was an amazing movie. Yes, the entertainment value was excellent. But what really made it special was the way the concept got people thinking. It can apply to so, so many areas of life. The Red Pill community has literally based its name on the movie, and with good reason. The concept of unplugging oneself from an entire system of intentional, insidious deception, whether living in an entirely virtual world, as in The Matrix, or in a feminine dominated reality that is blindly accepted by almost everyone in our society, is powerful. Today I want to challenge you to do it with the supposed connection between consumption and happiness. And what better time than just before Christmas?

Look around you. Everywhere you go, someone is trying to convince you to spend your Christmas dollars with them. And everywhere you look, someone is rewarding that effort by doing just that. There are literally people taking out loans or loading up their credit cards because of the social pressure they feel to participate in this annual spending orgy. And these poor decisions aren’t just being made on an individual basis; to the contrary, this is a movement of self destruction that has a nearly religious fervor.

Don’t get me wrong. As a member of society with family, friends, etc, I participate in all of this to some degree. It is definitely possible to derive joy from the act of giving. But my giving is entirely grounded in my ability to do so. If I were living paycheck to paycheck, struggling to pay down a mountain of student loan debt, unemployed, or in any other form of financial difficulty, you can bet my efforts would be focused on putting out that fire. I happily give out gifts at this and other times of the year solely because I have excess available to dedicate to that purpose.

But save for a short, unfulfilling period of my early twenties, I have never completely subscribed to the “buying more crap will make me happy” mentality we see all around us. Bigger houses to fill with more and fancier furniture, more expensive vehicles, stuff galore, it doesn’t matter. The theme permeates everything. More is better. But there’s just one little problem. It isn’t. In fact, quite the opposite has been true for me. And I don’t believe I’m alone in that.  

I lived a relatively simple life before I moved from Wisconsin to Texas. My commercial quality home gym was by far my most prized set of possessions. But I still had to get rid of over a thousand square feet worth of stuff before I could move because I had decided to live in a nice, but small apartment while I got acclimated to my new home. Every item I had accumulated over the years was something I had just had to have when I originally bought it. And most of them had seemed too important to get rid of at any point before that. But when suddenly forced to get rid of all but a small, carefully chosen selection of my earthly possessions and move into a much smaller space, a funny thing happened. I felt better.

Today, I have almost no desire to buy or rent a larger home in spite of the fact that I could easily afford to do so. In fact, the mere thought of doing so stresses me out. If I bought a house and suddenly had more space, I would almost certainly fill it with similarly pointless possessions to the ones I had previously thought I wanted, but had felt liberated by getting rid of.

Now let’s look at the other side of this equation. By avoiding being one of the many people whose very life embodies an obsession with the word “more,” I’m able to save and invest over half my income. This has given me something intangible that no “stuff” could: peace. For example, my industry is currently in a deep, ugly recession that has destroyed jobs, businesses, and even lives. And at the moment, no end is in sight. But I have over a year’s worth of living expenses in cash alone and much, much more in other forms.

Is a man like me likely to be unemployed for an entire year? No. Unemployment is extremely low and I’m a high achiever. And besides, already growing very weary of the sucking dick for money that is most W2 employment, over the last year, I’ve already taken the initiative of starting three businesses. One was a fairly quick failure but another has been a modest success so far and will likely continue to be that at a minimum. And I believe the third, and latest one, has a strong possibility of not just paying my expenses, but replacing most, or even all, of my current income by the end of 2020. So in the midst of relentless job attrition in my industry, and even within the smaller world of my employer, I sleep great at night. In fact, if I were offered any sort of reasonable buyout today, or forced to take one, as is the more likely scenario, I would gladly take it. I’m confident that between my currently small, but rapidly growing business income, my investment income, my cash, and if all else fails, getting another job, I will be just fine. To me, that is worth more than almost any possession I could possibly have.

But this isn’t just because I’m good at making money. It’s also because I keep my expenses reasonable, thus setting myself a low bar to clear. With the combination of the two of them, I’ve set myself free from the shackles that keep most people trapped in enormously stressful lives that are so far from ones they would truly love. And you could do the exact same thing. But it would probably require challenging some assumptions you’ve been programmed to believe – like “more is better” or that any worthwhile people might love you less if you don’t give them the right gifts.

So this Christmas, why not enjoy some time with the people you love while also being thankful for free will? Why not use that free will to start questioning your expenses one after another – are they really making you happy in a way that you wouldn’t be without them? Are they really worth more than the step closer to freedom that money could be instead? It’s your life. You have every right to live it the best way you can find. What a tragedy it would be to spend the entire thing as a plugged in consuming machine without ever even trying anything else.

How to Take Vacations for Little or Nothing

A sign I saw in a delightful little bar in St Pete Beach. The owner was actually a fairly young guy from New Jersey, who had said “fuck it” one day, moved down, and started a totally new business. He had me thinking about whether maybe I, too, should make a major change and literally make vacation my day job. However, thus far, I have taken zero steps towards doing so.

Happy Monday! I almost feel a little silly writing this post as I haven’t taken anything beyond a few day vacation in about four years now, but it’s the second to last post in my Annual Expenses series, so I’m doing it anyway. Over 2017 and 2018, I averaged $300 per year in vacation spending, which included nothing at all in 2017 and short trips to Wisconsin and Tampa Bay in 2018. The minimum level of spending in the vacation category would, of course, be zero, since this is an entirely optional category. That said, I sure could use a vacation. Anyway, let’s get into it.

My first piece of advice on cutting vacation expenses is to use the specific advantages you have. If you have a job that involves a lot of travel, you may be able to use rewards programs with hotels, airlines, rental car companies, restaurants, etc, to very nearly eliminate the need to spend money on those areas altogether when you go on vacation. If you live near a cruise port or somewhere else awesome, you can probably get a last minute deal for practically nothing if you’re vigilant. Don’t overlook the low hanging fruit.

My next best tip is to use credit card churning to pay for some or all of your vacation. While the situation has deteriorated dramatically over the last year, there are still some cards available with large enough bonuses to cover a round trip flight or two, several nights at a hotel, etc. Keep in mind that you need to plan ahead to make this option work. I recommend four to six months, unless you’re looking to get multiple cards, in which case you probably want to start working on it a year out. Some people don’t like churning for various reasons. My take is that if you do the math and figure out what you’re getting “paid” per hour of actual effort (keeping in mind that this is tax free), it makes a lot of sense to work through whatever issues you have. Very few people make THAT much per hour in their day jobs. If you want to look into this option, this post or this post talk more about churning and this website is probably the best source I know of for detailed, up to date information on what specific cards are offering at this particular moment, whether it’s a good deal or not, etc. You can also check out www.reddit.com/r/churning/.  

Vacation doesn’t necessarily mean going anywhere exotic, or even outside of the United States. Road trips are a great way to go on a vacation without spending a fortune. The more people in your family or group, the better the value since each additional person in your vehicle will reduce your gas mileage only slightly, but would require an entire additional plane ticket if you flew. Think of all the amazing things there are to see and do near where you live. I bet you haven’t even been to them all yet. And there are 49 other states full of them, just waiting to be discovered. You can even get suites in extended stay hotels that have kitchens in them, allowing you to avoid eating some of your meals in restaurants. This type of hotel is usually on the more affordable end. For example, Marriott’s Townplace Suites is usually around $100 or so per night in my experience. Or if you’re adventurous, you can even bring camping stuff and avoid some hotel nights altogether. I myself am not that variety of adventurous. But if you are, more power to you.

One other idea is to use online travel sites. Many of them just aggregate the same deals you could get buying from airlines, hotels, or car rental companies directly. However, some of them offer “blind” deals that can save you some serious money. With those, you commit to buying before you find out exactly what you are getting. But with the hotel deals, for example, you usually get to pick an area of a city and the number of star hotel you want. I remember paying less than $50 a night for a few hotel rooms that regularly went for $100+ doing that back in the day.

And as usual, Costco can save you money here as well. They have an entire travel division offering a wide range of vacation options. They also offer rental cars, which have been the best deals I could find more than a few times. But then, if you’ve been reading this blog for any length of time, you already know that my answer to just about anything is going to be “check Costco first.” It won’t save you money every time, but often it will give you a great product or experience for about the same price as a significantly lower quality one.

So there you have it – some ways to save money on traveling from a man who travels for work and almost never for vacation. But remember, that is only my current state. One day when you’re sitting on a beach somewhere, you’re going to look over and see me enjoying some delicious vacation-y looking drink in a seriously relaxed fashion. You won’t know it’s me, of course. But if you follow some of these tips, maybe, just maybe, you will have spent as little as I did to get there. Have a great day, Everyone!

How I Keep My Utility Expenses Low

I’m sure there are some energy company buildings in there. Image courtesy of Jean-Marc Buytaert

Happy Monday! I hope everyone had a great Thanksgiving break and filled it with happier and less stressful activities than work. Today, I’m going to tell you how I keep my utility expenses down. Over 2017 and 2018, I spent an average of $1100 a year on utilities. While I spent 2017 living in a three bedroom house in frigid Wisconsin, in 2018, I enjoyed the advantage of living in a 700 square foot, one bedroom apartment. My cost per year in my current situation is closer to $600. If you have a 2500 square foot house, you’re obviously going to be spending more than I do. So that is actually the first example of how I keep this expense down – I simply have less space.

First, let’s address one other advantage I have today that many households do not: choice. In most places I’ve lived, there is one utility company in town and they raise rates with impunity every chance they get. Not so in Houston, the energy capital of the world. While I believe there are only two electric companies here, there are almost countless service providers to choose from. And each of them has multiple plan options. There are plans that are oriented to save money for all different levels of use. The key is that you have to figure out how much you use, do the math, choose the best plan, and then repeat the process and switch at the end of the term when your rates would otherwise be raised through the roof. Living in Houston, it is possible to keep your electric bill under $100, or often even $50, at almost any reasonable level of use. And since the weather is good enough that I’m often still using the AC in December, there really isn’t much need for natural gas. So in many cases, all you have are the electric bill and the water bill (usually about $30 a month in my case).

But in spite of the seemingly infinite population living in Houston, most people do not, in fact, live here. What can you do if you don’t? Use less. There are a million tips out there on how to reduce your electricity and natural gas consumption so I won’t go into too many here, but in general, your biggest electricity hogs are your refrigerator and whatever is connected to your thermostat. So optimizing those items will probably be the best place to start. You can adjust the temperature of your refrigerator and freezer to find the best balance between spending a fortune and having food go bad (I never really had a problem when I tried it). Programmable thermostats are great, but the most effective method for battling that thermostat is resilience in the face of slightly uncomfortable temperatures.

From there, you may want to try something like the Kill-A-Watt Electricity Use Monitor. If nothing else, it will get you thinking about electricity use and give you a better understanding of which types of devices use a lot and which don’t. As for water, you can get low flow faucets, toilets, showerheads, etc, that will help cut down on use. But usually this is a fairly cheap bill.

Saving on utilities isn’t anything groundbreaking – it’s mostly all about use. Choosing a modest housing option in the first place is a huge part of it. From there, investing a little bit of thought into what you’re doing goes a long way. To be honest, this would have been a much better post years ago, when I was paying over $100 a month total and that was still on the low end for my area. Utility costs are so low in Houston that I’ve had the luxury of getting lazy and have nearly forgotten most of the measures I used to use to keep them that way.

How I Keep My Technology Expenses Super Low

Even my very basic setup results in this mess of cords behind my tv. Bonus points if you can spot the rabbit ear antenna I pull out on Sundays, which allows me to see the games in HD (on Saturdays I typically watch the Badgers let us down as always with the local alumni association).

Happy Monday, Folks! This is yet another post in my annual expense series. I’m sorry it’s been a little boring, but we’re nearly through! And hopefully I’ve helped you save at least some money. Today I’m going to tell you how I keep my technology expenses much lower than most people and still get everything I need. I’ve already written posts that address this, so this will be a quick one as a good portion of the information is already available at the links I will provide. Over 2017 and 2018, I averaged $500 a year on technology services. I believe a bare minimum number could be as low as $350 a year if you were trying to save every penny.

Step one is simple. I don’t have cable and I don’t recommend it for anyone. Instead, if I were the type who watched tv much outside of football season, I would simply figure out which streaming services had the shows I liked and subscribe only to those, only when those shows were on. Or just use Kodi. But I didn’t say that… So anyway, the only technology services I need are internet and cell phone.

For internet, I use whichever option is cheapest. The dirty little secret of this industry (at least the one most relevant to saving money) is that you need a hell of a lot less bandwith than most people think. Unless you’re streaming video on multiple devices in your home consistently, 20 or so Mbps is plenty. Even then you could get by with it. Those 100+ plans are the internet equivalent to driving a Ferrari on a road where the speed limit is 65 anyway. Last year, I was paying about $40 a month for AT&T. The year before that, I was paying $15 a month for a very minimalist Charter (formerly Time Warner) plan in Wisconsin. This year, I’m paying $30 a month for Comcast Xfinity. I do have my own router and modem, which I spent about $100 total on and should last several years. AT&T provided their own unit and while they didn’t come out and say they were charging rent, their service was about $10 more per month than Xfinity, which means they probably were. But since they didn’t separate that out on the bill, there was also no option to not have it. However, I was able to negotiate $200 in Visa gift cards up front, which made the difference for me and got me to sign up for a year. What do I do when the “promotional pricing” period ends? This. I don’t EVER reward the shenanigans that seem to be standard practice in this industry by paying more.

That leaves cell phone service. Everyone offers unlimited talk and text for basically nothing now, knowing that data is the choke point. So how do I slay the data demon and ultimately spend so little? I know how much I actually use (very little when not on WiFi, which is almost everywhere now) and I use services that provide minimal amounts for minimal money. Previously, and for all of the years 2017 and 2018, which the average above was calculated on, I had been using Republic Wireless. But when their new pricing scheme came out, it effectively doubled the price for a minimal user like me. So I switched to Mint Mobile when I got a new phone and would have had to start participating in that pricing scheme. Either service is a much better option than the contract carriers for most people and I’ve had zero issues with either. The key is taking the time to figure out how much data you actually need. For most people, it is actually a lot less than you think once you factor in that most of it is on WiFi.

That’s it – everything you need to know to pay a small fraction of what most people do for technology and still get everything you need.   

How Much of Your Life Will You Spend Working for Free?

Someone paid an awful lot in taxes en route to buying this beauty!

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 time.

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 lifestyle.

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.

What I Do About Medical Expenses

I’m going to reuse this picture because I can’t think of a better way to caption “What I Do About Medical Expenses.”

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 cure.”

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 that later.

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 arounds.

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.

How I Saved $35 on a Recent Purchase and Some Other Odds and Ends

Now if that isn’t one of the stupidest things I’ve seen in a while – think about it… – Spotted in a hotel room I recently stayed in while hustling my ass off as described in this post

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 $35 off.

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 better week!

My Best Efforts to Keep the Insurance Industry From Robbing Me Blind

This expense is one dragon even I cannot slay.

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 that.

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.