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!
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.
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
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.