What I Learned From the Latest of My Many Car Purchases

Sunrise, sunset. As you can see, when it comes to cars, I definitely have a “type.”

Happy Tuesday, Folks! I took yesterday off since it was Columbus Day and I’ve decided to do more to make holidays special, even the more dubious ones. This post has been a long time in coming, since it happened about a month ago now, but after months of researching and deliberating, I bought my next car. As the picture shows, I replaced my 2014 Hyundai Sonata 2.0T Limited with a 2015 Infiniti Q60S. This was pretty out of character for me since I ended up buying a totally different car than I had planned to and I committed some car buying sins I never would have previously considered in the process. But at least so far, I’m very happy with my decision. I’ve been buying cars for almost two decades now, and while some aspects stay the same, every purchase is also a little different. So here are the specifics from this time.

What stayed the same?

I did a ton of research before I even stepped foot on a dealership lot.

In this case, I found what I thought was the perfect car for me – on paper. I was going to buy a 2015 Lexus ES 350. In addition to having the usual bulletproof Toyota reliability, it has a venerable, naturally aspirated engine, meaning none of the turbo related issues so many of the cars being sold today are likely to suffer from somewhere down the line. The gas mileage is a solid 21/31 and it doesn’t require premium gas like most luxury cars do. It is a big, smooth, comfortable car, which is important for someone who drives a lot as I do. The main compromise I felt I would have to make is that like most cars today, it is not very pretty. But that’s not terribly important and other than that, the car checked all the boxes.

Doing the research is crucial. You need to know everything about the car you’re looking at – the fair market value, the long term reliability, any specific problems the year/make/model is known for, the features in different trim packages, etc. Most salesman suck at their jobs and will not know a lot of these things, especially with used cars. This doesn’t mean they won’t answer any questions you have; it just means you shouldn’t rely on the answers they give you. Keep their motivation in mind and go in armed with information from unbiased sources.

I also had financing lined up before I went to any dealerships.

I decided to finance this car instead of paying cash because my credit score has suffered some since I paid off my last car years ago as a result of having no current installment debt on it and I want it back where it was. No, there isn’t much practical difference between the mid 800s and the low 800s. But this stuff is literally what I do and yes, there is also some ego element to it. Anyway, another reason I got a loan is that at today’s interest rates, a small one (just over $10k in this case) costs basically nothing. I had a sub 3% rate ready to go at a local credit union.

 I walked away from two potential cars because the deal I wanted wasn’t there.

This is extremely important. Car salesmen know how to toy with your emotions and if you aren’t careful, they will have you feeling that you MUST have THIS car. Or that they’re such nice people that you owe them something. Or any number of other psychological tricks that they might play depending on what you respond to. Any time you start feeling yourself having an emotional response to anything involving money, it is a good practice to walk away until it has passed. And when buying a car, if you sense that you’re at the salesman’s limit and the numbers aren’t where you want them, that is the perfect time to walk away anyway. If he lets you leave, you know it really was the best he had to offer. And don’t believe any bullshit he gives you about this being “a one time, today only offer!” I promise he’s lying. And even if he’s not, if he was willing to give it to you, someone else will be too. If you remember nothing else, remember this: you will never lose money by not spending it. Think about it.

Like many of my previous car purchases, I bought a late model used car and saved a ton.

My Sonata was actually the one new car I’ve bought so far. I only bought that one because it was a demo model (6000 miles or less on it but still legally a new car) and it was selling for about an $8k discount off of its retail price of $31k. But even though I got a deal that good on that “new” car, and even though this latest car was significantly more expensive when it was new, I still paid less for this one. With options, the Infiniti retailed at just shy of $50k. But five years old and with only about 30k miles on it, I got it for $21k. I wasn’t concerned about the year/mileage imbalance affecting my resale value since I put on a ton of miles and will quickly reverse it anyway. Considering this car has a long proven, naturally aspirated engine and the Hyundai had a turbo, you could make the argument that this car’s powertrain probably has as many trouble free miles in it as the Hyundai’s did when I bought it – but this powertrain is in a considerably nicer car. And in case you think this particular model depreciates unusually quickly, there were plenty of available ES 350 options at right around $20k for that same vintage as well. Keep in mind that the secret has been out on Lexus for some time so they depreciate slower than almost anything on the road. But even there, the late model used discount is alive and well.

What was different about this purchase?

I bought my car from a “no haggle” dealership.

Most people know that Carmax is a fantastic ripoff by now. If you still don’t, compare any car on their lot with other comparable options in your area. Even without factoring in that most dealers will negotiate some on their advertised pricing, thus making it even lower, Carmax is going to be at least 10% higher than the best available options on nearly anything. They make it simple for you…to pay them an enormous premium for a car. This time around, I found a lot of dealers that appeared to be copying that business model. However, upon further inspection, I noticed something surprising. Many of their prices are actually pretty competitive and some are even exceptional. The dealership I wound up going with happened to have the exact car I wanted at the lowest price available for hundreds of miles. Could I have found a similar car for a thousand or two less somewhere else? Possibly. But it probably wouldn’t have been worth the time and effort. I only buy black cars with black leather interiors and the Q60S is a fairly rare car to begin with. This is a preference that always costs me money but one that makes me happy and thus, that I’m willing to pay a little for.

Anyway, I ended up getting a pretty decent deal on the car without the fun of negotiating, which normal people don’t seem to enjoy anyway. So don’t ignore all the “no haggle” dealerships; not all of them are ripoffs. I will, however, note that this was not one of those “delivered to your door” dealerships. I would NEVER buy a car I couldn’t inspect in person first, whether new or used, although it is significantly more important with a used one. And yes, I know they offer return policies, albeit for very short time/mileage windows. Do you want to try returning a car? I can’t imagine any scenario where that would go smoothly. For example, there will already be a loan in your name. That will have to be zeroed out or paid off. I can’t imagine that will report cleanly on your credit report. The titling process will already have been started. Do you think they refund that money? Do you think you won’t also be paying to title the second vehicle? Those are just a couple of issues off the top of my head. If you can’t inspect a car in person, don’t buy it. These aren’t tv sets; no two are alike.

I actually wound up financing through the dealer.

This particular dealer only dealt with a selected group of finance companies. Ever the cynic, I figured this meant they were going to add one or more points into my deal, which is a very common practice at dealerships and one of the main reasons to line up financing before you go. Had they tried to do that, I would have simply bought the car with cash or walked away. However, they wound up getting me a loan within a quarter point of the one I had already lined up. And with a loan as small as the one I took, I will pay basically nothing in interest anyway and a rate difference that small means nothing. Why did I take such a small loan?

I actually wound up trading my car in.

I have always sold my own cars in the past and have been very successful with it. In my experience, I’ve gotten anywhere from 20 to a whopping 50% more than dealerships were offering by doing things this way. But in this case, the dealership actually made me a pretty fair offer. I know because I did my research in advance. If I had sold the car myself, I would most likely have gotten $1-3k more for it. However, that would have involved spending time I simply don’t have and dealing with at least some people I absolutely don’t want to deal with. When you’re dealing with the public, you’re usually going to meet some assholes, some weirdos, etc. But the bigger issue was the time factor. For me, at this stage of my life, I decided it wasn’t worth squeezing every last dollar out of my car. Plus, the $10k I got for it by trading reduced my sales tax by $625 (you are only taxed on the sale price that’s in excess of your trade and the rate is 6.25% here), further reducing my motivation to sell the car on my own.

I threw my research in the trash and started over.

Like I said above, the 2015 Lexus ES 350 would have been a nearly perfect car in my situation. So why didn’t I buy one? Because I test drove one. I can honestly say I have never been so disappointed with a car in my life. The car was, in fact, nearly perfect – except for one little problem. It was the most sterile driving experience I’ve ever had. Although the stats were pretty similar to my existing car, the performance didn’t feel like it was. And even if it had been, it wouldn’t have mattered. I could have been in a car as fast as the heavily modified Supra I had back in the day (you know, when they weren’t just BMWs marketed as Supras), but so what? I couldn’t feel anything. It was like someone set out to create a car that felt like you were floating in it rather than driving. The car is extremely good at what it does and I thought I would like it. But I absolutely didn’t.

By the by, this is also a strong selling point for the Hyundai. I wanted to get out of that car for two reasons – the mediocre build quality (don’t get me wrong – it wasn’t a Chrysler product or anything, but it was starting to creak and groan way too much for a car its age) and the turbo engine that would inevitably start costing me money well before I wanted to get rid of the car. I drove a car that is significantly more expensive and objectively better in almost every way and yet, it didn’t feel like much of an upgrade at all. For anyone looking for a lower priced car that still offers an awful lot, you could do a lot worse than a Hyundai. And if you get a maxed out one like mine was, you might have a harder time noticing the differences between it and a luxury car than you would expect.

Anyway, after that colossal disappointment, I decided I’m at the point in life where I can compromise a little more between financial optimization and enjoyment. I do have to drive this thing after all. The car I bought is significantly faster, sportier, and more fun in every way than the Lexus. It will not be quite as reliable over time, although it should still hold up decently, especially for being a sports car. And while the gas mileage will rarely be north of 30, again, it’s not terrible for a car this fun to drive at 19/27. And like with most cars, I’ve already been finding that it does a little better than its EPA rating in real life since I don’t beat on it. So far I’m averaging a little north of 27 with probably 75% highway driving.

And I actually love the car. It is a few years “behind the times” in terms of technology, but I think that’s great since I want a car, not a computer. The reason I was looking at a 2015 Lexus in the first place instead of a 2016 or newer is that after 2015, they started adding more and more of the self driving features I have zero interest in, at least until further notice. In the case of the Infiniti, 2015 was also my year because Nissan caved to the turbo trend in the next model year. It’s no race car, but it’s a sporty, fun little car with a very nice interior and everything I want in it. I’ll do another post on the cost of ownership between the three cars (the Hyundai, the Lexus, and this one) but for now, suffice it to say, while this one is the most expensive of the three, I still consider it a reasonable compromise compared to something very sporty like a Corvette. It is certainly well within my means and as long as you stay there, at the end of the day, I think it’s ok to enjoy yourself a little every now and again.

Why I Like to Buy Used Cars

Driving my last car along the beach on South Padre Island on a beautiful morning

Happy Monday, folks! As I mentioned on Friday, I bought a car last week. So for the next few weeks, I’m going to be peppering in some posts about that process – both my general philosophy/methodology and how this latest purchase played out. Today I’m going to talk about why I like to buy used cars. The biggest reason to buy a used car versus a new one is obviously cost. But if you do it right, you can go beyond that and follow my core financial philosophy of keeping costs down WITHOUT sacrificing quality. When you think about cars, you want to think about the total cost per year. That includes, and typically in this order from largest to smallest, depreciation, gas, insurance, and maintenance/repairs.

Depreciation is your largest, most important cost. And the larger your acquisition cost, the more you’re going to pay in depreciation in most cases. But the depreciation curve almost always behaves in a fairly predictable way. For example, a typical $40k car will lose about $20k of its value in five years. But in the next five years, it will probably only lose another $10k. And in the next five, probably only $5k. Obviously different years, makes, models, etc depreciate differently. But that is the general pattern.

My favorite way to exploit this is to buy cars at about the five year mark, drive them another five to ten years, and take good care of them. You can usually still find one that age with 50k miles or less on it and with today’s cars, assuming the previous owner has taken care of a car reasonably well, that is basically the same as new. Just about any car, besides the crappy brands I simply don’t advise you to buy at all (I posted about the best and worst brands here), is going to go around 200k miles if it’s maintained decently and not driven excessively hard. And furthermore, I’ve done very little besides regular maintenance on vehicles with 50-150k miles on them. So to me, that is the range I want to own a vehicle for. By buying and selling when I do, instead of paying roughly $30k over 100k relatively trouble free miles for that $40k car, I pay half that for the same.

So by taking advantage of the differences between the depreciation cost curve and the maintenance/repair cost curve, I save a ton of money and get to drive essentially the same cars I otherwise would. But in order for that to work, I have to be very confident I’m starting with a good car. That requires first doing the proper research and then knowing and identifying the signs of a car that has been taken care of versus a car that hasn’t been. I’ll get into that plenty more before my series of car posts is complete. But that’s enough for today. Stay tuned for more of these posts and I’ll work my way through the entire process. And get your week off to a great start!

Don’t Be House Poor: How to Tame Housing Expenses

This is what a normally beautiful resort style pool area looks like when it floods during hurricane season. But one advantage of renting is that I didn’t have to lift a finger; the mess was cleaned up automatically.

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.

Answers to Some Common Questions About the Equifax Data Breach

The mischievous look in this guy’s eye makes me suspect he may be an identity thief. Image courtesy of Jean-Marc Buytaert

You would have to be living under a rock to have completely missed the media frenzy over the recent Equifax settlement. It is still going strong, even though it is nothing but a basically meaningless parody of justice to show the rabble that “the bad guys are paying the consequences.” And as a result, I’ve been getting a lot of questions about the situation and credit reports in general. Here are my answers to some of the more common ones.

How do I claim my $125?

Unless you signed up for credit monitoring services, nothing. Because that’s exactly what you’re eligible to get. If you did, you can claim your pittance here:

https://www.equifaxbreachsettlement.com/file-a-claim

What if I had my identity stolen?

If you had actual, quantifiable expenses resulting from it, you can theoretically recover up to $20k. You probably won’t get nearly that much, even if your expenses exceeded that amount. After all, there are hungry law firms at the front of the line, tons of people who will make claims, and a finite amount of money to cover it all. But again, if you want to make a claim, go to the link above. 

I never even gave Equifax permission to collect my data. How did they get it?

Yes, you did. Any time you signed up for a credit card, auto loan, mortgage, personal loan, or basically anything else that would show up on a credit report, you most certainly agreed to let all three major credit bureaus (Equifax, Transunion, and Experian) collect your data – and to allow many other things to happen as well. However, like any normal human being, you didn’t read it and like any human being who isn’t an attorney with an ass ton of time on your hands, you wouldn’t have understood most of the terms and conditions even if you had. Don’t like it? You can try “living off the grid.” As for me, I’ll keep my electricity, internet, car, home with an address that can have mail delivered to it, having living, breathing women willing to have sex with me (and that’s really the only reason for any of that other stuff to exist in the first place if you think about it), and so forth.

Should I sign up for credit monitoring?

Nope. Credit monitoring is just one more way the credit bureaus, including the one that potentially lost your data in this case, profit by selling the information you unwittingly gave them right back to you. It won’t give you an ounce of data you can’t get for free but you will pay for it anyway. Unless you’re determined to be part of the settlement. Then you can get the information that is already available to you for free…for free. Long story short, credit monitoring is bullshit.

Ok, then what SHOULD I be doing to stay on top of things?

1. The credit bureaus are each required to give you your credit report for free once a year. Go to www.annualcreditreport.com to get them. Get one every four months and keep track of which ones you’ve gotten and when. This way, you can space it out over the course of the year and be as on top of things as possible. They won’t have scores, but I have at least half a dozen credit cards that give various versions of my credit score for free and you probably have at least one. Besides, that isn’t the point. The point is to go through everything on the report and make sure it’s correct (or more likely, that the mistakes that are there aren’t materially adverse). Like any faithful churner, my credit reports have dozens and dozens of accounts, active, historical, etc. But even so, it takes me no more than ten or fifteen minutes to scan through them (again, this is three times a year) and make sure there are no issues. The point is, it’s not difficult, especially for someone with a more normal amount of financial activity.

2. Know what to do if identity theft happens. You should already be monitoring all your existing accounts weekly. So even if your finances are absurdly complex like mine, you will quickly realize if something happens that you were not a party to. Call your credit card company, bank, or whatever entity issued the financing ASAP and ask to speak to someone in the fraud department. It is a simple process from there. If you find an account you didn’t know about on your credit report, you have a bigger problem. But you just have to work through the process. First, make absolutely sure that you’ve really been a victim of identity theft and this isn’t just something you did when you were drunk and since forgot about or that is reporting differently than you would have expected it to. Then, call the police. Not 911 obviously. File a report with them. Go to www.identitytheft.gov and file a complaint with the FTC. Report the issue to the credit bureau in question. Freeze your credit with all three bureaus. This step will create additional hassles any time you want to do anything financial, but it is almost certainly necessary at this stage. You may even have to get an attorney involved. But if you pay attention, you will almost certainly learn something from the situation too. So at least it’s not a total loss.

I have the first form happen about once a year on average as I would imagine most people with a ridiculous number of credit cards do in an era where identity theft is so rampant that I once read that credit card skimmers with a thousand numbers on them were going for about thirty bucks on the black market. But thankfully, I have never dealt with the second. I’m sure I will eventually and when I do, I will attack the situation with great vengeance and furious anger (anyone else remember Pulp Fiction?) and maybe I will write a post about it and turn it into a net positive. But until then, I will just keep watching. And waiting. Keep that in mind, identity thieving assholes.     

How worried should I be?

Not. This shit happens almost every single day. There are twelve year old computer geniuses, in horrible countries where their gifts are being tragically wasted, coming up with new ways to hack into the most secure databases on the planet as we speak and many of them will succeed. It’s an inevitability. But luckily, you live in a country where the consumer is basically the only thing keeping our vastly overinflated economy afloat. No one, and that includes most politicians, has any interest in seeing what would happen if consumers lost that precious confidence that keeps them borrowing money to buy shit they don’t need to impress people they don’t like (I believe that one is a bastardized version of a George Carlin quote – that guy was a genius and he was right about 89% of the time, which is way more often than almost anyone, ever). The economy is basically the only thing keeping people just happy enough to prevent them from realizing (or caring) how corrupt those politician pieces of shit are and thus, consumer confidence is to be kept sky high. And it follows that the laws are extremely in favor of consumers when it comes to matters such as identity theft. Do your basic diligence and you will be fine.

Should I get identity theft insurance?

Probably not. Insurance is an industry run by a combination of typically beautiful crooks and people who are extremely good at math. It wouldn’t be so bad if insurance companies didn’t do all they could to screw the marks customers out of the money they should be entitled to at literally the only time they’re expected to do anything whatsoever in exchange for the money they collect year after year in the form of premiums that consistently go up for literally no fucking reason at all. But they do. Ever make a claim on your car insurance or homeowner’s insurance? Remember the experience? Now imagine trying to get those bastards to pay for something intangible. If I recall correctly from the last time someone tried to upsell me on my insurance (talk about barking up the wrong tree), it’s about a seven dollar a year premium addition and there’s probably an excellent reason for that. It’s bullshit and they will never pay you a dime, no matter what happens.

Why was this post so sarcastic and profane? My delicate sensibilities are offended.

I don’t care. This is my blog. Get out. And to answer your question, I’m not sure. I’m in a funny mood tonight. I hope I succeeded in providing some worthwhile information and entertaining at the same time. Maybe more people would read this blog if I could master that skill. I guess this post will serve as a test.

The Truth About All the Coffee Talk in the Personal Finance World

My simple, but wonderful at home coffee making setup – a burr grinder and a french press

“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.

Would You Like $50 for Doing Almost Nothing?

$50 could buy you an unlimited shrimp dinner at Outback Steakhouse for a pair of gluttons like my friend and I if you time it right. Bonus points if your friend says everything in an awesomely obnoxious Australian accent the entire time!

My most faithful readers may have noticed that last week, I missed the Friday post in the Monday, Wednesday, Friday pattern I’ve been following for a while now. This was one of the results of a little adventure I had while on a trip to the oil country. I plan to write a post about that trip next week because I think there were some worthwhile things to mention about it. But for now, just know that I wound up spending an extra night in a hotel room there. For some reason, I decided to read through some emails and for a less mysterious reason, I decided to act on one of them.

Not too long ago, I wrote about my new SoFi checking account. I’m happy to report that it has been a great experience so far. I haven’t been charged any fees (not even for checks, which most banks do charge for now), the bill pay functionality has worked smoothly, transfers to other accounts have been likewise, and I’ve been paid 2.25% interest on the money I’ve run through the account. So I’m very happy. But like any company that truly finds a place in my heart, that wasn’t good enough for the people at SoFi. So they found a way to put a little more money in my pocket and emailed me their idea. And on a scorching evening in a west Texas hotel room, I read that email.

Simply put, SoFi will pay me $50 for everyone I refer to them who starts a checking account. But they didn’t just give me an incentive; they wanted to welcome new customers into the SoFi family in style. And they’re going to do that by depositing $50 into the new accounts of everyone I refer to SoFi who starts one. That’s right folks, everybody wins! And it gets better. Once you’ve gotten your free $50, you can turn around and make $50 more for everyone you sign up. This means that anyone with a spouse or significant other who also likes free money has just been handed $150…or more! You can multiply that $50 times as many friends as you have who are interested in having a free $50 of their own.

Up to this point, I have written this blog for zero compensation. No advertising, no referral links, nothing. Simply put, income is not my goal in doing this. That said, if you have enjoyed reading my blog to such an extent that you’d like to toss a little cash my way as a thank you, make a little for yourself in the process, and try out a checking account that comes recommended by someone who has had them at literally dozens of different banks, feel free to use this link – which will do all of those things. If not, I will probably still manage to survive and will definitely keep writing this blog as long as I continue to enjoy doing so. And either way, I wish you a wonderful Wednesday!

P.S. As an extra little bonus, if you click the link above, you will learn what the B in B. Money stands for.

This Is What I Do When Conditions Change and I Start to (Gasp!) Lose Money

Can’t be getting paid subpar interest rates on savings if you want to visit the Texas themed lazy river cause there’s no way in hell admission is cheap! Image courtesy of Jean-Marc Buytaert

Recently I was taking my routine, virtual stroll through all of my financial accounts when I noticed something funny – and I most certainly don’t mean “ha ha funny”. My CIT savings account was only returning 2.4% APY. That’s odd, I thought. I’m almost sure that had been at 2.45. I did a little checking and sure enough, I was right. Now I don’t want to miscommunicate here; I understand why this happened and I don’t blame CIT Bank for it. Our long overdue recession has started and not only have rates stopped rising, but they’re actually already coming down slightly. Futures traders have even priced in one to two decreases by the FED by the end of the year. So I’m far from the only one making this call and it doesn’t surprise me in the least to see CIT Bank, a for profit business, doing what management feels needs to be done to protect the bottom line in changing conditions.

That said, what’s good for the goose is good for the gander. When conditions change, I also re-evaluate what I’m doing to make sure it still makes sense. Here’s a recent example in case you think I’m making this up. So I spent a half hour or so on good ol’ Doctor of Credit doing a little research. It turns out that currently, the highest rate on online savings accounts that don’t require absurd shenanigans like 10+ debit card (yes, people apparently actually use the things; but they shouldn’t) transactions per month is currently 2.51%. However, interest rate isn’t the only consideration. Many bank accounts also pay bonuses up front, which can quickly shift the balance when we’re talking about such low numbers. After all, in the grand scheme of things, 2.51% is still an awful return on investment, even if I do feel that cash is king in current circumstances.

So ultimately, and somewhat coincidentally, I decided not to move my savings account money very far, at least from an alphabetical perspective. I’m moving it from CIT Bank to Citi Bank. Citi’s online savings account pays 2.36%, even less than the 2.4% that started this whole conundrum in the first place. However, by performing a little financial gymnastics, which basically just involves making sure I stay within the rules of the promotion, I can also get it to pay me a $400 bonus for keeping $15k in the account for sixty days – more than the CIT account would have paid on that amount in an entire year! And meanwhile, I’m collecting the 2.36%, virtually the same rate as CIT was paying, on top of it.

How does the math work out on this? With $15k in the CIT account, I would have made $364 in interest over twelve months. But with that same $15k in the Citi account, I will make $459…in two months! If left in the account for the same twelve months as the CIT Bank account for the purposes of making an apples to apples comparison, that figure becomes $758. That, ladies and gentlemen, is what we call a win. The only downside here is that unlike credit card reward money, bank account bonuses are taxable income. But that’s more about credit card reward money being in an extremely privileged class of its own than it is about this being a bad deal; almost any income under the sun is taxable – even income that isn’t income at all in some cases (Ever hear of imputed interest? Look it up. It’s disgusting!).

The way I see it, there are two lessons here. One is that you should be regularly evaluating your available options, particularly when something changes with your current one. I preach that all day long. But the second lesson is one I need to be taking to heart myself going forward. Given our current economic circumstances, I’m not compromising on holding as much cash as possible until further notice. But with available interest rates on cash being as pathetic as they are, and with sign up bonuses being as large and plentiful, it could very well be worthwhile to move savings account money around two or three times a year. For example, if there were three options as good as the Citi bonus available (I don’t believe there are; but there are others that are close and again, conditions are always changing), I could make over $1500 in a year on $15k of cash – a damn good return considering it’s 100% risk free. Yes, it would be a little bit of work, but with emphasis on the “little” part. When all is said and done, I will have less than an hour into this little project. Would the extra $1200+ over and above what the CIT Bank account would have paid without any bonuses be worth three hours of my time? You bet your sweet ass it would! I do pretty well for myself (for now…) but I don’t make anywhere near $400 an hour…yet.

Good day to you all!

This Is How Much I Spend in a Year

My view of the famous Jerry Jones screen/dome from my trip to the 2017 Cotton Bowl, in which my Badgers narrowly defeated an over matched, but extremely motivated opponent with a bizarre team motto that was repeated almost nonstop by its fans – and yes, the expenses from this trip are included in the numbers below.

Words are all well and good. But without numbers, how much do they really mean? I’ve decided that in order to make this blog as valuable as possible for readers, I need to make it specific. As such, I’m going to give you a very intimate look at an important element of my personal finances. In particular, I’m going to show you what I spend on EVERYTHING. Obviously this is all specific to me, but to illustrate things more vividly, I’m going to go into detail on each of these “line items,” one post per week. Hopefully it will give some folks an idea or two on how to cut expenses without sacrificing anything that’s important to them.

Before I jump into the numbers, here is some basic information about me for context. I’m a male in my early thirties with no dependents (not even pets) and while I spend my share of time with certain young ladies, I live alone. The numbers below are average figures between what I spent in 2017 and 2018. In 2017, I lived in an upper middle class Milwaukee suburb with a relatively moderate cost of living. But for most of 2018, I lived in the Galleria area of Houston, which is pricier than almost anywhere in Wisconsin, but still very reasonable for a wealthy part of a major city.

I work as an outside sales rep in the commercial finance industry. That affects a couple of areas of my spending. First, since I expense around half a dozen restaurant meals most weeks, I don’t have much desire to eat at restaurants in my personal life and as a result, I spend almost nothing in that category. This also cuts down on my grocery spending somewhat, although I like to cook and spend fairly liberally on groceries for the meals I do buy. Second, in spite of my employer’s generous vacation policy, actually taking advantage of it would cost me much more in income than in any other way. Plus, I travel a lot for work, resulting in general travel fatigue, and I’m single. So this is just not an area I spend much in. However, I consider both restaurants and vacations luxury spending categories and thus, if one were trying to live as economically efficiently as possible, these numbers would still be very low.

As I said above, I’ll get more specific about what I do in each area in subsequent posts. But in general, my lifestyle (note, I said lifestyle, not spending; the difference between the two is the foundation of my financial success) is somewhere between middle class and upper middle class and I save over half my gross income. In other words, there is plenty of fat in my expenses since I pretty much do whatever makes me happy. No economic constraints limit my spending besides my desire to increase my net worth rapidly.

The first number in each category is what I actually spent; the second is about what I would spend if I needed to live as economically as reasonably possible. I will note that the most advantaged living situation is two productive people under one roof, assuming they can trust one another and are on the same page financially. When I lived with my ex-wife and we were working on paying off a mountain of student loans, we spent more than my bare bones total figure below but didn’t come anywhere close to doubling it (keep in mind the figure is for one person, not two). So it is definitely realistically achievable. If you are astute, you will notice that I’ve omitted one very large expense: taxes and fees. In the interest of keeping things at least somewhat private, I’ve decided to leave that exact figure out, at least for now. I’ll simply tell you it is less than the total of all my other expenses but not by much. Plus, there is only so much one can do to limit that number when the majority of your income is W2. I’ve been investing more of my time into improving that situation and if I find success, I may post about it at a later date. Anyway, here we go!

My Average Annual Expenses Between 2017 and 2018

  • Auto maintenance/repairs: 1300 (500)
  • Cash donations: 2100 (subjective)
  • Clothing: 700 (100)
  • Food – groceries: 1700 (1200)
  • Food – restaurants: 500 (0)
  • Fun: 2100 (300)
  • Gas: 2800 (1200)
  • Gifts: 1200 (200)
  • Household expenses: 700 (300)
  • Housing: 12,600 (6000-10,000)
  • Insurance: 3000 (2000)
  • Medical: 900 (0)
  • Memberships: 300 (300)
  • Other: 2400 (0)
  • Supplements: 100 (0)
  • Technology services: 500 (350)
  • Utilities: 1100 (600)
  • Vacation: 300 (0)
  • Vehicle depreciation: 2100 (500)

Total: 36,400 (13,550-17,550)

How did I arrive at these numbers? And why the range in the housing category for the minimalist budget? You’re just going to have to stay tuned to find out…