Month: November 2018 Page 1 of 2

Vacation on a very small budget

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On November 29, 2018

In Uncategorized

Michigan beach for a vacation on a budget

One of our favorite places to hang out.

 

As a teacher and father of four kids, summer vacations is something that we plan for with a lot of anticipation and look forward to.

From the beginning of our marriage, traveling was a necessity because my family didn’t live in the U.S. We took a few trips down to my native country in South America and enjoyed ourselves. Nothing extravagant, and for the most part we had where to stay for free.

As the years went by, we got more responsibilities and our trips became more sparse; instead of traveling every year, we did it every other year, then every four, five, and now we really don’t go anymore due to political and safety reasons. Especially after becoming parents it was just too much to afford the airplane tickets. For the six of us to fly there would be easily over six thousand dollars. Thankfully, we never got crazy with credit cards to make it happen. I wasn’t thinking about Financial Independence back then, but I always had in my mind the idea of “you can’t pay for what you can’t afford.” So, we were Ok with it.

At some point, we had a trip to Disney that was gifted to us by my in-laws. We all traveled together to ” The Magic Kingdom” and sure we had a great time ( the most exhausting time ever). But definitely a great contrast with what we have been doing for the last 8 years.

Most of us you know how hard it is for adults to escape social pressures and collective desires for wishing things. Even more difficult it is for kids when they go to school and talk to their peers. Working in a school it is not unusual to hear kids talking, even those in financial need, how they spend their weekends going to a plethora of places such as movie theaters, arcade places, trampoline ville, coffee shops, etc; especially in the winter months, although summer time doesn’t lag too far behind. Those kids conversations translate into lots of “wants and demands” from our kids, particularly at a young age.

We have never liked those places for our kids. Not even the play places from fast food restaurants. We also hate the idea of paying money to buy little trinkets through tickets and reward games. We feel that all those places are germ pools. I don’t think of ourselves as germophobics, but you know how it is, kids are sneezing, coughing all over the equipment, balls, game controllers and it is just inevitable.

Beyond that, there is also that feeling of being overwhelmed by people all wound up trying to win prizes, frenetically, shouting out their excitement with a soundtrack of some random upbeat pop music blaring from somewhere. Kind of like the same feeling as when you go to a mall. Everybody is there to consume food or buying goods of some sort.

Or like going to the grocery store when you are hungry, right? You end up buying more than what you actually need. You go to the mall, where everybody is buying and consuming and it looks so normal. Why not buying an ice-cream cone to each one of your kids so they can be like everybody else? Before you know it you are nearing your first hundred dollars spent; even when you could’ve pleased the family sweet tooth with a 2 for 1 sale at the grocery store for under $5 and still have ice-cream for another night.

Well, when it comes down to vacation time there are plenty of places where you can spend your money as if it grows on trees. Waterparks, amusement parks, museums, aquariums, zoo, you name it.
In our case, about 8 years ago we decided to go camping with our two first girls. My wife had some camping experience with her parents, and I also had my share of camping with friends in my native country.

With the girls being not older than 4, we decided to take a trip around The Great lakes. We started in our Chicago suburb and went up north through Wisconsin to spend the night with a friend, who kindly offered to host us in the Upper Penninsula of Michigan; better known as the U.P.

Beautiful scenic driving, great conversations with my wife and lots of sharing with the kids, as well as the expected crying and bathroom emergency needs.

We crossed the whole peninsula and made our way towards the Mackinac Bridge. We didn’t quite know where we were going to spend the night but were up for whatever.

My wife had heard about a place called Leelanau County, west of Traverse City, with various camping opportunities in the area. We decided to take the drive and made it to one of the campgrounds late that night. We helped ourselves to a campsite, set up and spent the night.

The following morning we woke up in the middle of a gorgeous forest about 50 yards away from the turquoise blue shores of Lake Michigan, with miles of white sand. Lots of historical sites to explore, mom and pop restaurants, quaint little towns and just magnificent scenery everywhere. Since that one time, we have been going back every summer to spend our family vacation time together in the same spot.

With my photography side hustle, I have been lucky enough to travel as far as Hawaii to cover a wedding event. I absolutely loved it. Also, in my younger years, I traveled on a dime to Europe a few times to stay with friends and explore what I could.

You may be asking, so what? Well, to each their own, but when I think about what makes a vacation a “vacation”, to me it is not necessarily where you go, or how fancy of a place you stay at. Sure a nice dinner by the ocean might be nice, but like the little trinkets you get at the arcade place, those things wear off. How much you spent in a hotel room, the wine you drank, the water slide at the water park, and all those things are just that. Things! What truly makes a difference in your vacations is the people you are with; how many times you laughed, chatted and truly spent time together.

Visiting a nice place is nice; don’t get me wrong. But I question how many times we judge our vacations by the level of fanciness and price tag on it vs. quality time that we spend with each other.

It took me a while to realize that I was just as happy going camping in Michigan with my family as I can be going to Hawaii to a fancy hotel. It may seem simple, but this thought really enlightened me. Many times we absorb desires from our social environment and we fall into the trap of making an irrational connection between happiness and material things. At the same time, these connections are costly and perpetuate a self-imposed obligation of keeping incurring into the same expenses that we expect will grant us happiness.

If there is one thing I love about the pursuit of FI is the idea of helping me align my priorities; time with my family Vs. possession of material things.

Usually, our summer vacation runs for about $1500. Six people plus a dog, for two weeks of camping, full of canoeing trips, kayaking, paddle boarding, swimming, biking, rock hunting, cherry picking, beer/cider drinking, lots of fires with smores and sharing.

I would not trade my very affordable vacation for Mickey ears or the most amazing Luau.

How about you? What’s your affordable way of having a memorable and affordable vacation?

Sharing memories by the fire with smores.

Lots of memories close to the FIRE.

 

How to fix your engine light under $10

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On November 28, 2018

In Uncategorized

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Right at the traffic light before I fixed my engine without even getting out of the car.

Nothing worse than being in your car, listening to some old classic rock, thinking about how great you are doing with your freshly reviewed budget; having some flashbacks of that cheap but delicious beer or wine you drank the night before in honor of your great plan to FIRE and there comes up that damn light to ruin your day!!! Because you know that means one thing: Money, money, money.

If you are like me, who chooses to drive a 14-year-old car, and who chooses to invest wannabe monthly car payments into my 401K, student loan, mortgage or any other sort of investment, you know that feeling then. It seems like when everything is going well, with no extra expenses and you are starting to look up for a brighter tomorrow it always happens; more expenses come your way.

Your mind starts roaming with the what ifs and you just don’t want more car debt or having to buy another vehicle.

Well, this has happened to me several times, but after the first two. I got smart. You should too.

If you have been to the mechanic lately you know that just for taking the car in, most likely, you will be charged at least a “diagnostic fee” and they aren’t cheap. Well, a few years back, I was in need of getting my car checked because my engine light was on. I panicked. At the time the car was just about 10 years old and my first thought was “is there something wrong with the engine?” What else could it be, right? After all, it’s a light that looks like an engine.

I never felt any difference or symptom while driving the car though…

Sure enough, I take the car in and I had to leave it overnight. A total hassle.

The next morning I get a call from the shop telling me it was a sensor and it had to be replaced. If I recall right, it was around $350.

About a year later, the same thing. The light turns on. S***!!!! “This is ridiculous!” I took it in again, this time they told me it was nothing and the light just needed to be reset.  They charged me a diagnostic fee, plus a bit more for resetting the light for a total of $125. “Luckily, it wasn’t $350 again”, I thought.

The idea of getting the light “reset” got me thinking. I started researching on YouTube and some forums and I found out that particularly oxygen sensors tend to throw error codes that will cause the engine light to go off sometimes. Ha!

Now the question is, how do you know? What can you do? Do you take it to the shop? Ignore it?

Most people take the car to the shop blindfolded and trust mechanics with no other option. If they tell you, you have to replace X or Y most people probably don’t even know where X and Y are.

Well, I found out too that you can go to auto-part stores like Autozone, Advance Autoparts and the likes and they can scan the car for you to see what the error code is. Of course, you will need a part, and the part most likely will be available at the store you are at. Win-win situation, right?

Well, that got me thinking too about what would I need for a DIY engine light car diagnostic? And that’s when things got interesting and significantly cheaper.

Scanners for cars are expensive( $70+). But if your job doesn’t depend on the tool you can always shop China through websites like Aliexpress.  All you need is a tiny OBD II device with the same connector that is used when you take your car for the gas and emissions test.

If you are afraid of fixing anything with your car, don’t stop reading quite yet. It’s so easy that you won’t believe it. This port or connector that you need for the scanner usually is on the passenger side under the dashboard. It almost looks like the ports of the good old Atari; I said in my story that I was in my 40’s, didn’t I?

The part you need to do this can be bought for only $6. It takes a while because it comes from China but it’s worth it. Then you need to get an App. that works with the device. I use Torque. Your phone and device synch via Bluetooth technology, and before you know it you can even find out the temperature of your coolant.

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This is one of the windows when you use Torque.

Needless to say, there is a window that shows you all the error codes your car is spewing. If the car is not stalling or giving you any particular issue you can just press that magic button that says “reset”, and you will continue on your way to FIRE feeling a bit richer.

As a matter of fact, on my way home tonight my engine light turned on. It’s already cold in the midwest and apparently, that can affect the functioning of Oxygen sensors in a car.

With a full stop at a traffic light I pulled my phone out, opened the App, check the error code and it was the oxygen sensor that didn’t complete the reading in the car’s computer. Since the car was not giving me any issue or symptom I went ahead and reset it the light. The traffic light changed to green and I kept on driving. On the next light, I turned off the car and waited for 10 seconds before starting it again.

Once I started the car, the light was gone and once again I got that feeling of triumph. I am keeping my money and using it for better things like my 403B or simply staying out of debt.

I have done this with both of our cars, and even for friends. I have saved thousands of dollars over the years. Seriously. I have reset the engine light no less than 10 times. Thanks to this six dollar device, it has cost me nothing. Nichts! Nada!

Plus, remember, you always want to trust the people you are giving your car to. If you trust your mechanic and feel they treat you honestly and fairly, well that’s a relationship to treasure. But also think that even if your mechanic is the nicest person on Earth, his job is to make money through his job. Your job should be to keep as much of it as you can.

My disclaimer here of course: I am not advising anybody to fix their car by themselves. This post is simply commentary and my opinion based on personal experiences that help my family stay on track financially.

 

 

Should teachers invest in 403B plans? Maybe…

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On November 26, 2018

In Uncategorized

Conman

Maybe you are investing in your 403B plan at the same time you are financing a retirement plan for a financial adviser.

If you are a teacher or have a teacher in your family you may know that in most cases these folks with nerves of steel have very few options to make their working time worth more; in other words, it’s not easy to get raises. The only raises teachers get are either based on years of service or additional credit hours of professional development.

Many people may read this and wish for a political debate; not my intention with this post.

However, if one thing is true is that teachers’ opportunities to grow their wealth are limited. And the reason is two folded. On one hand, you have to either spend years of service in the trenches or take more coursework that requires an upfront investment.

Another option that is available to teachers and other public institutions is a 403B plan. A tax-deferred account that allows you to save money. The way it works is you let your employer know how much money you want to be taken out of your paycheck and your money, free of taxes, gets put in a special account with an investing company. Once the account is set and the money is transferred you can invest it in the stock market. You will not be able to touch this money until you are 59.5 years of age, and with the magic of compound interest you will have a decent a mount of cash to supplement your pension or retirement fund.

With that last word I probably lost YOU because many people think of “the market” and Wall Street as some sort of hocus pocus. A too complicated form of money investing for the common Jane or Joe. I get it. That’s what I always thought myself. Moreover, if you lived through the 2008 crash you are probably thinking of potential massive cash losses.

But with all and the market crashes, nothing could be farther from the true. All it takes is a bit of casual reading and few podcasts to get your mind set on track.

Most importantly, don’t make the same mistake I made. Let me tell you my 403B story. Well, not a pleasant one but definitely one that I learned a lot from and should help you avoid some of the pitfalls of investing as an educator .

When I first started working in the public school system I became acquainted with the P.E. teacher of my building. He was about 4 years away from retirement. He was animate about getting me to open a 403B account through my district. I had no idea what it was or how it worked. Coming from a different country, that was something totally out of sight for me. In my mind I had no business trying to invest in the U.S. stock market.

Somehow though, I ended up throwing $40 into it each month with Fidelity. I figured it couldn’t hurt. My P.E. friend told me where to put the money. I did and forgot about it.

A few years later, I remembered about it and went to check how much money was there. Wow! To my surprise, there were $6k+. Not that it was a huge amount of money, but it was a decent amount of cash for someone who was living from paycheck to paycheck.

At the time, when I was working with Fidelity I had no clue about what to do, where to invest or whatever pertain to investing. I did have the desire though of continuing seeing my money grow.

Sure enough, someone I knew from work happened to also work for an investment company. More importantly, it was part of the School District’s 403 plan providers list. He explained to me that the great thing about working with him was that he was also a financial adviser, which could certainly help me finding the right allocation for my money and bring the best yields. What can be wrong with that right? He also let me know that there was a fee of up to 2.5%. Nothing wrong with that I figured. At the time, I was paying 3.6% with my home mortgage; in my mind, I was getting a deal!

You can’t know what you don’t know, right?

I worked for about 3 years with this individual and his company. My money was invested in a lot of Vanguard stuff; remember I had no clue. However, in the midst of all this fog, there was something in me saying that I had to figure out my money. I always had that feeling of being blindfolded and I wanted to take the reins. My ignorance and the convenience of having someone resolving my finances were costing me more than what it should have and I wasn’t even aware of it.

It wasn’t until one day sitting on the couch with my wife, after listening to Dave Ramsey in a YouTube video that I got thinking about my 403b again. Few searches got me to the doors of the Financial Independent community. I started with the MadFientist podcasts. I listened to “Why you should retire before you hit your number” with Chris Hutchins and I WAS HOOKED! My gears really started spinning.

I felt enlightened. What I thought was a great deal of 2.5% for placing my money in Vanguards funds, I realized I could get it for 0.017% by managing my own money. In other words,  what was costing me $850 a year I could get it for $6.8! Holy s***!!! I am not a math genius but I knew that was a huge difference. Even worse when you think about this same difference if you get to have half a million dollars. $12,500 Vs.$85. Nope. It’s not an error. That is the difference of having half a million dollars and paying 2.5% a year or 0.017% in fees.

Needless to say, I pulled my money from that company and went back to work with Fidelity. My then financial adviser argued that he could actually help me to stay invested in the market if it went down and I panicked, and that argument was supposed to justify his fees.  Really? This was laughable to me.

I have kept on reading and listening to awesome podcasts like the ones from Afford Anything with Paula Pant. I read a few books and I feel confident about what I am doing with my money. I am escaping high fees and the hocus-pocus BS of financial advising from someone that is just trying to skim my account and profit from me.

If you are a teacher, or if you are thinking about investing in your 403B, which I would highly recommend to any friend or co-worker, make sure you are not paying high fees. What is a high fee? For me anything above 1% I would have to challenge it and find reasons as of why I am choosing that fund over a total market index fund with fees of 0.017% or at least under 1%.

Currently, there are a lot of school districts handing out their 403B plan management to third-party administrators, also known as TPAs. Unfortunately, no all investment companies are willing to work with TPAs because they work as gatekeepers. TPAs charge a fee to investing companies like Fidelity and Vanguard to serve individuals in the 403B plan of any given institution. As a consequence, many times you have that most of the companies available to employees to invest are garbage. Why garbage? Because they charge an arm and a leg in commissions. They rip you off! It absolutely sucks! Particularly beware of annuity programs. On the other hand, companies that do offer low fees for their services like Vanguard and Fidelity become off limits to you because they are not willing to pay any fees to the the Gate keeper TPA company. Otherwise they couldn’t offer the low fees they offer to their investors.

What to do? Is there a solution?

First and foremost, be in charge. Take the reins of your money and get involved. Nobody will make better choices for you. Learning this stuff is not that hard, and you really don’t need to know the ins and outs of Wall Street to figure that you don’t need a financial adviser to manage your 403B. A financial adviser might have its time and place but I would highly suggest paying an hourly fee before having someone completely in charge of managing your wealth.

Companies like Fidelity and Vanguard, make it easy for people like me. They offer what they call target funds, which are portfolios already preset according to your estimated age of retirement. Do you think you can find a way to outperform the market by finding “that one stock” that will make you a lot of money? Well, don’t. That’s your first lesson as an investor: Don’t try to outperform the market or you will get burned. Shoot for market average, low-cost index funds. Market average is great and all you need.

Also, very important, challenge your current options with your district. It’s your money. You work for it, so you should have a say about where you want your money to be invested. It might take some pressure but don;t just comply with whatever. Talk it over with coworkers, educate yourself and push your administration to find the best possible options for you. Remember, it’s your money; you are not begging.

You may also be paying Union fees regularly with every paycheck, so this is something that all Unions should be talking about and fighting for. Teachers need good and sound 403B plan opportunities. You Union should be fighting this at state level. If you are not in a Union you should find a collective voice about this matter. It’s your money, it’s your life.

I would love to hear about your 401K/403B opportunities in the comments. Do you feel that your company or District selects providers in your best interests? Do they care about the fees some providers charge?

Used Items Depreciation

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On November 21, 2018

In Uncategorized

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Thanksgiving is just hours away and you really have to hold on tight so you don’t end up giving in to all the holiday sales. Time to tame your emotions! If you have made it this far you may be able to resist the infamous “Black Friday.”

Hey, I am not opposed to a good deal if it’s something that I truly need, and more importantly that I can’t buy used on Craigslist or Marketplace. I probably wouldn’t buy used underwear, socks or hats, but for sure anything that falls into the tool category or electronics deserves a search in sites where you can buy used.

Basically, you just save a ton when you buy used and if you do decide to get rid of the purchased item, most likely you will barely lose any money; used items hold their value better than newer items.

Not too long ago I decided to buy a bike rack system for our camping trips. I wanted something secure, trustworthy that would not be rattling all the way to our destination.

Sure enough, I ended up looking at Yakima products. They are expensive; at least for me. The model I wanted is called the “full swing” and it retailed for about $500 plus tax.

With a little bit of patience and a few daily searches on Craigslist, Ebay, and Market Place, I was able to find one for $350. Already almost 50% off. Still a lot of money though. I was able to negotiate it and ended up getting it for $300.

We used it a lot and it always met all of our expectations. It was solid. A great product. But like everything else, especially with a family, you transition from one stage to another and things end up in the garage. After a season of not using it, I decided it was to part with it.

I posted an ad in the same places where I buy used and in no time I had over 100 hits. Long story short, I was able to sell it for $290.

Think about my $10 loss, versus the loss of the person I bought it from who paid the $500+. Not to mention the tax savings! You buy a $500+ item and you may end up paying up to 8.75%, depending on where you live in Illinois. No thanks! I am not again paying taxes, but before I even touch my salary a big chunk of money is already taken out. If I can save myself some money by buying used items, I will. In this case, just in taxes I saved almost $50. Plus about $200 by choosing to buy something relatively used.

Many times we fall prey of our emotions. We think we deserve a treat. Go to the store with the perfect temperature and upbeat music and walk out with a bag like everybody else. We want the cutting edge technology or gadget everybody is talking about.

Well, nothing more sobering than an estate sale. You walk in and you see room after room full of clutter and items that at some point were also “the thing to have.” Now, there they are; being sold for pennies, and if they don’t sell they make their way to the garbage. Think about the fortunes we spent on crap that we don’t really need, and that after a while we just give away or trash. It’s not just something you throw out or you lose money on, it’s hours of work and time in our lives that we invested to afford those items and now we are just disposing them; we are disposing our lives!

Remember the best sale is the one you don’t buy.

 

Making extra cash with a side business or hustle

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On November 19, 2018

In Uncategorized

20181118_130806.jpgWhen thinking about retirement one of the key points is finding a way to increase your savings. You can achieve that in two ways. You can increase your earnings and lower your expenses.

Sometimes increasing earnings is difficult to do right away and requires casting hooks for a new job; or as it is in the case of teachers you have to take a certain amount of university coursework to step into a different lane in the salary schedule. Whatever your situation is you know it will not be immediate or easy.

In that case, lowering your expenses may be the most immediate option. Challenging every single dollar you pay for any product or services should be part of your path to be in a better financial situation.

However, the one thing that needs no delay and can help making you some extra money is a side business. What kind? Well, it depends on what you enjoy and what you would like to in down times.

This is an opportunity for you to explore what your interests are, your inclinations; what Sir Ken Robinson refers to as “The Element.” We all have it. We have talents that can bring a lot of satisfaction in our lives. Unfortunately, sometimes we get caught in the hamster wheel and we just run from 9-5 leaving behind every drop of energy and creativity in us.

Therefore, it is so important to find the time to exercise, meditate, go on walks or whatever your jam is when you can clear your mind and think about what you truly enjoy, or what you really would like to do.

If it’s something you don’t know much about it, don’t give up on the idea. Not knowing about it today doesn’t mean you can’t learn it. It may take a while, but if it’s something you are really interested in, even going through the process of learning the needed skills will bring a bundle of satisfaction into your life.

In my particular case, my side hustle has been photography and wood-working.

I didn’t know much about photography and lighting but that didn’t hold me back. I researched different sites online, got some books from the library and started experimenting. I would come home after work and after the kids went to bed I would do Photoshop lessons at my own pace and use my wife as a model. It wasn’t long until I started doing family sessions, weddings and making some extra cash on the side.

Also when you turn an interest or hobby into a side business, you also get to reap some tax deductions for your equipment that otherwise you would have to pay out of pocket.

If you haven’t tried a side business, give it some thought and try to find your Element as you make some extra cash to help you along the way.

Stop paying for commercials on TV!!!

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On November 18, 2018

In Uncategorized

Advertising on TV is crazy expensive, which makes it a very exclusive marketing tool for businesses to reach their audience. When companies advertise on TV they do it as premeditated damage control. They incur in a huge expense with the purpose of selling more products or services they manufacture or provide.

Regardless, all that money spent is an investment. They spend X amount of money expecting to make X+ Y%.

Those expectations get crystalized when families like yours and mine surrendered our cash to them in exchange for what they sell. Indirectly we are paying for all those forms of advertising.

To illustrate my point, I want to share with you my experience hiring contractors. Two summers ago our air conditioning broke; it wasn’t cooling enough. It needed a charge of gas.

Exactly the same week, my neighbor was going through the same situation. With the difference that he decided to call one of the big names that advertise on TV. They came within 24 hours. He was also charged $580. There was a $150 fee for being an emergency call, plus $120 per Lbs of gas, and then some sort of extra fee for tuning the unit or whatever they told him.

The guy I usually call, could not come right away. We waited for three days. Yes, those were hot days. It was uncomfortable. However, I am aware that AC is not “a thing” all around the world. Most people open the windows when it’s hot and bare the heat; so we pushed through those days.

Finally, our technician came over. I asked him if I had to replace the unit? My AC unit looks so bad, I am not kidding, that you wouldn’t think it even works. His response was “don’t worry about it. Save the money for the kids. If we make it work don’t bother.” A few minutes later he had it cooling the house with no problems. Coincidentally, just like my neighbor we also paid for 3 Lbs of gas. Out total was $120!!!! No service call fee, tuning and all the other scam fees my neighbor paid for. This is not pocket change. This was a $460 difference!!

My advice to you: Stop calling those companies on TV to fix your washer and dryer; you AC!  Post something on facebook and ask your friends for recommendations. Most likely, someone will recommend you a reliable contractor that will not bleed you to death.

Once you establish a relationship with a contractor, treat them well, respectfully, and be thankful for their help. It doesn’t take much to say “I really appreciate you came;” that goes a long way.

On my end, that day we scored a 79% savings!!!! It’s not rocket science. It’s all about choices we make on daily basis that put us in a hole of debt or set us forward in our path to build wealth.

 

 

 

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