Month: April 2019

7 things you can do to become handy and save thousands of dollars

Being handy is a consequence of being money driven.

Has it ever happened to you that you are about to come out of a month victorious, with no one unexpected expense in the budget and BAM! There it goes! The muffler starts making sounds. You don’t even want to take it to the shop because you know you will not come out of there without spending less than $350; being conservative.

You know how it goes. You take the car in, they tell you they’ll check what’s wrong and let you know in a few. Meanwhile you are in the waiting room mortified, invoking any higher being to intervene on how much the repair is going to cost.

The verdict: Yes, the muffler needs to be replaced but also the catalytic converter is about to go and there is a funky noise coming out of a bearing, which they highly recommend to replace. Now your previous guess of maybe $350 has rapidly faded away and morphed into$700. From that point on, there is no holding back for a big F@#$!!!!! Why me?

In your mind there is always that lingering idea of “I wish I could just fix this myself?” But right away the same thought links to another automatic thought of “I’m not handy.”

The truth

Ok. Take it from someone that has been bestowed with the handyman title. Nobody is born handy. I wasn’t jumping my dad’s car when I was five, ten or twelve. I never fixed anything until I had no option. And even until today I would say I am not necessarily handy but money driven. There are some things that now I have done them so many times, that yes, I can say they come easy. But more often than not I am trying to fix something for the first time and struggle.

How do you become handy? Well, I tell you a quick story that became my Handy 101 crash-course. I used to have a 1964 Land Rover Defender. It was all I could afford back then in the late 90’s. I loved that car, but the engine was in such bad shape that it required a liter or liter and a half of oil per week. Whenever I put my foot on the gas it was like a octopus escaping its predator; a curtain of black smoke would cover my path.

The time came when it overheated and the engine seized without ever turning again. I did not have the money to fix it; what seems like it has become the common denominator of my life. Maybe, and only maybe I thought I could afford to buy the parts.

Close to where I lived there was an area where mechanics would gather and work on the street for a more affordable price than a regular shop. They had taken over a corner where they always showed up and would fix any car brought to them. It was significantly cheaper, but still expensive for someone in his early 20’s.

It occurred to me that the difficult part of the job was to re-assemble everything. In my mind that’s what required the skills. After all, unscrewing bolts anybody can do right? I knew enough about mechanics to remember “righty tighty, lefty loosy.” So, I figured, if I can convince any mechanic to put the engine back together for me, I should be able to get the job done for half the price if I can take it apart myself. After all, I thought, all I have to do is wherever I see a bolt or screw I would just get it out. “Fair enough,” I said. Talked to one guy and he agreed. I got myself a deal!

Image result for righty tighty

Hours later I was going at it. Learning along the way what seemed to be the fuel pump, starter, valves, timing chain, etc. After being covered in grease for about a week I got it all out. Looking at the gallery of metal and greasy pieces all around my family’s condo I was ready to move on to the next step, as I was supposed to; but another idea came to me. ” Taking the engine apart wasn’t as bad as I thought it would be.” I could remember exactly how everything was supposed to go together. I knew the sequential order of the whole engine. I thought I could put it back together.

What happened next? I was opening new parts, taking some of the parts to be bored and properly sized, and in about two more weeks the car was running. I had a few difficulties along the way due to the fact that it was a British car and I was following a manual for American cars; the timing chain set up was different. But with a bit of extra help the car was running in no time. You can’t imagine my sense of accomplishment! I was elated!

Image result for defender 1964 engine series 1
Land Rover Defender 1964. Mine never looked in such a pristine condition though.

From that experience, I realized that with a little bit of patience and willingness to problem solve situations the possibilities for savings are endless.

You don’t have to be handy. You must be just willing to do what it takes. Especially in this day in age we live in, all it takes is your cell phone to find information about fixing anything you want.

I have fixed dryers using YouTube; that was a one time deal. I had not a clue.
Our AC broke last year; I swapped the motor and capacitor for less than $100. I had no clue what the capacitor was and I still, quite frankly, don’t know. I had to ask my neighbor to help me with the wiring and watch several videos. I had no clue. It was my first time.

I regularly do our brakes. The first time was a whole day nightmare. Now it takes me about an hour per wheel.

I have replaced our mufflers a couple of times for less than $100, using Rockauto.com- awesome prices and delivered to my door.

Fences, painting, table building, boat building, furniture making, and the list goes on.

Please, dont think I am bragging. I simply want to share my take on this idea of being handy because I know how much unexpected repairs cost, and how much you can save if you are willing to try fixing some things. I know how it feels when you have a budget and these unexpected expenses come after you like raging zombies and you have no defense.

I actually don’t think that we could have afforded our current financial situation if it wasn’t for that “handy-ness” or will to give it a try solving all these unexpected repairs. It can be frustrating, and I would be the first one to say that nothing is easy; there is always the broken bolt or stuck piece that will make you get very creative with your vocabulary, but it is possible. If other people can fix things, so can you. You can also be handy.

7 things to become handy and start saving thousands of dollars!!

Dare to try
Make sure that you are safe at all times. Getting under cars or dealing with electricity ( My weak link) can be dangerous. Make sure you are using all the necessary precautions. With that said, do your due research and give it a go.

The web got your back
In these days you can find a tutorial for absolutely anything. Do your research before you tackle the job. It will make your life easier. By the time you decide to face the beast you know exactly what weapons you will need.

Be patient with yourself
It will require more time than what it takes a professional to do the job but the more you do it the easier it will get. Don’t despair. You may need a break, coffee and words of self-encouragement before going at it again. Your grit will be tested to its limit sometimes, but there is an end to it and if you persevere you will win.

Help others
By helping others you get a chance to learn new skills and even make mistakes. There is no learning if there are not failures along the way. Plus, your friends, neighbors and family members will love you. With that said, if you are getting into unknown territory be clear and let people know that you are willing to try but you do not want to be responsible if something doesn’t go as planned; it’s up to them. Don’t bite more than you can chew.

Don’t spend a fortune on tools
Remember you are trying to save money. Don’t go crazy spending thousands of dollars to save few bucks. When it is a job that becomes a routine every so often it may justify spending few extra dollars buying a tool that will make the job easier; otherwise it’s not worth it. Don’ t buy a car lift for a one time job.

Buy used
Don’t forget you can buy like-new used tools for a fraction of their original cost; plus you will save yourself the sales tax. Apps like Facebook Marketplace or Craigslist may be all you need to help you find the tool you need.

Don’t listen to the nay sayers
Like with everything else, there are always those people that won’t ever try to do anything and can’t conceive that others will . They will tell you all the possible bad things that can go wrong and have no hopes on you, themselves or anybody. They prefer paying whatever, and using their credit cards because they feel that by paying they are protected against any failure. They could not accept that if something goes wrong it’s their own damn fault.

I hope you find this helpful and encouraging to start saving some serious money.

Have you ever scored some great savings by fixing something at home? Would you mind sharing? What helped you or didn’t?

How can someone retire on a teacher (or similar) salary?

When should I start thinking about retirement? Am I too young to retire? How do you plan your retirement? How do other people do it? How much money do I need to retire? Most people seem to work until 65, do I have to wait until 65 to retire?

***Disclaimer: If you are not a teacher, simply substitute 403B for 401K, and the same applies.***

All these are questions that teachers ask themselves most of the times when they are about halfway in their careers, few years before retirement age or in those days when we feel we can’t do one more day of dealing with behaviors, parents or administrators.

Unfortunately, the answer to all those questions it is not a one answer fits all scenario; and will depend greatly on your location as well as your expectations. Let me explain:

First of all, teaching salaries will vary greatly according to the state and district you work for. While some states and districts pay decent living wages, some others would make it difficult to live on one income and sustain a family.

Comparisons between public and private school salaries can also be very discrepant. Most public institutions will offer their employees a pension program as well as a 403B plan, whereas private institutions may be more limited in this aspect.

But wherever you are, you need to plan your retirement and make the necessary financial decisions at your reach to make it happen accordingly.

It is never too late to plan your retirement as a teacher ( It’s more like, it’s never too early)

One of the big problems that I see among teachers particularly at the elementary level is that we are so devoted to the profession that we forget to talk about money. “It’s all about the kids” teachers say.

Well, yes. It is all about the kids, but you should also do what is best for yourself and your family.

If there is one thing I could tell my younger self today is “why you didn’t figure out earlier what your FI number was? If you haven’t hear of the FIRE community, FI stands for Financial independent. RE stands for retire early.

Planning your retirement may seem like a daunting task, deserving of financial advisers, accountants and even maybe a shaman to grant the kind of financial security we feel will set us free as we sail into the sunset. The reality though is that there is nobody that can do more for us than what we can do for ourselves. The good thing is that the math is relatively simple.

The first thing you need to have in place is a budget or a system to track your yearly expenses. This will help you pinpoint easily what your biggest expenses are, what your non-negotiable or non-discretionary expenses are. How much income do you need to live and cover your expenses for a week, a month, a year?  Likewise, I think it is helpful to have your expenses classified as discretionary or non-discretionary expenses.

Discretionary expenses are those things that you may not want to cut out of your life but you know you will still see another dawn even if you part ways with, let’s say,  your cable subscription. Likewise, a gym membership, eating out, cellphone bills, kids activities, any random and impulsive purchase you may have in any particular month are eligible to bulk that list of expenses.

Non-discretionary expenses are your basics, such as groceries, utilities, rent or mortgage, health insurance, or any other expense that is truly indispensable in your life.

I also like to add a miscellaneous section for the financial misfortunes of each month, such as car repairs, birthday presents our kids get invited to, house repairs, donations, etc. You get the idea.

Once you have an idea of what you need yearly to live comfortably and what things you are willing to give up to make your retirement happen, you can start drafting a plan as to where that money will come from.

For teachers, the answer may be fairly simple. If you don’t have investments and you are just counting on your pension you have to figure out how much that pension will be and when you will be able to start collecting it.

All across the country, there is a tremendous push for increasing the retirement age for teachers from 60 to 65 years old. The easiest and fastest way to figure this out is by calling your teacher pension fund and ask. They are usually very helpful and can present different scenarios for you with very accurate calculations. For sure they will also have a minimum years of service.

Then the next question is, will your pension suffice your financial needs according to your current budget and its projection into the future when you are planning to retire?

If it doesn’t, you have to make up the difference with supplement income. Likewise, if you are not entitled to a pension through the school or district you work for you need to worry about funding your future life with the product of your investments.

How do you fund or supplement your retirement?

Well, everything goes here. If you are entrepreneurial and have been planning to start a business, that might be it.

However, the easiest way and, I would say, the no-brainer for every single teacher out there is through index fund investments. If you have the option to enroll in a 403B plan through your district you should definitely take advantage of it. Working diligently towards maximizing your contributions will be invaluable at the time of retirement.

How does 403B plan work?

In a nutshell, you decide how much money you would like to contribute out of each paycheck you receive. The funds will automatically be transferred to the investment company you have selected through your school district or organization, without paying any taxes. Usually, as Fidelity does, these companies have preset portfolios with a decent mix of stocks and bonds according to your retirement age, as a way to make it easy for investors. You also have the option of moving your savings from one fund to another, but if you don’t know much or are intimidated by the market, presets can be life savers; one less decision to make!

As 2019 the maximum contribution per year for 403B contributions is set at $19,000.

You also receive a tremendous tax advantage. By contributing to your gold egg nest you also lower your taxable income. That’s right, Uncle Sam wants you to save, and to encourage you they let you pay less tax; in other words, no tax on the amount you put away, and also your contribution will lower your adjusted gross income. It’s a win-win situation.

How does my 403B plan grow?

Unlike bank accounts, your 403B savings will have tremendous potential for growth. By investing in a 403B plan your savings will be tied to the stock market. In the last decades, the return has been around an average of 7%.

Also, the cool thing about investing in your 403B is that you will reap the benefits of compound interests. Which means that if in the first year you manage to contribute $10,000, the following year that amount at a 7% return will increase to $10,700. Now you have extra $700 that will be ready to work for you right away and earn another 7%. In addition to those yields, hopefully, you will be able to continue with new yearly contributions.

Using my favorite but simple interest compound calculator you can see that starting from $0 and maxing out your 403B contributions it will take 23 years to accumulate over a million dollars.

How long could my investment last?

According to a study by Trinity University if you use a rate of 4% as a safe withdrawal rate your savings will be likely to outlive you; which I am sure your family will also appreciate.

Putting it all together

  1. The most important thing in my humble opinion is to figure out how much money you will need to cover your living expenses at the time you are planning to retire.
  2. Second, you need to determine where you are financially. That is your starting point in your financial journey. Don’t feel bad for what you don’t have or haven’t done. Just the fact that you are thinking about this and planning your future should make you feel good.
  3. Set financial goals every year for yourself and your family. Be it paying off a credit card or student loan. Maybe going after your mortgage. All these things will increase your net worth and get you closer to financial independence.

A journey of a thousand miles starts with one step- Lao Tsu

What do you have so far? Do you have a pension? What is the age requirement to start collecting? Not enough? How much more do you need?Have you invested? If not, how much will you have to invest to secure your golden years?

Last but not least, if you do need to supplement your income the 4% rule is a good rule of thumb to get going. Remember, 4% is the safe withdrawal rate. With that said, for each 40K needed you will need one million dollars invested.

For the purpose of this conversation, let’s say you need about 30K to cover your basic expenses. Let’s also add some spending room to go on vacations and short trips with your significant other or even kids. Let’s generously round up to 45K total that you will need yearly.

If your pension grants you 30K with maybe the minimum requirement of years of service, all you have to make up for is 15K. Which 400K in investments should grant you comfortably.

Contributing 10K yearly, starting from zero should take you there in about 20 years. If you increase your contributions that time can potentially be trimmed back many years. 

I know, stashing away 10K or more might sound like a lot, especially if you are spending frivolously in brand new cars, brand-name clothes, happy hours, season tickets and all those things that leave you right at the beginning of the hedonic treadmill. But it’s not impossible!

The most important of all is to start. Do not wait!!! Time is the most valuable resource when investing.

With that said there are also many expenses in your life that can be challenged to increase the gap between what you earn and what you make. You want that gap to widen as far apart as possible to give you more room for increasing your investments.

Conclusion

If you are on your very first year of work you may not be thinking about retirement yet but there is nothing wrong with the thought of finding the shortest path to freedom. A time in your life when you will pick and choose what you want to do. Don’t feel guilty or selfish for leaving your profession. After all, there are many ways in which you can particpate as a valuable member of your community. It’s not the job that gives you value as a person. It’s you and who you are that gives value to any job.

Chasing financial independence will help you see the big picture. It will push you towards making a plan to reach goals; your own goals, not somebody else’s. There is more to life than exchanging time for money. But it depends on what we do with our money if we get to see what that something else is.

First trimester went by and we are still plowing through.

Missed in action

When I first started this blog I want it to be my accountability piece. My source of feedback and inspiration to continue my journey to Freedomville- AKA FIRE.

I had so many things in mind I wanted to write about but never had the time. I barely managed to write some of those ideas and draft them so that I can come back to them at some point…

Life threw a curve ball (Very personal here, feel free to skip this section)

My family has been through a whole lot of stresses and taking on more responsibilities.

As you know, if you have read some of my other posts, we are a big family. Two adults and four kids, plus our dog. However, last year my mother joined our family also. She came in April of 2018. She speaks no English and had never experienced winters in the Midwest.

We went through a lot! And my family life got turned upside down. Moving to a country with a different language and experiencing the polar vortex in the midst of your 70’s is not easy task. Neither it is to leave your country at the brink of complete economic collapse. I hope I never see myself in that situation. Feeling like you have worked all your life, accumulated enough wealth to live for the rest of your life and suddenly you have nothing. Just fiat currency that’s easy to weight than to count it when you are going to buy food.

Our family dynamics were thrown off balance. We had to figure out many things for her such as health insurance( More on that later) and a new purpose in life. Her stay with us made me reflect a lot on what would my life be and what I want it to be when I retire. The critical aspect of having always a purpose, which may well be a hobby, a passion or desire for learning a new skill. All these experiences made me think deeply about the importance of remaining mentally flexible as I go through different stages of my life.

Some of the challenges we faced had to do, first of all, with space. We own a 1,800 Sq Ft home, which we feel fitting for us. However, three bedrooms for my wife and I, four kids, and now grandma left little room to not feel a bit crammed or in need of a small space to have a breather. Added to that, one of our kids is in those pre-teen years, which adds energy to any sort of stress.

We were able to find a job for her with very flexible hours, in a non-stressful environment and doing something she loves- A dream come true, right?  But she was terrified to drive and so we ended with a combined round trip commute of 3 hours. My wife would drive her in he morning, go back home and I would pick her up at the end of my day. Each of us took one hour and thirty minutes each days she worked. Three hours combined added to our regular day of dealing with our kids, job, classes, etc. Most of the weeks she worked three days which became extra nine hours of driving.

All these little things also created extra expenses of gas, food, and an increase in utilities and a huge toll on our stability as a family. My wife and I were left with very little time to even talk. And when we had the opportunity to talk without kids or my mother we were so freaking tired that we would just crash. I definitely go to know personally what people refer to as “decision fatigue.”

At some point I even flirted with the idea of forgetting about our financial goals and procrastinate them. But we didn’t! We managed to have those few money conversations and to stay the course to FI.

2019 Financial Goals

As we set sails at the beginning of this year 2019 we decided that the best we could do at this point is to redirect some of the contributions we were using towards my 403B and get rid of my wife’s student loan that we have been paying now over 12 years.

We still contribute to my 403B, but instead of doing $350 per pay check, we are doing only $100 for the  time being. We took a HELOC on our rental, lowering the interest rate from 6.5% to 4.5% and we are expecting to kill it by 2020.

The student loan balance is 22K, and so far this year we have to increased our payment from $230 to $716 a month. Fourteen payments of $716 will amount to $10,024. Almost half half way there and…and…we already got three of those payments knocked out; it’s easier when you see the journey to your goal chunked down!

Tax return

We are also counting on a decent tax return. We received our 2018 return and stashed it away. We received almost 10K!!!! 5K will go to the student loan and the rest will sit in cash as a small emergency fund. So far the money is just sitting there as I scan the horizon of possible unexpected expenses, but I can’t wait to pull the trigger and put down all that punch-in-the-face money towards the loan.

Once we receive our tax refund for 2019 we will do the same again. Split it and completely pay off the loan. We will have to increase my payments a little bit to cover a small remainder. I am estimating about 2,000 left that I will have to make over in the next 10 months, which we will get taken care of one my salary goes up in August and we switch our health plan from PPO to HMO( That alone $274 savings a month).

Another, BIG FINANCIAL goal for 2019 was to max out my payment with my school district. So far I am just 3 credit hours( One more class) away. This was a $880 expense that will result in a 6K increase for next year, starting in August; not a bad deal.

Conclusion

Things are going as planned or even better. I continue using Mint as my quick snapshot but I find using spreadsheets is critical to stay the course.

We are trying to reduce debt and liability by killing the student loan and widen the gap between my income ( I am the only income and I am a teacher) and our expenses.

I am also trying to maximize my income. If things work well, by August I should be approaching the six figure milestone.

By being frugal and mindful about our spending we are plugging the leaky money holes. We tackled the ups and downs of expenses, pay for professional development that will bring more money in through my job, managed extra expenses with a new family member and we even booked our summer vacations at our favorite camping spot.

Our cash flow after glorious March and its 3 pay days is looking like this:

small budget retirement spreadsheet.

January and February were a bit tight but March was a relief. August will be the next month with 3 pay days.

As I was typing this post my oldest daughter said to me “didn’t we have more money before we moved to this house?” -We have been living at our current location for three years.

To which I responded:

“Honey, we used to live from paycheck to paycheck, and many times we had to use credit cards to cover expenses.”

NO MORE! It feels so freaking good to be out of that rabbit hole.

We still have a wonderful life. We have each other. We have health. The kids get to do their activities, and I go to work every day walking a little taller knowing that my years at my job are numbered. We have a small emergency fund, a rental and a bit invested. Couldn’t ask for more!!

I also, finally, figured out how to work my property value in Personal Capital and although my net-worth is mainly equity three years ago it was a negative.

This is how we are looking like these days:

Personal capital

This might seem small for some, but for someone who came to this country(U.S.) with only $800 in his pocket few years ago, this is incredible; at least for me.

Forever thankful to the FIRE community and all the podcasts and blogs put out. All the information given out for free.

I hope my story inspires others as I have been inspired by the so many stories I read every day.

I welcome any suggestion or take-away from your first 2019 trimester. Feel free to share your struggles and thoughts about this first quarter.

 

 

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