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

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On April 25, 2019

In Uncategorized

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. I have no idea how to do it.”

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 I was in desperate need to do it. 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 struggling.

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?

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On April 19, 2019

In Uncategorized

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.

https://www.niche.com/blog/teacher-salaries-in-america/

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 didn’t you figure out earlier what your FI number was? If you haven’t heard 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.

Saving a million dollars
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

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.

Saving for your retirement through 403B plans
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Contributing 10K yearly, starting from zero should take you there in about 20 years. However, if you increase your contributions, that time can 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 participate 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.

By

On April 7, 2019

In Uncategorized

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.

 

 

Setting up new financial goals and resolutions in 2019

By

On January 8, 2019

In Uncategorized

Reaching financial goals is possible

This is a great milestone for our family and we definitely feel like celebrating!!!

The beginning of a new year is usually kind of slow and somewhat filled with uncertainty; especially when you are in debt. My family and I used to land in December with at least 2-3K added to our credit card and gasping for the relief of a still far-away tax return.

This year that is not the case and I am extremely proud about it. I feel in charge of my finances! Empowered because I feel like I know what I am doing and nothing is left to serendipity. It has not been all roses and certainly my wife and I have had some moments of tension but here we are. We even managed to get a brand new roof on our home without any financing and credit cards are still clear.

More importantly though, we have come up with a plan to hit some serious financial goals in the near future.

In the past few years, I have been contributing regularly to my 403B. However, if you have read anything about how much money you need to retire and reach FI without consuming your savings, you may be familiar with the 4% rule; which basically says that you need to save enough money through investments so that you can safely withdraw about 4% of your savings yearly. In a nutshell, if you want 40k a year you need about a million dollars. Another way to look at it is by saving 25 times your yearly expenses, which will add up to the same amount. 25 times 40k= a million dollars.

Well, in my case and my situation reaching an amount of a million dollars by just investing in the market is not very likely; plus, as I have said before, in ten years I want to be ready to call it quits with my job if I want to and potentially dive into other endeavors and interests of mine. Including sharing more with my family.

In order to do that, the most likely way to do it is through real estate; especially since we already got our feet wet as landlords. We have been renting our first home for three years now and what once seemed to be a mystery of life I can sincerely say it has been the best financial decision and risk we have embarked on as a family.

We not only profit through the rent, but we also benefit building up our property’s equity and shelter our hard earned cash through the art of yearly depreciation.

For a while, we had thought about using some equity as leverage to buy another property but we have discovered through this financial journey that we are conservative investors and would prefer a more secure path. We like to sleep well at night.

So far the only debt we have is our home and rental mortgage. Plus a pesky 22K student loan that has been juicing us for a while (easily 13 years) in $300 monthly payments.

Therefore, the plan is the following: I already dropped my 403B contribution from $600 monthly to only $100. We are increasing our student loan payment from $300 (minimum payment is $268) to $716. Added to that, we are putting 5K down from our 10K tax return. The other 5K will be stashed away as an emergency fund for our rental. By March next year, we will kill the student loan using part of our tax return, and free up the cash we were using towards it. Finally, we will be able to buy a brand new car!!! Just kidding.

After paying that debt we will have $1016 free and clear available for our next debt pay-off: Our rental.  The mortgage balance on that property is 122K. By next year after we are done with the student loan we will add the $1016 each month to the principal and regular payment plus a little extra from the monthly rent cash-flow. I calculated our payments at $2600 monthly so that we can pay the mortgage off within 5 years.

This coming school year 2019-2020 I will be getting another raise of about 6K, after finishing 8 credit hours in course work.

Once the property is paid, we will save $1218 in monthly payments. There will be about 21K free and clear coming in from rent, plus $1016 saved from the student loan we would have already paid off. All this combined, would total approximately $47,000 yearly, extra. That is incredible! Literally, it is hard for me to believe that this is at my reach in relatively a short period of time. As a teacher, the only source of income and father of four, this is like having a second job while sleeping.

For this reason, I have given up on the idea of continuing pouring my income into the market for now. I would need to save over $1,000,000 to draw that kind of money from the market. I still have a small contribution going to my 403B and I am planning on using my yearly salary raises to increase it, but for now, due to my age (45), the most efficient path to building wealth, in my opinion, is through real estate.

At the time of reaching these goals, I would still have 4 more years before I reach 55 and I am able to retire( taking a huge penalty). At this point, I will re-assess my situation and explore the idea of getting 2 or 3 more properties in the same area.

I feel that by having the safety net of the first property, saving and acquiring some other properties should not be difficult every other year.

January never excited me this much, but 2019 certainly is different!

Any word of wisdom is welcomed in the comment section. Do you have any financial goal that you are working on or that you have reached recently?

How much do you spend to work?

By

On December 13, 2018

In Uncategorized

 

 

One of the expenses that many times go unnoticed is what we spend at our workplace. Depending on the kind of job you have you may have to comply with a specific dress code or look, that demands a lot from your budget. Also, the more people you work with the more opportunities you will have for birthday celebrations, secret Santas, Halloween boo’s, Go-Fund-me’s, baby showers, retirement rendezvous and an endless plethora of reasons to potluck.

I don’t want to sound like a Debbie Downer but I just can’t figure out how people can afford the congo-line of celebrations. Seriously! One thing is someone having a heart attack and you along with some co-workers lend a hand to the family to cover bills with a Go-Fund-Me or throw a baby shower here and there, but holy cow can it get expensive!

I must look like the biggest jerk, but some time ago I decided to be very selective with my contributions at work. Boss’s day was the first one to go. I am sorry, that’s like the biggest brown-nosing celebration. Why would I spend money on someone who says hi when she/he feels like and makes 3 times more than me?

Baby showers, I am sorry but they are also very particular. Usually is young people, recently hired at your workplace, you really haven’t even talked much to the person and you are asked to contribute for a shower. The same goes for weddings! Why do we have to be gifting for weddings too if we are not even invited?

Folks, it gets expensive! When it comes to holiday cards and a simple $2.50 card can do…No! We have to go for the $10 card with freaking music and lights or it is just not good enough.

I can easily spend over $1000 a year in cards, flowers, pumpkin day, tomato day, go-fund-me’s, showers, weddings, school fundraisers, meal trains, adopt a family for Christmas, coat drives, food drives and many more. Simply, I can’t. I am all about giving, but I do think that we need to conquer our finances before we can help others. Furthermore, I believe that helping doesn’t have to come in the form of money. Help, can be in the form of guidance to others, listening, caring for others or simply having a genuine relationship with someone that goes beyond Hallmark cards.

Then, there is also the social pressure of the attire for work. In that regard, I think women have it worse than men. It seems like women feel more compelled to dress up and look the best possible at work. As a guy, I watch in awe how some of my co-workers talk about just running into great sales and simply buying something because a deal is just too good to pass. Well, in my experience when a deal is too good to pass, it is worth it waiting it out and think it over. Most likely it is actually too good to be true and consequently, it’s better to let it pass. As far as sales go… the best sale is the one you just don’t buy; great savings that way.

I firmly believe that in order to eliminate some of the expenses at work you must look at your job as a business. Your job should be an extension of your responsibility as CFO of your money. It makes no sense to go to work for $100 a day if you have to dress up in $100 outfit. Or if you must have enough outfits so people don’t notice that you are wearing them more than once; who cares? You shouldn’t.

If you wear $100 outfits every day, go to work on a 30K ride that conveniently you switch every 7 years, join every potluck and celebration at work, pay for daycare for 1 or two kids, pick up your coffee at the drive-thru, buy lunch and take another coffee for the commute home I just can’t imagine what is left of your paycheck! Debt?

Even if you have a nice six-figure salary to cover all this, you are simply throwing money away that could certainly buy you years or early retirement. No question about it.

On my end, I try to look professional and clean. With that said, I own about 3 pairs of work pants that I use through the whole year; each one about $15 a piece. Sometimes, I wear the same pair of pants through the week. All I do with those pants is go to work and come back home. Once at home I jump into my shorts, sweatpants or jeans. I absolutely do not care if people talk about me wearing the same pants. I do change my underwear on daily basis in case you are wondering and shower daily; so no concerns there.

I also have a collection of about 10 shirts that I use regularly, where some of them are as old as ten years old but still look nice. Every year when we go on our summer vacation I hit a store in the town where we camp and buy a few shirts for about $10 a piece.

I estimate that my yearly clothing expenditure orbits around $150. Depending if I need shoes or not. I try to buy shoes for under $60 and they must be built to last at least 2 years.

To illustrate my point I wanted to make a comparison between what I save going to work compare with a typical co-worker.

Itemized expenses Go with the flow & spend as you go yearly expense Small Budget mindful worker yearly expense
Car paymentx12 $3,600.00 $636.00
Boss’s day contribution $10.00 $0.00
Baby showers $10.00 $0.00
Wedding shower $10.00 $0.00
Meal train for someone sick $10.00 $0.00
Students/kids fundraiser $10.00 $0.00
Secretary day $10.00 $0.00
Potlucks( Fall, winter, spring) $30.00 $0.00
Clothes $50 a month, being conservative $600.00 $150.00
Coffee (2)x(5 days)x(4 weeks)x(12 months) $2,160.00 $0.00
Gas, a small car using a tank a week for $25×52 weeks $1,300.00 $1,300.00
Lunch (5 days=50)x(4 weeks)x(12 months) $10 ea $2,400.00 $0.00
Yearly $10,150.00 $2,086.00
Plus 2 $10 contributions for the year

The $636 for car payment comes from my calculation, based on our last purchase of a used minivan for $2,000. For gas, I am using the same amount for both scenarios. However, my proximity to work allows me to get almost two weeks out of one tank. Likewise, I do work with people whose commute is 40 minutes for 20-25 miles away; bad choice for the budget.

Another item that I am completely low balling is clothing. I constantly hear coworkers talking about the clothes they buy, and for sure they brake the $50 mark.

All these things are critical in order to save money and fund investments properly. I firmly believe that if I go to work and I am being paid for what I do, it is a must to make money; as much as I can. In order to increase earning I have to options. I can either get paid more or reduce my expenses to maximize my earnings. Ideally, I would do both.

Someone recently told me, “but you are a teacher, isn’t it all about the kids?” To which I responded, ” I give everything of me when I am at work, and enjoy very much my job, but I go to work for money.” Don’t you?

I would love to hear other people’s opinions on the subject and how you handle expenses at work.

Work party 2

 

buying a used car

Should I buy a brand-new car or a new-used car?

By

On December 5, 2018

In Uncategorized

Ohh cars! You gotta love them. How not to? They are such an art! They are designed with such ingenuity. They represent a summary of generations’ hours on end of trial and errors, trying to achieve efficient engines and fuels in order to combust progress and economic growth. Their interiors become every day more and more comfortable, to the point that their seats look more appealing than our couches. They are also loaded with technology that allows you to navigate the radio airwaves or demand phone calls with the command of your voice; as long as you don’t have an accent like mine, that is… a plethora of bells and whistles such as cameras to help your driving, integrated navigation systems so you don’t forget where you grocery shop, heating systems to warm up even the parts of your buddy that never see the sun, safety airbags ready to save your life, and in case you forget to use the brakes they got you covered… Gosh! How not to love them?

Well, unfortunately, it doesn’t matter how much we pay for a brand new car and how new it is, the fact is that it will break down sooner or later. Having a brand new car is no guarantee that it won’t break down, or even worse that it won’t be involved in some sort of collision where you may total your investment and get just a fraction of its cost after the insurance company makes the depreciation calculation. Now, that might be the argument for some people to go ahead and purchase a brand new vehicle and enjoy the perks of a warranty for the first two years or so, plus a hefty insurance policy, just in case.

However, when you calculate the number of hours of work you must invest, and consequently hours of your life, to pay for …what many consider such an investment, you might reconsider your spending.

According to Carfax and similar sources, a brand new car is bound to depreciate 15-20% in the first year of ownership after being driven out of the lot. Twenty percent! To add insult to injury, long gone are the days when you could find a simple car with just the basics. Now with all the bells and whistles that cars are sold with, it is extremely difficult to find a family car for less than $20,000. And once that you are sold into spending $20,000 in a vehicle, why not to spend a few more thousands in all the luxury that everybody craves. What difference does it make if your car payment of, let’s say $500 becomes now $550 for some extra safety features or technology “coolness for your ride?” Right? Just a few extra bucks!

About six years ago my family and I were in need of another car (The one we had got a trans problem). Convinced by a good friend of mine we made it to the Toyota dealer. At the time we were interested in a minivan Sienna. The financing, of course, is always a hook; especially when they offer to finance your 30K+ vehicle at 0%. I just couldn’t wrap my head around the idea of paying such a high price and for such a long time. Also, for something that I knew would end up needing car repairs regardless of how much I care for it.

We moved on from the idea of buying new,  we spent some time thinking about it and came up with the final decision; we were buying used! We spent some time on Craigslist looking around for options and right away we found plenty. We chose a 2005 minivan. It was year 2015, so at the time it was a ten-year-old vehicle. In the pictures, you could see some rust but in general, it looked great. We went to see it and it was solid. There were no noises, oil leaks, rattling underneath or anything like that, and the engine felt very responsive. Needless to say, we made a move. For $2,000 we bought our next car hoping it would last at least two years. I figure, if it lasts 2 years it would cost me about $83 a month. Much less than the car payments of $550 a month that the dealer had offered me previously for a new Sienna.

We have used that car now for 3 years and it’s still running strong. We take it on vacations, to the beach, everywhere. The best of all is that I don’t care if the kids walk in with muddy shoes or sand. If I have to go and buy some wood at the hardware store I am totally comfortable loading up bags of mulch, pavers, cement or whatever I need. If the dog leaves some hair behind after going to the park or beach I can care less. I own the freaking car; the car doesn’t own me emotionally or defines my life. I am paying, after 3 years $55 a month for this car. If I keep it for 2 more years, which I am planning on doing it, the price will come down to $33 a month ($2,000 divided by 60 months).

The best yet is that if I do decide to sell this car, the Kelly Blue Book trade-in value is between $300-700. My guess is that I would be able to sell it privately for $800 to $1,000. Even choosing the worst case scenario of $700 would leave the price of this car at $1,300. After five years of driving it: $1,300 divided by 60 months= $23. How does that look next to any car payment out there?

When I compare our minivan against my Corolla the difference is significant. I bought my Corolla brand new in 2004. It was pretty basic.  I paid $16,000 for it and paid it for 6 years. Dividing $16,000 by 14 years and 12 months, it comes up to $95 a month even after all these years. I still have that car and it runs great but it is still almost double than what I pay for my used minivan.

I don’t know you but I don’t think I will ever buy a new car again. When the need arises I will buy something that is at least 2 years old. Although I think that a car between 5 to 8 years old would have more potential for some serious savings.

You may feel very apprehensive about buying something used. I understand. I get it. Here is my recommendation to you: First of all don’t get the same ideas that some of my fellow teachers get. Don’t switch cars every 5 years or so. There is absolutely no need for that. That is the biggest waste of Benjamins!

Second, if you are uneasy about buying a used car, just hire a mechanic! How much can it be? $150? Even if it was $300, it is still worth it. You are saving thousands of dollars that will make a great deal of wealth in your 401k/403B.

Third, internalize that cars are disposable. With that said, understand that as you junk them you are also throwing thousands of potential savings. Literally tens of thousands of dollars!

 

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