Author: Small Budget Retiremet Page 2 of 3

I am an elementary school teacher, landlord and father of four amazing kids, trying to reach my financial retirement in the next ten years. We enjoy frugal living in one of the most sought after Chicago suburbs as we manage our small budget to push us towards financial independence and early retirement. This blog will share some of our strategies and stories of our journey from $0 to FIRE.

Illegal immigration: An national sham

Image result for immigration sign

Alright. This will probably be my most political post ever. Although my intention is not to get into an argument about who is better or best, if Democrats or Republicans. Everybody has their reasons to vote one way or the other and although I do have my own political perspective I will not try to convince you one way or the other. All I know, is that some things gotta change and what I am about to share with you is one of them.
Needless to say if you have been reading my posts, you know that I am in the teaching business. By now, after 16 years in the profession I have helped many students and their families, most of them immigrants. Sometimes these families may or not have a legal immigration status but this doesn’t mean that their kids can’t go to school and receive an education. Sometimes the family may not have a legal status but the kids are U.S. born, which makes them U.S. citizens by “Jus Soil,” which grants automatic citizenship and right to the land where one is born.
I know. This is controversial. But that is the law. I don’t make the rules. Many people would call this BS and would agree to deny the right to citizenship to these kids. The counterpart of “jus soil” would be “jus sanguinis” which establishes the right to citizenship based on the citizenship of the parents.
Some people would argue that welcoming immigrants is a core value and part of the foundation of the United States.

“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!”

Statue of Liberty poem by Emma Lazarus

Regardless of immigration status the one thing I see in immigrants coming to the United States is a tremendous drive to push their kids to give them opportunities that otherwise they would not have had in their home country. They are very hard working people, resilient, and always living with their glass half full despite of inhabiting in the shadows, as cogs of the economic system.
These illegal immigrants that many times get blamed for the bad and the worse are also an important contribution to the economy.
Disclaimer before you stop reading: I am not advocating for open borders and letting everybody into our schools, using our social programs and living on welfare, yada, yada, yada. However, I do want to ask you to put yourself in the shoes of one of these families who lives surrounded by the lack of opportunities, basic needs such as food and water. Many times harassed by gangs, drug cartels, threatened with rape and death. Ask yourself if you wouldn’t do whatever it takes to get your family to a better place if you were in that situation? I would. I would do whatever it is necessary to keep my family safe and to provide for them. There are situations when the line between what is legal or not gets blurred by the need of survival.
If you feel entitled to a better life than others just because you were born in a privileged country, ask yourself what have you done to deserve better than others? Has your contribution or your family’s been such that it has made your country what it is today? Has your contribution to your country been that invaluable that otherwise it would not be what it is without it? Most likely the response to this is a flat NO. Most people’s contribution to society doesn’t go beyond holding a 9-5 job, paying taxes, social security and spending money; which is not much different than what Illegal immigrants do as well.

A vicious cycle

This might be as much of a surprise to you as it is for me, but many people do not know that besides doing the jobs that nobody wants to do for cheaper, illegal immigrants also contribute towards the economy. Not only by paying taxes but also contributing to social security.
Let me explain. Once someone overstays a visa or crosses the border illegally the firs thing the will need to get a job is a social security number. Since you can’t get one unless you have a legal resident status most people use one that doesn’t belong to them. Once they are hired by any company, with each paycheck federal and state taxes will be withheld as well as contributions to social security; without hope of any benefits in the future.
If the individual chooses to work for cash most likely than not this person will report income every year through an individual tax identification number, also known as ITIN number. Why? Because there is always the hope that an opportunity for naturalizing or gaining residency might come and people fear that paying taxes every year will be a requirement to be eligible.

Can we straighten things up?

The one thing that both political parties agree upon is the need for immigration reform. The question is not if we will have immigration reform but rather, how would that look like? Are we talking about deporting more than eleven million people after repossessing their assets in a holocaust-look-alike situation? Or are we talking about granting a citizenship path to everybody without any vetting, forgetting about all the other thousands of people waiting in line for a visa number? How about those children who came to the country at a very early age, who don’t even speak their parents’ native language and think of the United States as the only country they know as home?
Can the economy bare deporting such a large group of people without any consequences? According to pundits this would be a strong wind blow to a dwindling system already dancing on a tight rope.


If all undocumented immigrants were deported today, next year’s Social Security trust funds would have approximately $13 billion less for benefit payouts. It’s a considerable loss of dollars, especially when it’s projected that the Social Security funds will be depleted by 2034.
According to New American Economy, undocumented immigrants contributed $13 billion into the Social Security funds in 2016 and $3 billion to Medicare. Three years prior, the Chief Actuary of the Social Security Administration, Stephen Goss, wrote a report that estimated undocumented immigrants contributed $12 billion into Social Security.”

https://www.marketplace.org/2019/01/28/undocumented-immigrants-quietly-pay-billions-social-security-and-receive-no/

In other words these people work all their lives in a low paying job, they are allowed to put money into the system, they live in the shadows of a fake identity but they can’t ever receive any benefit as far as retirement is concerned.

You may say though, that they use social programs, “drain the system,” etc. However, you can’t receive any social program benefit unless you have a legal status that can be proved. No Medicaid, Medicare or ACA. I know this from personal experience. You may receive donations from organizations that focus on helping immigrants but not from the government. On the other hand, if there are children who have been born in the U.S. to parents with illegal status, the children are eligible to receive services because they are considered American citizens by “jus soli”. I am sorry, I don’t make the rules. I know what you might be thinking!

The system is broken

I am sure you have heard that before, but just because it’s broken doesn’t mean that nothing can be done. Many people think that the problem is a matter of choice by saying ” well, illegals just don’t want to nationalize.” That is not true. You just can’t go to the closest immigration office and say ” I want to be a citizen” and done; you are on your way.
To be a citizen of the United States there are really few options besides being born in the country. You can be granted residency if you are transferred or hired by a company in the states. Also if you are an investor with 500K to a 1M to invest in the country you can be granted the so called green card( No green anymore). If you possess any special talent, like playing baseball professionally (of course) may grant you residency.
Other than that, getting married to an American citizen( my case) or being petitioned by a family member could also help you. However, petitions for family members may take 14 years or more depending on the country of origin.
In the meantime, political parties and politicians reach for visceral feelings pandering to their respective bases trying to rake votes in for the next election and nothing really gets done.

A true story

Recently I received an email from a former student asking me for observation hours, which is a common practice in education. After realizing that I am so old now that my students are becoming adults I gladly accepted by letting her know she was welcome at any time.
After many conversations about education I remembered that she had come to the U.S. as a third grader without a lick of English. I remembered that during a writing exercise I had to basically stop to hear the account of this kid describing her crossing through the border. She described how her family had been brought to the border by some men and how they had to run and hide. Later, they had to spend sometime hiding in the basement of a house with other people until someone picked them up. She retold this story in a mix of fears and emotions as if it was some sort of scary but fun adventure she and her family survived. Almost as if it was a clip of Roberto Benigni’s Life is Beautiful.
Now she is a confident 19 year old, totally fluent in English, full of dreams and ambitions. She is attending college and is passionate about making a difference and working with kids. Unfortunately, even when she has been living in the states most of her life she is still considered an illegal immigrant, which will decimate her chances of getting hired by any school district.
Should she continue on the path to become a teacher in hopes that an opportunity for naturalization will come her way from the political arena? Or maybe she will fall in love with an American citizen that will grant her legal status? Or should she choose a different career path that will allow her to work in any part of the world, such as computer science, web design, accounting, engineering, etc?
Could you imagine the feeling of a 19 year old that has done everything right to achieve and chase the American dream being told F*** you! You don’t belong here, it doesn’t matter how hard you try you will never get a chance in the country you call home!
These are the kids that we have invested in and prepared to join our workforce. Why have we granted a K-12 education to all these kids if they are destined to live in the outskirts of prosperity?

Solution

I don’t think the solution is that complicated but I highly doubt that any politician will do what is needed fearing consequences in the polls.
I think it is fair to realize that perpetuating illegal immigration can’t be part of the solution. Keeping people down and living in the shadows contributing to a broken system is not fair to anybody.
I also think that deporting 11 million people will carry a financial and moral consequence that we are not willing to deal with; at least most of the population.
At this point, I think the only solution is to offer a path to citizenship to those who are already here, following the necessary vetting process to ensure our communities’ safety.
Also, some sort of linking between social security numbers and local state IDs should help tremendously to prevent identity theft. No more people using somebody else’s number.
I think it is fair for schools and other institutions to demand documentation that shows a law abiding status. Most countries do it.
Having more control on illegal immigration will allow to grant more visas to political asylum seekers, the visa lottery program, family members and petitioners backlogged in the immigration system.
It will not be perfect but definitely better than what it is now.

What do you think will be a good idea to fix the immigration system? Feel free to share your thoughts. As long as they are objective they will be well received. I don’t do well with one sided fanatical and tribal thoughts. Keep it real.


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.

 

 

Setting up new financial goals and resolutions in 2019

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?

 

 

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?

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!

 

Vacation on a very small budget

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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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…

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?

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