Archives For Money

We went to Las Vegas three years ago and decided to go through the “Timeshare experience”. Well, it didn’t disappoint and you can find the entire story here, but I had to share this comment with you!! I’m pretty sure it’s real, but it’s almost too good to be true. Here it is:

Jason the TimeShare Rep

Woww, what a response! I even have his email address if you want to get in contact with him to buy a timeshare. He seems like a great guy, and I’m sure his response would be even better than my “mean manager” if you don’t buy one!

I didn’t previously realize I didn’t have the right to tell people not to buy a timeshare, so sorry about that. Also, if anyone talks to Jason, please teach him grammar.

Yes, I’m one of those guys. I’m fully bought in on Apple products and too plugged into the “ecosystem” to escape anytime soon. I’m also one of those people who love to save money and shudder at the thought of throwing down $850 on a new phone, or worse yet, signing up for their new phone leasing program with unlimited monthly payments.

But I have to admit, I almost did the lease plan just because I wanted to pretend I wasn’t actually spending that much on a phone… but then…

I found a deal for a $650 credit when buying a new iPhone!!

As always, there’s a catch… and this one comes with a new credit card in your name. I’m largely over my absolute distaste of credit cards which was largely taught by Dave Ramsey, but I still only use them for the benefits and pay them off each month. That said, let’s get to the deal!

Here’s the plan:

  • Sign up for the citi AT&T “access more” credit card
  • Charge $2,000 within three months
  • Buy a new iPhone from AT&T with no contract
  • Maintain service for 15 days
  • Receive your $650 credit!

Here’s the catch:

  • Pay the annual fee of $95
  • Sign up for (or keep) AT&T service for at least 15 days

As long as you satisfy the requirements and play by smart credit card rules, you can get a $650 credit for the $95 fee! After I have the card for 10 months or so, I’ll probably cancel it just so it’s no longer alive. If you don’t have AT&T, you will have to open an account ($45 activation fee) and probably pay two months for phone service (~$90) before you could cancel and keep the phone. You can also get AT&T to unlock the phone… but basically this is the easiest if you already have AT&T.

I got the card today and will start the process shortly to replace my wife’s shattered-faced iPhone 5. I’ll update you after I get through the full process of ordering the new phone, activating, and getting my rebate. If you’re interested, check out this post which gets much more into the details.

You can apply for the card here. If I was smart and ambitious, I’d figure out how to get a commission for clicks, but I’m not, so rest assured I’m only recommending this because I like you.

A large majority of the traffic Google sends my way goes to the post, “How much car can you afford? The 20% rule”. If you’ve been around here for a while, you’re probably sick of me talking about this simple rule, which is to spend no more than 20% of your annual income to buy a car. I get quite a few comments, some supportive and others from people who think I’m deranged for thinking this way.

Lately, I’ve had a few commenters disagreeing with the rule because throwing away money on cars is their passion… oh wait, I guess that’s not quite how they put it. It’s actually a pretty convincing argument because they’re so passionate about the driving experience. This guy in particular is quite in love:

But its my passion_2

 

I think I have a problem with the undertone in his comment… mostly that it makes me uncomfortable with how connected he is to the “driving experience”. I’ve never seen someone so locked in while driving to the store to get milk!

That being said, I totally get where Joe is coming from. I like the driving experience as well, and I can imagine that the more you get into it, the more you’re tuned in to the subtleties of the drive.

But having a “passion for it” isn’t an excuse for throwing away all of your money on it!

Take my friend (who I’ve made up) named Jones. He’s incredibly passionate with keeping up with… well, his neighbors. He loves appearing to be the richest person on the block and there’s no way he’ll let anyone appear to get ahead of him.  Because of his passion for keeping up, he’s driven himself into loads of debt that will soon sink the nice boat he just bought.

But since it’s his passion, it’s all good right?

Let’s take a look at the next commenter “E”. He’s against everything in the article (wow, it actually makes me sound like a writer when someone calls my post an article!!).

But its my passion

Glad to hear that “E” can still afford food even though he’s spending 60% of his salary on a car. Holy crap, even when I was making bad decision on car buying, I still wasn’t spending that much!

In the end, E and Joe can spend as much as they want on cars, but they’re obviously somewhat concerned because they’re looking for answers on how much car they can afford (and subsequently disagreeing when they find answers). I wrote the original post to give people an idea of what’s not too crazy when buying a car. Mostly it’s intended for rational people who are looking to get ahead financially, but if that’s not your thing, then don’t Google it!

Work has been sucking up a lot of time lately and not only has it caused me to cheat on my wife, it’s also caused me to cheat on our personal finances! In both cases, it wasn’t a serious form of cheating, just a lack of time to fully focus.

When we traveled around the world, I kept a daily log that showed how much we spent and helped budget our trip, but now we pretty much pay the monthly credit card bill and only find out then. However, I have recently completed a retrospective by adding my debit and credit card info to a pivot table and confirmed what we suspected, our lack of attention has equated to a higher than needed spending (and I’m reconfirmed my nerdness).

Thanks to the hot Dallas summer our renovations have slowed with only the yard and two interior bathrooms remaining and it’s allowed us to refocus on finances for a while. We’ve made four not-too-painful changes that are now saving us $400 extra per month!

Here’s how our we’re saving:

Groceries – $150/month

Groceries are always one of the highest monthly costs, and a lack of focus can allow the bill to skyrocket. As you might have suspected after the whole the Whole Food’s animal welfare scale post, we’ve been yuppin it up at Whole Foods and other equally expensive grocery stories.

A few months ago a Trader Joe’s opened up close enough for us to bike to, so we’ve slowly started transitioning our shopping. We noticed a lot of items were cheaper, but it wasn’t until we started paying attention that we realized how much cheaper it could be overall. They only carry their own private brand so they maximize efficiency in the supply chain and minimize store size… which means – lower costs!

We’re currently saving about $150/month as we’ve fully transitioned over and save on some major items like coffee ($11.99/lb to $4.99/lb) and blueberries ($6.99 for a giant carton vs $4.99 for a tiny carton at our old grocery store).

Taking our lunch to work – $150/month

This was one initiated by my wife and reluctantly accepted by me. After the earlier mentioned spending audit, we realized we were spending around $200/month on lunch bills. Once she got a hold of that little piece of information, she decided it was time to put a stop to it so we both started taking our lunch to work. Okay, maybe not a total stop, but we cut it down to about $50/month.

Cutting Cable – $50/month

If you paid attention to one of my last posts, you already know we cut cable and are now depending on a combination of OTA (over the air) and Dish Sling TV. If you didn’t pay attention, well you deserve to pay $109/month for cable! We’re over a month in with this cost-cutting experiment and no major issues… we’ll see what happens during football season though.

Cell phone savings – $50/month

Over the years cell phones have evolved from much cooler than a pager to a technological must-have; and with it the cell phone companies have become very good at prying as much out of our pockets as they can.

My company offers a nice 28% corporate discount through AT&T, but we were still paying around $168 month for our two iPhones (yes, I’m an Apple guy, but to be fair, owning their stock for a couple of years has more than paid for those two phones). After a lot of research, I decided Wal-Mart’s smart talk plan at $45/phone all in was the way to go. I called AT&T to discuss cancellations costs, and they magically found a new plan that saved us $50/month! All of this without even having to call or visit Wal-Mart (my preferred option).

You may have already cut your expenses to the bone, but if not, I challenge you to spend some time on them now. You never know where you might find an extra couple of hundred dollars per month!

For most people, 401k’s are the best option to generate a large amount of wealth. They’re easy to set up and use, and many companies offer a matching contribution that makes it even more lucrative.

I’ve participated in my company offered 401ks since I started working in the corporate world 11 years ago and even though I was a Finance major and always hear about the dangers of high fees, I never really checked what I was paying. When I started my new job a few years ago, I basically selected an allocation that sounded pretty good and didn’t pay much attention after that.

However, now that I’m trying to figure out when we can retire (a later subject for another post), I’m really starting to understand the impact of half a percent! The common number people use when determining the amount they can safely withdraw from their nest egg in retirement (SWR = Safe Withdrawal Rate) is 4%. If you have a million dollars, that means you could pull out $40,000 per year with a pretty good chance of your money lasting 30+ years. However, if you’re paying a financial adviser or other fees of 1%, you’re automatically taking away $10,000 per year away from your retirement.

Anyway, that’s what made me think about my 401k and how much they’re charging. It turns out I was making some dumb decisions. Check out the table below which is the actual investments overview for my 401k. I’ve hidden some things and added the “FEES” column on the table because of course they wouldn’t make it that easy to find. Let’s take a look:

This is an actual screenshot of the funds available through my 401k

This is an actual screenshot of the funds available through my 401k

My biggest mistake was contributing to three funds that were charging .35%, .51% and .67%. Why did I even invest in those funds in the first place? After doing a little research, I think I know why. The area that is blacked out in each fund title is my company’s name… and yes, those are the four funds with the highest expense ratios. I probably put money into those funds because I was comfortable with the company name and it felt okay.

Ohhh, but no, it turns out they’ve created these “specialty” company funds so they can make more money off of us! Yes, that’s what really led to the HOLY CRAP moment! Check out the highest fee’d fund (SM/MID-CAP EQUITY) with the rate of .67% and compare to the similar fund (US SMMID CAP EQ IDX) with a tiny .05% fee and it has better returns over one and three years!

It may seem pretty tiny, but let’s see how these little HOLY CRAP fees add up over time. We’ll use two different starting investment amounts, $100k and $1 Million so you really see the impacts. To keep things simple, I used a future value calculator and estimated the value different of going from a .5% fee down to a .05% fee.

Basically, it’s a calculation to see how much bigger your nest egg can be by paying lower fees. I used an investment return of 7% annually. Let’s get to the chart:

Investment Fees Impact Table

HOLY CRAP! Yes, that right columns means if you cut your expense ratio from .5% to .05%, you’d have almost $45k more on $100,000 investment and over $440k more on a million dollar investment! That’s what these innocent sounding little fees will actually cost us! That’s pretty messed up – especially if you have similar funds available with lower fees.

So what should you do?

Log into your 401k or other investment account and check out your fees. You don’t have to make any changes right away, but at least make sure you know how much you’re paying. Then look at the table below and realize how these fees eat away at your investment annually:

Killer Fees

Now you might be getting angry enough to actually make a change. Your company determines the funds you can choose from in your 401k, so you should look through your list and investigate the fees on each one. These are still pretty hidden, but you can usually click on the fund name and it should be on that page. If you have any high fees, you should look at changing those investments to fund with lower fees if similar investment classes – you can exchange funds within your account.

If you have a stock account outside of your 401k, you should do the same thing. The best low cost funds are all usually from Vanguard. If you need something right away to put your money into, I’d recommend Vanguard’s “VTSAX” which is their Total Market Index Fund and charges a mere .05% if you have more than $10,000 to invest in the fund.

These little numbers can make a huge different in your retirement nest egg over time. So go on… you can easily do this in a few minutes while your boss gives that boring update in your conference call that you’re not really listening to anyway. If you need more investing help check out my post on how to start investing.