Category: Money

According to J.D. Power, the average Americans’ cell phone bill was $73 per month in 2014, which comes out to roughly $850 per year. If you were to invest that $850 per year and allow it to compound over 10 years you’re looking at an opportunity cost of over $12,000 which is a ridiculous amount of money.

If you are paying the average amount, or really anything over $20 per month for your cell phone, chances are you could be missing out on some juicy savings.

I recently changed to a new service provider, Tello, which uses Sprint’s network and offers a plan with unlimited texting, unlimited minutes and 200MB of LTE data and unlimited 2G data after that for $12.30 a month after all taxes and fees. Again, that’s an essentially unlimited plan for $12 per month.

You may be thinking, “I don’t know if I could make it in this crazy world with only 200MB of fast data and unlimited slow data!” Consider that you would save $720 per year compared to the average American, be about $10,000 wealthier every 10 years of your life, might be more conscious of the time you spend staring at a glowing screen, and you can always download all of the entertainment you would like on WiFi (which you most likely have access to 90% of the time anyways).

When I personally made the switch from multiple gigs of data to 200MB, the only major change I made was downloading podcasts while on WiFi instead of streaming music while traveling. I also made some updates to my phone settings (most of which are outlined in this helpful article on reducing your data usage). After all, data is the most expensive part of any cell phone bill so it makes sense to optimize your usage no matter what service provider you use.

And if you really can’t make it with more data, Tello has more plans with higher data such as one with 1GB for $14 per month. If you want to check out the plans they offer, feel free to use the link below which will give you a $10 credit if you try it out (and will give me $10 too, so thank you!)

Tello Plans

#MoneyGoals

(Pictured: Me using my 200MB of data in Deep Ellum, TX. July 4, 2018)

A smart man once said to me, “Sometimes the most obvious points are the most insightful.”

The idea that recurring costs are more impactful than one-time purchases seems like one of those points. It’s obvious that saving $10 per month on your cell phone bill would have a bigger impact in a year than trying to find a good deal to buy a new TV for $50 off, but how many of us spend time researching big purchases and hardly pay attention to our smaller monthly charges?

Next time you’re looking to save some cash, see if you can optimize your weekly or monthly spending. Rent, all kinds of insurance, cell phone/internet/TV service and groceries are some of the areas I focus on, and you can certainly think of more. Stay tuned for a hot tip on how to save on cell phone service next week!

#MoneyGoals

(Pictured: My most prolific money-saving tool, shielding me from recurring expenses of gas, car insurance, tolls and maintenance. Dallas, TX / October 20, 2018)

Here’s every dollar I spent in 2018:

Rent – $7,804 total, $650 per month (up from $4,874 in 2017, a $2,930 increase)

I went from having 4 roommates in the beginning of the year to 3 roommates in May and June, then to 1 roommate in a new apartment in downtown Dallas in July. While paying twice as much rent downtown is not fun, my quality of life has increased greatly due to the time and freedom that comes with a 10 minute commute. This expense will increase in 2019 as I plan to live downtown the whole year.

Cell Phone – $140 total, $12 per month (down from $152 in 2017, a $12 decrease)

I used the service provider TPO for the last three years, but unfortunately they are discontinuing their U.S. operations. I have been researching new carriers with phone plans in the $10-15 per month range, and will update you when I find one I enjoy and would recommend. Until then I’ll take advantage of the two free months of service TPO gave me for ending my service (hence the $0 for December’s phone bill).

Groceries – $1,377 total, $115 per month (down from $1,475 in 2017, a $98 decrease)

I’m still eating truckloads of rice, lentils, beans, vegetables and nuts, consuming copious amounts of delicious and healthy food for less than $4 per day. The decrease from 2017 may be due to increased time traveling this year (in Europe many of my meals were prepared for me by my amazing friends), more meals at restaurants, and more meals paid for by work/at work related activities.

Dine Out – $319 total, $27 per month (up from $147 in 2017, a $172 increase)

Dine out expenses more than doubled this year, which was a deliberate move to spend more time with friends (see my post on Buying Happiness) and be more generous about paying for other people. I did stress a bit about the increased expenses, but looking back on the year the extra $172 for spending time with great people and having interesting experiences was money well spent. This number may increase in 2019 (although not by too much :P).

Travel – $1,236 total, $103 per month (up from $948 in 2017, a $288 increase)

My 3 week trip to Europe accounts for most of the $1,200 I spent on travel this year, with a few flights to Minnesota and one to Denver providing the balance. This number was kept a few hundred dollars lower than it should be as I volunteered to fly out one day later on one of my Minnesota trips and received travel credit from the airline which reduced the cost of my last two trips of the year.

I expect to spend less in 2019 on travel as it will be my first full year of full time work, but I said the same thing a year ago about 2018 so we’ll see!

Transportation – $100 total, $8 per month (down from ~$450 last year, but I didn’t track transportation as its own category then)

This figure is made up of ~$40 for tubes, one tire and a pump for my bike, ~$40 for gas to people who gave me car rides, and ~$20 for one Lyft ride. This ridiculously low number of $8 per month is possible thanks to my bike and the public transportation system in Dallas (which either school or my employer has always paid for). I’m a fan of living close to work/groceries/friends, which reduces my reliance on owning a vehicle.

Other – $2,258 total, $188 per month (up from $1,103 in 2017, a $1,155 increase)

Most of my miscellaneous expenses this year were due to buying professional clothes and having them tailored (~$850, whoa that was higher than I thought it was), wedding/graduation/thank you/baby/Christmas gifts (~$400), a new guitar (~$300), experiences such as concerts/museums/comedy shows (~$200), and apartment furniture/household items (~$150).

I expect this category to decrease in 2019 as most of my professional wardrobe will last for a few years, and the guitar and apartment expenses will not be recurring.

TOTAL – $13,234 for the year, $1,103 per month (up from $8,700 in 2017, a $4,534 increase)

The $4,500 increase from 2017 to 2018 came from rent (~$3,000 increase) and other expenses (~$1,100 increase). Rent will continue to increase in 2019, and should end up being around $10,000 for the year or ~$830 per month. I expect my total spending for 2019 to be around $14,000 – $16,000.

As we enter a new year, this is a perfect time to start tracking your own spending and start investing (if you haven’t started already). Let me know if I can help in any way, or if you have any questions or comments on my spending for the year. Thanks for reading, and best of luck in 2019!

Related posts:

My Personal Spending Report for 2017

Why I Don’t Use a Budget

How to Eat Like a Superathlete on $130 a Month

Preparation

#MoneyGoals

In December, the S&P 500 (an index which tracks 500 of the largest companies in the U.S.) declined over 12%, and if you have been watching your investments, you’ve most likely seen their value go down by hundreds if not thousands of dollars.

No one enjoys watching their investments lose value, and many people will sell their stocks and pull their money out to stop the bleeding. This is the last thing long term investors like you and I should do.

Imagine you bought 10 apple trees for $100 apiece. You sell the apples they produce every year for $5 of income per tree, and you plan to sell your apple tree farm in 40 years for $1,000 per tree. Six months after you buy your apple trees, you hear that the price of a new tree has dropped to $50.

While disappointed that you didn’t buy your trees for $50 each, you won’t dig up your $100 trees and go sell them for $50 (which is what people who sell their investments when the stock market goes down essentially do). Instead, you should go buy more $50 trees because you know they will still make $5 per year and will be worth $1,000 apiece in 40 years.

Likewise, when the stock market goes down it represents a sale for long term investors. Similar to the hypothetical apple tree farm, our investments will still produce income every year (in the form of dividends) and will still be much more valuable decades down the road.

So go buy yourself some shares of VTI, and save 12% during the stock market’s holiday sale!

#MoneyGoals

 

(Pictured: Transition defense provided by Sammy J and I. January, 2014)

 

On May 9th, 2018 I received an undergraduate degree without taking on any debt. Here’s how:

1. Work hard, work early

The earlier you start working hard on your goal to graduate college debt-free, the easier it is (as with many things in life). While staying up late doing homework after a basketball game in high school was no fun at the time, the scholarships that I received from my academic efforts were certainly worth it.

I also worked a few part-time and summer jobs in high school, and saved most of my income to help pay for college. Starting with a little bit of a financial cushion was helpful during my freshman year.

2. Get a job during school

I mentioned in my post about the 5 Things I Wish I Did Freshman Year that I did not get a job my entire first year at college. After spending most of the savings from my high school jobs, I started working again before my sophomore year began.

From then on, I always had a job (and for one semester my junior year I worked two jobs while taking 18 hours of classes). I definitely would have needed to take out student loans if I didn’t have the income from those jobs.

3. Live with roommates

I kept my housing costs ridiculously low during school by living with 4 and sometimes 5 other people. I had my own small room, but if you want to cut down on rent even more you could share a room with someone else. I’ve found that living off campus can be more affordable than on campus as well, although if you live too far away your commuting costs may eat up any savings on rent.

4. Get a bike and/or use public transportation

Even if you own a car (which I did not during college, and still do not), using a bike or riding the bus/train for your daily transportation needs can save you hundreds if not thousands of dollars every year. If you take public transportation, you get the added bonus of being able to study during your ride.

5. Cook your own food

I was on the meal plan my first year of school, and paid $3,600 for two semesters of eating at the dining hall, roughly 8 months. This comes out to $450 per month, which is almost four times the average of $123 I paid for groceries per month in 2017 (see every dollar I spent that year). While a meal plan certainly helps ease freshmen into adulthood, it’s financially smart to start cooking for yourself ASAP.

6. Keep applying for scholarships

While everyone applies for scholarships before freshman year, there are many scholarships out there for continuing students that many people don’t apply for. I could have done a better job at this, because I only applied for continuing student scholarships once. I took an hour one day to fill out a few forms, and ended up landing a $1,000 scholarship. Not a bad hourly rate!

7. Be flexible

I went to a school none of my hometown friends or family had ever heard of, 1,000 miles away from where I grew up. My bike was my main mode of transportation, I cooked almost all of my own food after freshman year, and shared a bathroom with multiple roommates. All of these things required hard work and flexibility, and in the end it paid off in the form of a debt-free degree. #MoneyGoals

 

(Pictured: One of UTD’s finest professors, Mr. Polze, and I after graduation. Richardson, TX)

***Before getting started here, if you ever have any questions or would like to learn more about your 401(k) or anything personal finance related, feel free to email me at hashtagmoneygoals@gmail.com. I’d be happy to help!***

All right, wtf is a 401(k)?

A 401(k) is a special type of savings account that invests your money and allows it to grow over time. The money you put into a 401(k) gets taken out of your paycheck before you even see it. Arguably the best part about a 401(k) is that it reduces your taxable income, meaning you will pay less income taxes. You’re basically giving yourself a raise.

How do I know if I can contribute (put money in) to a 401(k) account?

When you’re offered a job, your employer will likely tell you if they offer a 401(k) or not. If you don’t get any information regarding a 401(k), it’s ok to ask. Your employer also benefits from having your participate in a 401(k) program, because it reduces the taxes they pay as well. It’s a win-win!

How do I make contributions?

This depends on your employer. Most workplaces these days have online portals where you can select how much you want to contribute and what to invest in. Some employers might have you fill out a paper copy. It’s up to you to choose what percent of your gross income you would like to contribute.

How much should I contribute?

This one is up to you. The more you contribute, the less income tax you’ll have to pay and the more money you get to keep. I would encourage anyone to aim for contributing at least 10% of their gross income. If you want to contribute more, go for it! If you aren’t able to contribute quite that much or you love paying taxes, you can start at a lower percentage and work your way up.

At the very, very, least, check if your employer offers a match. If they offer a 3% match, then contribute at least 3%.

WTF is an employer match?

Ahh my bad, I should’ve explained that before mentioning it. To encourage employees to contribute to their 401(k) programs, employers will often offer to match your contributions up to a point. For every dollar you put in, they will put a dollar in too.

Let’s say you make $50,000 per year, you contribute 10% of that to a 401(k) account, and your employer has a 3% match. This means that you will put $5,000 into the account, and your generous employer will put another $1,500 in for you. (Thanks employer!)

The key point here is that you won’t get that $1,500 unless you contribute at least 3%. If you only put 1% of your gross pay in ($500) then your employer will only put in $500. If you put 0% in, you get $0.

This is the most important point of the whole post, if an employer offers a matching program, contribute at least enough to get that full amount. If you don’t do that, it’s like walking past $1,000 on the sidewalk, and kicking it down the storm drain. Yet ONE IN FOUR EMPLOYEES do exactly that, and miss out on their 401(k) matching program. WTF!

What investments should I choose?

This is where things can get confusing. There are so many different funds to invest in, and it can be hard for those of us just getting started with investing. To keep it simple, pay attention to 2 things:

1. It should be an index fund made up of mostly stocks. My favorite is a “Total Stock Market” index fund from Vanguard. Other companies (such as Fidelity, TD Ameritrade, and Charles Schwab) may offer similar products. If you can’t find a total stock market index fund, then an S&P 500 index fund will do just as well. Some companies offer a “Target Retirement Date Fund” i.e. you plan to retire in 2055 so you invest in the Target 2055 Retirement Fund. That works too!
2. The expense ratio should be less than 0.50%. The expense ratio is how much you pay the company who runs the fund. If your expense ratio is 0.25%, for every $10,000 you invest you will pay the company $25 every year. This relatively small number adds up over time, so you want to keep your expense ratio low. Most total stock market and S&P 500 index funds will have really low expense ratios (my go-to fund has an expense ratio of 0.04%) but check to make sure!

When can I use all this money I’m piling up?

Since a 401(k) is a savings vehicle and a tax-shield for retirement, the funds are meant to only be used in retirement. To encourage this, there is a 10% penalty for withdrawing your money before you turn 60 (59 and a 1/2 technically).

While it is possible to take your money out of a 401(k) before you retire, I would strongly caution against it. Obviously emergencies happen, and sometimes you need the money now. But if you’re taking that money out to buy a new car or something similarly unnecessary, then you’re throwing tens, if not hundreds of thousands of dollars in tax savings and investment income away.

Ok cool, I got my 401(k) set up at work, contributing 10% of my gross pay into an S&P 500 index fund with an expense ratio of 0.13%. Now what?

Now go about living your life! Maybe bump your contribution up a few percentage points every now and then. Keep working hard, doing things you enjoy, and in 40 years you might just have a few million dollars sittin’ in that bad boy. Feel free to write me a thank you note when that happens 🙂 #MoneyGoals

 

My apologies to my dear mother for my hideous, yet abbreviated profanity. If it gets one person to set up their 401(k) it’ll be worth it mom!

(Pictured: a photo embodiment of the phrase wtf)

The increase in income after a student graduates and starts working full time is a pivotal point in one’s personal finance journey. This moment will often set the precedent for saving and spending habits for decades to come.

And it can be tough to resist drastically increasing your spending. You feel like you should be rewarded for those long nights of studying and those years of sharing a bathroom with multiple people. It’s time for a few upgrades: a bigger apartment, a nicer car, fancier restaurants and some new clothes. Maybe throw in a 4K TV while you’re at it.

The tendency to spend more as income increases is known as lifestyle inflation, and it is a killer for saving money and planning for retirement. Unfortunately, it’s also a widely accepted and even celebrated part of American culture. Some people will take it so far as to start spending money before they start earning more money, banking on the higher income in the future to pay off their purchases today.

So how can you keep from having your financial foot caught in the bear trap of lifestyle inflation? Contributing to a 401(k) at work is a great way to save money, and since you won’t see it in your paycheck you won’t be able to spend it. If a raise comes your way, consider bumping up your 401(k) contributions, or putting some of your new earnings into an IRA.

Tracking your spending can also be an easy way to keep an eye on lifestyle inflation, or sticking to a budget (although I don’t use a budget).

I personally enjoy calculating my savings rate, i.e. “I saved 30% of my income this month.” When your earnings go up, you should be able to increase your savings rate, or at the very least keep the percentage constant. Alternatively, you could set a monetary goal, such as, “I want to save $3,000 by this time next year.”

No matter how you go about it, controlling your spending as your income increases is an important step to achieving your financial goals. So to all my friends who will graduate soon and start working full time, I challenge you to fight lifestyle inflation and start your retirement savings off strong. #MoneyGoals

 

Related reading: Why I Want to Live Like I’m in College My Whole Life

(Pictured: My ticket to the Mavs game last night. You bet that I didn’t pay for it though, my man CF hooked me up)