Health Care Flexible Spending Accounts: Don’t Lose Your FSA Money

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Here’s my annual reminder (to myself, really) to get back all the money sent into Healthcare Flexible Spending Accounts (HC FSA) before it disappears forever. The maximum salary deduction limit is $2,700 for 2019. You can pick this during Open Enrollment season, but it can also be adjusted during “qualifying life events” like the birth of a child, marriage, or divorce.

Quick ideas. If you didn’t exhaust your funds with insurance copays or deductibles, here are eligible items that you can still buy over-the-counter without a prescription. Just order things online and then submit the receipt. Amazon even has a special FSA-eligible page that accept FSA/HSA debits, complete with an “under $25” and “little-known eligible items” section.

Certain over-the-counter (OTC) items such as cough medicines, pain relievers, acid controllers, and diaper rash ointment require a prescription for reimbursement. This is an added hassle, but worth a quick ask if you have a doctor appointment anyway.

When getting a receipt, make sure it clearly includes the following:

  • Date of service or purchase
  • Name or description of the item
  • Amount of purchase

Deadline extensions. Employers have the option of adding one of the following:

  • Some plans allow a grace period until March 15th of the following year as opposed to a December 31st deadline to use your funds, but it may only apply to claims and not late purchases. Check with your employer.
  • Some plans allow participants to carry over up to $500 in unused FSA funds into next year. Check with your employer.

Big, exhaustive lists. Some of these are searchable by keyword as well.

Finally, only your FSA administrator can provide you with the exact guidelines for reimbursement according to your plan. I learned this the hard way when our FSA administrator switched one year from in-house to Conexis (now since acquired by WageWorks). Wow, Conexis was a pain. I had to submit some claims three times before finally getting approved. If you count the time wasted, I probably lost money by participating in the FSA at all. The skeptic in me suspects that this bureaucratic nightmare is part of their business model. (Remember mail-in rebates?) Guess who gets to keep un-reimbursed FSA funds? The employer, which can then use the money to pay for… the FSA administrator.

p.s. If you have a Health Savings Account (HSA) and think you are ineligible for an FSA, look for a “limited-purpose FSA” option that is restricted to dental and vision care services. These have the same max annual salary deduction.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Permanent Gift Guide 2019 – Give Stuff That Lasts Forever

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I’m reading through all these gift guides and so much of it seems just trendy and disposable. Do any of the authors actually own all the stuff they list? How many of these gifts will end up forgotten in a few months? I decided to create an alternative “Permanent” Gift Guide, consisting of things that (1) I actually own, (2) I’d buy again if I lost it (it sparks joy), and (3) I expect to last for a very long time (or at least comes with a lifetime replacement guarantee).

Coleman Classic Gas Camp Stove – $44

We found one of these while cleaning out my in-laws’ house, which means it is probably 30+ years old. This is the classic Coleman double burner camp stove, which is simple and sturdy. Even if you aren’t a camper, this is useful as an extra burner during Thanksgiving or a backyard party (connect any propane tank with adapter). Use it during a blackout or as part of your survivalist gear. We already had our own Coleman single-burner butane stove, and I had this beefier-looking red copycat on my wishlist.

Moka Pot Coffee Maker – $30
A lot of people love espresso, just like the Italians. But traditionally Italians only drink espressos in cafes. They don’t have huge, fancy espresso machines at home; they have Moka pots! (Okay, they now like Nespresso pods.) Something like 90% of Italian homes have a Moka pot. Read this Atlas Obscura article for details. I also learned why Cuban households also love Moka pots. Comes in different sizes. Bialetti is the original but there are other Moka pots that are cheaper and with good reviews.

LEGO Classic Medium Creative Brick Box 10696 – $28
When cleaning out my parents house, what were the toys that still worked and my own kids could pick up and start playing with instantly? Legos and Hot Wheels. As a kid, I never ever followed any of the directions that came with a Lego kit, so I am partial to these big assortment Lego mixes. Lego wants their bricks to be biodegradable, which is nice but at least their stuff lasts forever and can be used forever!

All-Clad Stainless Steel All-in-One Pan – $180
I first heard about this brand when they kept winning comparisons by America’s Test Kitchen. However, they are quite expensive. Now, you don’t need All-Clad everything, but do I think a large stainless steel fry pan or all-in-one saute pan from All-Clad is an important kitchen addition that will pretty much last you forever. (Skip the non-stick All-Clad and go with T-Fal for best non-stick value.) Resurrect occasionally with Bar Keepers Friend.

Patagonia Houdini Jacket – Men’s and Women’s – $100
This ultra-lightweight jacket (3.4-3.7 oz) packs into it’s own chest pocket (so there’s no extra bag to lose). This means you can throw it anywhere, from your cargo shorts pocket to your purse to your travel carry-on. It’s good for wind and light rain (not fully waterproof though) and just those times when you’re a bit chilly. It’s relatively expensive but the quality is high and it has traveled with me everywhere for several years.

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Lodge Pre-Seasoned Cast Iron Skillet – $15
With over 10,000 reviews (!) and a 4.5 out of 5 star average rating, these heavy-duty beasts are trendy again. Great for searing and pan-frying, oven-safe, no worrying about scratches or dings. They will outlive you for sure. Got a rusty one? They are easy to resurrect; here’s a quick video on how to season your cast iron. Here’s a slightly-more expensive version with a silicone handle and the bigger 12-inch version.

Darn Tough Full Cushion Wool Socks – Men’s and Women’s – $25
You wouldn’t think socks would come with an unconditional lifetime warranty, but they do from Darn Tough. If you wear a a hole in them a decade later, they will still replace them for free. Made in Vermont and comes in different thicknesses for use in both the heat and cold. High-quality wool keeps your feet dry and doesn’t stink. These are pricey, but I am slowly collecting them as part of my minimalist wardrobe.

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Zeroll Original Ice Cream Scoop – $16
If you walk into an ice cream shop, this is probably the brand that they use. Once you try it, you will wonder why all the other ice cream scoops in the world are so bad in comparison. It has conductive fluid that makes it easier to get through rock-hard ice cream. It creates the perfect ball shape for placing on cones. The 3-ounce size makes medium-sized ball, but other sizes are available. Why not own the best ice cream scoop in the world for under $20?

Osprey Packs Farpoint 40 Travel Backpack – $160
After doing a lot of research on travel/hiking backpacks, I decided to plunk down a lot of money on an Osprey Pack. They have an All Mighty Guarantee that will repair any damage for any reason free of charge, no matter when you bought it. So far, I have not been disappointed. Quality materials and construction. (My previous pack was from REI, but they discontinued their lifetime repair/replacement guarantee in 2013.)

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Le Creuset Enameled Cast-Iron Dutch Oven – $350
I cook multiple times a week with our Staub and Le Creuset enameled cast-iron dutch ovens. Cast iron isn’t a lot of maintenance, but you do have to keep it dry after each use to prevent rusting (and seasoning it again takes time). With enameling, you can just wash and leave it wet. The dutch oven shape also makes it perfect for braises, stews, and soups. (They also look nicer at dinner parties.) They do run $200-$300 but spread out over years of use it’s not that bad. I love ours, but honestly I don’t know how much better they are than this Lodge Enameled Dutch Oven which regularly runs under $60.

Hot Wheels 20 Car Gift Pack – $20
I gave my old Hot Wheels to my daughters, but will be giving some new Hot Wheels to my nephews. I will admit that some of my old ones seem much more heavy with more metal content than the new ones, but none of the new ones have broken yet either.

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Wusthof Classic Knifes – $350
I remember wondering if Wusthof and Henckels were worth the price as I zapped them onto our wedding registry. Then someone actually bought us a set of Wusthof Classic knives and we proceeded to use them nearly every day for over a decade. They have been professionally sharpened a couple of times (less often than recommended), but they still work perfectly with no chips or rust spots. I bought a $40 Asian cleaver from a shop in Chinatown a couple years ago, and it only lasted a few months before large rust spots appeared. My mom told me I didn’t treat it right. Probably. I told her I’d rather spend $80 on a knife and have it last decades even after not treating it right. So I bought this one.

Let me know if you have suggestions (preferably due to personal experience).

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Mint Mobile Promo: 3 Months of Unlimited Talk, Text, 12 GB Data For $45 Total ($15 Per Month)

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In my own phone, I use Mint Mobile to keep my cell phone costs low. They use the T-Mobile network, which means if you have a compatible phone switching just involves swapping in a new SIM card. It works just fine in my iPhone X. I just renewed for another full year of service for $240 at the 8 GB tier ($20 per month).

They just started a limited-time 40% off promo on their highest data tier with Unlimited Talk, Text, 12 GB of LTE Data per month. Instead of $25 per month if you buy a full year, it’s only $15 a month for 3 months ($45 total).

As with most of their promos, it’s about getting you to try them out so you can feel comfortable buying an entire year at a time. That’s their “gimmick”, where you buy in bulk and save.

They also offer a 7-Day Money Back Guarantee (starts upon SIM activation) so you can test them out before making any commitment at all. Here is my Mint Mobile SIM Activation and Number Port Transfer Review. Be sure to use their phone compatibility checker first to see if you can bring your current phone over and just pop in the Mint Mobile SIM card.

Also see:

Disclosure: This post includes affiliate links. If you make a purchase through the links above, I may be compensated.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Enough Curve: Consider the Ongoing Costs Of Your Purchases

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Our youngest child successfully completed her first semi-autonomous Halloween, but also threw up after eating her candy. Instead of just a case of diminishing returns (stops tasting as good), it was an important life lesson about negative returns! This reminded me of the “Enough Curve” from the early retirement manifesto Your Money or Your Life, which maps the relationship between fulfillment and the money spent.

In the beginning, you are getting a lot of “bang for your buck”. You have the basics: enough to eat, safe shelter, clothing and general safety. After that, you are moving into comforts that help you think beyond day-to-day survival. This is a good thing. However, eventually you start getting diminishing returns where an extra dollar spent isn’t getting you much more in personal fulfillment.

If you keep going, as the TV ads say you “deserve”, you can get to a point where you experience negative returns. You spend more, but get less. Minimalists call this when “Your stuff owns you” vs. You owning your stuff. Here’s a few examples:

Too much housing. The more house you buy, the higher the insurance costs, lawn maintenance costs, home repair costs, heating/cooling/electricity/gas/utilities costs, cleaning costs, security costs, and so on. If you have too much space, you may also find yourself filling the extra space with junk you don’t even need. Extra furniture, extra toys, who knows.

Too much car. The more car you buy, the higher the insurance costs, repair costs, maintenance costs, detailing costs, and so on. You worry more about small scratches and dings. The strange thing is that the most expensive cars are not any more reliable or long-lasting than a Toyota Corolla or Prius.

Housing, cars, utilities, gas, and insurance costs are linked together and add up to nearly half of all household spending as shown in this visualization from Engaging Data :

Housing and car purchases tend to be infrequent, so the next time it comes up, try to take a good hard look at the total cost. One of the central tenets of Your Money or Your Life is that you are exchanging your finite life energy for money. Once you internalize that, you realize that many things are not worth exchanging years of your life working.

I’m not here to draw a line about what is okay and what isn’t, as it will be different for every person and every expense. I struggle with this as well. This is just a reminder that it’s easy to minimize this extra financial and mental baggage when the dopamine rush comes at the time of purchase. Finding enough is hard, but taking a moment to consider the ongoing costs helps me make better decisions.

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Mental Model For Expenses: Past, Present, and Future (With Animated GIFs!)

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The theory behind financial independence is simple. Spend less, save more, invest it into income-producing assets. The reality is complex, full of daily decisions about balancing income and spending. The Morningstar article (yes, M* is writing about early retirement too now) A Simple Plan for Financial Independence presents this simplified graphic of your “personal economy”.

Income can come from labor, capital, or land. Expenses can be put toward your past (debt), present, or future (investing in capital or land).

I’ve been thinking about this “past, present, and future” mental model for expenses, it meshes will with the simple rules that I want to teach my children: Avoid debt whenever possible, and seek out income-producing assets.

Present. There is countless advice to save money on current expenses. Call it prioritizing, call it frugality, call it whatever. These are important, but I’d rather focus on the added ideas of past and future.

Past. While debt is an important part of the economy, I hate that going into debt for non-essentials is so readily accepted in today’s society. Using home equity lines of credit for a kitchen remodels. Credit cards for vacations. The entire microloans trend where you buy a $100 pair of jeans for $10 a month times 12 months ($120) is a dangerous mind game. Debt is having compound interest work against you, and thus making someone else rich. Debt should not be normalized. Debt is an emergency!

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Future. If you look at people who have really achieved financial freedom, where they truly spend the day doing whatever they want and without money worries, they have all have collected a big pile of income-producing assets. It could be rental property, commercial real estate, a laundromat/car wash/business, dividend-paying stocks, municipal bonds, a pension, Social Security or even just bank CDs if you have enough. In most cases, they collected them with purpose. They didn’t just put the minimum into their 401(k) and call it a day. They would shovel whatever extra money they had into their favorite money-making machine. When I buy more stocks, I see a future income stream:

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When you buy one of these income-producing assets, it should get you excited!

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I’m still not sure exactly how to create this distaste for debt and this desire for money factories, but I’m working on it. If you have these two in place, that should help with everything else – earning more income with labor, spending less on the present.

Oh, and here’s a funny-but-sad representation of the paycheck-to-paycheck lifestyle.

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Financial Freedom and New Car Loans Don’t Mix Well

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Apparently, my rule of thumb about affording cars isn’t exactly going viral. If you are serious about financial freedom, you shouldn’t be taking out loans for luxury items. A new car is a luxury item! Basic transportation will cost you under $10,000 and you can usually get a loan with the best interest rate from a credit union. Here are some surprising statistics from the WSJ article The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its Cars (paywall?).

The average new car auto loan is now $32,000 over 69 months. 1 out of 3 people are rolling over debt from their previous car. 90% of new car loans are for longer than 4 years. 70% of new car loans are for longer than 5 years. This is crazy. Soon we’ll have a 15-year mortgage for cars.

Dealerships now make more money from car loans (and add-on insurance junk) than the purchase price. They are getting a cut of all the interest you’re paying.

So far this year, dealerships made an average of $982 per new vehicle on finance and insurance versus $381 on the actual sale, according to J.D. Power, a data and analytics company. A decade earlier, financing brought in $516 per car and the sale made dealers $837.

This is why I support the FIRE movement. It may not be perfect, but it can inspire a change in mentality where you would never consider going into debt for heated leather seats. Instead of a $32,000 car loan, you could spend $8,000 on a used 2012 Toyota Corolla and put $24,000 towards owning a $120,000 investment rental property with positive cashflow. Or you could put that $24,000 into maxing our your 401(k) or IRA. Or you could start building a compounding stream of dividend payments from owning high quality businesses. Or seed your own new small business. The idea of owning income-producing assets is what should get you excited!!

I’m not saying you should never buy a new car. If you have your financial ducks in a row, then sure buy whatever car you want… with cash! The debt industry wants you to have your dessert NOW, and pay for it later. They want a direct cut of every future paycheck. If it’s a luxury, you should have to save up for it first, and then buy it. I know, such a quaint idea.

Getting far enough ahead to pay cash for your next car can seem impossible. Consider taking out a loan for minimalist basic transportation from all the major credit unions (NavyFed, PenFed, Alliant CU) as well as your local credit union. It’ll work at used car dealerships and even on a car off Craigslist. $10,000 financed at 3.5% APR for 3 years is under $300 a month. After 3 years, instead of starting another new lease or facing another 4 years of car payments, you can now use that $300/month to buy your next income-producing asset.

Here is a chart tracking non-housing debt from the New York Fed. The slight decrease from 2009 to 2013 made me optimistic about the future. Since then, the debt has shot back up and my optimism has gone down:

Have you noticed that half of all TV commercials are about new cars? It takes a lot of effort to convince you to buy something you don’t really need.

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Causes of Wealth: Reality vs. News Coverage

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Our World in Data has a very in-depth page on Causes of Death from around the world. Then they asked: Does the news reflect what we die from? What if they compared what we read in the news and the raw data? Here is a chart that compares actual death stats against Google search data and the mentions of causes of death in both the New York Times and The Guardian newspapers (click to enlarge):

Two-thirds of us will die from either heart disease, cancer, diabetes, or kidney disease. Meanwhile, over 70% of the causes of death you’ll read about in the news are either murder, suicide, or terrorism.

What about the disconnect between reality and what we read in the news about becoming wealthy? Here’s my quick take using a Google Spreadsheet (obviously not exact or based on actual data):

Most people probably realize that the news does not exactly reflect the real world. However, we can still unconsciously develop a “bias for single events”, even with financial topics. There’s also “social media bias” where what you see is only the highly-edited positive clips of their life. You see their #bestlife, but what you don’t see are their credit card debt, the downpayment from the Bank of Mom and Dad, or anxiety attacks about money.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Employee or Student Discounts for AT&T, Verizon, Sprint, and T-Mobile

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Updated 2019. Each of the four major cell phone providers offer discounts for certain large groups, even applied to an existing personal line. You could qualify through your employer, educational institution, or even affiliation with certain organizations like AAA or credit unions. Many also have discounts for military and/or first responders. So grab your work or school-affiliated e-mails, check out these links, and find out what discounts are available to you.

You may still find a better deal with a lesser-known prepaid or MVNO plan (especially if you don’t need data), but sometimes a major carrier with a discount can be very competitive.

AT&T Wireless. AT&T Signature Program

It’s easy to find out if you’re eligible for savings for your qualified AT&T wireless service through your employer, school, or other association. Just enter and submit your work or school email address and we’ll show you whether you qualify for applicable discounts and benefits on wireless services, devices and more.

Don’t have a work or school email? If you don’t have a work or school email, bring your student or employee ID to an AT&T store to find out if you’re eligible for the AT&T Signature Program.

Verizon Wireless. Employee Discount Program

We offer great monthly discounts for corporate, government and education employees, as well as valued service members and veterans. If your organization has an agreement with us, you may be eligible. Sign in below to register for a new discount or renew an existing discount.

T-Mobile. In 2014, T-Mobile changed their corporate discount program for consumer lines. Existing corporate discounts were mostly left grandfathered in. The T-Mobile Advantage Program now gives a $25 gift card per device instead. If you have a work phone directly paid for by your employer, you may qualify for Business Family Discounts. Keep in mind that T-Mobile also has special discounted plans for the military and those age 55+. The ability to stack discounts varies.

The T-Mobile Advantage™ Program lets you receive additional benefits or rewards based on your affiliation with your military branch of service, company, organization, or government agency. Check your organization’s eligibility.

If you have a company-provided business line with T-Mobile, you can now add your family to your account and save up to 50% off the first two lines on a family plan. Already have your family on a Simple Choice plan or T-Mobile ONE? You can get in on the BFD too!

Sprint. Sprint Works Program.

The Sprint Works? Program extends exclusive savings and special offers to employees, students and members of organizations. Please complete the form to see if you qualify.

LoveMyCreditUnion.org also offers credit union members Sprint monthly plan discounts and waived activation and upgrade fees. I’m not sure how these would stack with the Sprint Unlimited Kickstart $25/month plan.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Business Idea: On-Demand Garage Rental + DIY Car Repair Lessons

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The NY Times has a new article They Supply the Garage, You Bring the Elbow Grease where you rent space hourly or daily for DIY car repairs. The article referenced GarageTime as a place to search for a residential or commercial garage space in your area. Most commercial spaces include lifts, while others are essentially listing their large driveway with an electrical connection and perhaps an air compressor. Be prepared to sign a liability waiver.

My related business idea is to use the space to teach people basic car repair skills like how to change your oil, replace brake pads, replace headlights, repair dents, or perform common after-market modifications like LED headlight swaps. YouTube has tons of how-to content, but I think there is still a market for someone to be walked through the process the first time. For example, someone could list their space and also upcharge for some lessons. The next time, the customer could just do it themselves.

I’m a bit surprised at the timing of this article, as isn’t the stereotypical Millennial is supposed to just stare at their phones and not do anything dirty with their hands? I also keep hearing that cars are becoming more and more like computers on wheels. I suppose it’s a nice little reminder that DIY is still alive, and some people still like to save a few bucks and do things for themselves.

You don’t even need a garage for many basic maintenance tasks that can save you money. For example, here’s a Youtube video I found the other day that shows you how easy it is to change both the engine air filter and cabin air filter on my 2015 Toyota Sienna. Your dealership shop will charge you at least $100 an hour for this knowledge. You’ll also probably be charged more than the $12 for the cabin air filter and $11 for the engine air filter that Amazon is asking. (These seem to have good reviews, but OEM parts are also available online.)

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The Power of Being Open-Minded About Cutting Your Household Expenses

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Here’s the short version of this depressing WSJ article Families Go Deep in Debt to Stay in the Middle Class (paywall?). Household incomes have gone nowhere. Meanwhile, housing prices are up, healthcare costs are up, and college tuition has skyrocketed. Ouch. However, you can’t control that things are worse for you than if you lived in another time period. You can only control your response, and that is why I try to focus on actionable ideas instead of dwelling on “the way it should be”.

“Make more money” advice is hard to pin down. Of course I want everyone to have a high income. I like the idea of spending money on improving your marketable skills, “investing in your yourself”. However, everyone has a different combination of what they are good at, what they enjoy, and what others will pay them to do:

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Meanwhile, I find that spending advice applies much more broadly. My most general spending advice is that you need to expand what you think is an option. Most people hang out with people around their own income level, look around, and then spend the same money on the same things. The trick is that net worth shoots up when you earn a good income, but spend like someone who earns about 1/2 or 2/3rds of what you make. It may not feel natural, but you have to trick yourself into picking from a wider menu of options. Here are some quick examples.

  • Housing. You could buy a 4,000 sf house with a 3-car garage. A family of four could live in a 1,000 sf apartment (mine did). You could share an apartment with roommates. You could rent a room inside a large house. You could buy a duplex and live in one side, rent the other. You could buy a 4-plex and live in one unit and rent out the rest.
  • Transportation. You could lease a $60,000 SUV and pay about $8,000 year in lease payments – after 3 years and $24,000, you’d have to start all over again. Alternatively, you could buy an entire car for $8,000 and own it for another 10 years. You could downsize from a 2-car to a 1-car household. Many urban residents don’t own a car at all.
  • Food. A single person could eat out at every meal, never touch their stove, and easily spend $1,000 or more per month on food and alcohol. A family of four can cook all meals at home and spend under $600 a month. These days, food has become the ultimate convenience item, but it’ll cost you.

I can be hard to stay open-minded about your expenses. In fact, many quickly become defensive. You’ll often hear a straw-man argument like “I don’t want to sit around sorting coupons, eating lentils every meal, or living in poverty”. I wonder if they have seriously considered all of the options above.

You don’t have to pick the cheapest option in every category. You probably know someone in an expensive house but drives a 20-year-old Toyota. I know someone who makes over $250,000 a year but rents a cheap, single room in a large house (while eating out every night). I know someone who owns a beautiful beachfront house, but AirBNBs the majority of it.

I’ve been looking for over 15 years, and there is no single path to financial independence or early retirement. Even if you don’t want to embrace frugality as the cure for everything, the cold reality is that it’s hard to live at life true to yourself unless you first reach at least $10,000 in savings to ride out the bumps.

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The Status Spending Test: Two Simple Questions About Your Car and Home

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I feel like I’ve been reading a lot of backlash against the “latte factor”. I agree buying a Starbucks latte every day will not directly lead to poverty, and forgoing it will not make you independently wealthy. However, sometimes a concrete example is more powerful than a vague position like “just prioritize your spending” (which I believe, but sort of like “spend less than you earn”).

Instead of the small stuff, I prefer to start with the biggest expenses and work down from there. You may consider your mortgage and car payments to be a “fixed” expense, but that doesn’t mean they can’t be reduced. Tom Welsh of Humble Dollar has a post Pay to Play which includes a very simple test to see if you are spending an excessive amount on your social status, possibly at the expense of your future basic needs. No calculator required. No budgets.

How can we tell if we’re engaging in heavy social spending? Two simple tests can help you analyze your own degree of social spending.

Test No. 1: Did you pay $57,000 or more for your car – a 50%-plus premium to the average $38,000 new car price?

Test No. 2: How many rooms in your home are used by people every single day? Divide that number by the total number of rooms in your home. Is it 50% or less?

My current vehicle is a 2015 Toyota Sienna, bought used for well under even the average number. It creates zero excitement and is little more than a reliable appliance, but I have come to love it (and its sweet sliding doors) for what it is. We are a family of 5 inside a 2,000 sf house, and every single room is definitely used every single day, often by multiple people at the same time. We prioritized room, safety, and reliability in the car. We prioritized location with the house, with minimal commute time, while also trying to make it smaller (and cheaper) but still allowing for a home office.

Now, a luxury car and a big house may be your prioritized expenses and well within your means. Which is great. But if it isn’t, you may have found something to cut back on that is much more powerful than skipping the Starbucks. Moving is a huge pain, but it’s a one-time change to which you quickly adjust, while potentially improving your overall financial picture for the rest of your life.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Which Households Spend More, Less, or Exactly What They Earn? Breakdown by Income Level

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In the post How Well Do Americans Balance Income and Spending? by the St. Louis Fed, they examine the breakdown of household spending as compared to income.

In terms of the big picture, 55% of US households were net savers (earned more than they spent), 30% broke even, and 15% ran an income deficit (earned less than they spent). However, that’s everyone across all income levels, and thanksfully they looked deeper in the 2016 Survey of Consumer Finances and broke it down further by income quartile.

It is not surprising that lower income households overall have a harder time spending less than they earn. Instead, I would consider these two observations:

Out of the households in the bottom income quartile earning less than $27,000 per year, roughly 75% of them manage to break even and/or save money each year. This is not to say that households that are earning close to the poverty line ($26k for a family of four) are not struggling. However, I think a family that is “just getting by” on a $100,000 income would appreciate their situation more if they know that so many $26k income families are breaking even at this level, with a third of them even managing a surplus.

Out of the households in the top income quartile earning over $98,000 per year, roughly 25% manage to save nothing or go into debt at the end of each year. Yes, most households with a six-figure income are saving some money. But a quarter of them aren’t saving anything!

I have always been struck by the huge variation in spending by the same number of humans in the same city. The family earning $50,000 finds a way to spend $50,000. The family earning $250,000 finds a way to spend $250,000. If you have a relatively high income, that is a huge opportunity. Don’t waste it. If you create a budget surplus and invest it in productive assets, one day those assets will do the “work” to make money instead of you.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.