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.

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.

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.

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.

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.)

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 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.

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 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.

Which Airline Miles Are Easiest To Redeem For Economy Awards? 2019

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Cashing in your frequent flier miles for a free flight can be hit or miss, especially around a holiday. Which airlines are the most generous with making seats available? Each year, consulting firm IdeaWorks tries to run a fair comparison of all the major airlines to keep them honest. This WSJ article (paywall?) discusses their process:

In March, IdeaWorks searched for two award seats together on various travel dates between June and October on each airline’s busiest routes. Seats have to be available at the airline’s lowest everyday price—typically 25,000 miles round trip for a domestic coach ticket. The company made nearly 4,000 queries.

Below are the rankings of the 6 major US airlines. It is important to remember that this ranking focuses on domestic economy tickets only (no business class or international flights). The article does also rank international airlines on availability from a related metric.

For 2019, the most improved airline is United Airlines, while the worst decline goes to Delta. Not surprisingly, United claims this was totally on purpose because that’s what customers want and they are all about that… Meanwhile Delta suggested that the change was simply a result of more demand because their program is so popular. Shrug.

If you fly a lot on United, you can get significantly expanded award availability with the Chase United Explorer card. Add in the free checked bag for you and a companion, and the perks can easily offset the annual fee.

Southwest and JetBlue remain on top at close to 100% availability, but that is a bit misleading since both of their points are revenue-linked with no blackout dates. For example, 25,000 Southwest points will buy you basically any “Wanna Get Away” ticket that costs up to about $375. So the results are really just saying that Southwest’s busiest routes almost always have a flight that costs under ~$375. JetBlue is only 98% because some of their flights are just over the price threshold. I wonder if they included flights to Hawaii, now that Southwest flies there?

I have come to appreciate the simplicity of Southwest’s structure, especially now that I primarily shop for multiple economy tickets. For example, you can reliably value their credit card bonuses of 40,000 points = $600 in Wanna Get Away airfare, and 80,000 points = $1,200 of Wanna Get Away airfare. I can buy five seats on the same flight, no problem. Others prefer the traditional, more complex structure because it offered the skilled person the chance to get outsized value, like a $3,000 ticket for 50,000 points.

Airlines make a huge percentage of their revenue from selling these airline miles, which they create out of thin air both for actual flying and specifically for credit card users. This also means they have an incentive to create “miles inflation” such that each mile is worth less and less over time. I like this annual WSJ survey because it shows that someone is paying attention and calling them out publicly, at least on seat availability.

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.

Keep Your Hilton Honors Points From Expiring with a $1 Amazon Purchase

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hiltonhonors0Updated with alternative method. My relative lack of travel these days means that I am constantly keeping miles and points from expiring. Here’s the official policy of Hilton Honors point expiration:

Hilton Honors Points do not expire as long as Members remain active in the program. To keep an account active, Members can stay at one of Hilton’s hotels, or earn or redeem Hilton Honors Points within 12 months. [For Hilton Honors credit card holders, Hilton Honors Points will not expire as long as the Member is a cardholder in good standing.]

You need to earn or spend Hilton points every 12 months, which is on the short side. My usual strategy is to use Hilton Honors Dining to earn a few points at my neighborhood burger joint, but I was running short on time. I found that you can redeem Hilton points at Amazon through their Shop with Points program. The redemption ratio is 500 Hilton Honors points = $1 on Amazon.

First, link your Hilton Honors account to Amazon.

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Next simply use as little as 5 Hilton Honors points to offset $0.01 of any purchase. If you were planing on buying something for $25, just pay for $0.01 with Hilton points, and $24.99 on your credit card. You used to be able to simply buy a $1 Amazon gift code for 500 points and call it a day, but that is no longer an option. If you have Amazon Prime and no other needs, you can still buy one of the following items that cost only $1 or less:

Checkout and choose to pay with Hilton Points, where you can specify to only use as little as 5 points ($0.01). You would want to make sure that it is in stock, so they charge you immediately.

Check for the activity to show up in your Hilton.com account the same day as it is shipped:

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Bottom line. If you have Hilton points expiring soon, you can redeem as little as 5 Hilton points for $0.01 off any Amazon purchase and create qualifying activity that posts the same day. If you have Amazon Prime, I share some $1 ideas. Hilton points are more valuable when redeemed for a free hotel night, but in this case it can be worth sacrificing a few to keep the rest alive and active.

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.

Nomadland Book: What Really Happens When You Don’t Save Enough For Retirement?

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I’m reading Nomadland: Surviving America in the Twenty-First Century by Jessica Bruder. Essentially, it’s the story what happens to a group of people when their plans for retirement fall apart. Here’s the book blurb:

From the beet fields of North Dakota to the campgrounds of California to Amazon’s CamperForce program in Texas, employers have discovered a new, low-cost labor pool, made up largely of transient older adults. These invisible casualties of the Great Recession have taken to the road by the tens of thousands in RVs and modified vans, forming a growing community of nomads.

You’ll probably retire earlier than you expect. Consider this EBRI chart showing the big difference between when workers expect they will retire (dark blue) and when people actually retired (light blue). One-third (34%) of all workers ended up “retired” by the time they reached 60, but the majority didn’t see it coming (which I assume means it was mostly involuntary).

Going through the book, here is a rough breakdown of the stages that the people went through:

Plan A: Ideal retirement. You have plenty of savings and income in retirement. I’m all set with a rock-solid pension, Social Security, and a big pile of investments.

Plan B: Make everything more modest. I don’t have as much as I’d hoped. Maybe I don’t need that beach condo? Maybe I’ll move into a smaller primary house. It’ll be easier to clean. I’ll just have to take less vacations. No problem.

Plan C: Work longer. Hmm, not still enough. That’s okay, I’ll just keep my job a little longer. I have lots of valuable work experience. I’m still healthy.

Plan D: Find any job. I’ve been laid off, and now I’ll have to find something that is full-time and offers benefits. The easiest targets are retail: Walmart, Home Depot, McDonald’s.

Plan E: REALLY cut expenses. My house is going into foreclosure. I have to sell all my other assets, including whatever life insurance policies, 401k plans, jewelry, and anything else of value that I have accumulated.

Plan F: Ask for assistance from extended family or friends. I can’t find any steady work that pays the bills (or may no longer be healthy enough to do so). I need to find cheaper living arrangements, immediately. I might crash with my children or other family/friend.

This corresponds well with this EBRI survey that I found afterward:

What happens if none of this works? That’s the common thread through many of the people profiled in this book. Not only did Plan A fail, but their backup plans also failed. Many had a late divorce. Many lost their high-paying jobs in their 50s, when they were planning to work until 70. Others had medical issues that racked up huge bills. They worked retail for a while, but it never added up to a decent full-time income. There just aren’t as many jobs for someone in their 60s and 70s. They lived with their children for while, but their kids are struggling as well.

One solution that some came up with in this book with is to change “homeless” to simply “houseless”. You buy a big van or small RV for well under $10,000 and you live in it. As long as you can find a place to park it, you’ve just cut your housing cost down drastically. People figure out to live on $500 a month. You can also now travel for temporary work – Amazon warehouse picker, campground manager, agricultural farm worker. As more and more people do this, they have formed communities and annual gatherings to support each other.

The book has me switching between two feelings: empathy for what brought them to this place, and curiosity about the mechanics of their day-to-day life as modern-day nomads. For now, one big takeaway is that people can and do fall through the cracks. The folks in this book are still taking action and working to survive and hopefully once again thrive.

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