Hacking Travel Hacking: Getting the Most from Travel Hacking without Spending More

Admittedly, I’m a  little bit green behind the ears, but I’ve always been smart with credit cards.  Or at least responsible. My first credit card was an American Express Green Card, and it was a good choice.  You have to pay off the total balance at the end of the month. There’s no option to build up significant debt, so in some ways it’s a little bit like training wheels.  This makes it a good card for building responsible habits while bolstering your non-existent credit score.

But I soon learned there is so much more benefit to a credit card than convenience and a good credit score.  The opportunity to earn rewards or cash from credit cards is huge. And the Amex Green card – it’s not great for racking up reward points.  So after a year or two of 100% on time monthly payments and good credit, I was approved for a Chase Freedom card. $150 cash back – just for putting my regular spending on a card?  No annual fee? Yes please.

About a year later, the plot thickened when my brother introduced me to the Chase Sapphire Reserve – the holy grail of travel rewards cards.  And you guessed it – I signed up for that card too. And in the year and a half I’ve had the card, I’ve gotten well over $1500 of free travel (including the 50,000 point offer with sign up).  I love that card. As someone who spends nearly all of their discretionary budget on food and travel, it racks me up some serious points, and in a hurry.

This year however, I discovered travel hacking.

Mind. Blown.  

Travel hacking is a concept that involves routinely signing up for new credit cards to get a bajillion points (this is the technical term) through sign up bonuses.  For those of us who are “good” with credit cards (i.e. always pay off the monthly balance IN FULL and treat the plastic the same way they would cash) it is an incredibly lucrative way to travel for free, or next to free.

So how to hack the hack?

In order to get the bonus at sign up, there is a minimum spend attached to every card.  I recently signed up for the Chase Ink Business Preferred card, which comes with a $5,000 (over three months) minimum spend requirement.  That means we would have to spend roughly $1667 per month. In order to avoid going over our monthly spend budget, I kept brainstorming ways to spend $1667 a month, without really spending $1667 a month.  And for those of you who are good at math, that math doesn’t really add up…

In comes the hack. Today, there are so many ways to pay people back.  In addition to good old fashioned cash, there seems to be a new online payment app each week.  I’m very fortunate to work with people who are instantaneous about repaying their debts. (Same with friends and family) So when I offer to pick up lunch, I’m often reimbursed before I make it to the restaurant.  But by charging the cost of lunch to my card (often $50-$100 for 3-6 people), I’m getting way more bang for my minimum spend buck.

This past week, I brought my friend to Costco.  As many of you know, you have to use a card (or cash) attached to the membership owner’s account.  So the $300+ worth of food and party supplies she needed? You guessed it – that went towards my minimum spend of $5,000.  And she sent me an immediate payment online. In this scenario – we both win. She needed access to cheap, bulk items for a birthday party.  I need to spend upwards of $5,000 over the course of three months while trying to maintain a stringent budget. The win-win here is important to me. I don’t believe in taking advantage of anyone – especially my friends and family.

In looking at my spend budget last month, Mint tells me that there was $627 in reimbursable expenses.  That’s more than $600 that I didn’t have to spend, and it doesn’t include the $300 from Monday’s Costco run.

To recap:

  1. Read about travel hacking.  It’s an incredibly lucrative way to travel the world for free or nearly free.  The folks at ChooseFI have laid it out really well here: https://www.choosefi.com/all-articles/travel-rewards/
  2. If you have friends, coworkers and family members WHO PAY YOU BACK IN FULL, EVERY TIME, offer to pick up the tab.  In this way you can expedite “spending” the minimum to receive a sign up bonus while sticking to a stringent budget.
    1. Travel hacking – using a credit card sign on bonus to get free travel/cash/rewards – only works if you are someone who is RESPONSIBLE with credit cards. If you are someone struggling to rid yourself of consumer debt, and have a history with credit card debt – it may not be a strategy for you.  Know thyself.
    2. If you have friends, family, or coworkers who are constantly trying to get out of paying for things – don’t offer to pay for them.  This only works if you get paid back 100%, 100% of the time.
    3. Be honest with your friends about what you’re doing.  My friends know that I am trying to rack up points. When I took my friend to Costco, I explained everything I knew about travel hacking to her, and how her purchase at Costco was gong to benefit me.
    4. Try to make it beneficial to both parties.  If you’re going to go pick up lunch for a busy coworker, you’re helping them. If a friend needs access to a bulk supply store, you’re helping them.  Make it work for both of you!
  3. Always think of new ways you can optimize! If you don’t have friends and family who are good at re-paying their debts, look for times when you know you have a big purchase coming up to open a new credit card.  We knew we needed to put about $1600 of repairs and maintenance into our car. So you can be damn sure we waited to make those repairs to coincide with the opening of a new credit card.

WTF is an ETF?

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Ever feel like the finance word has it’s own little language and you need a decoder pen to figure it out?  I certainly do.

If you’re at all interested in investing in the mythical stock market, the term “ETF” is part of the jargon you’ll have to get familiar with.  Luckily, this one is pretty straight forward.  It stands for an exchange traded fund.  Which immediately clarifies it’s definition, right?

Wrong…Well, maybe to some people, but not for me.

So let’s break it down.  An ETF is a hybrid of a stock and a mutual fund.  Another way to think of it – an ETF is the love child of a stock and a mutual fund. 

So for this analogy, parent 1 is the “fund” and parent 2 is the “exchange trade” part. 

So what does exchange trade mean? Simply put, these funds are bought and sold (in other words, traded) on large markets such as the New York Stock Exchange, or the NASDAQ (this is the platform, exchange or market, where these trades are executed).  Buying and selling ETFs have many of the same advantages and disadvantages of buying and selling individual stocks. The price of an ETF can change from one minute to the next during a normal day of trading.  The price you pay is based on the exact time that you purchase the fund. In many brokerage accounts, you can set up a price at which you want to purchase or sell an ETF in the same way you can for individual stocks.  This can be an advantage or a disadvantage, depending on your outlook. 

That explains half the family tree, what about the “fund” portion?

The fund portion of ETF refers to the numerous companies or bonds that are represented by one ETF. An ETF is often centered around an objective or an industry.  For example, VTI is an exchange trade fund made by Vanguard that is designed to mimic the entire stock market. There are also ETFs designed to follow different industries like as renewable energy, or investment strategies like dividend growth.  Similarly to index funds, ETFs have a fund manager. He or she manages the amount of each company that is represented within the fund. In this way, risk can be somewhat less than owning an individual stock. If an individual stock tanks, your entire investment tanks right with it.  But if a company within an ETF is on a downward spiral, the fund manager will likely adjust the way that company is represented in the ETF. This is similar to the management of mutual funds.

ETFs often have a lower cost for an initial investment than do mutual funds.  Find a brokerage that is able to provide no-commission trades. As I am a huge fan of Vanguard, allow me to quickly plug for them:  The purchase of Vanguard ETFs through Vanguard never results in a commission or transaction fee. And their fund management fees are among the lowest in the industry.  (There is a battle towards the bottom between Vanguard, Charles Schwab and others. Which actually works in your favor)

In my mind, there is one large disadvantage to an ETF vs. a mutual fund.  You can automate investment into a mutual fund. For example, I have $250 transferred from my bank account every pay day into my brokerage account.  From there, it is directly invested into Vanguard Total Market Index Fund, Investor Shares. All of this occurs without me clicking a single button or link, it is automated.  To invest in ETFs takes a few more steps. I can still automate biweekly deposits into my brokerage account, however I have to actively go in and choose the ETFs I want to invest in and execute that transaction.  IMO, it opens you up to more room for emotional investing, or, forgetting to invest in the first place!

In summary, what are the take home points about an ETF?

  • ETFs, or exchange traded funds are traded similarly to individual stocks.  This means that the price of an ETF can fluctuate throughout the day. In many brokerage accounts, you can set up minimum or maximum prices that will trigger a buy or sell of that ETF.
  • ETFs are similar to mutual funds in that they are representative, or an index of, an objective, or industry.  For example, VTI the Vanguard Total Market Index ETF is very similar to VTSAX, or the Vanguard Total Market Index, Admiral Shares.
  • In relation to individual stocks, ETFs can mitigate some of the relative risks of the market.  By putting various types of eggs in your basket, versus only one type, you have a better chance of balancing out losses any individual stock may have with the gains of an alternative stock in the fund.
  • As long as you agree with the goal or objective of the fund, the work is done for you by a fund manager.  He or she is in charge of looking over the make up of your fund.
  • Pay attention to fund fees.  As a point of reference, VTI, which I’ve already plugged, has an expense ratio 0.04%
  • Know yourself.  Often times, the emotional roller-coaster of seeing daily fluctuations of the market can deter people from investing.  This can harm your overall investment success. Will a huge drop in the price cause you to panic and sell off all your ETFs? If that’s the case, maybe you’re better off with the set it and forget it approach of a mutual fund quietly chugging along in the background.

Four Financial Truths I Learned During My Morning Run

I secretly (or not so secretly) love personal finance, but for most people, it’s a daunting undertaking to get your financial life in order.  Getting into good physical shape is a similarly overwhelming task for a lot of people.  So this morning while quietly chugging along down the road, I found myself absent-mindedly drawing parallels from my financial goals to my fitness goals.  Here’s what I came away with.

  1. Incremental efforts can yield big results.  This morning, I really didn’t feel like going out to exercise.  I woke up sore from a 10 mile walk I had gone on this weekend, and to be honest, I just didn’t feel like it.  But when I got dressed, I put on athletic gear and my sneakers.  And then I decided to go for a walk.  And then after a mile I was feeling more motivated.  And then I decided to run for an additional 20 minutes!
    • Think of the athletic gear here as opening an investment account.  At a place like Vanguard, it’s free to open an account.  But that small action takes next to no time, and motivates you to build on that move.  It can feel a little silly walking around in athletic gear if you’re not planning on doing anything athletic. Similarly, it can seem a little silly to open an investment account and just let it sit there.
  2. Slow and steady paces can accelerate you progress.  I don’t usually think of going for a walk when I think of ways to exercise.  As someone who exercises relatively regularly, I always pass it by as “not enough” effort.  But walking is one of the best forms of exercise out there!  Similarly, setting up automatic transfers to a savings or automatic investments into an investment account is one of the best things you can do for your financial health.  Just as you may not see immediate benefit from going for a walk, you won’t see the immediate benefit of automating your accounts.  But watching  your account balances grow over time may motivate you to accelerate your savings, in the same way that going for a walk for 20 minutes motivated me to accelerate my pace for an additional 20!
  3. Sometimes, it’s a little painful.  When I’ve been away from exercise for a time, getting on the pavement or in the gym hurts.  But the more I can slip into muscle memory, the less one individual work out can incapacitate me.  Similarly, managing your money and investments is a muscle that you have to build.  Each incremental action can initially cause you to be uncomfortable.  Take for example the idea of transferring $20 a week to your savings account.  That first week – you may really miss that $20.  But after a month of spending $20 less, you barely even notice it’s gone.  And then you’re ready to try a new muscle building action!
  4. You’re going to make mistakes.  This morning when I went on my athletic wear and sneakers, I chose a comfortable tee-shirt, and a favorite pair of running tights.  I went out the door and set off at a brisk pace.  The further into my walk I got, the more annoying my pants seemed to be.  They were simultaneously giving me a wedgie and falling down.  What the heck!? Sooner or later I realized I had them on backwards.  (You’d think this was an obvious mistake I would have immediately recognized and remedied.  Surprisingly, it took me until minute 8 of a run, after 20 minutes of walking…).  I could have quit at that point – I wasn’t too far away from home.  But I recognized the value in completing the workout.  Yeah I had to stop every once and a while and fish out the wedgie, but eventually, the run was over and the goal was achieved.
    • Inevitably, we’re going to make mistakes with our money.  Hopefully, it will be as inconsequential as a wedgie.  If not, we can course correct.  The most important thing is keeping the end goal in mind.  My run today was one step closer to being the fittest person I can be.  Every dollar I invest in my financial fitness is one dollar closer to financial freedom.  Compounding little victories is king! (Or in this case, queen.)

Millennials Marry and Merge Money

I got married in 2017 to the guy I met when I was 15 years old.  He’s pretty great, and definitely one of the more tolerant people I’ve ever met.  We’ve been together a long time.  Almost 12 years.   We went to different colleges in different states, which helped us to develop a sense of self apart from our identity as a couple, and made us into self-sufficient and independent minded adults.  It also led us to develop slightly different approaches to money management.

I have to say, I’m not surprised that fighting about money breaks up a lot of couples.  It’s a super personal and super tricky subject that we’re just not socialized to talk about.   Plus, it’s hard not to look at your partner’s spending as “your” money – even if you make similar salaries and are spending at similar rates, which my husband and I do.  At least it was for me. I had after all, recently discovered the FIRE movement, and was anxious to get started.

So, when we millennials got engaged, moved in together, and started actually merging money we were blissfully unaware of the challenges we were soon to face.  We had talked about money before we got married – not infrequently either.  We had discussed our utopian life where we would put all our money in one pot and in our heads, it was that simple.  You know, what’s mine is yours…and all that crap.  We quickly came to realize that this very simple philosophy and naivete did not anticipate the intricacies of two personal finances becoming one.

Here’s what we failed to discuss:

  • How much do money did each of us spend on things like gas, groceries, car insurance and toiletries/necessities, and how would that change living together?
  • At what purchase price do you need to “okay” something with your partner?
  • What are our joint savings goals?  Should we have individual savings goals as well?
  • What is a reasonable amount of money to spend on travel?
  • What is a reasonable amount of money to spend on a new bike?

The last two are more so to illustrate a theme that emerged early in our “we need a budget” phase of money talks.  Tracking expenses has been really helpful for us.  We realized that we both felt like the other was spending more, even though we were both spending about the same.  Now we’re more conscious and wary of an absent-minded credit card swipe.  It also took us a minute to figure out that we had different ideas about what it means to “waste” money.  We fell victim to a few stressful fights about money.

But you know what, we’re okay with our spending now.  I don’t roll my eyes at certain line items of our credit card statement anymore.  In fact, I don’t even really look at the charges all that often.  Here’s how we decided to split up our monthly saving and our spending:

  1. We take off about 37% of our income right off the top. This goes to our 403(b) and 401K accounts, our Roth IRA accounts, our emergency fund, and our post-tax brokerage account. Our marriage, and thus our budget, is relatively new.  Hopefully we’ll be able to get closer to 50% savings rate after a few months.
  2. We looked at our repeating monthly charges (car payment, utilities, rent) and calculated our fixed monthly expenses.
  3. Then, we looked at what we had been spending in an average month, and agreed upon an amount of money that we both considered reasonable spending for a young couple living in a city.  We decided on $2,500
  4. We divvied that money up into three categories: yours, mine and ours.  We decided that we could both have $500 to spend every month – no questions asked.  Anything left over goes into an individual savings goal that you can tap for big purchases, again, no questions asked.  Then, we had $1500 to spend on things like gas, groceries, toiletries, and shared experiences like dates.

We track our spending through Mint.  About once a week or so, we go through and “tag” each of our transactions as him, me or us.  We don’t perseverate about the dollar amounts or the category of spending, just whether or not we came at or under budget.  This form of “anti-budgeting” works well for us.

And here’s why:

  • We’re now both directly in control of how quickly we can save towards our individual goals.  If I come in under budget, I’m that much closer to my next trip.  If he comes in under budget, he’s that much closer to his road bike.
  • We’re working together to come in under our joint budget.  If we spend less than our allotted $1500, we throw that money into our emergency fund.  We’re about $12,000 of the way to $18,000.  And the number is quickly shrinking – we started in November with about $3,500!
  • I don’t cringe when he spends $17 at five guys, and he doesn’t eye roll when I spend $13 getting my eyebrows threaded.
  • We’re meeting and exceeding our savings goals!  Go Team!

I almost made a huge mistake on my taxes, here’s how I fixed it.

Happy April, Happy you better have your taxes in by today, day!  It’s crunch time for tax season, so I hope you’ve gotten yours figured out.  Mine threw me for a loop this year. And, true confessions, I filed my city school tax yesterday… 

A couple of things happened to me in the tax year 2017.  I learned a lot about money, and got super excited about tax advantaged accounts.  I also got super married. Well, I got married, and I was super excited about it.

As some of you may know, marriage changes your tax filing status.  Here are a few things I did not know going into tax filing season:

  1. The IRS considers your filing status as married for the entirety of the tax year in which you are married. In other words, if you get married in September, in the eyes of the IRS, you’re considered married for the entirety of that tax year.  It doesn’t matter that you’ve been paying for life as a single person for 9 of those 12 months. (eye roll)  
  2. The income limits (AGI) for tax-advantaged accounts (traditional IRAs and Roth IRAs, among others) are different for a couple who is married filing jointly vs. a high roller single person. While this may seem obvious to many, thinking of potential tax implications was not the first thing to cross my mind when I got engaged and subsequently married.
  3.  On a related note, automating your savings is an excellent strategy – one I encourage.  I also encourage the “set it and forget it” mindset. Except don’t fully forget it. If you have an automated savings plan, perhaps give it a looksie when you undergo a major life event. Make sure it still makes sense for your new situation.
  4. There is likely a solution to your problem, so don’t panic.  Find an excellent tax (or problem specific) professional, and ask for advice before you act.  This can help you avoid penalties, fees, or additional taxes.  Freaking out and winging it is not a good idea.

Long story long:

Early in 2017, my soon to be husband got a new job.  Because I’m no dumb dumb, I knew that when he left his job, he should roll over his existing 401K to a trad IRA.  IMO, the best place to do this would be at vanguard to save him the expensive management and fund fees of his employer sponsored account.  So I stole his identity and opened a trad IRA at Vanguard. In my opinion, this is one of the nicest things an identity theft has ever done.  (I’m kidding, obviously. His account was opened with his knowledge and permission, yada yada yada.) But then I got to thinking… Prior to merging finances with me, he did not have any type of additional retirement savings outside his employer sponsored plan.  I have a Roth IRA that I’ve been faithfully contributing to since 2016. “How can I help him to accelerate his retirement savings?”, I mused.

And this is where I failed to do the appropriate amount of research.  He (I) started contributing to his trad IRA (for him) in small monthly increments.  And at the end of 2017, we (I) were looking at an exciting $3,000 we could deduct on our tax forms!  I began to see the potential for our tax refund to grow if I could max out both our Trad IRA contributions before filing our taxes for 2017.  So I took the remaining contributions I had available (remember I had been contributing to a Roth IRA already) and opened a shiny new Trad IRA for myself.  I was practically giddy. I was so excited for all the money that we would be able to deduct on our taxes this year.

Except we couldn’t.

Because our adjusted gross income was greater than $119,00 and we both contribute to employer sponsored plans, my husband’s (done by me) and my contributions (also done by me) to our traditional IRA would not be deductible.  This is when panic set in. “I committed tax fraud”, I thought, “and I did it on my husband’s account too”.  Worst. Wife. Ever. Surely, I was going to IRS hell.  

Well no.  I did not commit tax fraud.  We (I) simply made some overzealous non-deductible contributions to my and my husband’s account, therefore negating any tax advantage the accounts had.  We (I) were essentially contributing to a brokerage account that we could not access until at least 59 1/2.  Well that sucks…

Enter the wisdom of a tax professional. (For clarity sake, this is NOT me).

I paid for the tax software that allows you to speak directly with tax professionals.  And I spoke with three CPAs, and two very helpful retirement specialists at Vanguard. (Side note, shout out to the Vanguard Customer Support phone lines, you guys are awesome!)  Because I had discovered the error before filing our taxes, I was able to re-characterize our contributions from a traditional IRA to a Roth IRA.  (Note that a re-characterization is different from a roll-over). The modified AGI (Adjusted Gross Income) limit for a Roth IRA in 2017 was $186,000.  This number, my husband and I fall below. Yay! We could re-characterize his account contributions from traditional IRA contributions to Roth IRA contributions.  

I’d love to say that was the end of the story.  But for learning purposes, (my own) I’d like to explain a middle step in which I panicked blindly, and withdrew $100.05 of my trad IRA contributions. This was a random number, done on impulse. This withdrawal subjects me to taxes on any money that money had made, as well as an early withdrawal penalty which is 10%.  So I have to eat $10.05. But my point in telling this story is to illustrate that:

  1. Everybody makes mistakes
  2. Panicking is probably the most instinctual reflex, but also the least helpful one.
  3. Most mistakes are fixable.  Relax, it’s part of the learning curve.  
  4. You have to be wise enough to recognize what you don’t know. Get help when you need it!
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For full disclosure/disclaimer purposes:

  1. I am not a tax professional or adviser – consult yours before making any important tax related decisions


Has the Journey to FI Hampered My Style?

If you had known me two years ago, you would not recognize the person I am today.  I was a serial shopper. A shopaholic, if you will.  I worked in a retail clothing store for 5ish years.  I took loans from the bank-of-mom to buy myself (and my now husband, my brother, mother and father) new clothes – every month.  (Now phrases like, “It’s not on sale if you didn’t need it” really speak to me).  And honestly, I bought all that stuff because I took great pride in my sense of style.  It was part of my identity.  My friends were always impressed with my new look and flashy labels.  And that kind of positive-feedback loop is addicting! 

I bucked the cycle of endless consumption at the beginning of 2017.  I read, listened and watched whatever I could get my hands on about minimalism.  And since then I’ve sold off >$7,000 worth of clothes.  If you can sell $7,000+ worth of clothes and still have a substantial closet left over…you definitely had a problem.  But, there remains a problem.  I still like clothes.  And I still like fashion. So how have I married my old life to my shiny new financially fit one?

Well to start, I’ve set some pretty aspirational goals for myself at the beginning of this year.  (I don’t like the idea of resolutions, probably just because I think that they never work.  I did like the idea of setting goals though. Which I realize is just a matter of semantics.  Anyway, I digress.)  One of my goals this year (and forever) is to have more intentionality with the way I spend money in relation to clothing (among other things).  So I’ve set a goal to buy no new clothing for an entire year.  I decided that if I absolutely needed to buy something, used clothing is okay, but the preference would be to buy nothing. It’s now April, and I only broke the rule once. I bought a new sweater when I was in Ireland, because, well, Irish Knits are life. (And I have ZERO regrets about that).

So how has this shift changed the way I dress on a day-to-day basis? What still needs work? Here’s my round-up of how my goal of financial independence has hampered (again, pun very much intended) my wardrobe growth:

    1. There is less turnover and waste in my closet.  By paring down my wardrobe choices I’ve begun to pay attention to the style that I like, not just the newest trend.  Most of us reach for the same items in our closet again and again. Figure out what those items are, and dump the rest. I did this by asking three questions, Does this fit?, Has it been worn in the last six months?, and would I buy it again today? When you love every item in your wardrobe, it’s easy to pick out outfits.  So many times I found myself buying a top to go with one pair of pants. And then not wearing either item. Now I have a cohesive style. Each item goes with numerous others. I’m not needlessly buying to fill non-existent gaps.
    2. My wardrobe is applicable and functional to my real life, not my imagined one.  I’m not a super fancy person, but I do like to go out to dinner, and sometimes dress up.  For a long time, I fancied myself to be quite a fancy fashionista. My pinterest boards were full of #streetstyle and #wardrobegoals. To some extent, I still like to keep up with fashion.  I’m a little superficial in that way, but I’m okay with it. The glaring fact of the matter is, however, that my job requires a business casual wardrobe that allows me to move freely and comfortably, and it’s not fancy.  It’s hard for me to do my job in blazers that make it hard to lift my arms above my head. Now when I get dressed in the morning, I know that not only are my clothes attractive and put-together, but they’re also functional.
    3. I have no buyers remorse. I used to buy a lot. Like a lot a lot.  To the point that before we were married, when speaking with my husband, I’d purposefully omit the truth about the average number of packages being delivered to my apartment on any given week. I spent a lot of time returning things I’d impulse bought to the store.  Or worse, I’d forget to return it, and be stuck with it. In either case it was a massive waste of time. Worse, I had already wasted the time earning the money to be spent on needless or unwanted items! When I bought things that were itchy or uncomfortable, I’d force myself to wear it because I didn’t want to admit that money had been wasted.  That sense of obligation to material objects is exhausting. I don’t want to, nor do I have to worry about my average cost per wear anymore. But more importantly, I’m not sneaking packages into my house. I want an honest and open relationship with my husband. Clothes are definitely not more important than that!

Well that’s all great, but what still needs work?

    1. I still get an itch to go shopping now and again. (Old habits die-hard and all that)  Sometimes I have to purposefully remove myself from the opportunity to spend, or turn down shopping opportunities with my friends.  But do I feel deprived? No. I’m almost always happy with my decision to hold off on a purchase. And if I’m not, I don’t believe in needless deprivation! I go buy the damn thing! (See Irish Knit incident). 
    2. Marketing works. There is a reason the marketing industry is so robust – it works.  We’re constantly inundated with the impulse to buy the next hottest trend.  There are some ways to limit your exposure. My email is filtered to remove promotional offers, and I regularly delete them without looking.  Again, if I didn’t know I needed it before it was 30% off, I don’t need it. But sometimes I fall victim to the super cool looking women of pinterest, instagram and television.  I’ve found myself adding items to my cart after seeing some version on some model somewhere. And for the most part, I’ve caught myself, but it’s a work in progress.
    3. I’m influenced by my friends. But hey, who the heck isn’t?  My friends are well put together and seem to always have new things that they look great in. While that may sometimes be the case, I’ve started to realize that it may also not be.  No one pays as much attention to your outfit as you do. So although you may not have ever noticed it before, it’s very possible that your friend has owned her cool sweater for a year (or three). It’s also very possible that your friend is willing to swap clothing items for a period of time.  (My best friend and I call this a seasonal swap) If you’re close in size with your friends and have a mutual respect for one another’s property, you can essentially double your wardrobe! It’s been slow progress, but I’m trying to shift my mindset to this angle. But remember – this outlook only works if you both are willing to share.

So what is the take-away?  Yeah, my style has changed since I’ve re-prioritized how I spend and save money.  It’s changed in a really good way though. I’m not stressed about planning my outfits.  I have no guilt when I purchase an item – I’ve thought about it, and it makes sense for my life and what I need.  Maybe it could be considered #streetsmartstyle?

Why It’s Time to Start Investing…like now

So why should you bother to invest in the first place?  Everything in this post boils down to one basic principle – If your money is making money, you don’t have to.  So you need to invest because it turns every dollar you earn into your personal employee.  Be the boss of your money, and you’re the boss of your future.  

So why can’t you just save your money? Saving money in a bank account is great.  Saving it in a jar or under the mattress is not. It provides you with the peace of mind of having cash readily available in the case of an emergency.  But in most bank accounts, the amount of interest earned is unimpressive.  And that’s putting it kindly.  Here’s why – the value of one dollar today is not the value of one dollar in the future.  Inflation refers to the increasing cost of goods as services with time, and thus the relative decrease in the buying power of your money.  Inflation is something that is monitored and influenced by the government.  In countries like the U.S. the goal is to keep inflation at about 3%.  Does your savings account pay 3% interest?  Mine doesn’t.  So, what? You’re actually losing money by keeping it in a savings account?  Sort of.  But I prefer to think of it this way.  A savings account buys you the security and convenience to quick cash when you need it most.  When you know you have about 3-6 months of living expenses in your account, you can walk away from, or into any situation you want.  The 2 or more percent you’re losing to inflation? Well, that’s the cost of flexibility.

This is why you need your money to work for you.  This is best illustrated through a process called compounding. Investopedia describes the concept of compounding like this:

“Compounding is the process of generating more return on an asset’s reinvested earnings. To work, it requires two things: the reinvestment of earnings and time. Compound interest can help your initial investment grow exponentially. For younger investors, it is the greatest investing tool possible, and the #1 argument for starting as early as possible.”

Let’s break that down a bit. When you are working, you are dedicating time to a job, for which you are paid money.  When you invest your money, your money is also given a job – to make you more money. So every day, your dollars go to work in your investment.  Eventually your dollars make you more dollars. Those additional dollars get hired and start to work for you too. In this way, your additional dollars are making you even more additional dollars. Think of them as your little employees (or minions) out to do your bidding!  It stands to reason than, that the longer you’re in the game, the more money you stand to make.  And this is true, the earlier you start, the better off you are. 

A few more thoughts about investing:

  • There are a number of investment opportunities in which you can choose to park your money.  A classic and favorite amongst FI community members is low-cost index funds. An additional example includes real estate investing. Different investments have different opportunities, risks and potential reward.  Think about your goals for investing. Do you want to build a stream passive of income? Do you want to build wealth that you can systematically draw down on? There are different strategies for different goals.
  • Most strategies work best with a long-term plan.  Stick with your strategy for the long haul, and don’t get caught up in day-to-day market fluctuations – this is how people lose money.  
  • Starting sooner is always better.  But that doesn’t mean it’s ever too late to start.

The Hierarchy of Personal Finance

I have a tendency to get overwhelmed by information and act impulsively.  A sort of, close my eyes and point mentality when faced with decisions.  This is NOT the best way to approach your finances.  But the good thing about this impulsive nature for me was that I wasn’t hampered by analysis paralysis.  I didn’t sit and obsess over which tax advantaged account I wanted to start contributing to, or what financial goal I wanted to start saving towards.  Which is good, because I think sometimes the biggest barrier to starting is not knowing where to start.  And that’s okay.  You don’t need to optimize your savings and investments to achieve success.  There are literally a bajillion different ways to reach financial independence.

How are you going to do it?

Remember that investing is a long-term game.  It took time for you to get a job and make money, it takes time for your money to make you more money.  Figure out first what the goal is.  Why have you decided to become a little more financially savvy?  Do you want to retire early? Are you trying to start a business?  What’s motivating you? Prioritize around your most energizing motivator.

So without further ado, here is how I’ve broken down my priorities since my journey to financial independence has begun:

  1. Contribute the minimum amount to an employer sponsored retirement plan (401K, 403B, etc) to get 100% of the employer match.  Employer matches are literally free money. If you don’t know if you have one, stop what you’re doing and call your HR department now. Employee sponsored retirement plans that have a match are the only guarantee in life.  Except death and taxes. It is the only place where you can bank on an X% return. It is literally free money. Consider it part of your salary. You wouldn’t leave a 3% (or more) raise on the table would you? No, that would be stupid.
  2. Start saving for an emergency fund.  An emergency fund is a source of grievance for a lot of people who are super nerded out into personal finance.  But, like, cash, like doesn’t grow and you lose money to inflation. Yeah, but you know what always seems to grow?  The number of “emergencies” that you seem to have when you don’t have a fat stack handy. The amount of money you need to save will depend on what your risk tolerance is and where you are in life.  As a general rule of thumb, it’s a good idea to have 3-6 months of living expenses (rent or mortgage, bills, utilities, food budget, etc.) saved up IN CASH. That way, if the car needs a new part (or like whatever, idk I don’t understand cars) – Boom, you’ve got the cash, and you don’t have to put it on your credit card.
  3.  Look at the other tax-advantage accounts you qualify for.  There are income limits and annual maximums that are associated with certain retirement accounts.  Articles detailing those types of accounts to come. In short, look for ways to protect your money from one of life’s guarantees – death, wait no… taxes.  You always have to pay taxes. Sure as shit my friend. It’s a question of now, or later.
  4. Go back to item number 1.  Add whatever money you can reasonably afford to that account.  Remember, the game is to protect ya bills from the tax man. Note, this is different from tax fraud. An interesting story to come on that…
  5.  Start saving for ways to grow your money.  This can be with a normal brokerage account, or this can be for a big purchase, like a real estate investment.  It can also be money you want to use to help start your own business. There are a number of ways to grow the money you have available to you, and there have never been more opportunities for side hustles.  Generally speaking, pony up and earn more, or sell the pony and spend less. (Don’t ever sell the pony, they’re beautiful and majestic creatures).
  6. Trickle more money into your overall net worth so that one day your investments, side hustle, or both can support you.  
  7.  Chuck the deuces and say good-bye to your 9-5.

The Category of Debt:

Notice I didn’t really talk about debt.  That’s because where it falls into your money situation is extremely personal and situationally dependent.  And, to be frank, I don’t have any.  To put it simply, which is going to cost you more, your debt (and the associated interest you’re getting slammed with) or the opportunity cost of saving and investing the money you could have been using to slam your debt with.  Here’s an example. Say you have credit card debt. Say that you owe about 5,000 and that the interest that credit card is charging you to front that $5,000 is 17.5%. If you make monthly payments of $200, it’s going to take you 32 months, and more than $1,000 extra to pay that off! You would have to find an investment that could reliably make you more than 17.5% to make it worth it delay paying off that debt. Weigh your options, make your decisions. 

Welcome to my FIary!

Hello all! You may be wondering what the heck a FIary is.  That’s because it’s a word I made up, meaning Financial Independence Diary.

So welcome to my Financial Independence Diary!Here I hope to document my journey towards financial independencee, both as a cathartic exercise for myself, as well as in the hopes of helping or inspiring others on their journey to FI.  This blog is starting pretty much from the beginning.  Enjoy the ride, and watch out for the bumps!

For me, the journey began with the concept of minimalism.  About a year ago, on a whim, I watched a documentary on the concept on Netflix.  I’m not sure how or why, but somehow it caused a huge perspectival shift for me.  I began to see how I was surrounded by stuff… A lot of which I didn’t need or use!  I started looking for fat to trim.  And I got rid of a lot.  In a seemingly natural progression, I started to take a hard look at the way I was spending my money.  A core principle of minimalism is, after all, living with intention.

What happened?  Well, I stopped buying clothes for every (or no) occasion, and sold >$7,000 (and counting) worth of clothes on Poshmark.  I opened a Roth IRA, and up’ed my 403 (b)contributions to the annual max.  I got married and I convinced  (read, coerced) my husband to do the same.  We started an emergency savings fund.  We have an investment account. And little by little we’re systematically growing our net worth in the hopes of one day forever leaving our 9-5s.

Here I hope to share some of the basic knowledge I’ve gleaned, and to document my journey to financial independence, in real-time.  I learn best by example, so I’m going to strive to be as transparent as possible with my numbers. I am by no means an expert, so I anticipate there will be many mistakes along the way – but hey, maybe you’ll be able to avoid them on your journey!

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