Category: budgeting

Paying for Health Care: The FSA & HSA

Paying for Health Care: The FSA & HSA

For the past several months, my life has been consumed with my health. I was informed in June that I would probably need surgery on my leg for an injury I incurred in May. An MRI confirmed that result in late August. I received a cortisone shot and was able to schedule my surgery in December to align with the school winter break. This has been a lot, physically, to handle. But healthcare and finance are very much intertwined, and one of my favorite financial tools is the health care account I have through work called the FSA (Flexible Spending Account). Other people will have access to a similar account called the HSA (Health Savings Account). Both are tax-advantaged accounts for paying for most things medical and I think everyone should have one if they can.

I have been very fortunate to always have health insurance. Strike that, great health insurance. My parents both worked union jobs and I work a union job now. I have never been without insurance coverage. As such, I never knew much about health insurance or paying for medical care until this past year when I knew I’d be looking at several on-going expenses even with my good health insurance. I learned from a friend at work that our employer offers an FSA which is a separate account one can use to pay for out-of-pocket medical care. I was able to learn about this in time to establish one during the November open enrollment period and it became available to me January 1, shortly after my surgery.

Even with good health insurance, everyone has some medical care costs throughout the year. Back when I started my job, we sat in a presentation during which we were basically told not to bother with an FSA because if you don’t spend the money, it will disappear. The presenter in essence told us the FSA was not worth it. This was about the worst financial advice anyone has ever given me.

Double Tax Advantage of Health Accounts

Let’s take a step back and determine how an FSA or an HSA benefit you in your daily life. These are accounts set up through your employer to help you pay for health care. They are awesome because they use pre-tax dollars. What this means for you: say you have a $20 prescription cost. Just paying for it, how I did for years, from your checking account, means you pay with after tax dollars. That means I’d need to earn $23.25 at work to be able to have $20 to spend from my checking account. This is because I have about a 14% effective tax rate (all of my local, state, federal, and Medicare taxes divided by my gross income). If you have a higher effective tax rate, like 25%, you’d need to earn $26.66 at work to be able to pay for that $20 prescription. If you use your health account, you only need to earn $20 at work to pay that $20 bill. You might be thinking 3 bucks, 6 bucks, who cares? Well, first off, that’s just nonsense. Any money you save, even a dollar, is a benefit to you. But expand this out to a year: say you pay $20 a month for a prescription, that’s $240 for a year. You could pay with a health account exactly $240 from your gross income, or you could pay with after tax dollars, requiring you to earn $279.07 if you have my 14% tax rate. Now you just saved yourself almost 40 bucks on just that prescription alone. That’s just one example.

The health accounts can be used to pay for prescriptions, contacts, and office visit co-pays. These are the top three expenses they help with, in my opinion, but check your HR guide for the extensive list of every expense you can use the account on. If you’re like me and visit the doctor all the time, co-pays can add up. Every time I go to the physical therapist, I have to pay $15. To visit the surgeon, it’s $25. I know people have co-pays ranging from $10 to $30, and these have to be paid for each visit no matter how many times you visit them. Everyone has some medical costs throughout the year and being able to use pre-tax dollars in one of the health accounts is an invaluable financial tool.

In an earlier article, I showed how contributing to a 401(k), IRA, or 457 account can lower your tax liability. The FSA/HSA do the same thing. But the health accounts can be used today to pay for your daily medical expenses. Say you contribute $500 to your health account, that means your taxable income will be lowered by $500. If you’re in the 12% tax bracket, that means you lower your federal tax bill by about $60. My Ohio state tax bill would go down about $15. This is the double benefit of the health accounts. First, you get to pay for your medical expenses with pre-tax money. Second, you get to pay less in taxes. For me, $500 in that account first saves me $81.39: if I had to pay $500 in after tax dollars, I’d need to earn $581.39 to get $500 deposited in my checking account. Then, $500 comes off my taxable income taking me from about $40,665 to $40,165, which saves me $60 in federal taxes and $15 in state taxes. I’ll take that total of $156.39 in savings!

FSA vs. HSA – Contributions and Rollover Limits

You are able to contribute more to the health accounts to further lower your taxable income, but that is where the difference between the FSA and HSA become very important. Let’s revisit what that presenter told me during my first week as a fully employed adult: don’t do an FSA because you can lose the money. This is 100% true. If you do not spend the money you contribute to an FSA throughout the year, it will disappear, not roll over. Contributions to an HSA roll over from year to year. You need to know if you have an FSA or an HSA so you can determine your contributions. In some cases, $500 of an FSA will roll over, but check with your HR department to know if you have that option.

  • While the maximum you can contribute to an FSA in 2018 is $2650, you don’t want contribute that much if you aren’t certain you’ll spend all of it. I looked at my co-pay costs from past years and asked my doctors how many visits I should expect post-op and figured $550 to be an appropriate level to contribute. If I don’t spend it all on post-surgery care, I know I can use the account to buy contact lenses, which I do wear regularly.
  • The maximum you can contribute to an HSA in 2018 is $3450 and if you can, you should contribute the maximum, since it rolls over. This allows you to save for potential future health costs, whether unforeseen emergencies or you just want to save for potential costs that come with age.


FSA vs. HSA – Type of Health Insurance Coverage

The biggest difference determining which account you’ll have access to is what type of health insurance you have. The HSA is only available to people enrolled in a HDHP (High Deductible Health Plan). The IRS defines high deductible as $1350 or more for a single person or $2700 for a family. This means that if you are required to pay $1350 before your insurance starts to pay for your health care, then you can have an HSA. The HSA allows you to pay your deductible with pre-tax dollars. High deductible plans, in theory, mean a lower premium (the amount you pay every month just for having health insurance). You are able to contribute 2.5 times the deductible. You’d probably want to contribute at least the amount of your deductible to the account so you have it ready to go if you need to pay it.

An FSA can be offered to people with other insurance – the not high deductible plans. My deductible is $0. We just have to pay co-pays for most office visits.


Additional Benefit of the HSA

There is a third tax advantage of the HSA. An HSA is very similar to a 401(k) retirement account because you can actually invest the money and it will collect interest. You will not have to pay tax on the growth your HSA account accumulates. While you are young and in your 20s it would be an excellent idea to invest your HSA money in stocks that will grow a lot, so that you have even more money available to you when you reach an age when you’ll pay more for health care.

This option isn’t available for an FSA because it doesn’t have the yearly roll over.


Always have an FSA or HSA

Even in future years when I won’t be paying for weekly office visits and regular prescriptions, I plan to always contribute a little bit to my FSA since it is a double tax advantage. Contact lenses alone can cost $200. I’ll probably maintain $200 to $500 in contributions in future years. I also like the psychological support the FSA gives since I have a completely separate account for medical expenses. I don’t have to think about whether paying for my co-pay means less fun spending that month. The money is already set aside and accounted for. There really is no reason not to hold one of these health accounts if you have the opportunity for it. If you have children, these accounts are going to be gold-mines since kiddos always have to go the doctor.

We never know how health care cost and insurance coverage is going to change given it is heavily tied to our political climate. The best thing you can do for your personal situation is just be prepared and use the tools available to you. That’s why if you have access to the HSA, you should build up the account for your own personal insurance plan and make it ready for a long time horizon. They don’t expire so you can have hundreds of thousands of dollars in your 50s when costs start to rise.

Double Your Money: Rule of 72

Double Your Money: Rule of 72

A few weeks ago, one of my students came to me just before lunch and asked, “can we talk about the Rule of 72?” Of course my heart fluttered with joy because a kid was actually asking me to teach them something mathematical. “Sure!” I said, “What specifically do you want to know?” She smiled, “well – like – what is it? I was at this party with my friends and her parents and the people presenting asked us if we learned about all these different money things in school and the one thing I remember was ‘the Rule of 72.'”

So we sat down and learned the Rule of 72. It’s very simple: the rule let’s us estimate how long it will take money to double its current value. I never fully appreciated this tool because I prefer precision and I always sit down with the actual compound interest formula to calculate based on my timeline. I never used the Rule of 72 in any planning of mine because the rule gives you the timeline and I’d rather plan for my preferred timeline. The rule let’s you estimate time based on your rate of return. You just divide 72 by the rate and it gives you the time.

So for example, if you expect a rate of return of 8%, your time to double would be 9 years:

If you expect a rate of return of 9%, your time to double would be 8 years.

If you expect a rate of return of 10%, your time to double would be 7.2 years.

It’s a really nice rule that is fairly simple for sketching out some plans. The problem is, of course, that you can’t predict what rate you will earn unless you have a CD, rates of which currently hover at 2% or below. A rate of 2%, according to this rule, means your money will take 36 years to double in value. Note, also, that the rule becomes less precise as you move further away from 9%. So for low rates like 3% or high rates like 16%, it doesn’t work as well.

What we did next is why I really started to like this rule. My student then asked “Is that what that one guy was talking about when he said we could have 2 million dollars by the time we retire?” Earlier in the year one of our guest speakers encouraged students to plan and to save now, when they are young because of the beauty of compound interest. A cool example is that if an 18 year old saves $2000 a year for the four years they are in college, they can have $2,000,000 by the time they retire. She wanted to know exactly how. So we did the following math together.

Assume we just start calculating at age 22 when she’s saved $8000. What we can do is calculate how many doubling periods we’d need to reach $2 million or more. So we doubled $8000 until we got there:

Each arrow is a period of doubling. It would take 8 doubling periods for that money to break the $2 million level. So now what we need to do is determine how long a doubling period is and then determine how old she’ll be after the 8 doubling periods. We need the Rule of 72 to calculate how old she will be when she can retire with her desired $2,000,000.

If she earns a rate of 8%, the doubling period is 9 years. So at 9 years * 8 doubling periods, it would take 72 years of patiently waiting for the money to be $2,048,000. She would be 84 years old. That’s kind of old. My student made it quite clear that she did not want to work until she was 84.

If she earns a rate of 10%, the doubling period is 7.2 years. So at 7.2 years * 8 doubling periods, it would take 57.6 years of waiting. She would be 79.6 years old. That’s better but not by much.

If she earns a rate of 12%, the doubling period is 6 years. So at 6 years * 8 doubling periods, it would take 48 years for her money to double. Now she is 70 years old when she can retire.

Some people do expect to retire when they are 70 years old. But you can retire on social security at 62.5 years old. My student pondered a good retirement age and said, “well can’t I just retire one doubling period early with $1 million?” Of course you can! Having $2 million isn’t going to be necessary. With her 12% rate that means she’d only need 42 years of doubling which would make her 64 years old. That’s much more reasonable. Remember that in this example, she only saved $8000 in total. She could save more to have a higher ending balance. It was just an example we used to explore the Rule of 72.

The 12% actually the rate that Dave Ramsey uses when he writes about this on his blog. He says that if you invest $2000 for 8 years starting at age 19, you will have more than half a million more at age 65 than a person who saves $2000 a year starting at age 27 and never stops saving.

The point is that the earlier you start, the better off you will be. You give yourself more doubling periods and you don’t have to save as much out of your own pocket. However, 12% is a very aggressive rate and many people won’t actually earn this rate. You have to be comfortable with more risk, meaning more dips in your account value. When using the rule of 72, use numbers from 6% to 9% for your estimates. The last thing my student asked me is “What do you do?” referring to the rate that I earned. When we meet again and discuss this, I will let you know what we learned!



Tax Planning by Saving More

Tax Planning by Saving More

In the last post, we figured out how to calculate our tax bill with the new tax brackets. We found out Single Sam who makes $40,000 is going to save $31 every other week in taxes thanks to the new brackets. He is going to be smart and save that money or pay it toward any debts he has. The problem is that right now Sam isn’t saving for retirement and you might not be either. But you should. The younger you are, the more your money will grow and compound over time. That means you need to save today! Not 10 years from now.

This math can be explained here.

The second phase of tax planning is to move beyond just knowing how much you owe to controlling how much you owe. If you choose a retirement account that is tax-deferred then you don’t just get the benefit of a company match and the compound interest. Tax-deferred accounts mean you don’t have to pay taxes on the money until you actually retire, lowering your tax liability now. These tax-deferred accounts include 401(k)s, 403(b)s, 457(b)s, Traditional IRAs and other similar accounts. Contributions to pension plans also lower your taxable income, but if you’re like me, you’ve been contributing to that since day one and have no choice in the matter. These other retirement accounts have a lot of personal choice involved. You can choose how much you want to contribute each year up to the maximum, which is $18,500 this year, for those under 50.

When you contribute to a retirement account, this is considered an adjustment to your income. Every dollar you contribute is subtracted from your gross income when trying to calculate your taxable income. So let’s assume Sam starts off slowly but surely, and contributes $1000 to his employer’s 401(k) plan. Now when he calculates his taxes, his taxable income will be





$27,000 which we know will lead to a lower tax liability. Sam will owe

$3,050 in taxes. By contributing $1,000 to his retirement account, he lowered his tax burden by $120. This makes sense because $120 is 12% of $1000. So for every additional $1,000 that Sam contributes to retirement, it will lower his federal tax bill by $120.

And it won’t just lower his federal tax bill either, it will lower his state taxes as well. When we calculated state taxes, we saw that we used the federal AGI to begin the calculation. For Sam, his AGI is $40000-$1000=$39,000 in 2018. Last year, his AGI was $40,000. In Ohio, an AGI of $40,000 or less, allows you to claim a personal exemption worth $2,300. This would make Sam’s taxable income $37,700 and his state tax liability $773 last year, when he didn’t contribute to retirement. Now this year, his Ohio taxable income would be $36,700, making his Ohio tax liability $744. For every $1000 that Sam contributes to retirement his Ohio tax liability will go down by around $29 or $30.

All of this saving is starting to be a lot to keep track of. In the table below, you will see that for every $1,000 saved in a pre-tax account, its implications for federal tax liability and state tax liability. The final column is the sum of the federal and state tax bills. The table goes up to $10,000 just so you get an idea of how much his tax bill could go down if Sam saved 25% of his income.

Dollars Saved Pretax Federal Taxable Income Federal Tax Liability Ohio Taxable Income Ohio Tax Owed Total Tax Bill
0 28000 3170 36700 773 3943
1000 27000 3050 35700 744 3794
2000 26000 2930 34700 713 3643
3000 25000 2810 33700 684 3494
4000 24000 2690 32700 654 3344
5000 23000 2570 31700 625 3195
6000 22000 2450 30700 595 3045
7000 21000 2330 29700 565 2895
8000 20000 2210 28700 536 2746
9000 19000 2090 27700 506 2596
10000 18000 1970 26700 476 2446
For gross income of $40,000


When Sam goes from saving nothing to saving $10,000, his total tax bill drops from $3943 to $2446, which is a savings of $1497. While he might have $10,000 in an account he cannot touch (maybe) until he is 59 1/2, he has reduced his yearly take home pay by only $8503.

Find Your Comfort Zone of Saving 

Many sources will tell you to save between 5% and 10% of your income. But the more you save now, the more your wealth will grow. Saving more provides security and options as you progress. I save 20% of my income in pre-tax accounts, and I am looking for ways to be able to increase that percentage.

When using tax planning as part of your personal finance strategy, a lot is going to be about your comfort. Start saving just a bit but then increase as you start to feel more comfortable with the idea. If you are in the 12% tax bracket and were to save $1000 in retirement, you’d reduce your yearly take home by $851 which would turn out to be less than $33 per pay check, if you are paid biweekly. Can you live with $33 less in your pay check? The answer is probably yes. So you can definitely contribute $1000 this year to retirement. Remember that in 10 years, that money will double. When you add more, there is more to double…

If you were to save $2000, your yearly take home would be reduced by $1700, which would be about $65.38 per paycheck you didn’t see. Can you do without $65 of spending every 2 weeks? If you saved $3000, you’d reduce your yearly take home pay by $2551, which would be about $98.12 less per paycheck. Can you do without $100 per pay check? If you saved $10,000, your yearly take home pay would be reduced by $8503, which would be about $327.04 less per pay check. Can you do without spending $327 per pay check? Probably not. Not right away. But you can do without $33; you have my complete vote of confidence. You can definitely start with saving $1000 right now, even if you make “only” $40,000. Work your way up to $10,000 as you earn and learn more.

Saving in pre-tax retirement can seem a little scary to some people because you can’t touch the money. But that’s not always the case and plus, you don’t really need it. Money is a tool often just for security purposes. You have money you’re putting aside for future use and it has this awesome benefit to you now. If you can reduce your take home pay by just a little bit, you can do a lot of good for yourself in the long run. Find your comfort zone of saving and just start. The tax benefit is worth it.

A Year Without My Grandfather

A Year Without My Grandfather

One year ago today, my grandfather died. It took me completely off guard, and I did not think it would. He was 87 years old but I was still completely unprepared for him to go. Since that day, I have spent hours daily thinking about him, our relationship, and the things he cared about. In many ways, this blog is an exploration of our relationship, as my love of numbers came from him. The cover to my blog is the flag and the shells from his funeral. 

Growing up, I saw my grandpa almost every single day. He babysat me when I was a little kid. He drove me to and from swim practice in the summer and helped my mom out with taking me and my friends to and from sports and school activities. I rode my bike to my grandparents’ house because they lived in our same neighborhood. He was at my high school graduation. He taught me how to calculate square roots by hand, along with many other algorithms I have long forgotten. The more I showed prowess in my ever advancing math education, the more other family members lauded me as being like him. I never particularly desired to be like him, it just turned out that way.

After his death, I found myself doing two of his daily routines without really being aware of it: checking the weather and checking on the stock market. If I spent the morning at my grandparents’ house, I had to watch the channels my grandpa wanted until about 10:30 or 11 am. He flipped between Bloomberg and the weather channel. I never understood what they were saying on Bloomberg so I just waited til he flipped back to the weather. About 6 weeks after he died, I was visiting with my grandma and she told me how she’d been watching the stocks because that’s what he always did. She told me how he’d always tell her if they were losing or making money. Now she had to interpret it for herself.

Another time when she and I were visiting at my parents house, she saw my composition notebook where I budget and make all of my financial plans and asked to look at it. “Oh, Santo used to keep a ledger like this. You’re a lot like him, aren’t you?” she laughed. Now, I’ll never stop keeping a handwritten ledger. I had no idea I was doing anything like him. I just grabbed a notebook when I was in college to keep track of my scholarships and tuition bills, and I continued the habit as I added other sources of income.

When it comes to money, my grandpa knew what so many people miss: money is just a tool to provide security and to build a comfortable life. He avoided greed and gluttony. He built wealth through compound interest so that his family would be taken care of. Now that he is gone, his widow need not worry about food or clothes or shelter. My grandparents lived with his parents for the first years of their marriage, and they never moved out of their first house. There were small upgrades here and there, but they did not let their lifestyle inflate as they gained more income and wealth. I really started to internalize this over the past year. Money is a vehicle for one’s life. The more you save up, the safer and more comfortable you feel. After saving, then you spend on necessity, then you spend, modestly, to enjoy life.

My grandparents are like the OG frugalists. They were born the year of the start of the Great Depression. If you ever want to know how to truly be frugal, look no further than your own grandparents. In her basement, my grandma has shelves of supplies stocked up from spaghetti sauce to laundry detergent. Everything must be bought on sale, and only on sale, which means you don’t buy when you need it but when it’s available at buyable price. They live by the mantra “it’s not about how much you make, but about how much you save.” My grandfather saved/invested so much money and planned so well for retirement that when he reached the age of required minimum distributions (70 ½) from his IRA, he just withdrew the money and put it into his local bank. He didn’t even need that money he saved up. They tried not to spoil their kids or grandkids so that we would learn how to live on less and work for everything in our life. But at the same time, they built up a nest egg that eventually will pass on. They provided in knowledge and wealth at the same time.

My grandpa was one of those people who believes you should pay less in taxes throughout the year and owe money rather than to receive a refund. He implored “don’t give an interest free loan to the government!” While I’d like to honor his ideal, I am not quite there yet. One day, I hope I can adjust to this mindset and way of operating. Until then, I am trying to pay exactly the right amount, with perhaps just a little bit too much going in.

Every bit more I learn about investing and personal finance, I feel a little closer to my grandpa. He didn’t talk about this much with me, but it was a great interest of his. He wasn’t raised to talk openly about money but he was raised to be a breadwinner and to take care of his family. Times are different now and talking about money is becoming less of a taboo each year. And it isn’t just for men to make money anymore. My grandpa never stated that girls should just grow up and get married. He liked that his granddaughters went to college and can provide for themselves. Two of us became math teachers, one is following in his footsteps in military service, one is a doctor of physical therapy, and one is a social worker. My brother, the only grandson, also served in the military and is taking care of his own family.

A year later, I think about how much I have grown because of him. I miss him immensely. I miss him quizzing us on topics we had no clue about during holiday dinners. To stay close to him, I learn about baseball stats, investment strategies, and keep watching the weather. I wear his sweaters my grandma gave me and read his old novels. I carry him with me.

Real Talk February 2018

Real Talk February 2018

I’m going to be straight right from the start – I spent wayyy more money in January 2018 than I thought I was going to. I did a terrible job estimating my expenses. I am trying not to be too hard on myself since I knew I was in a time when everything is up in the air, but at the same time, I need to do better. I had estimated in Real Talk January 2018 that I’d spend $711 on bills and more than $850 on various moving expenses. I definitely spent more than $850; that’s for sure. This would be a sum of about $1561 but I really spent $1971.42 on those things.

Take Home Pay…

  • January 12 = $1110.82
  • January 26 = $1206.00

My January 12 check was lower than I expected because my 403(b) contribution didn’t update, so I still paid $100 into instead of $25. The January 26 paycheck is what I should be getting regularly. That is, until the tax withholding tables are updated with my employer. I’m not holding my breath.

I also got a refund of $66 from my renter’s insurance policy.

I also had $850 already in my checking account. I had a total of $3232.82 to spend on the items below.

What I really spent on bills…

Car Payment = $300

Car Insurance $96.65

Student Loan = $160

Gas = $0 ~ they forwarded the balance to my new home’s account so I don’t get to pay it until next month. It was $51.77.

Water = 28.85 * 2 = 57.70 ~ they double deducted my bill for some reason, this should be forwarded to my new home’s account balance

Sewer = 16.40

Electric =52.47

Internet = 88.47 ~ Thought I could manage without internet for a while, but it is impossible to do my job without internet. This cost includes the installation fee and the first month’s cost

Groceries = $175.43 ~ yikes!! by the time I had posted in January, I had already spent $39.62 and was expecting to spend $70 more. But I actually spent $135 more. Part of it is because I hosted a dinner at my house last week to celebrate the new home and I always go all out on those meals. Part of it was I am just plain inefficient with groceries most of the time. I have to do better on this and make meal plans.

Gas for Car = 69.58 ~ I’ve been driving wayy too much and that’s going to change. I won’t be driving back and forth from my old rental to my new home and I also won’t be driving to certain places anymore. I’ve got to bring this cost back down to $50 or less.

Physical Therapy = $30 ~ I just made this payment this morning through my FSA. I didn’t include this in my overall expenses since the FSA contribution is deducted from my pay check. I will be making payments as my FSA is filled. Since I go to PT twice a week, my copays per pay-period will total $60 but my FSA contribution is only $21.15 per pay period. But eventually I will drop to 1 time per week and 0 times per week. I will keep making payments of $40 per month until I get the whole bill paid off. Unfortunately, my employer doesn’t let you front load any account so I just have to spread out these payments according to their schedule. It’s kind of annoying but I can’t do anything to change it. As long as you’re making payments the Clinic doesn’t charge you late fees or call you about the bill.

Total Bills = $1016.70

What I really spent on moving into the new house..


Moving Expenses = $497.19 ~ nearly $200 more than I had hoped. I moved   literally in the middle of a blizzard. I had to buy salt, and I felt I needed to buy my friends who helped $25 gift cards to Amazon because it was a difficult and miserable experience. I had to buy salt for the ground and gas for the moving truck, among other things.

Change of Locks = $80.32

HVAC Service = $109

Washer = $738.47 ~ I did a ton more research after my January post and determined that an energy efficient washer would be worth the money. This washer would use less water and less electricity to run so there would be savings over the life of the washer. I am happy with my choice to spend more for a higher quality product.

General Household Items = $46.99 ~ I had budgeted $200 for this, but after spending so much on the washer and moving, I didn’t rush out to buy anything I didn’t absolutely need.

Total Moving Costs= $1471.97



Other Expenses…

YMCA membership = $65.88 ~ this covers registering, and membership through Feb 14. Working out in the water is a good part of my physical therapy and I am also able to ride an exercise bike, the other staple of my PT.

Netflix = $11.87

Savings = $63.13

Synagogue Dues = $110

Eating Out = $119.96 ~ wow. way too much. I’ve known I was spending too much on eating out. I was hanging out with people who eat out a lot and just spending without thinking about it. It’s also super easy to spend money during a turbulent time because it’s easier than cooking. This is all money I could have saved.

Other Expenses Total = 370.84


Total January Spending = $2859.51 

If I do a calculation of income less spending, I get $373.31. Some of these items had already been paid for when I wrote on January 5. Some of the items haven’t yet been paid for because they are on my credit card (I need to pay $93.20 from my next pay check for the card bill due March 7). I don’t like to just save the remaining balance in my checking account in case something comes up, so I am going to save and even $300 to my emergency fund.


February outlook…

I once again don’t know what any of my bills will cost. My home is much bigger than the place I have been renting. That means it will cost more to heat and there are more lights to turn on. I have kept the house at a chilly 66 degrees to counteract this. I am going to give myself an estimate of $935.50 for bills in February. Since I get paid this Friday and no bills are due before then, I do not need any of the money that remains in my main checking account. I have a daily spending checking account with a balance of $61.21 which should cover any groceries and gas I need before Friday. I will be doing a bit of driving this week due to doctor’s appointments that aren’t close to home. My income this month should be $2412. My second paycheck of the month will need to cover my first mortgage payment which is due March 1! Bills will actually total $1695, which leaves $717 for saving and extra expenses. I feel confident that I will have more regular spending by the end of this month since bills will start coming for the house and I’ll know what to expect.

Another item of income this month will be my Federal and State tax returns for a total of $2141. This will go straight to my Roth IRA. I want to max that account out for a total of $5500 this year.

Net Worth

After reading about the motivation that many people find from tracking their net worth, I decided to do this myself. Net worth is the difference between your assets and your liabilities (loans or debts). I calculated mine yesterday. Things that are not included: value of checking accounts and the savings of $300 that will be added in this week.

Assets Liabilities
Home Equity 13650 Mortgage 76250
VCLFU 4766.20 Autoloan 12847.55
Barclays 1001.97 Student Loan 20987.15
Schwab Brokerage 1448.10
Schwab Roth 972.69
STRS 12977.00
AXA 403b 2029.13
457b 200.00
Total 37045.09 110084.7
Net worth -73039.61


When I see my financial picture laid out this way, I am more motivated to save money and to become more efficient with my spending. I’ve been lazy because I already do a “good job.” I automatically save 20% of my gross pay through retirement plans and I save between $300 and $500 of after tax money. But I can do much, much better. I want to get my net worth to $0 as soon as possible.

Things to note about this net worth table:

  • My STRS account value is only updated one time per year. I get the statement in September. The value is actually much higher than $12977 but it is difficult to calculate its current value.
  • After my 5th year teaching, I will be able to have my student loans forgiven, so I will not be working hard to get than number down. The federal government will forgive up to $17500 in loans for teaching 5 years in a high need district. My goal is to get as much of that $17500 as possible, which is why I only pay $160 per month on that loan instead of sending extra income toward it.
  • My main focus of paying down debt is the auto loan. I am working my way up to paying $50 then $100 extra per month, so I can pay it off early.
the monthly spending diet

the monthly spending diet

Have you ever been enticed into reading an article about how to save more money that ended up telling you that in order to save, you need to cut x, y, z, a, b, c, d, e and f from your budget? I always come away from those articles thinking “I don’t even have x, y, or z and I don’t know about the rest.” I know a lot of other millennials always feel like they can’t really cut much out. But if you’re like me, there is room to remove excess from the budget. I just don’t want to delete everything I do from my spending, because that’s like deleting my life. I enjoy going out to dinner; it’s one of the top ways you get to spend time with friends or get to know new people. I want to share a new strategy that I have been working on for the past two months in order to decrease my spending.

In November, I went bowling with some friends and two of them were chatting. One woman said “this month without beer is rough” and the other laughed as if she knew what she were talking about. I thought the woman was sick and her doctor told her not to drink. I stupidly asked this. She told me “no, that’s this month’s theme – no beer.” As she went on to bowl, the other woman explained to me that every month she takes on some challenge, focused on health and fitness in order to stay sharp. She’s done other themes like 100 pushups and pullups every day or running 100 miles in a month. I immediately loved this idea and wanted to incorporate it into my life somehow. Not being the fitness buff my friends are, I wondered if I could make this a financial concept instead.

I’ve read blogs and Facebook posts about people doing a “no-spend month” and I made it maybe a week the two times I tried to do that. You just end up depriving yourself of your life if you cold turkey cut everything out. That week that I did survive the no-spend month, I felt sad about not being able to do what I wanted. Then I ended up spending money, and I felt guilty. Then I quit the idea and felt liberated. Who wants to feel guilty about spending their hard earned dollars? Not me. However, at the same time, I know that I do waste money. I’ll look at my monthly statements and ask myself, did I need to buy pizza 5 times this month? And that’s where I started. I decided to do monthly themed financial diets. The first one was in December, appropriately titled “no-pizza December.”


A month is the ideal time frame for change

The psychology of the monthly theme is brilliant. Goals need to be realistic and measurable, so 30 or 31 days is the perfect time frame. They say it takes 28 days to form a habit. You go into it thinking that you only need to do the thing for a month, but then you might just build a habit from it. It might seem silly that I was buying pizza all the time and needed a formal title to cut back. The deeper issue is that we are creatures of habit and we aren’t always aware of our habits. I was making a habit of stopping by the local pizza shop because a) the pizza is delicious b) it was cheap due to its personal pan size and c) it was fast – only about 5 minutes total to make and box up. Oh and I was also justifying it to myself as supporting a local business of a family I know. I’d be driving home from work, exhausted from working with teenagers all day, hear my stomach grumble and think “wow I really don’t feel like cooking right now but I really need to eat.” The easy fix is to spend 5 extra minutes before I get home and have a delicious pizza. It so easily became a habit that I wasn’t even thinking about.

The other psychological piece of it is something I’ve said before: it’s easy to spend just X number of dollars because you know you have it. But spend 5X, and you might have spent too much. Repeatedly spending money is where the waste comes from. It’s $6.95 for this delicious little pizza. It’s really not that much. Five times means I’m spending almost $35 a month on a pizza. Plus that time I also got a salad. Plus those 3 times I was craving a pop and bought that too. I know that most people reading this have something that they regularly are spending money on but really don’t need to. Just look at your debit or credit card statements.


Impact on your life and wallet

So how did my month without pizza go? I genuinely craved pizza multiple times per week. I didn’t cave though. I did not buy a pizza and now in January, I have bought one pizza. I haven’t rebuilt the pattern. That one pizza I bought was definitely for convenience sake and was also for nostalgic reasons. It was the last meal I had in the last rental I’d ever live in. It was the perfect way to close out a chapter of my life. I feel good knowing I am not wasting money on pizza anymore.

My January spending diet was no candy. I have a terrible sweet tooth. I honestly love candy. Halloween was my favorite holiday as a kid. Twix, Kit-Kats, Reeses, Hershey, Dove Chocolate, Sour Patch Kids, Dots, Twizzlers, Orange Slices, Spice Drops… you get the point. Around Christmas the treats start coming into the teacher’s lounge and I start thinking, I’ve been so good the past few months not eating candy, that the habit picks up again. Yeah, I’ve been craving a Reeses this whole month, but I haven’t spent money on impulse buys at the grocery check-out or the gas station. Again, I feel good about this small change. My next diet is no Amazon purchases.

These spending diets are not 180s.  I saved maybe $35 in December from what I normally spend. Maybe $20 in this month. Yet, that’s better than spending it! The point is more so to deflate your spending just a little bit and refocus your habits. If I had continued on my pizza path, that’s a potential of $420 over a year spent on one type of food. I keep coming back to what my dad taught me to ask myself, “Do I need that? or do I just want it?” The spending diet cuts back on things I want but don’t need, without completely depriving myself. I feel so much better when I curb useless spending this way than the bigger diets I’ve tried to implement. I believe that after 6 months of doing this, I will see a transformation in my overall spending because I have spent short spurts focused on one thing. As I have demonstrated, the diet becomes a habit that continues. After six month-long diets, I could have eliminated the same waste that people on entire no-spending months are attempting to eliminate. I won’t notice a major change in my life because it isn’t major. It’s small changes, one at a time, that I hope to let build. Small changes that last are better than big changes that don’t.

Real Talk January 2018

Real Talk January 2018

I originally wanted to do a monthly post that summarizes my current financial position and post it on the first of the month. But I am a little superstitious so I waited. Plus, I wasn’t sure if it was a good idea, because, well, I’m a hot mess right now. I am a member of several financial groups on Facebook and read a lot of other blogs. Everyone is posting images and spreadsheets of their 2018 budget. Not just the next month, but the whole year! And I’m over here like… with nothing. Then I remembered, though, that a lot of millennials either are in this position or have been very recently. It’s hard to admit that I don’t have a budget for the coming year, but I’m OK with it. A budget is just a tool for planning what to do with your money. And I have a plan, it’s just not filled with numbers yet. And that’s what I mean by being a hot mess. There are a lot of things in flux right now. A lot of things I don’t know. In one minute, I am absolutely freaking out about money, and in the next minute I remember it’s all going to be OK. I have done enough planning up to this point that I can withstand a period of weirdness and confusion. But I think sharing my thought process and my rough plan will be good for me and for anyone who decides to read this thing.

First of all, I bought a house. I have mentioned it briefly in earlier posts, but now I really bought it. It’s mine. I closed two days ago. I paid the down payment. The mortgage is in my name. I have the key. I am a homeowner. It’s the American Dream. Buying a house is a huge responsibility, and one that I’ve wanted for a long time, but it’s scary, overwhelming, and it costs money. So, I have items to buy for this house. I have a chimney that needs cleaned. Carpets that need replaced. I’ll need to buy a lawnmower. There’s a porch begging for a swing. And the list goes on, and on, and on. And it never ends until I sell the place. I’m fine with it; I think; it’s just new. It’s going to take some adjustment. I am used to letting a landlord know when something is seriously wrong with my property. Now it’s my job to go on youtube and then to the hardware store and figure out how to fix it. Or, worse, it’s my job to pay someone else to fix it.

While all of these things eventually are going have to be bought and paid for, it’s not happening all at once. One thing that no one ever mentioned to me, until I was in the thick of house hunting, is that buying a house has this weird financial buffer, that if timed correctly can free up a lot of income for these purchases I am talking about. When you buy a house, the mortgage payment “skips a month.” That’s how the realtor described it to me. This means that whatever month you close in, you’d expect the mortgage to start the next month, but it actually skips that month and goes to the next month. If you are like me, and close at the beginning of the month, that gives you almost 2 full months before the money is due. While I closed on January 3, my first mortgage payment isn’t due until March 1!  Instead of spending the set amount on my rent or mortgage, I am going to be using a chunk of my paychecks to tend to the house. I just don’t know exactly how much yet. I have to prioritize purchases, price out the different projects and items, and I have to continue earning money.


So let’s get into what I’m actually spending money on this January and see what we come up with.


Paychecks on January 12 & 26. My gross pay is 1964.34 at each paycheck. I have no problem sharing this since I am a teacher and it’s public record. Oh you didn’t know? Yeah, anyone who is a government employee has a salary that’s listed on the treasurer’s website. When I started teaching financial literacy, I made it a point to tell students my income and make the examples as specific as possible. People just learn best from concrete examples.


Gross Income: $1964.34

Pretax deductions:

  • STRS retirement 14% = 275
  • AXA 403(b) = $100 or $25, not sure when that is going to drop
  • 457 contribution = $100
  • Health Insurance = $45
  • FSA contribution = $22.91

Predicted Taxes:

  • Medicare $28.48
  • Federal $184.75
  • State $39.87
  • Local $49.11


I am not sure how tax withholdings are going to change now with the new tax law. Some sources report that new withholding tables were supposed to be ready for the new year and this new bill was terrible for accountants over the holiday season. I highly doubt, though, that in my school district things will be up to date. We’re always behind. I don’t think state and local taxes will change too much. And my calculations are a little off due to some new additions. I have added in a new retirement contribution to the 457 of $100 but dropped my previous 403(b) account’s contribution from $100 to $25. I don’t know when they’ll update that. An additional $25 of retirement contribution will alter my tax liability a bit, but it’s not going to be by much. And the new FSA (flexible spending account) will also alter my tax liability, again, just a bit. So even my taxes I can’t plan on!

All of those deductions would leave me with $1194.22, which is lower than my last paycheck, certainly. To be honest, I haven’t gotten a consistent paycheck since last school year. I got a raise. Then I got another raise that was a fake raise and they took back. Then I got a grievance settlement. Then people were sick at work and I covered classes. It’s actually been really impossible to budget the way some people do, way in advance. I just know I am going to have enough for food, shelter, and some savings. I plan the specifics when it happens.


What do I have to pay for then this month?

  • Car payment $300 – this has been the same for over two years
  • Car Insurance $96.65 – this number dropped $4.68 since I am moving – yay for not being by a highway anymore!
  • Student Loan $160
  • Gas ?
  • Water ?
  • Sewer ?
  • Electric ?
  • Internet $50 or $0 depending on if I can tough it out without it for a bit… I did it in grad school
  • Groceries $70 – I already bought some this month and I am trying to budget a little higher since I always spend more after a move
  • Gas for car $35
  • Physical Therapy $15 per visit, paid for from FSA – will pay for as the money goes into that account


All in all, I know I need to spend $711.65 on bills… or less. I also know I don’t know how much I am going to owe for any of my utilities. Since I am moving mid-month, I don’t know what the levels will be for my current place. And I guess I’ll assume that no bills will come or be due until February for the new place. Maybe I should just expect $150 for the rest of that. Could be more though since it has been very, very cold and the insulation in my rental is terrible. But it’s OK, because I can clearly afford those bills with my next paycheck. It makes me tense not to know those numbers, but I have to accept it.

I currently have $850 from my last check that can be spent on home items. What I am thinking about spending:
  • Moving Expenses $300 (or more)
  • Change of Locks $75 if I DIY
  • Synagogue Dues $110
  • HVAC Service – ?
  • Chimney Swept $150?
  • Washer $400?
  • General Household items $200


Obviously, I can’t cover all of this from that $850, but I can cover most of it and then push the washer to the next check or use my savings for it. When you buy a house, you have to leave over some savings. Don’t lump it all into the down payment. Since I have known and have been dying for my own laundry life for a while, I am definitely going to spend this money. I am lucky enough to be getting a dryer donated to me by my brother.  I also will be using several gift cards I have to make purchases from Home Depot/Lowe’s/Target. I have got $75 to Home Depot, $50 to Lowe’s, and $100 as a VISA gift card. I actually bought the Home Depot cards myself in December to prepare. The VISA gift card is a reward I got for getting a second opinion with Howard Hanna, which was perfect since I ended up getting my mortgage through them. What I am also planning on doing is using my credit card to make any additional Home Depot or Lowe’s purchases first, because I have triple rewards for that category this month. So a $400 washer with free delivery is going to earn me 1200 points. I’ll pay it off right away and not incur any interest.


As I said, I feel like I am a hot mess. It’s a really weird time for me right now. I know I have my income. I know I need to spend money, but it’s all so in flux that it’s driving me crazy. I think everyone is going to go through a time like this. Just know that you can still make budgets and frameworks for yourself even if you don’t have all of the numbers. I’ll let you know how things have panned out next month!

If you have a partner, be open in talking about money. If you have friends who are chill, talk to them about money. Ask your parents. Even if they were uptight about money when you were a kid, you might find that they are more willing to talk to you now that you are an adult. Research has shown that our brains really struggle to solve financial problems on its own. But with help, we experience less stress and think more clearly. When it comes to money, we need to drop the masks and have some serious real talk. Keep learning; knowledge is power. Good luck with your budgets this month!

The Latte Leak Effect

The Latte Leak Effect

I am not a frugal person. Sometimes I wish I were more frugal, but I am happy with how things have been going. My grandmother is frugal: she buys everything on sale and can make $200 cash last 6 months. I spend all of the money allotted in my budget for flexible spending every two weeks. And maybe one day, I’ll get better with that kind of spending. But one thing I don’t do, is making a habit of spending money on something I don’t really need. When I was a kid, my parents taught me to quantify everything in a larger time frame. As I alluded in my last blog post, of course I can spend $5 or $10 bucks on something! However, if I do that regularly, I am making a habit of it and am probably wasting money.

Beware of little expenses; a small leak will sink a large ship. -Benjamin Franklin

For the millennial generation, Starbucks coffee (or something like it) is our Achilles tendon. We grew up with it, we love it, and we need it every day. It’s delicious and the cups sometimes have inspirational quotes on them, and it’s just so charming how the barista never spells our name correctly. It’ not very expensive if you think about it — just $4 for a delicious pick-me-up. It’s so true that $4 is not that much money. But $4 three times a week brings us to spending $12 on coffee. I can buy Folger’s or Maxwell big can of coffee for $8 at Giant Eagle and brew it at home. That big can will last me 4 – 6 weeks. So in a month, we could spend $48 on coffee drinks, and in a year $576. And this is all being very conservative. You or someone you know buys coffee at a coffee shop every day of the week! Many drinks, especially in the bigger cities, cost more than $4.

Save Save Save

If you want to save more money, start with the simplest stuff first and cut out the things you don’t need. Remember, you want Starbucks coffee, you don’t need it. You can brew coffee at home for 10% of the cost. So let’s assume you take action and stop your coffee buying habit. Over ten years, that money diverted away from coffee could be worth $9011 if you invested it into your 401(k) or your own brokerage account. This model assumes an 8% growth rate. My next few posts will be about savings accounts and investments. The bottom line here is: would you rather have your expensive coffee habit with nothing to show for it or the nine grand 10 years from now that could be put toward buying a house, or a pre-owned car, a vacation, or opening your own business. Think of all you could do with $9000 and you need to decide if your coffee habit is worth sacrificing that opportunity. If it were $5 drinks 5 days a week, you’d be cutting out $100 a month of spending, which means you’re investing $1200 a year. In ten years, your investment will be worth $18,774.

Now, obviously not everyone drinks coffee. For some people, this is craft beer bought out at the brewery, or it’s Subway sandwiches, or it’s video games and their consoles. Whatever it is that you have a habit of spending on it, ask your self if it’s worth it. You should definitely enjoy your life, but make sure you’re spending on what adds value to your life. And always quantify everything on the larger scale. Think “it costs $X now, but it costs $5X for the work week, meaning it costs $52X for the year. Is there something I’d rather buy with that $260X?” If you are currently not saving any money or saving very little, you need to cut down your spending habits immediately. Remember, you should be using 20% of your take home pay for financial goals, which includes saving for an emergency fund. Don’t let a latte sink your financial ship before you even get going on it. You probably have a good 50  – 60 years left to live your life. How do you want to do it?

Easier said than done

I know. If you’ve built up a habit over 5 years, it is all but impossible to break it. This is why I have started doing targeted spending diets. I stole the idea from a friend who does different (literal) diets to work on her health and wellness. My vice is pizza. I didn’t buy much pizza for the few years after I graduated college. But this awesome pizza shop opened right down the street from me. $6.95 for a smaller 8-slice pie. It’s larger than a personal pizza but it’s not quite a medium. It takes 3 minutes to cook. One of my student’s families owns it so I justified my spending as supporting their family. Midway through November, I looked at my debit card statement and just thought “oh my goodness, how much money am I spending on pizza while I have good food in my fridge?!” So December’s diet became no spending money on any pizza. I’ve heard of people doing a no-spend month, during which they only  buy the essentials. I tried that and it was too difficult to just stop my entire current life. The pizza diet has been working out great because I am focused on avoiding just one thing, and it happens to be the thing I was more frequently spending money on. So in addition to not spending money 4-6 times in a month on pizza, I am eating out less because pizza was my go-to for about 4 months.

Just commit for one month to cutting out one thing, even if it is very small. Send that money back in to your savings account or send it to an investment account.You’ll thank yourself one day.

Happy Birthday, Dad!

Happy Birthday, Dad!

Today’s post is going to be in honor of my dad and the things that he has taught me about finance and responsibility. Today is his birthday and we are also coming up on his 10 year retirement anniversary. Many of the habits that I have around saving are the direct result of what he’s taught me explicitly and by example.

In my 50/20/30 budget post, I told you how my dad was always telling me that your housing payment should always equal one week’s paycheck. This was a big item that stuck in my brain as I started researching places to rent in Cleveland. It was difficult to be able to stick to this budget because I was living alone. I hadn’t made many friends and everyone I knew already had a roommate or a significant other they lived with. I experimented with a budget that would exceed the 25% of monthly income so that I could live in a normal apartment in the city. I found quite a few wonderful places starting at $800 a month. Many people I know pay this much on rent. But I couldn’t fathom saving $200 less per month. That’s $2,400 less per year. If I’d done that, I’d still be years a way from buying a house. My dad’s voice repeated in my mind and I searched harder, and adjusted my living expectations. I didn’t want to live “south of Lorain,” which is the Cleveland millennial way of saying “the bad part of town” in Ohio City, a cute walkable neighborhood on the near west side. The “bad part” of Ohio City was still walking distance to the West Side Market and all of the bars and restaurants on West 25th. I’ve still been able to enjoy all Ohio City has to offer, while living in a less fancy neighborhood. I sucked it up for the past two years in order to save more money and am now able to move a very nice neighborhood in Cleveland Heights, where I bought my first house.

Obviously, my housing choices have been primarily about being able to save money. Growing up, any time my parents or grandparents gave me any money, my dad always encouraged me to save it, or save part of it. Once I was about 10, my dad knew that I’d probably save the money he gave me, but he always let me make that choice. Rather than saving for me, he taught me to save on my own. I was probably 6 years old when my dad introduced the concept of “want vs. need” to me. If you aren’t familiar with this concept it goes like this. You’re about to spend money; is it for something you want or something you need? If you buy everything you want, you aren’t going to have any money left over to save. And if you’re like most people, you have a credit card, which makes it all too easy to swiping mindlessly and spend more than you make. If a 6 year old can understand that not every Barbie and water gun needs to be purchased, so can you. Many people convince themselves that they need things, but all you need is food, water, clothes, and shelter. All of these things can be done very frugally. You need a few pair of pants, a few shirts, and some socks and underwear. Everything else was something you wanted to buy. Know the difference. I needed a place to live, but I wanted to live in a nicer apartment. I chose to stick with only what I needed. You might need a car, but you want to buy it new. If you have the money, you can definitely buy new things and spend money on what you want, but remember you have a finite amount of money. Remember to set out that flexible spending budget that should occupy only 30% of your income. And the less you spend on wants, the more you can save for future, larger purchases.   

Perhaps the most important idea my dad taught me though, and one that is so terribly overlooked, is the value of time. We derive so much value from money: how much of it we spend, how much of it we save, how much our portfolios grow. But money can only buy so much. Growing up I had this friend whose house was much bigger than ours and had nicer stuff in it. When our moms would take us shopping, she was always able to buy more clothes and accessories. As a young kid, I lamented not being able to have as nice of furniture, decorations, clothing as my friend. I liked stuff, just like most people. It was difficult to understand why she had so much more when our dads had almost the same job. The auto factories for Ford and GM were two of the three biggest employers in my hometown of Sandusky. Her dad worked for Ford and my dad worked for GM.

The difference was not that Ford paid more highly than GM at that time, but that my friend’s dad worked overtime every, single day. He also worked weekends. He earned at least 20 hours a week of time and a half. And he worked many holidays like the day after Thanksgiving, MLK, etc. and was able to earn double time. He worked a lot to get paid a lot. My dad eventually explained that to me when I was old enough to understand. But he said this simple thing to me. “I know she has a lot more than you, but her dad isn’t around very much. One day you’ll be happy that I was with you every day after school and on the weekends. One day you’ll understand.” I actually had many classmates with parents who worked boatloads of overtime. I had many classmates whose parents didn’t spend almost an hour every day after school talking with them. By the time I was 18, a senior in high school, it was crystal clear what my dad meant. Several of my classmates had been ticketed for underage drinking, and some with DUIs. These were kids I had gone to school with for 12 years. This can have long lasting effect on one’s life, like a scholarship being pulled or being prevented from working at certain jobs. There was of course the actual fine to be paid for these missteps. Everyone has their own free will and their own choices to make. But the habits and mindset we form is influenced by our environment, and in my environment my dad was spending time with me, not buying things for me. The time he spent educating me and just hanging out with me, was a far superior investment than any income he ever earned. I was a first-generation college student and now hold two Bachelor’s degrees and a Master’s degree. A huge part of that pay off was due to his time-based investment in me.

 Money isn’t everything, but time is. Time is the only thing you can’t earn more of. You get what you get. What that means to me is that you can learn to live on almost any income. I know first hand because I watched my dad have to retire at 52 years old, long before he was ready, and live just fine on that pension. It was an adjustment for him, but he managed because he could always weigh want vs. need. Of course more money makes things easier! But if earning more money for you means working many more hours a week, weigh out if that time investment is worth the financial pay off. Don’t wear yourself out working 60 hours a week if you already earn enough to live on after just 40 hours of work. Especially if you have children, as many millennials already do. I make $51k a year and it would be great to earn more so I could buy a bigger house or afford cable television. But I like being able to go home and spend time with my niece and nephew, with my grandma, and with my parents. If I were waiting tables on the side, I’d sure be making some nice cash, but I wouldn’t have the time to see my family back home. I’d probably not have very many friends here in Cleveland. I’d rather enjoy my time than work myself into a stressed frenzy trying to make my income go to $65k a year (remember also that more money means paying more in taxes). I make enough money right now to live a very happy, comfortable life. I’m careful due to much of what I learned from my parents, and I try to enjoy my free time because I know it means so much more than time that is free from work. What financial lessons have you learned from your parents? Post a comment below if you have advice you remember from your parents.

Happy birthday, dad! Thanks for everything.

Why didn’t they teach me this in school?

Why didn’t they teach me this in school?

As you go further on your journey to understand personal finance, this question may cross your mind once or twice. You might feel betrayed by your secondary school for having failed to teach you all about how to handle money, insurance, and retirement. I could tell you a thing or ten about this from a teacher’s perspective but I remember being a high school student not too long ago. The foundational things you need, you did learn. Budgeting is an exercise in adding, subtracting, multiplying and dividing. You know those skills, you just might not be used to using them. But more importantly, you learned the underlying concept to interest – which is how credit cards, all loans, and retirement operate – in your Algebra 1 and Algebra 2 classes. Exponential functions and exponential growth are taught in both of these classes. If you forgot that information, I strongly encourage you to spend some time with Sal over at Khan Academy to relearn this concept. Even though you can find online calculators to do the math for you, I really believe that you are more empowered and more in control when you understand what those calculators are doing behind the screen. You need to be able to estimate and imagine what would happen to your credit card bill if you only paid the minimum, even if just for a month. That way, you don’t make that choice for yourself.

I had a discussion with my mom a few months ago in which I asked her a similar question, though. I didn’t ask her why I didn’t learn this stuff in school, I asked her why she didn’t teach me more when I was living with her. I was specifically referring to all of the components of buying a house and getting a loan. She simply said “you weren’t ready.” There is a time for everything and she said she knew that if she had tried to talk to me about these minute details, that I wouldn’t have been interested or remembered. But at least I had the math skills to be able to do all these careful calculations now. That conversation changed my mindset that some things probably don’t need to be taught when you are 14 or 15, but you need to have the foundational skills to come in and learn later on. It’s up to you to invest your time learning now, as much as you can, about how to adult. You’ll learn it well and remember it if you put your mind to it and then take action based on what you learned.

So if you’re looking for a way to learn the tips and tricks for how to adult well, I suggest you spend 10 or 12 bucks on Amazon the next time you get paid to buy this awesome book. I discovered it a few years ago and I actually have run a Donor’s Choose grant to get this book as the text for my financial algebra class. There are tons of great pieces of advice in this book that I continue to come back to for myself and for others. I picked my 7 favorite principles and if you want more, check it out for yourself! There is even a workbook to go with it. I haven’t used it but I would recommend trying it if you are really struggling to get your budget under control after having read the book.

Principle 1: Marry the “financially right” person

Trying to live out this principle is actually what led me to finding and buying this book the first time. I had an ex who I thought I was going to marry. We’d been together a few years and things started slowly coming out that made me pause and eventually start thinking, “what would we teach our kids?” When all the cards were on the table, I learned that he had accumulated at least $24,000 in credit card debt and that it was no accident. He spent more than he made for years. I had to walk away from a person I loved because there was no way to build a life together with that much debt plus all the other “normal” debts we had: student loans and financed cars. I found this book on Amazon and gave it to him right before we broke up. Marriage is a partnership and you have to have similar values and goals, otherwise one of you will always lose out. And you don’t want it to be you.

Principle 15: Save/Invest 50% of every salary increase

I love this idea because it prevents you from constantly inflating your lifestyle or constantly waiting for the next raise to start saving, investing, paying on time, or whatever. Saving gives you a sense of safety like no other financial move. Whatever your lowest income level is, learn to live on it and stick to it.

Principle 16: Save 90% of every bonus (or nonplanned income)

This is important to remember if you work in an industry where bonuses are a regular, yearly thing. Some people plan on their bonus in their budget. But it’s not actually guaranteed. Don’t make plans for it until you know you’re getting it and make that plan be to save it. Use it to build up your emergency fund. Just put it out of your mind and out of your spending reach.

Principle 58: Invest in your 401(k) – at least to the company match

Oh my gosh! This is so important! If you are not putting into your 401(k), immediately contact HR tomorrow morning to get that account set up. The greatest asset you have as a millennial is the time to let your investment grow. As I mentioned above, you need to refresh your memory on exponential growth to really grasp this. And if your employer is willing to also put money into the account on your behalf, you need to do that! That is free money you’re leaving behind. You wouldn’t leave $100 cash sitting on a table so don’t reject getting your company match for retirement. It will be worth much more 30-35 years from now when it’s time for you to spend it.

Principle 62: Renting – if you have paid one month’s security deposit, don’t pay your last month’s rent

Boy, do I wish I had learned this while I was in college. I am a clean person who didn’t have rowdy parties in her apartment. I left every apartment in the same condition as when I moved in, but I never have gotten a full security deposit back. There have always been ridiculous items on the statement sent back to me. And it’s not worth the time or money to try to fight it. As I get ready to leave my final rental, I am finally going to follow this advice.

Principle 70: Always choose the highest deductible

This is something I am not fully following but wish I was. As soon as I get a true emergency fund built up and my car ages a few more years, I will switch my car insurance deductible to the $1000 level. For my newly purchased homeowner’s insurance, I have chosen the higher option of $1500. The point here is to save on your monthly expenses by choosing a higher amount that you will pay for damage to your car or house should something happen. Insurance is just there in case something happens, so don’t pay too much for it.

Principle 82: Bring your lunch to work as often as possible

Let’s talk about how multiplication fits in to personal finance. A lot of people I work with buy lunch at Subway down the street. They get a 6 inch sub and a drink. Assume they spend $7 and go three times a week. That’s $7*3 days= $21 a week, or $84 a month. Do you need to spend $84 a month on sandwiches?! Do you need to spend $1008 a year for lunch? You could make those same sandwiches, which would probably be healthier, for about $5-10 a week at home. It just depends on what you buy to put on it. It drains your budget to eat out all the time. I didn’t even bring up the miles on your car or gas you could be spending just to get those subpar sandwiches. Make eating out a special occasion.


Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 1 other subscriber

“The price of anything is the amount of life you exchange for it.”

-Henry David Thoreau

“It’s not about how much you make; it’s about how much you save”

-millionaire grandma