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How Credit Cards Make Money

How Credit Cards Make Money

Hello TTF Community! Today we wanted to shed some light on the credit card industry. Specifically, how credit cards make money off of consumers like you and how you can take precautions to avoid paying into their wealth. But first, we have a confession to make. It is something we have had a very easy time coming to terms with, but nonetheless, a confession it is. Ms. TTF and I are complete and utter deadbeats. I know, I know… how could we possibly be okay with this? And why in the world would we admit it to everybody in such a fashion? It’s simple, really, because we are deadbeats in the eyes of the credit card companies. Visa, Mastercard, Discover, and American Express all agree that we are deadbeats. Why is that? Well, deadbeats is the term your friendly neighborhood credit card companies have given to individuals who consistently pay their credit card statement balances on time, and in full, every time. In effect, if they don’t get paid, they get cranky. So how do they make their money off of consumers like you? Well, there are many ways (and I mean MANY), but I am going to focus on three of the most basic ways that impact the every day consumer, and how to avoid them. Basics of Credit Cards Let’s first do a quick recap over the basics of credit cards and how the billing cycles and payments work from the consumer’s perspective. To demonstrate this, let’s take my most recent statement from my Citi Double Cash Credit Card. My “July” statement (which I include in air quotes because it includes June and July charges) spanned 6/21/2019 through the statement close date of 7/18/2019. The total for my “July” statement was $1,000 (rounding for easier math). Statement Balance The statement balance is the total of all charges incurred minus any payments (or refunds, rewards, etc.) made between the dates of the statement cycle. In our July statement, the statement balance was $1,000.00. This just shows that we swiped our Double Cash card for $1,000 worth of purchases between 6/21 and 7/18. Current Balance However, if I don’t check my balance until July 31st, I could have two different balances. One would be the statement balance (the $1,000) and the other would be the current balance. The current balance would be the $1,000 plus any additional charges to the card after the statement close date and minus any payments made after the close date. Any of those additional charges after the close date will be added to the next statement. For example, I checked the balance of the Double Cash card on July 31st and the current balance was $1,300.00 because we had purchased $300 worth of items in those 13 days after 7/18 (our close date). Note: Any additional charges after the statement close date are not included in interest charges for that period (if accrued). Minimum Balance Due Minimum balance? Yes, credit card companies require you to pay a minimum balance of approximately 2-3% of the statement balance, or $25 to $35, whichever is more, by your payment due date. If you pay less than the minimum balance due, you are hit with a late fee. In our example, my statement balance was $1,000. Since 3% of $1,000 is only $30, my credit card company ups the ante to a $35 minimum balance due and if I miss paying that $35 by the payment due date, 8/16, then I am hit with a late fee. Grace Period My due date to pay my statement balance of $1,000.00 in full is 8/16/2019 (29 days after the statement close date). The time between my statement closing date of 7/20/2019 and the payment due date of 8/16/2019 is known as the “grace period.” In essence, I don’t have to pay a dime of that $1,000.00 until the payment due date. With that said, I can pay any amount up to $1,000.00, or even more (e.g. the current balance), at any point prior to or on the due date. If I pay the full statement balance by 8/16/2019, I don’t pay a late fee or any interest. In effect, I borrowed $1,000 for almost a full month, for free, and paid it all back on-time.  If however, I didn’t pay anything by the due date, I would have incurred: A late fee of $35; and  Interest charges on the unpaid balance of $1,000 Let’s talk more about those two charges and how exactly credit cards are making money (aka their hoards of wealth). 1. Late Fees Ever returned a library book late? What is a library you ask? Well, many would ask that, but I am assuming, hoping, or something in between, that TTF readers are fans of the library. Knowledge beyond measure for the price of $0.00? Yes, please. Anyways, if you return a library book late, they charge you a fee of about $0.25 but it could be up to $1.00 per day. Unfortunately, the credit card companies are not nearly as forgiving, and typically charge considerably more if you are even a day late on paying the minimum balance due. Responsible Credit Carding Tip: Set Up Automatic Payments for each Credit Card I don’t know about you, but paying $35 for missing your payment due date is a tough pill to swallow. The good thing is, you don’t have to “remember” a thing. The credit card companies have put tools in place to ensure that you don’t ever miss your payment due date. If you navigate your account online, there is a section that reads “Set Up Automatic Payments.” This is a MUST. When you get there, you will have to enter the bank account where you would like your payments deducted from. Just make sure this isn’t an account that is always riding the “overdraft fee danger zone.” There are a few options when setting up automatic payments. First, you can elect to “Pay Full Statement Balance” on or before the due date every single month. While I think this is an excellent practice for most, I admittedly do not select this for my cards. The second option and the option that the Miss and I utilize is to pay the “minimum balance due.” We set this up to pay the minimum balance two days before the payment due date just to be safe.  Why do we elect to pay the minimum balance versus the full statement balance? For us, we keep a pretty close eye on our finances. In fact, every Saturday following pay day, we sit down and manually pay all of our credit cards. Yes, I did say all of them because we over-optimize and certain cards have better rewards for certain spending categories – more on that in a later post. As a result, we are consistently paying our current balances in full, twice a month. This brings our balance down to zero by “paying off the card” two times a month (great for your credit score). The automatic minimum payment is just a safeguard for us in case we have an especially busy month or are traveling. Check out Miss TTF’s post on tracking your monthly bills. Late Fee Forgiveness Tip If you haven’t set up “Automatic Payments” and you have recently been hit with a late fee, there might be a chance to get it waived. There is a handy dandy 800-number on the back of your credit card which will connect you to your credit card company’s customer service team. BEFORE you call, set up automatic payments for the card. If you don’t, they are most certainly going to recommend that you do. If you do this before the call, you show that you have given some thought on how to prevent this in the future versus just asking them to waive the charge for you. You can be honest with them, let them know you missed it on accident, and that you understand the consequences of that but are willing to take more precautions to ensure it doesn’t happen again. 2. Interest on Existing Balances Now on to the second way that credit cards are making money and snatching up your hard earned money. Interest. I used Credit Karma’s Credit Card Interest Calculator to demonstrate how long our statement balance of $1,000 would take to pay off by only paying the minimum balances each month and how much interest you would pay over that time. As you can see, the card currently carries a 15.74% APR (Annual Percentage Rate). This is a variable rate and can change and is likely to if you start missing payments or stop paying in full. However, assuming that it stays a steady 15.74%, it would take 37 months – over three years! – to pay down just one month’s of expenses in full. Over that time, you will end up paying an additional $261 in interest to carry that balance over 37 months. Now, $261 to carry a balance of $1,000 over 37 months doesn’t seem that bad, and frankly, I would agree. But to be clear, I never condone giving away money like that, it just doesn’t seem terrible for having your balance on someone else’s books. In honestly, the credit card company is only making $7.05 per month on you, how could they get “rich” off of that? Interest on America’s Debt Well, let’s put this into perspective because that $1,000 balance is only .000000000970874% of American credit card debt as of August 2019. If you are backing out the math, that means the total American credit card debt comes out to a staggering $1,030,000,000,000. Yes, I did mean to type $1.030 trillion. This is absolutely, positively coo-coo for cocoa puffs madness, but it is true. As is the case with such statistics, they only seem to get worse year after year after year. I wish, at my very core, we were chipping away at that debt with each passing year, but that is just not the case… yet. Now let’s illustrate just how expensive credit card interest can be using our $1.030 trillion debt. If everyone in America were to pay the minimum balance due on their debt, to the tune of 3% per month, we would be paying a total of $30.9 billion per month. Even paying that much, it would still take America three years and nine months to pay off that $1.030 trillion balance, assuming no other debt was added (I know this is a laughable assumption, but it makes math easier and who doesn’t like when math is easier). During that 45 months of debt pay down, the credit card companies would have made $333.2 billion in interest. Averaged out, that comes out to $7.4 billion per month from just one of many of their revenue streams. Not too shabby for them, horrible for those paying the interest. So what is the solution?  The solution is as simple as they come, but also easier said than done. Do not, and I repeat DO NOT purchase anything on a credit card that you cannot afford to pay cash for. There is just no other way. Credit cards are an amazing tool IF, and ONLY IF, you can responsibly handle them and the purchases you make. It allows you to keep cash on hand for a smidge longer, you can rack up some nice sign-on bonuses, and accrue cash back and other rewards. Again, this only works if you can pay the full statement balance every month. The rewards earned will never be good enough to offset late payments and/or interest charges. And this brings us to the third way that credit cards make money off consumers like you… 3. Cash Advances I truthfully knew very little about cash advances prior to researching this article, but holy smokes do the credit card companies rake it in from this handy little service their offer. Cash Advances are pretty basic in theory.

Our Goals after I quit my job Ticket to fi

Our Goals After I Quit My Job

Yes, this is yet another article in our series of me quitting my W-2 job. It was and has been a massive change to our lives and we are still trying to process all the emotions and new systems behind it. So today we wanted to give ourselves our very own accountability partner, YOU. We are outlining all the goals we have after I quit my job. We definitely need to have an end goal in mind so I don’t go on crazy rabbit holes and create the cure to cancer or something awesome but completely irrelevant. Take a look at our other articles in the quitting series: Why I Quit My Job… For Good How We Can Save 50% on Only One Income Goal #1: Replace my previous take-home income  This is our number one priority for obvious reasons. The entire reason we decided I should quit was to be able to get in a position where we can scale our income much more dramatically than we could in any W-2 job. We have already worked to decrease our expenses and are saving as much as we can. Our current savings rate is 50% even though we are only on one income. However, before I left my job, I was saving 50% and Mr. TTF was saving more than 50% of his income. So now, we need to increase our income (i.e. side hustle money) to get back to that same level of savings we had before. In my W-2 job, I was taking home about $2,000 a month with some variance to account for the number of hours actually worked. So we will need to find a way to replace just over $2,000 every month.  We plan to replace that income from a handful of different channels all outlined below: Blogging: Ticket to FI We are not currently making any money on the blog but have plans to. There are many different ways for us to monetize our blog but we have our thoughts behind each. I am adamantly against ads on our site. For many sites, this is a great method for earning some extra cash, but the amount of times an ad has made the content inconvenient for me is overwhelming and I don’t want that for our visitors. I think affiliate marketing is a great method for making money and that will definitely be one avenue that we explore. Our main focus, though, is going to be on building products for our community that can help others reach FI. We want to share the tools that we use ourselves that actually work.   This is probably going to be the hardest way for us to initially start earning money but with me going full time we will be able to learn much quicker what works and what doesn’t.  Our earning potential for TTF is completely unlimited, that’s the beauty of it. While we haven’t actually made any of our products yet or discussed pricing or strategies, we will definitely start posting about our income for TTF once there is income to track! Dog Sitting/Walking  We both love dogs and don’t have our own (yet)! Since I am home full time now, my availability is completely open on the site. This way I can do doggy daycare or vacations for a week, rather than just take weekend business which is where most availability is already.  This will be an easy way for us to get some extra cash while still allowing me to work on the blog. I can get some exercise in with them early in the day so they sleep all day and I can continue working. It is a nice way to earn some money without requiring a whole lot of my attention throughout the day. Much different than babysitting a kid.  My earning potential on this ranges from $12 for drop-in visits at the doggo’s home to $27 for overnights. I am thinking once I start getting some reviews and repeat clients I could be making around $250 a month, consistently.  Since this business won’t just appear on my door one day (could you imagine how great that would be? A bunch of cute dogs at your door!) we do have to spend some initial start up time getting “our name out there.” In reality, we just printed some postcards and I am going to distribute those to all our neighbors in the complex consisting of over 100 units. I’m hoping to get a bite or two since I know there are dogs that stay home all day (e.g. the dog barking at 4:00 am when his owner left for work and we was trying to get some energy out). From there, we plan on going to local pet stores and vets and distributing our information as much as possible. Real Estate This is a new facet of potentially passive income for us. We have definitely been aiming to buy a rental home for some time but just kept putting it off due to analysis paralysis. So we finally bit the bullet and have some plans in the works. We have been listening on and off to the BiggerPockets Podcast for a few years now, but never committed to actually purchasing a property. And we have almost all the Bigger Pockets books and discuss the idea constantly, but never sat down and looked at deals or reached out to those necessary to make this work. Since I have been home, Mr. TTF wanted me to watch the live weekly webinars. Well, I watched one and was HOOKED. I actually went super sane and bought the BiggerPockets Pro membership so I can run numbers through their calculators (plus other great benefits). As you may have seen from my Instagram stories, I completely dove headfirst into the world of real estate. Specifically into the BRRRR strategy. We now have a plan to own two rental properties by the end of October. We are hoping for a buy and hold rental as our first and then one that will go through the BRRRR method. This is super ambitious but there are a plethora of resources available to us and we really have no excuses not to be able to do this. Clearly, we have discussed the outrageous housing prices in our own area so we will have to look out of state. We are considering Phoenix, Arizona and Milwaukee, Wisconsin right now as those are two places that Mr. TTF has lived and (somewhat) knows the area and/or has some connections in those areas. Goal #1 Recap So all in all we have three main methods of madness to ensure we reach the same income level we were at before. Two of these methods require a lot of knowledge and a lot of time, so it’s a good thing this is my full time gig. Goal #2: Create a reputable brand in the FI community  So besides obviously trying to cover our expenses with our side hustles, we also want to actually make a difference in people’s lives. We want to help our readers and others in the community learn how they can properly manage their money and reach financial independence without working until they are 65. Let’s be honest, there are a million other ways for us to make money from home. Especially if we just focused on real estate. We can get 20 units, each making $100 in cash flow a month and make the $2,000 needed. Don’t get us wrong, we will do this with real estate, but we do really want to focus on teaching the community. We are passionate about everything personal finance and financial independence. We want you to have the freedom to choose what you do with your day. No one should be miserable because of money and we hope to make an impact in changing this mentality for our society. We are just two people but even if we only help two other people, we can call that a success. Personal Goals So everthing thus far has been career/income related which makes sense as this is a personal finance blog. But, I do have some personal goals since I won’t be using the better parts of my week for a W-2 or commute. With so much time in a day and no true daily time commitments, I can find time to focus on some more personal areas of opportunity. #1: Exercise  This is my biggest one. And unfortunately, almost a month into this adventure, I’ve only worked out 5 times. Pathetic, I know but this is the most I have worked out this year. And honestly probably the most I have worked out in the last 3 years combined… it’s bad. I am the worst at motivating myself to work out and I truthfully shouldn’t have to be motivated, I should just fricken do it. Mr. TTF always gives me a hard time because I have good metabolism but I am ridiculously out of shape. I climb a flight of stairs and I am winded. So with me quitting, I want to get in shape and be able to go on a hike and not be incredibly embarrassed by myself dying. I’ll need to find something I like doing and someway I can do it for free because I am not ready to drop $400 on a 2 year membership to a gym like Mr. TTF does. #2: Improve cooking skills  Mr. TTF can attest to how much better my skills have gotten since we started dating. There was this one night I was trying to be all sweet and make him dinner for when he got home from work. I made chicken tacos, and come on, that should be SO EASY. But I overcooked the chicken by honestly like 30 minutes, it was so dry you could break it. It was absolutely positively horrible, but Mr. TTF was so supportive and actually ate the whole meal and I have no clue how. That’s love! But I have gotten so much better since then. I am by no means where I would like to be, but I do see progress so that is fun. And clearly, Mr. TTF will eat anything so I have become my own critic and I am tough on myself. I end up not liking the majority of things I make. They are edible but just so bland. I am excited to start experimenting so more with my time and maybe I can even bake my own bread! Additional opportunities And as our Opportunity Fund’s name suggests, we now have a plethora of opportunities available to us. Although, not at the forefront of our radar, no longer having a job does allow us to consider the following with less work-arounds: 1. Ability to move We are not actively looking for anything right now. However, eventually we would like to be closer to my folks. They are only 2 hours north of us, but the proximity would allow us to see each other much more often and not have to put 200 miles on our cars. With me being flexible to work anywhere with a Wi-Fi connection, I could move to Thailand and still be okay. That may not work for Mr. TTF’s job at the moment, but once we are able to find him a job we won’t have to worry about also finding me a job. This way we can find housing as close as possible to his work so we can reduce his commute time as well. 2. Get a dog This is something we have been talking about for a while but with both of us at work all day, we just couldn’t do that to the pup. Now that we have the opportunity to properly take care of the dog with me being home, we can discuss the idea in more detail. But dogs are pretty expensive so we’ll see how

Saving 50% on One Income

How We Can Save 50% on One Income

As you may know, I am officially working from home. After lots of planning and calculating, we are ready to hit the ground running. Even though the actual day we decided to put in my notice was somewhat unplanned, we had actually planned for the possibility of me leaving wage-paying work. We had planned to continue saving money and obviously be able to cover all of our regular expenses. So we wanted to dedicate this whole post to how the heck we are going from a DINK (dual income, no kids) to one salaried income and one stay-at-home blogger making $0 (SO FAR!). And yes, as the title suggests, we are still able to save over 50% on just one income. Sounds scary and terrible, huh? Don’t worry, we got it figured out! How do we plan to sustain ourselves?  Now for the most asked question, how are we going to be able to afford our lives?  As a DINK couple, we will definitely need to adjust our spending habits and our savings rates now that we will be moving down to one income. But in no way are we going to be hurting or struggling for money as so many think we will be.   Someone at my work even asked me if my parents were going to be helping me out. Now, don’t get me wrong, my parents would support me in any way needed. But no way in HELL would I ever ask them for money. ESPECIALLY, if I am voluntarily quitting my job to pursue a passion. I know people do this but I do NOT recommend it. There are still so many ways to support yourself and actually plan for opportunities like this to arise. Opportunity Fund This is where I recommend everyone starts, not only with their FI journey but when looking to have any sort of income changes like quitting or changing jobs. Mr. TTF and I have had a heavy focus for the past year on piling away an easily accessible, all cash savings. This is often known as an Emergency Fund to most in the FI community. However we feel that this cash savings will help give us more opportunities to grow and be free, more so than just cover us for emergencies. So we have named it our Opportunity Fund. We have also decided to grow this Fund far past the recommended $1,000 or 3 months of expenses. We are pushing to reach the $100,000 that Scott Trench recommends in Set for Life. This will allow us opportunities to cover 1 year of expenses (around $40,000) and have money ready for a down payment on a home, whether primary or for investment purposes. Now, we have not yet hit that $100,000 mark, but we have just surpassed $51,000 in cash. Again, this does not include any investments we currently have in index funds or retirement accounts. But with this $51k, we feel safe enough to take the leap into the one-income lifestyle.  Reduced Expenses This works hand in hand with the Opportunity Fund as the less you spend, the more your Opportunity Fund can cover. For example, a Fund of $100K for a couple that spends $20K a year has 5 years covered. Compare that to a couple that spends $80K a year, they have just over 1 year covered. Now that may seem like a pretty dramatic difference, but this is a common reality for many couples in our community. That said, we have been working significantly harder to reduce our monthly expenses to reach under $3,000 a month. To some in the FI community that may sound like a lot. And don’t get us wrong, we don’t wish we were spending that much, but living in Southern California, 42% of that is just for our rent.  Check out more of our fixed expenses and costs here! Nonetheless, we are proud of where we have gotten our spending to. Just last year, we were spending an average of $4,200 a month. Our quality of life has not changed at all, in fact, we are happier with our new lifestyle as we spend more time with family, have less clutter in the house, and spend far less time at the store or on the road. So, had I quit a year ago, we would have needed $50,400 to cover just 1 year of expenses. That would have been our entire savings. Now that we have cut our monthly spending habits to $3,000 a month, we only need $36,000 to allow us one year of hustling to replace that income. That extra $15,000 that is currently in our Fund can now be used for a second year of emergency fund or in our case for a down payment on a rental property or for our 2020 Roth IRA contributions. Mr. TTF’s Income Lastly, and most importantly for us, Mr. TTF’s income is now able to safely cover our monthly expenses. This is strictly due to our focus on cutting those expenses as much as we could. We wanted to still be able to save 50% of our income so we had to work diligently to cut our expenses to reach below that 50% line. Here is a current breakdown of our expenses: Fixed Expenses: $1,590.00 Variable Expenses: $910.00 Total Expenses: $2,500.00 (45% of take home pay) Savings: $3,100.00 (55% of take home pay) We are lucky to be in a situation where Mr. TTF is making a significant amount of money but we are not solely relying on this. Even if he were to lose his job (Heaven forbid), we would still be able to safely cover our expenses with our Opportunity Fund.  How will our expenses change?  Even though we have worked hard in the past year to cut our expenses, we still need to account for any potential changes that will come in our expenses with me no longer working. Since I will be cutting out a huge chunk of my day being spent elsewhere, there will be some changes to the main categories of our spending and a few to our smaller categories.  Transportation  As I’m sure I have mentioned before, my commute is 19 miles each way to work and I need to go into work Monday – Friday. This adds up to 190 miles a week just driving in rush hour. According to AAA’s 2018 Driving Costs Report, my VW Jetta (small sedan) costs me $0.45 a mile. This adds us to $85.50 a week and $342 a month. Now since this is an average estimate, we won’t directly see the $342 correlation in our monthly budget. But we will see far fewer gas trips, oil changes, new tires, and general car maintenance throughout the course of a year.  Since Mr. TTF has a 2008 and I have a 2010 and my car is a bit smaller than his, I have historically gotten better gas mileage than him. His car also takes premium gas which runs about $0.30 higher per gallon in California. On average, we spend around $175 a month on gas for his car and right around $120 for my car. Since he is going to be driving so much farther than me everyday, we have decided to switch cars. He will be driving my car to work everyday due to the better gas mileage and I will drive his around town, only if needed. With these changes, we are expecting to see about $100 drop off every month from our Gas and Fuel category coming in right around $200 a month now. Food  Don’t you just love food?! Me too! Now that I will be home all day, we are expecting this expense to go up slightly. I was lucky in that one of the benefits of the office I worked at served food for the employees for FREE. We had access to coffee and breads in the mornings and a full lunch with a salad bar and soda station throughout the rest of the day. I would get my coffee for free in the mornings and then a full lunch. I would bring maybe 1 meal a week for lunch just in case there was something I didn’t care to eat. Most of the time, I could make it work though and would just bring home my lunch and eat it for dinner one night.  Since I will no longer have lunch provided, or coffee (gasp!), we will need to adjust our our weekly meal preps. I am currently making enough food for Mr. TTF to bring to work and enough for our dinners for the week. But I am still learning meal portions and how much food we will actually eat! I don’t anticipate that we will need to adjust our budget too much though, given the changes. We have been much more dilegent in our grocery shopping and meal prepping. In June we were able to get our grocery expense down to $100 for the whole month! It may have a bit of learning curve but I am adamant to keep our grocery budget under $200 as our average is $187 for the first half of this year. Social Outings  I was previously working in a very close office space with fellow salespeople, so yes, we can talk. And we can talk a lot. All of my closest friends have come from work and I was last in an office with some of my closest friends. Not only did we see each other every single day but we attended many work outings together. We’ve gone to baseball games, amusement parks, the zoo, conferences, and even on sales calls out of the state. Needless to say, we spent a lot of time together. Now that I have started working from home, I no longer have that luxury of taking a 10-minute break to play foosball with some co-workers. In fact, I am completely by myself for the majority of the day. (Hopefully, we get some doggos here soon!) All in all, our average spend for outings (bars, restaurants, events, etc.) is $170 a month. (Note: this does not account for any of our trip spending as those are separately labeled in vacations.) I separated all the transactions into the following categories to see how we can estimate moving forward. Date Nights Mr. TTF’s Parents’ 2 Month Visit Friends and Family Miss TTF’s Outings And lo-and-behold, I was floored to found out that even though my work would take us out for great “free” events, I ended up totaling $232.82 on work related spending for just the first half of this year alone! This is all birthday lunches and additional booze at said outings. Just to be clear that is almost $40 a month for work stuff! So even though it may feel like I am “going out” more in order to see my friends, it looks like I am going to just about break even as I do usually go out once a month or so already. Hosting Social Events In all fairness, I would LOVE to host friends and family at our place. However, we live 20+ miles from all of our friends in the area. And unfortunately, a good majority of our friends and family live much farther than that, ranging from 125 miles for my family to 5,275 miles to my bestest friend in Europe. So… hosting is not as convenient as we would like it to be. Once we are able to purchase our own home though, or at least have a guest room, we will gladly have everyone stay over for a fun night or weekend! Health Insurance  This is one that many people have questions about. What am I going to do about health insurance? Surprisingly enough there are options out there. Yes, there may be added costs compared to what you pay with your current company. But please don’t let just one expense deter you from changing

Ticket to FI Fixed Expenses

What Our Fixed Expenses Look Like

Every month we review our expenses and we separate everything into Fixed Expenses and Variable Expenses. You can take a look at our post on tracking expenses to see more about the specifics! Today we here to reveiw what our monthly fixed expenses look like. These are the items we have to pay every month and come in a fixed cost so we can plan ahead. But first… TTF Family, how are you? It is hard to believe we are midway through July already. Less than half the year is left?! It is absolutely, positively incredible how time flies. Weren’t we just watching the ball drop in Times Square? Well actually, weren’t most of you just watching the ball drop? Miss TTF and I struggled to find this happening live as we scrambled on YouTube just minutes before the clock struck 2019. In fact, I think we both missed it and ended up watching the ball drop bringing in 2018….whoops! Nonetheless, we had a great time. We reflected on some attitude of gratitude and I laughed my way to sleep watching a New Year’s episode of one of the greatest shows on turf, Friends. To be clear, this is a classic Mr. TTF tactic. Whenever I am exhausted, I convince Miss TTF to watch one of her favorite shows while I slowly, but almost immediately, fall asleep. She always catches me. I think the snoring might give it away. At any rate, I think she carried me to bed… or woke me up and told me to get my ass to bed. Yeah, the latter is probably more like it. Goal: Reduce our Spending One thing I remember for sure, is that when we kicked off the New Year, we vowed to reduce our spending. In 2018, we did a good job tracking our spending, meeting about it occasionally, but at the end of the day – or year for that matter – we didn’t feel like we had the grasp on our spending that we had hoped. We didn’t know whether we had a “good month” or a “bad month” or if we spent a lot in a category. So Miss TTF did the unthinkable… because not knowing how we did in 2018 was not an option. She went through ALL of our 2018 expenses that we did a “C+” job categorizing and broke it out in an excel document that looked like a modern day Profit and Loss statement. Here is a copy of our December sheet. This is just the Expenses portion and yeah, it’s pretty intense. Now, we only use our new sheet which is far less complicated. It was incredible and eye opening. We were astonished at the amount of money we had spent without a second thought. The total came to right around $66,800!!! How, when, and where did we spend all of this money? So we went through it to get a better understanding of it. It was completely legit… all of it. We came away more motivated than ever before not to let this disappearing act happen again. After we first reviewed it, Miss TTF suggested a “no spend year.” While I couldn’t agree more that this would be a great idea, we quickly realized how difficult it would be to accomplish. With that said, we were laser focused. We buckled down and took a hard look at what we could cut. Why Should You Monitor your Fixed Expenses? By tracking, categorizing, and finally settling our fixed expenses we are able to take a look at what can be cut down and take full advantage of the Waterfall Effect. The Waterfall Effect By cutting down on each or any of your fixed expenses, even if only by a percent, a waterfall effect of those savings will flow throughout the life of the payment. This means that not only will you get the savings once but you will be able receive those savings again and again, month after month. This also has an even greater effect given that your fixed expenses are usually your higher ticket items. By being able to cut down on these cost, you will have a much higher impact on your finances than cutting out a few $5 Starbucks throughout the month. For example, say you are able to negotiate a 5% discount on your rent when you resign your lease. You were able to do so since you pay early and have stayed in the same apartment for the past 3 years, reducing their turnover rate. If they were trying to raise your rent to $1000 a month, you just put $50 in your pocket every month. Compare this to if you coupon clip for groceries every month. On average you are able to get a 10% discount on your entire grocery bill (with a lot of work finding and cutting coupons every single time). Your grocery category is normally $400 a month and with a 10% discount, you save $40 a month. A great savings, but not only do you save less but you have to put in far more effort to get those $40 than the 1 or 2 calls necessary to reduce your rent just the one time. “Balances your Checkbook” Regularly tracking your fixed expenses also allows you to spot any errors from month to month. This is like balancing your checkbook but without all the stress of counting pennies in a separate spreadsheet. Using our method of tracking your expenses you can easily see if your Internet company suddenly raised your Internet prices because the promotion was over (happened to us) or if they double charged you for your phone bill (also happened to us). Not only should you figure out what your monthly expenses are to see where you can cut down, but you should be tracking them monthly to ensure you are being correctly charged and there are no future discrepancies. Our Monthly Fixed Expenses Now, for the details you were really looking for: what each of our fixed expenses look like, down to the penny. Rent – $1,250.00 Yes, we are still renting. We have gone back and forth and back again on whether or not we should buy a primary residence and we always leave off on renting… for now. In our defense, the cost of purchasing a home in Southern California is INSANELY expensive. There are many other places in the U.S. of A. where your mortgage would be about the same as you pay in rent. That is not the case in most places in Southern CA. If we were to carry a mortgage, plus property taxes, property mortgage insurance, and home insurance, we are looking at a minimum of $2,000 per month. This is, of course, with anything less than 20% down as 20% down can cost you anywhere from $75,000 to $110,000 for the homes that our “in our price point.” Since this is our reality, we have opted to rent, and yes, make someone else wealthy. I know, I know, this is doesn’t sound like a very FI decision, but we have our reasons. And yes this rent seems astronomical, given that I live 20 miles from work and we have a 1 bedroom, 1 bath apartment. But given the current cost of living anywhere closer to work (a 1-bedroom averages $1,900/month), we actually have a killer deal (comparatively, right?). Disney Annual Passes – $97.00 So Miss TTF wrote an awesome post about our decision to purchase Disneyland Annual passes. Are they expensive? Damn right. Did it make sense for us? We think so. We visit Miss TTF’s family often and they are located very close to the Happiest Place on Earth. This gives us free lodging so we don’t have to drive there and back in a day. And so far we have been 16 times this year! That averages out to just $45.56 per visit… and we still have 2 more months to go. If you saw the joy this place brings to Miss TTF, you would surely agree with me that is was a good call. I mean she literally skips… until she gets tired (she will hit me for this one :)). Add to that, this is our tradeoff for putting every other vacation we have “planned” on hold for the time being. We also use this as our monthly date night, so compared to a nice dinner, a $97 tab runs just about even. Truly, we have a blast every time we go. And even though we are intensely focused on FI, you have to enjoy the journey. Car Insurance – $90.01 This covers both the lovely Miss TTF and yours truly. We each pay about $45 per vehicle. Miss TTF is still on her parents’ plan, paying her own monthly cost. This has allowed her to keep their 26 year history and the benefit of multiple cars on one plan to keep the cost down. Having a good driving record and older vehicles has also helped keep our costs down here. With that said, we still call on an annual basis to ensure we have all offered discounts applied and that our coverage still makes sense for our circumstances. Internet – $55.99 Now this one is too, too expensive. I have prided myself in keeping this at or below $50 for the past few years, but this year my “luck” ran out. When I called last December after our bill went up to $63.99 to see if they had any specials, they told me to call back at the end of the month. Well that was smart of them to do knowing full damn well that the end of December is freaking busy and that I would clearly procrastinate longer… and they would be right. I didn’t end up calling back until mid-January. When I ended up calling back, they told me I needed to buy a new modem because the current model couldn’t accommodate the latest and greatest speeds which they did have specials running on. Well done, they delayed me yet again and obviously knew I am an obsessive researcher of any and all purchases, big or small. So I did some research. Then I did some more research. And damn it if I didn’t do some more research. I went as far as to order a re-he-he-he-heally nice modem only to cancel it once I told Miss TTF the cost… back to square one. Then I freaking finally ordered a new modem, it arrived, and about a week later, I called them to get my “special” after paying full rate for about 4 months. Damn their delay tactics!! It totally worked. When all was said and done, I was able to get another annual promotional rate of $55.99. The difference in the monthly bill, over a year, will pay for that damn modem. Better yet, the next time I am looking for the promotional rate, it won’t be at the end of the year in peak holiday season. Cell Phone – $54.98 Now this might not seem like much, but trust me when I say, I earned this rate. When I muster up the strength to recount the nightmare that was once my disastrous phone bill, I will write the post detailing the entire experience. Long story short, I realized through a bitch of an experience, to never, ever, and I mean EVER, lease a phone from a carrier. As long as they have you under their finger, they can put you through the wringer. The second I purchased my phone outright and told them where they can put their “free upgrade,” I have had control of my phone bill. It is miraculous that since I own my phone, and can switch carriers within an hour, they never mess up my bill. I will never buy a phone through a carrier again. I will happily buy my phones refurbished from Apple. Another perk, which stems from

How to Track Your Monthly Bills

How to Track Your Monthly Bills

It’s almost payday again and that means “Bill Pay Day” as Mr. TTF likes to say and he is all too right. Sometimes it can feel as though the bills never stop coming. We want to help you learn how to track your monthly bills so there are no more surprises when it comes time to pay your bills. Pay day should not be a stressful day! I was on the same pay cycle as Mr. TTF when I was working. He currently is getting paid bi-weekly. That means, every other weekend, we sit down to ensure all our money is going to the right places and that we have enough to pay everything. Since we make such a big priority of saving (as you should, too) we do run into that issue every now and again. Start with Saving We will constantly stress this point but we always pay ourselves first. We have both been at a savings rate of about 50% of our take-home income. Mr. TTF has a direct deposit set up to automatically separate his check 50/50. This is an easy method for him as he is salary and the split will always be the same amount each week. For me, I was getting paid hourly so my paycheck was different every week. I would average $1,050 per paycheck. Every pay day I would deposit $500 first thing to my savings account. I worked off a set amount regardless if my paycheck was more or less. Mr. TTF worked off a percentage which, technically, could be considered a set amount as well due the consistency of his paychecks. Tracking your Monthly Bills Once we are able to pay ourselves, we work to ensure we have all the bills covered: rent, utilities, insurance, phones, all the credit cards, etc. There’s a lot to keep up with in life and bill due dates should not be something you need to memorize and rattle off top-of-mind. Forgetting to pay a bill, even just once, can be a huge hit to your credit score, not to mention additional costs with late fees and interest rates. We have a few easy tips for you that will make it easy to track your monthly bills and get those dates from floating around in your head into a system that you will be able to repeat time after time. #1 Have a Color Coded Calendar Having a color coded calendar is the first method we cover to teach you how to track your monthly bills. This method has been all over social media (in the finance community) recently because it such an efficient and sustainable method. Having a color coded calendar is a visual and in-your-face way to ensure you never forget a bill again. What is it? This is a simple method in which you will use one color per pay period to group all your bills associated with the pay period the money will be coming from. You will highlight the pay day and each bill due until the next pay day the same color. For example, for this week’s payday you use blue. You can highlight that payday blue on the calendar. Then highlight in the same blue every bill you need to pay until the next pay period. You can now easily see on the basis of color that rent, car insurance, and utilities are due before you get another paycheck. That means that this paycheck needs to cover all those expenses first and foremost. This allows you to plan ahead to see how much money you will have left over for more flexible spending, like groceries and Happy Hours. And you won’t have any excuses to miss any of your bills! How do I use it? To use this method successfully, you will need to be consistent, as with any method of financial tracking. Don’t start a whole new process just to accommodate this new method of bill tracking. Chances are you already have some sort of calendar method that you use to keep track of doctor’s appointments, practices, work schedules, etc. Whether you use a wall calendar or an app, I would use something of the same method. You don’t need to use the same calendar, just a similar method. I know my mom has these two large whiteboard calendars right by one of the entrances to her home. People could easily see it if they visited, so she doesn’t want to add all the bills to be paid to that calendar. But she could add a smaller whiteboard calendar to the wall near her desk in the office. Much more out of sight but the using the same method she is already used to using. This helps to ensure she actually updates her calendar. Since she already using a whiteboard calendar to track social events, she already knows she will have to take the time to erase and update every month. Different Types of Calendars Wall calendar Tip: Fill out the entire year at one time since your pay dates don’t change unless you ask for them to be Whiteboard calendar Online calendar (ex: Google Calendar or your Apple Calendar) Tip: Have a separate calendar for your bills so you can show or hide it Tip: Set all bills as reoccurring payments, whether weekly, bi-weekly, or monthly Pocket calendar or planner Tip: Keep it in your purse or desk for easy access on payday Another good tip is to write the amount due next to the due date as you receive the bills. Some bills are the same amount each month so you can write those ahead of time easily. This will help your calculate how much is dues each pay period. And you can CROSS IT OFF when it’s paid. It’s the worst overpaying or paying twice and oh so satisfying to cross that puppy off. Benefits of the Calendar Method Color-coded Visually appealling Flexible to fit your lifestyle and method of organization Can fill out a lot ahead of time Easy to add annual expenses to Can easily see the next cycle / month Easy to cross off once paid Disadvantages of the Calendar Method Can get mixed in with other calendar events if using only one calendar/planner Can disappear in the whirlwind if using a printable calendar, a small pocketbook, or whiteboard. Not the best method for number based people Pay cycle can be in two different months (pages) #2 Make a List Making a list of bills is the second method we cover to help you track your monthly bills. This is the way that I personally track our bills. What is it? This method is as simple as it sounds. You list out all the bills due in order and include the due date, the bill description and the amount. Start with your next paycheck and list every bill from there. How do I use it? I used to take a random scratch piece of paper and write my paycheck amount at the top. Beneath it, I would write how much is going to savings, and all my bills with their due dates. If I reached the next pay day I would add that in there and continue on. Essentially it is the calendar method in list view (also a good method I just thought of). In order for you track your monthly bills with the List Method, each line will have the due date (7/12), the bill description (Auto Insurance), and the amount ($45.00). Once it is paid, go ahead and cross that puppy off. I will then make calculations off to the side subtracting each bill as it is paid from the overall paycheck. Now, I am using Google Sheets so I can access it anywhere and don’t lose any papers with all my bills and income on it. (Please don’t tell Mr. TTF, but this definitely happened once or twice… he’s a crazy for security.) With Google Sheets now, I am able to keep a loooong running list of all our bills. Each pay day will first list the paycheck amount, the savings amount, and then all of the credit cards and balances so we can pay those off every paycheck. Then the additional payments needed in that period that are due sporadically. Doing this on the computer allows me to copy and paste easily from paycheck to paycheck. Benefits of Bill Lists Ideal for list or number oriented people as it is easier to include the amount due Easier to add all the items you pay every payday (Savings, all Credit Cards) Easy to use online and keep a long running list Disadvantages of Bill Lists Not “pretty” like a color coded calendar is Harder to keep on pen & paper More difficult to add in additional bills The pay cycle could be on two separate papers Less secure on loose leaf papers General Bill Paying Tips Now that we went over just two of the thousands of methods you could potentially use, I do have few additional notes here at the end. First, these two methods are just some ideas to get you started. Once you start tracking your bills you will find what you like and what you don’t. Maybe neither of these systems will be what you end up with, but we recommend just starting! Working with Credit Cards You may have noticed that I didn’t discuss credit card due dates in too much detail with regards to either of the methods to track your monthly bills. You can definitely add credit card due dates to both methods as you would the rest of your bills. However, I highly recommend paying off all your credit cards every payday. This keeps the balances low and ensures you aren’t spending more than you earn! If you decide to pay off your credit cards every payday, then you would put their “due date” as the same date as each payday. If you decide to pay off your credit cards the traditional way once a month by their due date, then here are a few additional tips. Do not put the minimum payment as the amount due, you need to pay the full statement balance. Bonus points (to you and your credit) if you pay the entire balance down to zero. This is considered as paid off when your balance is zero. This helps boost your credit score and proves that you aren’t spending more than you earn. And don’t forget for every new credit card you get (which should not be often) be sure to update your bill pay method of choice with your new due date! Auto Payments I highly recommend setting up as many payments as you can to auto pay. This works best for reoccurring payments that are always the same amount (Subscription services probably make you, but car insurance, car lease, rent). Just be sure you won’t overdraft and that you don’t overpay! Eventually, if you are consistently checking all your bills and paying on time, you can take them off but again missing a payment is a big NO-NO so just rather be safe than sorry! Stay Ahead of the Game Now even though you are planning out your bills for each pay period you should still be thinking into the future. Always take a look at the next pay period and be sure the next paycheck will be able to cover everything there. Sometimes all your big bills fall into one pay period and one paycheck won’t be enough to cover it so you will need to plan ahead and see if there is anything for next period that you can pay now. You will also want to add all your annual bills to the your tracker. Some examples of annual bills would be car insurance, car registration, tuition costs, and if you move often, rental deposits. Conclusion Now that we have reviewed two simple methods for you to track your

Car Buying Mistakes

Car Buying Mistakes: Leasing

TTF Family!! Today, we continue on the beaten path of my Early Money Mistakes, focusing on my car buying mistakes. There are more mistakes? you ask. Yes, there are more and honestly, the more that I write about these mistakes the more that come to mind. So raise your glass and cheers to me learning the hard way (so hopefully you don’t have to), and we are off to another one of Mr. TTF’s fumbling face plants. Do you remember how I told you that my life has been a series of “one step forward, two steps back” scenarios? Well, I wasn’t kidding and here is yet another example of that. Transportation Costs Vehicle / Transportation is typically one of the top three expenses we deal with in life. And there is a lot of room for error, causing that cost to unnecessarily increase. We’re going to talk about the mistakes I have made and how you will be able to prevent them. Housing (checked that mistake box) Food (Miss TTF will have more on this one soon) Transportation (the reason we are here, now) My First Car First, a little backstory on my car buying career. The first car I ever owned was a used White Chevrolet Cavalier. I got a kkkk–iiiiii–llllllllllll–eeeeee–rrrrrr deal on it, and I mean a killer deal… my parents bought it for me. No, I did not grow up with money growing on trees, my family was very much middle class. In fact, when people used to ask me where I lived growing up, I would always mess with them a bit. I would ask them if they knew where this really, really, and I mean RE-ALLY wealthy neighborhood was? When their eyes lit up just thinking about that neighborhood and the massive McMansions that lined the golf course, I would stop their imagination dead in its tracks and say, “Yeah, I am the neighborhood just before that.” I would watch their gaze come back down to earth when they realized I lived in the older development that had nothing to do with the ritzy new neighborhood. With that said, my parents made sacrifices, and by sacrifices, I mean delayed their own retirement, so that they could provide us kids with things they did not have growing up. We had everything we needed and then some: a beautiful home that slept my smelly friends and me (my mom’s words, not mine). We had more food and snacks than Ms. TTF and I ever do. Most of all, we had a massive amount of love and support. That Dream Moment So yes, they purchased me my first car as a complete surprise to me. I will never forget when they opened up the garage and I absolutely lost my shit. I went crazy. It was like George Gray from the Price Is Right just unveiled my “Braaand Newwwww Car!!” Frolicking and hugs ensued, followed by my first ride and song in my car. “You Can Do It” by Ice Cube was the natural choice as I thought it was an awesome song at the time and sounded incredible at max volume. I am sure the neighbors felt differently, but I certainly wasn’t concerned then. For my first cruise, I took it to this nearby country road that never had another car on it and doubled as my “runway.” You could easily reach over 100 mph on this stretch… with a 6-cylinder. Unfortunately, this Cavalier was a 4-cylinder so I think I rocked closer to 75-80 when all was said and done. But it didn’t matter, according to my friends, I had reached 200 mph on that day. I had made it, life was good. This car should have lasted 10 years. I am sure you can pick up on the “should have” so I will confirm the bad news and tell you that it lasted about two. You see, I learned a valuable lesson that day on the side of the highway when my car stopped running… cars need oil… like really badly. Cause of death: Engine seized due to nickel sized hole in the oil pan and a completely oblivious car owner. Oh, the places I could have gone with the money I would have saved on cars over the years if I had simply taken care of the Cavalier… Car #2 While I lucked out with my parents purchasing me my first vehicle, I thought I was on my own-ish on the second. But as it turns out, my dad just told me, “I was in no position to purchase another vehicle” that I was “still goofing off and playing basketball,” etc. etc. So at this point, I am just embarrassed that my parents purchased two vehicles for me. Heck, I think my parents should have told me to get a second job and figure out how to purchase my own vehicle. But alas, they are nicer than I. If it is any consolation, I took much better care of this vehicle, but more on that later. So what was my second vehicle? It was a… drum roll please… Subaru Impreza Outback. “Automatic or Manual?” you ask. I mean, I was getting to it, but it was a Manual. And you are correct, nowhere have I discussed that I could drive a manual… because I couldn’t! That made for an interesting test drive, let me tell you. I will never forget the time I stalled it about twenty times at this T-intersection on a slight hill. This kid was playing soccer in his front yard, oblivious to the world outside of his game. That was until I stalled the car about fifteen times. At this point, he was wondering what the heck was going on with this imbecile (me) trying to turn right in front of his house. For all he knew it was another eight-year-old, like himself, who stole his parent’s car and was making a run for it… or at least trying to. As time went on, I got much better, but only after stalling it and struggling in every place imaginable. All Wheel Drive Growing up in the midwest, however, this car was awesome. With all-wheel drive, shoveling my car out was a thing of the past. I went to school at the University of Wisconsin-Milwaukee. Their street plowing strategy was interesting, at best. Essentially, they would plow down the middle of the street, pushing the snow up against all of the cars parked on the street. From there, they left it up to the tax paying citizens to shovel their cars out and complete the job. So every morning after a snowfall, you would see the groggy, resentful, college students outside shoveling their cars out. Not me, though, which I am certain they resented me for. As they were shoveling away, I simply turned the ignition and drove right over it with my all wheel drive (and in my head, smiled and waved at them and in their head, they smiled and waved the bird back at me). Lesson: Taking Care of the Things You Own Pays Dividends It was a great car and as I mentioned earlier, a car I took care of. I learned how to complete my own oil changes, check fluids, and I learned that Discount Tire will rotate your tires for free. At the time, they would also plug your tire for free if you happened upon the good fortune of accidentally running over a nail or other sharp object (so long as it is in an area that can be plugged). Of course, by offering such amazing customer service, they are playing on your reciprocity trigger in hopes that you will one-day purchase tires from them. I do, so hey, I guess it works. This car made it all the way out to Arizona, but eventually became more expensive to maintain than it was worth. The damn thing had a serious rear-wheel bearing problem. It was an issue I had repaired to the tune of $600, twice for a total of $1,200. It needed to be replaced again, but by that time, I decided it was time to move on. I let this car sit in my previous apartment complex for over a year before they decided it was abandoned and it was impounded. Unfortunately for me, it wasn’t completely gone, I had just procrastinated what I was going to do with the damn thing. Fortunately, I had a good friend who knew the ins and outs of this business and helped me turn the car over to the company that had impounded it. This was a far superior outcome of paying a massive amount of money to get a car out that was no longer running. No, thank you. So long and farewell to the Sub and on to the vehicle that replaced it. Buying My “First” Car So now it was my turn to actually buy my own car. I did extensive research on car buying. In the near future, I plan to post my learnings in the car buying process. It can be daunting, but there is a lot you can do to put yourself in a good position. One of the biggest leverage points is patience. At the time, I was borrowing a friend’s car while they were working out of state. This allowed me to take the necessary time to buy the right vehicle for me at the right price. For whatever reason, I was dead set on finding a Honda CRV or a Toyota RAV4. It was very important that I have this because I didn’t have a family to drive around, I almost never transported anything large in size, and it was less fuel efficient than a simple car like a Honda Civic or Accord, or a Toyota Corolla or Camry. In all honesty, it was not uncommon to hear stories of smaller, more simple cars being stolen in Arizona which is why I stayed far away from them. With that said, having the extra cargo space of an SUV would serve me very little, and coupled with the decreased fuel efficiency, it would certainly cost me more… it was perfect (insert all of the sarcasm you can muster here). It wasn’t long before I came across a beautifully cared for Honda CRV. The stars had aligned. The seller was leaving the country and needed to get rid of it sooner than later. I had it checked out by a local mechanic and was able to negotiate a great deal. I was elated and llloooovvvveedddd driving that car. Very unfortunately, that love was short lived. The Much-too-Early End of the Perfect Car Fast forward two months and I rear-ended another vehicle and totaled my car. I was out apartment shopping on that beautiful AZ afternoon. When I was returning home after looking at a completely overpriced studio, I took my eye off the road for a moment, and when I did look up, the highway had turned into a parking lot much to my chagrin. I could not stop in time and that was a very, very long day. Fortunately, nobody was hurt. In fact, the car I hit didn’t have a scratch on it; it was a massive pickup truck. My car was not so lucky and would never be driven again. This was the point at which I recognized just how good of a deal I got on that car. The insurance company paid me more for it than I had paid for it. What?? Was this even possible? I was dumbfounded and had no idea this could happen. Buying My 2nd Car So here I was again, going through the car buying process for the second time in a few months. I was so happy to be done with the car buying process when I had finally purchased the CRV, and now I had to do it all over again?! The difference, this time,