What Can you do with $1,400 a Month?

SS

I don’t know about you, but for me, not much. But according to the Social Security Administration, that is approximately the average monthly benefits that retired seniors were receiving as of December of 2016. This highlights the importance of having limited reliance on Social Security income later in life. It is no longer enough to have something to supplement Social Security, but it is looking more and more like Social Security itself is the supplement rather than the main source of income. Currently, we spend a third of that amount in my household for food per month. It is imperative that we plan appropriately if we want to maintain a decent standard of living. We do not have to live lavish lifestyles, while that would be nice, but it would also be rather unfortunate if we worked for 40+ years and ended up living in squalor in our old age.

Although I am relatively young, I place great value in planning for retirement. After all, due to the effects of compounding, time is not only of the essence, time is our friend, so we must start early. The more time we have, the more opportunities there are both for growth and for recovery in the event of a downturn. The time is now to build that solid nest egg. Barring an accident or illness, I have at least another 30 years of work left in me, 31 to be exact. I have been actively saving for retirement since June 2007. That is 41 years of full time work where wise lifestyle choices and prudent investments will come together to ensure that I live the life that I earned throughout my working career. Note that I didn’t say the life that I wanted. Because when it comes to being retired, you don’t get the life you want, you get the life you deserve. As harsh as it sounds, it is our reality.

Different practices both as a result of changes in our political landscape and employers’ decreased willingness to contribute to their employees lifestyle, has drastically modified retirement outcomes. There are fewer and fewer pension options for people who dedicate their lives to serving the public or helping advance companies. Most of our futures now depend on market volatility. Even those with pensions are now beginning to supplement their defined benefits with additional investments in 401ks or 403bs.

I know there is an older segment of our population that reasonably had expectations for a pension since that was the practice at the time. Unfortunately, things started changing later in their careers and they did not have the time to save enough to bridge the unanticipated gap. There are also changing factors like longer life expectancy that plays a significant role in the “nasty surprise” our seniors face when they began to outlive their funds. For example my former roommate actually told me that her grandmother outlived her retirement funds by 14 years. While she may have planned, she didn’t necessary plan to live to be 90 because back when she was in the working world, that was unheard of.

So we’ve identified the problem, but what steps are we taking to make sure we don’t fall victim to a lack of planning? Here’s what I’m doing:

Traditional IRA: I rolled over my 401k into a traditional IRA from a previous job approximately 3 years ago and today I contribute to it monthly.

401k: Unfortunately, this new job no longer offers a match but I can still save pre-tax so I started out by contributing $25 a pay period and increased it gradually until it reached 10% of my income.

Pension: I am eligible for a pension at age 55 if I work at least 10 years and the amount I am eligible to receive increases every year I work past the 10 years. I will most likely work at least the 10 years to ensure that I become eligible.

Real Estate Sales (Today): Selling real estate is a way of boosting my Social Security Income because the Self-Employment Tax that I pay out of my real estate income contributes to my social security payments.

Real Estate Sales (Later): I also plan to continue doing part time real estate sales a few years after I retire from my regular job. This will supplement my retirement income for the first 5-7 years delaying any distributions I will have to take to allow my investments to grow further.

Rental Properties: They are the gift that keep on giving. They don’t require much effort. As I get older, I will probably spend more money to outsource some of the services so I will no longer have to deal with tenants, but by then, my mortgage will be gone and my rents will likely increase so I don’t anticipate a significant drop in my margins.

Reduce Expenses: I will be doing my best to avoid debt, I will consider downsizing to one car, and my living expenses should decrease significantly as the mortgage on our primary residence will be gone.

What are you doing?

Advertisements

Lil’ Ugly: Driving my Way to Financial Freedom

9519722708_722302b979_b

Actual car, not pictured

That’s my mom’s nickname for my car: Lil’ Ugly. She came up with that a few weeks ago. I don’t know if she’s just sick of the multiple dents and scrapes peppering the body of my beloved 2008 Honda Accord, but she has been on a pretty aggressive campaign to sow discord between me and my road buddy.

I am what you call a road warrior. I easily put 20,000 miles a year on my car. In my day job as well as my work with real estate, I do a lot of driving. While Massachusetts isn’t a very big state, it’s not that hard to hit the 20k club both a a real estate agent and a landlord running to and from properties. In all of these years and miles, my faithful commuting partner has remained loyal, offering great gas mileage and reliability.

I haven’t had a car note in 10 years and that has allowed me to save a tremendous amount of money. My husband’s car which is more recent (and in much better shape than mine) was paid off a year and a half early. So I am in no rush to jump into another car note situation, even though my car is becoming a topic of conversation every time I pull up. Instead of allowing it to stress me out, I revel in telling the stories of how I got each dent, scrape, chip and rust:

“This one is from when I was pulling out of the garage while steering with one hand and holding a water bottle in the other.”

“Picture it, Museum of Fine Arts, 2011. Hit and run.”

“I came out of the mall one day and I had this dent. Someone must have opened their door a little too hard.”

But how do I manage to not let the gentle teasing get to me? Well, it does get to me. I just dry my tears with the stack of thousands I save every year from having a reliable paid off car. I sob in my stock portfolio and wipe snot bubbles with my early retirement fund. Devastating…

Here’s what my car has cost me (besides gas) since I’ve owned it:

New tail lights: $15

New wipers: $30

New Tires: $500 x 2 = $1,000

Quarterly oil change (includes filter change, fluid top off and tire rotation): $40 x 4 = $160 annually

New brakes: $300 x 3 = $900

Service every 35k miles (currently at 137k so approximately 4x) averaging $500 each: $500 x 4 =  $2,000

That’s a total of just over $5,000, which means my car has cost me less than $75/month to maintain it. Meanwhile, others continue to pay $300-600/month on a car note, plus higher insurance premiums and excise taxes for those who lives in states with personal property tax (nearly 10 times my maintenance costs) just to be seen in a nice car. Now, in all honesty my husband’s car is much nicer and we do have that as a back up in the event that we need to go somewhere that my car is not respectable enough, so maybe that’s where my complacency comes from. If you are single or are in a one-vehicle household, you might want to have something nice in case there is an important affair to attend. But that’s still not a good enough reason to buy the most expensive car you will get approved for.

Just because the dealer says you can, doesn’t mean you should. If the key to success is living well below your means, it doesn’t make any sense to live at, or even above your means. Sure, I could afford a $500/month payment, but by refurbishing my old girl at the cost of $75/month, I’m saving close to $5,000 a year which I can put towards other ventures.

I do have to acknowledge though that I made a good decision early on that continues to pay dividends years later. Honda vehicles are known to be reliable and for that reason tend to have low cost of ownership as well as maintaining their values better than other cars. Although I can’t escape a new car for ever, I think there are enough Accords on the road with 200k+ miles to give me hope that my homie and I might be together at least another year if not longer.

Prey to Play: Exploiting Black Misinformation

defeat

In a country built on a legacy of race-based abuse and marginalization, it should be a surprise to no one that segregation was the norm until HUD decided to outlaw discriminatory norms that after several decades (excluding centuries of slavery since “property” cannot own property) of people of color, mainly blacks, being locked out of financial markets. Then redlining moved from exclusionary practices to predation. As recently as the early 2000s, communities of color were still targets for predatory lending practices, which do nothing to alleviate the inequalities we continue to witness between different demographics regarding generational wealth. However, I am becoming just as alarmed by the defeatist attitude and victim mentality of some black people as I am outraged by the systematic and oppressive treatment perpetuated by powerful institutions.

Thanks to the internet, everyone, including myself, has a soap box. High speed internet and free platforms has given rise to a multitude of different social justice movements, of which, many are catalysts for change, some are questionable and some others I find without merit. Among those that I find to be without merit, are those that really call for what seems to be throwing in the towel and making no efforts toward self-improvement because after all, the boot is on our neck, so why should we even bother breathing? Let’s just hold our breath and die right here. While this might be a simplistic summarization of it all, I struggle to extract any other point from the message when the systemic oppression is continuously highlighted with any educational effort made to provide solutions to the problem.

“We are kept out of financial markets! We don’t own homes! We don’t have infrastructure in our neighborhood! We don’t have retirement accounts!”

But, there is no effort to save, to attend a home buyer class, to build a business to request a pamphlet from the employer about what 401k plans are available. Meanwhile, anyone who makes an attempt at providing the information is quickly labeled “classist”, tool of white supremacy and is bombarded with an overwhelming list of excuses reasons why they can’t get a job, save money, have decent credit, own a home, travel, etc.

Everyone is complaining about what are real problems, but do so without seeking real answers. Identifying the concerns are a first step but not even half of the battle. Education followed by action are still necessary to reverse course. Although, sometimes I can’t help but wonder if the e-SJWs actually want to see changes.

They might very well be afraid because struggle, while uncomfortable, is not unknown so there might be a sense of safety there. Struggle can be used as a crutch to escape accountability. At the same time, there is also the possibility that they might  run out of discussion topics that will generate adequate traffic to their pages and build their following. That pool of fans is actually a critical source of donation money for those who chose to crowdfund their lives rather than work. If their entire platform is built on enumerating the ills of the community, what will they talk about when most people have taken definitive steps towards self-improvement? To me, that in itself is a form of exploitation. That is the equivalent of not teaching a man to fish, not even giving him a fish, but instead, complaining about how hungry you both are just because you want company. It is unfair and self-serving to keep people ignorant in order to build a platform off their misinformation. With the accessibility of the internet and the amount of people willing to provide the right information for next to nothing, it would probably be less work-intensive, and definitely be less abusive, to get a job than to keep our peers misinformed.

We shouldn’t encourage mediocrity just because the playing field is not leveled. Just because we can’t close the gap, doesn’t mean we shouldn’t try and bridge it. After all, the world doesn’t end with us after we are gone. There are still future generations for whom we can make the world a little better. Our forefathers who fought for freedom did not get to live to see integration, but they laid the ground work for the civil rights movement. Doing anything less than putting up a good fight is regression. We have to do better. Black exploitation isn’t suddenly fashionable because the perpetrator is not white.

Your 7-Day Guide to Financial Discipline

financial-literacy-money-jars-istock_000048253042_double

While you can’t strike it rich in 7 days, you certainly can organize your life enough in 7 easy steps (1 per day) to improve your financial management skills.

Monday: Maximize your retirement contributions, either to the maximum amount you can afford or to the IRS limit. If you have not yet started contributing, do at least the minimum that will get you a company match.

Tuesday: Create a budget. Budgeting is the building block of financial freedom. Start based on the new amount you will have left over in your paycheck after you’ve changed your retirement contributions.

Wednesday: From your budget, you will of course categorize a portion of your income as savings. Set up an automatic transfer that will happen around the same time every month. Saving in autopilot mode is the least painful way to set money aside because you don’t have to think about it.

Thursday: Set calendar alerts of all your upcoming bills. Nothing is more damaging to your finances like late or missed payments. They negatively affect your credit score reducing your chances of getting the most favorable rates and you face the potential of late fees that will chip away at money that you need to hold on to. Having your alerts pop up a day or 2 in advance if you’re paying electronically or a week in advance if you’re paying by check, will make sure you stay on top of everything you owe.

Friday: Clip coupons and know your cash back opportunities. I am not a fan of processed foods so I cannot always escape a high grocery bill. However, even fruits, vegetables and certain grains go on sale, particularly if they are in season. Familiarize yourself with the circulars throughout the week and clip some coupons. It will help you stay organized and maximize your savings.

Saturday: Set some goals for the upcoming week. Having specific goals gives us something to strive for and motivates us to improve on our previous efforts. Whether you want to start small by saying you will make coffee at home every day for the upcoming week to save money, or you decide on something more long term like paying off your credit card debt, setting goals will keep you motivated.

Sunday: Meal prep for the week. The markup on prepared foods is brutal. If you eat out regularly, you will hate yourself when you see how much it costs you monthly or even annually. The easiest way to avoid temptation so you can resist the convenience of prepared foods is through advance preparation. While you may either run out of food or get sick of eating the same thing, bringing lunch 3-4 days a week will still yield a better outcome than buying lunch 5 days in a row.

Persistence, Patience, Purpose

 

We grew up in the age of microwaves, airplanes and high speed internet, which means we want everything yesterday. The same is true for our financial security. However, no matter how quickly we can download movies or get from one coast to the next, we have to accept that short of an inheritance or the Mega Millions, we have to build our success one block at a time.

Having the level of comfort that we want, does not happen overnight. We must first set goals to have something to strive for (Purpose). But we will surely face obstacles, and worse yet, failure. We must continue to push forward in the face of adversity (Persistence). Falling short of our goals is not a condemnation of  our plan itself but an indication that our approach was not the correct one. But most importantly, we have to be able to wait to reap the fruits of our labor (Patience). Rome was not built in a day, neither will your first million. Few great successful self-made millionaires saw overnight success. While it does get easier over time, and the second million may be earned overnight (because it takes money to make money), your first break won’t happen that quickly.

These are the 3 Ps of success that will help you keep a fourth one in mind: Perspective.

Financial Insecurity is Back in Style

img_4486

If you were reading this blog last year, you should remember this story.  Since this is an old story, you probably figured that, better late than never, but she has finally turned her life around. After all, she is (even) older and wiser and has faced enough challenges in her life to have learned her lesson. If that’s what you thought, you thought wrong. The money nightmares are back.

Back in March she bought herself a brand new SUV. Hot off the lot with all the bells and whistles: leather seats, GPS, sunroof, etc. Given her poor credit and the high cost of the car, she’s looking at a $480 monthly payment not including insurance which is another $250. Two weeks ago, she slipped down a flight of stairs and she is now collecting disability payment in the amount of $300/week until she completes rehab. Excluding all utilities, her share of the rent is $600. I’ll save you the trouble of doing the math: she has once again placed herself in a situation where is back on the brink of financial instability.

It is critical that people start making calculated and responsible financial decisions. It would be an understatement to say that I am disappointed in the constant self-sabotaging practices that we engage in. It is as if we are not just satisfied with being mediocre. We are behaving as though we find excitement in the struggle and we chase it endlessly for the thrill of living on the edge. There is no other explanation for why someone making $15/hour would buy a $40k SUV after losing 3 other vehicles to repossession.

Money: Power & Control

power

I don’t think it’s realistic to talk about money without addressing the power it holds. There is a reason why poverty begets violence. Money is about resources, survival and livelihood. Our most primal instincts are awakened when money is at play. Access to money and other resources that only money can provide can determine access to everything else in life such as the quality of education, health care, customer service (Nordstrom v. Walmart), etc. There is a lot of power in money at a societal level and we know it. However, we don’t spend enough time discussing the role money plays at the lowest levels relative to womanhood.

One of the greatest power dynamic that exists is the one between men and women. Given the importance of money in society, it is not surprising that there are constant discussions about how men and women use money, who should pay for what and of course who should manage it. Some people of both genders see women as frivolous spenders. We are split on who should pay. And because of point 1, some people think that the male 1/2 of the household should manage the funds of the married/cohabiting couple.

Personally, I think these are all small minded perceptions of money management. While I married a very fiscally responsible person, there is no one with tighter hold on a purse strings like me. I am also very organized and unlike most people (male or female), spreadsheets excite me. To apply that tired sexist and unfunny joke to me that I’m bad with money like most women is insulting. Plenty of women are good with money. Some of us are great savers because we are disciplined, others went to business school and understand financial markets well, some others are single mothers who know how to make a dollar out of 50 cents.

Sure, I can rant about negative stereotypes on the internet, but how can I complain when I mostly run the finances in my house? The problem is that this is not the reality for many women. Financial bullying is a thing. Many abusers, knowing the power of money or how crippling the lack of it can be, use it as a tool for control. I know of women who hide their purchases in their car for many months so the husband does not catch wind of their extracurricular mall activities. These are the women who are often chastised for going over budget yet are only able to access the bare minimum to keep the household running. They may even be provided less than the minimum but are required to ask their husbands for additional funds if they need anything else.

This is where the “allowance” comes in. Having an allowance in itself does not have to be problematic. The issue usually arises when the person who dictates the allowance is somehow not restricted by any artificial limits on their own discretionary spending. This unequal treatment is often the stepping stone to all other financial abuses that the nonworking or lower earning spouse will eventually experience.

Finally, we can always expect the money bully to make a last ditch effort at retaining his power: limiting your earning potential. Many times, an abusive partner who wants to keep controlling your money may prevent you from working or sabotage your opportunities by jeopardizing your work or even demanding that you reduce your hours.

These are all the reasons why I advocate that women make a serious effort to be financially independent when they enter a relationship. Although people may not always show their ugly side early in on, it helps establish certain expectations and a financially independent woman may even be a turn off to an abusive, controlling, financially bullying man. I understand that financial independence is not realistic for most. Education, child care, mere access to employment are all factors. But, from what I’ve witnessed and the dangerous situations that women have placed themselves in because of lack resources, even a part-time minimum wage job is better than having to ask your abuser for $40 for gas just to be able to leave him.

I have volunteered at a shelter for battered women where, in order to control capacity, the maximum stay  was 2 weeks. Many of the women ended up moving back with their abusers because the alternative to the occasional black eye was homelessness in the harsh New England winter. These are situations that make me grateful, not only for a supportive husband, but for my financial know-how, and my earning potential in case he were to ever become less than the man I expect him to be. For some women, employability and financial stability are a matter of life and death.