Author: greg

Here’s every dollar I spent in 2018:

Rent – $7,804 total, $650 per month (up from $4,874 in 2017, a $2,930 increase)

I went from having 4 roommates in the beginning of the year to 3 roommates in May and June, then to 1 roommate in a new apartment in downtown Dallas in July. While paying twice as much rent downtown is not fun, my quality of life has increased greatly due to the time and freedom that comes with a 10 minute commute. This expense will increase in 2019 as I plan to live downtown the whole year.

Cell Phone – $140 total, $12 per month (down from $152 in 2017, a $12 decrease)

I used the service provider TPO for the last three years, but unfortunately they are discontinuing their U.S. operations. I have been researching new carriers with phone plans in the $10-15 per month range, and will update you when I find one I enjoy and would recommend. Until then I’ll take advantage of the two free months of service TPO gave me for ending my service (hence the $0 for December’s phone bill).

Groceries – $1,377 total, $115 per month (down from $1,475 in 2017, a $98 decrease)

I’m still eating truckloads of rice, lentils, beans, vegetables and nuts, consuming copious amounts of delicious and healthy food for less than $4 per day. The decrease from 2017 may be due to increased time traveling this year (in Europe many of my meals were prepared for me by my amazing friends), more meals at restaurants, and more meals paid for by work/at work related activities.

Dine Out – $319 total, $27 per month (up from $147 in 2017, a $172 increase)

Dine out expenses more than doubled this year, which was a deliberate move to spend more time with friends (see my post on Buying Happiness) and be more generous about paying for other people. I did stress a bit about the increased expenses, but looking back on the year the extra $172 for spending time with great people and having interesting experiences was money well spent. This number may increase in 2019 (although not by too much :P).

Travel – $1,236 total, $103 per month (up from $948 in 2017, a $288 increase)

My 3 week trip to Europe accounts for most of the $1,200 I spent on travel this year, with a few flights to Minnesota and one to Denver providing the balance. This number was kept a few hundred dollars lower than it should be as I volunteered to fly out one day later on one of my Minnesota trips and received travel credit from the airline which reduced the cost of my last two trips of the year.

I expect to spend less in 2019 on travel as it will be my first full year of full time work, but I said the same thing a year ago about 2018 so we’ll see!

Transportation – $100 total, $8 per month (down from ~$450 last year, but I didn’t track transportation as its own category then)

This figure is made up of ~$40 for tubes, one tire and a pump for my bike, ~$40 for gas to people who gave me car rides, and ~$20 for one Lyft ride. This ridiculously low number of $8 per month is possible thanks to my bike and the public transportation system in Dallas (which either school or my employer has always paid for). I’m a fan of living close to work/groceries/friends, which reduces my reliance on owning a vehicle.

Other – $2,258 total, $188 per month (up from $1,103 in 2017, a $1,155 increase)

Most of my miscellaneous expenses this year were due to buying professional clothes and having them tailored (~$850, whoa that was higher than I thought it was), wedding/graduation/thank you/baby/Christmas gifts (~$400), a new guitar (~$300), experiences such as concerts/museums/comedy shows (~$200), and apartment furniture/household items (~$150).

I expect this category to decrease in 2019 as most of my professional wardrobe will last for a few years, and the guitar and apartment expenses will not be recurring.

TOTAL – $13,234 for the year, $1,103 per month (up from $8,700 in 2017, a $4,534 increase)

The $4,500 increase from 2017 to 2018 came from rent (~$3,000 increase) and other expenses (~$1,100 increase). Rent will continue to increase in 2019, and should end up being around $10,000 for the year or ~$830 per month. I expect my total spending for 2019 to be around $14,000 – $16,000.

As we enter a new year, this is a perfect time to start tracking your own spending and start investing (if you haven’t started already). Let me know if I can help in any way, or if you have any questions or comments on my spending for the year. Thanks for reading, and best of luck in 2019!

Related posts:

My Personal Spending Report for 2017

Why I Don’t Use a Budget

How to Eat Like a Superathlete on $130 a Month

Preparation

#MoneyGoals

In December, the S&P 500 (an index which tracks 500 of the largest companies in the U.S.) declined over 12%, and if you have been watching your investments, you’ve most likely seen their value go down by hundreds if not thousands of dollars.

No one enjoys watching their investments lose value, and many people will sell their stocks and pull their money out to stop the bleeding. This is the last thing long term investors like you and I should do.

Imagine you bought 10 apple trees for $100 apiece. You sell the apples they produce every year for $5 of income per tree, and you plan to sell your apple tree farm in 40 years for $1,000 per tree. Six months after you buy your apple trees, you hear that the price of a new tree has dropped to $50.

While disappointed that you didn’t buy your trees for $50 each, you won’t dig up your $100 trees and go sell them for $50 (which is what people who sell their investments when the stock market goes down essentially do). Instead, you should go buy more $50 trees because you know they will still make $5 per year and will be worth $1,000 apiece in 40 years.

Likewise, when the stock market goes down it represents a sale for long term investors. Similar to the hypothetical apple tree farm, our investments will still produce income every year (in the form of dividends) and will still be much more valuable decades down the road.

So go buy yourself some shares of VTI, and save 12% during the stock market’s holiday sale!

#MoneyGoals

 

(Pictured: Transition defense provided by Sammy J and I. January, 2014)

 

On May 9th, 2018 I received an undergraduate degree without taking on any debt. Here’s how:

1. Work hard, work early

The earlier you start working hard on your goal to graduate college debt-free, the easier it is (as with many things in life). While staying up late doing homework after a basketball game in high school was no fun at the time, the scholarships that I received from my academic efforts were certainly worth it.

I also worked a few part-time and summer jobs in high school, and saved most of my income to help pay for college. Starting with a little bit of a financial cushion was helpful during my freshman year.

2. Get a job during school

I mentioned in my post about the 5 Things I Wish I Did Freshman Year that I did not get a job my entire first year at college. After spending most of the savings from my high school jobs, I started working again before my sophomore year began.

From then on, I always had a job (and for one semester my junior year I worked two jobs while taking 18 hours of classes). I definitely would have needed to take out student loans if I didn’t have the income from those jobs.

3. Live with roommates

I kept my housing costs ridiculously low during school by living with 4 and sometimes 5 other people. I had my own small room, but if you want to cut down on rent even more you could share a room with someone else. I’ve found that living off campus can be more affordable than on campus as well, although if you live too far away your commuting costs may eat up any savings on rent.

4. Get a bike and/or use public transportation

Even if you own a car (which I did not during college, and still do not), using a bike or riding the bus/train for your daily transportation needs can save you hundreds if not thousands of dollars every year. If you take public transportation, you get the added bonus of being able to study during your ride.

5. Cook your own food

I was on the meal plan my first year of school, and paid $3,600 for two semesters of eating at the dining hall, roughly 8 months. This comes out to $450 per month, which is almost four times the average of $123 I paid for groceries per month in 2017 (see every dollar I spent that year). While a meal plan certainly helps ease freshmen into adulthood, it’s financially smart to start cooking for yourself ASAP.

6. Keep applying for scholarships

While everyone applies for scholarships before freshman year, there are many scholarships out there for continuing students that many people don’t apply for. I could have done a better job at this, because I only applied for continuing student scholarships once. I took an hour one day to fill out a few forms, and ended up landing a $1,000 scholarship. Not a bad hourly rate!

7. Be flexible

I went to a school none of my hometown friends or family had ever heard of, 1,000 miles away from where I grew up. My bike was my main mode of transportation, I cooked almost all of my own food after freshman year, and shared a bathroom with multiple roommates. All of these things required hard work and flexibility, and in the end it paid off in the form of a debt-free degree. #MoneyGoals

 

(Pictured: One of UTD’s finest professors, Mr. Polze, and I after graduation. Richardson, TX)

***Before getting started here, if you ever have any questions or would like to learn more about your 401(k) or anything personal finance related, feel free to email me at hashtagmoneygoals@gmail.com. I’d be happy to help!***

All right, wtf is a 401(k)?

A 401(k) is a special type of savings account that invests your money and allows it to grow over time. The money you put into a 401(k) gets taken out of your paycheck before you even see it. Arguably the best part about a 401(k) is that it reduces your taxable income, meaning you will pay less income taxes. You’re basically giving yourself a raise.

How do I know if I can contribute (put money in) to a 401(k) account?

When you’re offered a job, your employer will likely tell you if they offer a 401(k) or not. If you don’t get any information regarding a 401(k), it’s ok to ask. Your employer also benefits from having your participate in a 401(k) program, because it reduces the taxes they pay as well. It’s a win-win!

How do I make contributions?

This depends on your employer. Most workplaces these days have online portals where you can select how much you want to contribute and what to invest in. Some employers might have you fill out a paper copy. It’s up to you to choose what percent of your gross income you would like to contribute.

How much should I contribute?

This one is up to you. The more you contribute, the less income tax you’ll have to pay and the more money you get to keep. I would encourage anyone to aim for contributing at least 10% of their gross income. If you want to contribute more, go for it! If you aren’t able to contribute quite that much or you love paying taxes, you can start at a lower percentage and work your way up.

At the very, very, least, check if your employer offers a match. If they offer a 3% match, then contribute at least 3%.

WTF is an employer match?

Ahh my bad, I should’ve explained that before mentioning it. To encourage employees to contribute to their 401(k) programs, employers will often offer to match your contributions up to a point. For every dollar you put in, they will put a dollar in too.

Let’s say you make $50,000 per year, you contribute 10% of that to a 401(k) account, and your employer has a 3% match. This means that you will put $5,000 into the account, and your generous employer will put another $1,500 in for you. (Thanks employer!)

The key point here is that you won’t get that $1,500 unless you contribute at least 3%. If you only put 1% of your gross pay in ($500) then your employer will only put in $500. If you put 0% in, you get $0.

This is the most important point of the whole post, if an employer offers a matching program, contribute at least enough to get that full amount. If you don’t do that, it’s like walking past $1,000 on the sidewalk, and kicking it down the storm drain. Yet ONE IN FOUR EMPLOYEES do exactly that, and miss out on their 401(k) matching program. WTF!

What investments should I choose?

This is where things can get confusing. There are so many different funds to invest in, and it can be hard for those of us just getting started with investing. To keep it simple, pay attention to 2 things:

1. It should be an index fund made up of mostly stocks. My favorite is a “Total Stock Market” index fund from Vanguard. Other companies (such as Fidelity, TD Ameritrade, and Charles Schwab) may offer similar products. If you can’t find a total stock market index fund, then an S&P 500 index fund will do just as well. Some companies offer a “Target Retirement Date Fund” i.e. you plan to retire in 2055 so you invest in the Target 2055 Retirement Fund. That works too!
2. The expense ratio should be less than 0.50%. The expense ratio is how much you pay the company who runs the fund. If your expense ratio is 0.25%, for every $10,000 you invest you will pay the company $25 every year. This relatively small number adds up over time, so you want to keep your expense ratio low. Most total stock market and S&P 500 index funds will have really low expense ratios (my go-to fund has an expense ratio of 0.04%) but check to make sure!

When can I use all this money I’m piling up?

Since a 401(k) is a savings vehicle and a tax-shield for retirement, the funds are meant to only be used in retirement. To encourage this, there is a 10% penalty for withdrawing your money before you turn 60 (59 and a 1/2 technically).

While it is possible to take your money out of a 401(k) before you retire, I would strongly caution against it. Obviously emergencies happen, and sometimes you need the money now. But if you’re taking that money out to buy a new car or something similarly unnecessary, then you’re throwing tens, if not hundreds of thousands of dollars in tax savings and investment income away.

Ok cool, I got my 401(k) set up at work, contributing 10% of my gross pay into an S&P 500 index fund with an expense ratio of 0.13%. Now what?

Now go about living your life! Maybe bump your contribution up a few percentage points every now and then. Keep working hard, doing things you enjoy, and in 40 years you might just have a few million dollars sittin’ in that bad boy. Feel free to write me a thank you note when that happens 🙂 #MoneyGoals

 

My apologies to my dear mother for my hideous, yet abbreviated profanity. If it gets one person to set up their 401(k) it’ll be worth it mom!

(Pictured: a photo embodiment of the phrase wtf)

The increase in income after a student graduates and starts working full time is a pivotal point in one’s personal finance journey. This moment will often set the precedent for saving and spending habits for decades to come.

And it can be tough to resist drastically increasing your spending. You feel like you should be rewarded for those long nights of studying and those years of sharing a bathroom with multiple people. It’s time for a few upgrades: a bigger apartment, a nicer car, fancier restaurants and some new clothes. Maybe throw in a 4K TV while you’re at it.

The tendency to spend more as income increases is known as lifestyle inflation, and it is a killer for saving money and planning for retirement. Unfortunately, it’s also a widely accepted and even celebrated part of American culture. Some people will take it so far as to start spending money before they start earning more money, banking on the higher income in the future to pay off their purchases today.

So how can you keep from having your financial foot caught in the bear trap of lifestyle inflation? Contributing to a 401(k) at work is a great way to save money, and since you won’t see it in your paycheck you won’t be able to spend it. If a raise comes your way, consider bumping up your 401(k) contributions, or putting some of your new earnings into an IRA.

Tracking your spending can also be an easy way to keep an eye on lifestyle inflation, or sticking to a budget (although I don’t use a budget).

I personally enjoy calculating my savings rate, i.e. “I saved 30% of my income this month.” When your earnings go up, you should be able to increase your savings rate, or at the very least keep the percentage constant. Alternatively, you could set a monetary goal, such as, “I want to save $3,000 by this time next year.”

No matter how you go about it, controlling your spending as your income increases is an important step to achieving your financial goals. So to all my friends who will graduate soon and start working full time, I challenge you to fight lifestyle inflation and start your retirement savings off strong. #MoneyGoals

 

Related reading: Why I Want to Live Like I’m in College My Whole Life

(Pictured: My ticket to the Mavs game last night. You bet that I didn’t pay for it though, my man CF hooked me up)

 

1. Your personal federal and state income tax rate

It’s interesting to see just how much you will pay in income tax based on your annual income. The Tax Foundation does a much better job of explaining this than I can, and they have helpful graphs so check their pages out for federal and state taxes.

2. What “standard deduction” and “personal exemption” mean and how they work

A standard deduction is a set amount of income that you don’t have to pay taxes on, and depends on your filing status. In 2017, this was $6,350 for single people and $12,700 for married people filing jointly.

A personal exemption is also a set amount of income you don’t have to pay taxes on, but this does not depend on your filing status. Everyone gets a personal exemption of $4,050 for 2017.

This means that if a single person made $50,000 in 2017, after the standard deduction and personal exemption, they would only need to pay taxes on $39,600.

3. How to reduce the amount of taxes you pay

The majority of Americans could be paying less in income taxes at their current income levels. Only 10% of 401(k) participants contributed the maximum amount to their 401(k) accounts in 2016, meaning 90% of people could have reduced their taxes by contributing more.

(A 401(k) reduces the amount of taxes you owe, similar to a standard deduction, and your earnings are invested and allowed to grow until you retire. I’ll probably do a full blog post on 401(k) accounts soon)

Using the 2017 rates above, if a single person earning $60,000 per year didn’t contribute to their 401(k) at all, they would pay $8,139 in federal income tax (on $49,600 of taxable income after their standard deduction and personal exemption).

If the same single person earning $60,000 contributed the maximum amount of $18,000 into their 401(k), they would only pay $4,274 in federal income tax (on $31,600 of taxable income after their standard deduction, personal exemption, and 401(k) contributions).

This person in scenario #2 just gave themselves a $4,000 raise by maxing out their 401(k). Not bad!

There are many other ways to reduce your taxes, such as contributing to an Individual Retirement Account, a Health Savings Account, taking advantage of tax credits, and others.

4. What your tax dollars are used for

It’s easy to think that you don’t benefit from paying taxes, as our benefits are often indirect or we won’t see them until we retire. A significant amount of your federal income taxes are used for defense and military (not getting invaded is cool right?), healthcare (not dying of rampant disease is cool right?), and social security (not making Grandpa work is cool right? You’re welcome Grandpa).

After those big three, there is also a certain amount used for infrastructure and transportation (did you use a road today?), education (you’re able to read this right?), and science/medical research (which has given the world lots of cool stuff, including camera phones and wireless headphones, among others).

I can drive a car from my house in Dallas to my hometown in Minnesota 1,000 miles away on roads that I could never pay for myself. At a low estimate of $2 million per mile of interstate highway, those 1,000 miles would cost 2 billion dollars to create. Now those few thousand dollars I pay in taxes doesn’t seem like that much.

5. You have to pay your taxes

At the end of the day, we all want to reduce our tax payment as much as legally possible, but we don’t want to avoid paying the taxes we legally owe. That would not be cool.

#MoneyGoals

(Pictured: The Washington Monument as seen from the Lincoln Memorial, May 2016)

On December 26th, 2017 I went on a walk with my mom and sister. The high for that day was -4 degrees Fahrenheit, with a low of -15 degrees and the wind made it feel another 10 degrees colder than that. According to the National Weather Service, frostbite can occur within 5 minutes at temperatures between 0 and -19 degrees Fahrenheit.

After a few minutes of being outside, I could feel my eyelashes sticking together every time I blinked. Out of the corner of my eye I could see a coating of ice forming on the inside of my sweatshirt, the moisture from my breath frozen within seconds after leaving my lungs. While the signs of extreme cold were apparent, I was toasty warm with every inch of my body (except my eyes) blanketed in multiple layers of clothing.

Preparation is vital when living in a severely cold and snowy place like Minnesota. Shoveling your driveway early in the morning so you can get to work, turning your car on 15 minutes before you leave to let it warm up, and spreading salt on ice so it melts before someone slips on it are common practices. These proactive measures make future life easier, safer, and more comfortable.

Likewise, preparing for your financial future can greatly improve your future quality of life. Saving 20% or more of your income, contributing to an IRA, and taking advantage of an employers 401(k) match will make your financial goals and retirement planning feel like a warm car in a snow-free driveway.

Short-term preparation can just as beneficial. If you know you are going to work on Monday, you can prepare by making your lunch on Sunday night. If you are traveling, you can plan ahead by checking out public transportation options at your destination instead of relying on Lyft or a rental car. These small preparations add up, and played a large role in keeping my personal spending under $9,000 for 2017.

How are you preparing for the future?

#MoneyGoals

Here is every dollar I spent in the last year:

Rent – $4,874.00

This breaks down to an average of $406.17 per month. Achieved by living with 4 roommates for most of the year, and 5 roommates for a few months in the summer.

Cell Phone – $152.63

Average of $12.72 per month. I use the service provider TPO, and I also didn’t buy a new iPhone (still rockin the 5c).

Groceries – $1,475.42

Average of $122.95 per month. I buy lots of bulk brown rice, beans, lentils, fruits and vegetables. I detailed my favorite go-to recipe here, and there will be more recipes to come!

Dine Out – $146.78

Average of $12.23 per month. This is the most noteworthy number to me, because 140 dollars is more than it costs to buy groceries for an entire month. Less than 10 meals at restaurants over the last year cost more than approximately 90 meals and snacks when I buy and prepare my own food.

This is why I rarely dine out. It’s almost ten times more expensive than cooking yourself, and is usually less healthy as well.

Travel – $948.39

Average of $79.03 per month, although almost all of my travel expenses came in March and May for my trip to Australia. There were other expenses that landed in the groceries/dine out/other columns that were directly connected to my traveling and I wouldn’t have spent money on otherwise. A couple road trips to Austin (July) and San Antonio (September) rounded out my year in traveling.

Other – $1,103.16

Average of $91.93 per month. I will probably break this “Other” category into more specific categories for 2018 to get a more accurate picture of my miscellaneous expenses. The big expenditures for 2017 that landed in this category were a new bike and parts (~$450), gym locker and membership fees (~$100), wedding/Christmas/graduation gifts (~$200), and this blog (~$100).

I will definitely start a “Transportation” column to track my bike and bus expenses for next year, so I can compare them to an average American’s car-based transportation costs.

TOTAL – $8,700.38

Average of $725.03 per month. This will most likely increase in 2018, as my housing situation might change after graduating, and I will be lucky to keep my housing expenses around $400 per month. I may be able to offset those costs by not taking an overseas trip this coming year, and hopefully not getting my bike stolen.

If you have any questions, comments, or criticisms about my spending habits, I’d love to talk to you about them! I would also encourage you to track your own spending, as it is a powerful way to boost your saving efforts. Thanks for reading, and best of luck to you in 2018 🙂

#MoneyGoals