Net worth Update

20190808_165628.jpg
We absolutely love the Great Lakes!

Well, I have been away for quite some time but the family keeps me busy. Having 4 kids at home in the summer is not an easy task and my wife couldn’t do it all by herself, as well as it wouldn’t be fair.
My family and the summer have kept me away from the keyboard but I am still chugging along on the FI road; I can’t believe the year is already over the June hump. Many times I find myself wishing time to pass by quick just because I am thinking of all our financial milestones I will hit on the way but I am trying to correct that mindset; time is our most valuable asset after all.

Anyway, I will give you my net worth update and then add few more personal things in a separate section so you don’t have to read it if you don’t want to.

A Picture is worth more than a thousand words?

Well, not many thousands here but at least some. Here is where we are at and significantly better than a few years back:

:Untitled

It may seem like not much for many people but this really blows my mind. All the way unitl 2017 we were living from paycheck to paycheck, paying down credit cards and bills, gasping for the next tax return to pour it into our credit card balance and pretend to be out of debt for few months or weeks…
Now we have managed to be credit card debt-free through the whole 2018 year and 2019. No debt other than our mortgages and the pesky student loan we are battling.

Still from paycheck to paycheck

We are still from paycheck to paycheck with the exception that now our money doesn’t go to somebody else’s pocket as soon as I get paid but rather to ourselves. We are trying to always pay ourselves first. What do I mean by that? Well, we are easily having extra $800 each month after paying all our bills, but instead of using that extra money to eat out more or buy more things we are taking it straight to the most pesky debt we have, which is our 22K student loan. We have managed to pay almost have of it between last year and this year and hope to be done by 2021. Each month, religiously we take $300 out of my first paycheck and $416 from my second paycheck. Usually we save them up for a couple of months and then dump all that money on the student loan balance. That way the money saved up can be partially emergency fund.

The current balance of the student loan is 11K. By continuing making the same payment the balance should come down to about 8K. I am not that concerned about the interest we are paying; it used to be 6.5% but we lowered it to 4.75% by taking a home equity loan against our rental property.
In the worst case scenario our tax returns are usually around 10K, which should be more than enough to completely pay off this loan and remove those $716 from the debt ledger and potentially go back to fund my 403B.

Maximizing earnings

One of the key factors to position yourself in a good financial situation is to minimize your spending and maximize your earnings as much as possible. Widening the gap between income and expenses will pave your way to FI.
If you make a lot of money but you spend just as much as you earn, your net worth will go nowhere.

In the case of teachers the opportunities to maximize earnings are not quite as easy and usually require extra credit hours at an approved college or institution.
In my case, this year I was able to max out my salary after taking 8 credit hours of coursework. The investment was $900, but this small investment will bump up my salary for almost 6K, leaving me a couple of thousands short of the magic 100K! Woot -woot!

New savings

We will be enjoying some new savings once I start my school year. We finally decided to switch from PPO health insurance to HMO. The difference is about half price. I used to pay $220 bi-weekly(went up to $280) and now I’ll be paying only $122 per paycheck to cover my whole family of six people.
My car insurance used to be $100 and I was able to slash it down to $48 eliminating things I really didn’t need such as coverage for my car in case of collision with an under insured motorist a fault. I did this because I really don’t care about fixing my car in case of collision. It would be cheaper to buy another used car.
I also had some supplement health insurance in case of a collision with an under insured motorist at fault, which supposedly would cover medical expenses. My regular health insurance would be enough to cover hospitalization expenses, so I got rid of that.

I am estimating about $4K savings in health insurance and about $624 in car insurance, which I will most likely allocate to pay off our student loan.

The biggest optimization

Almost 4 years ago my wife and I took the biggest leap of faith trying to get out of the neighborhood we were in. If you have read some of my other posts you may know the story. We had to make a choice between selling our house and pocket maybe 5K after owning this house for about 12 years or rent it out for at least a year and make more than that with a positive cashflow of $500 per month.

So we moved out to an awesome area and became landlords. We have rented our first home to the same tenant for 42 months. We were scared to death at first because the only calls we could get were Section 8 recipients and we have heard horrible stories about Section 8 tenants. We had no option. We screened our tenant the best we possibly could and it was overall a pretty good run. The only hic-cup was a rent increase moratorium imposed by Section 8 to landlords due to funds cuts.

We weren’t able to increase our rent for almost 4 years and we were opting for the security of having a tenant that was always on time with the rent at the expense of some more income. However, nothing is forever and this summer I received the infamous call from my tenant explaining that after getting married she would no longer qualify to receive assistance. According to the tenant they couldn’t afford rent even when I didn’t increase it for almost 4 years.

Luckily I put a lot of effort on building an emergency fund that would cover a potential vacancy and repairs. As they started looking for a new place I also started to look for a new tenant. In the process I realized that rent has simply skyrocketed in the area. According to my area rental market I should be able to collect about $500 extra a month, which would leave me with a positive cash-flow of about $850 monthly. From 3.7K annually we were getting, now we will go to 9.9K!
Unfortunately, my tenant changed her mind and decided they wanted to stay with me after realizing they couldn’t find anything cheaper. Sadly, I had to say no. That sent things in a down spiral of nastiness and rudeness but at the end things worked out and she is willingly moving out after a few threats of evicting her. I felt sorry for the family but I can’t subsidize housing for someone who thinks that honeymooning in the Bahamas and going to Disney is more important than affording housing for her family.

This is a huge move for our family! We plan to use all those savings to continue investing and paying off the mortgage of this rental before we invest in another property.

Summer 2019

This summer was outstanding. We took a a trip to northern Michigan to bask in the sun and enjoy the unsalted, free-shark waters. We took our camper (used) up there and spent about ten days enjoying each other’s company. I have not calculated the total cost of the trip but I am estimating close to $1000 including gas, food, ice cream and a few eating outs with the fam. We did lots of biking, kayaking, hiking, paddle boarding, fishing, etc. Most of the things for free except for our ice cream nights which ran for about $24 for a family of six people; totally worth it!
In the next two weeks the whole situation with our rental should unfold. Old tenant moving out, new one moving in, Section 8 inspection, and sometime in between I will need to lay down 600 Sq Ft of laminated flooring to replace the rental’s beaten up carpet.
Wish me luck!

20190730_104447.jpg
Found this awesome Traffic Master floor for $0.49 at Home Depot

In the meantime, I just sewed a couple of holes in my old work shoes and I am just ready to start a brand new school year. I would love to squeeze another year out of my old Sketchers 🙂 My older kids don’t stop saying “why don’t you just buy yourself some brand-new shoes?” They don’t get it yet.

20190811_101949.jpg
Saving my shoes for another year of rumbling at school

I would love to hear about your summer. How are your financial goals for the year panning out? Are you hitting your financial milestones?

 

 

Advertisements

How to get your car insurance for almost half price

Do you ever find yourself frustrated because after reading so many articles about saving money you realize that you are already doing all the tricks under the sunt? Sometimes I wish I was the latte drinker, so I could just cut it out and save a ton. We budget, plan meals for six, get down with almost every DIY out there, side hustle, etc, etc, etc. At the end, we feel like there is no much more we can do other than keep riding towards FIREville slowly and steady.

With that said, sometimes you do hear advices from different bloggers and podcasters in the FIRE community that stick with you and kind of become part of your toolbox. One of those tools that always has stuck with me was the words of J. Money at budgetsaresexy.com who I heard once saying “make sure you challenge every expense in your budget.” Yes, budgets can be a pain at the beginning but once you got yours down it becomes the most eye-opening experience financially speaking. Not only you realize where your hard-earned salary is going but it also helps you to project how much you will need in future months, as well as it can give you a starting point in your FI journey( I did it to figure out My Plan)

 Anyway, 2018 was a great year for my family. We managed to stay completely out of credit card debt, and we got used to budget and track our income. We also managed to pay cash for a brand-new roof and keep our saving ratio untouched.

We have gone through each item in that budget scrutinizing how much we are spending in each category and how we can either cut back in expenses or tame the wildest beast called “miscellaneous.”

Now, some expenses are a true pain in the Arsch. Why? Because they are time consuming. They require research, looking up terms and lingo that you are not familiar with and sometimes you even do some reading your state laws to make an educated decision.

For a while, I have had my eyes on our car insurance. It seemed to me that $100 a month, $1,200 a year for two cars was too much; just as a speculative observation. Regardless, I was thirsty for some more savings and $100 a month seemed like an opportunity to challenge. But again, I needed time to do my due research and shop around for better options. I didn’t want to call my agent without knowing exactly what is in my coverage and end up confused and intimidated with all the jargon.

With the arrival of my teacher summer break this was on top of my priority list.

As I mentioned before we were paying $100 monthly for two cars. We have a Corolla 2004 (177k) and a Dodge Caravan 2005(140K). Our lives unfold within a 15-mile radius. We haven’t had tickets in more than 6-7 years. My expectation was to lower that bill to maybe $80. That would have made me very happy.

The Results

Starting July 2019 we will be paying only $40 a month for both cars, which will save our family $720 yearly. Another added bonus this was that we realized we never added our new (used) car to the policy. That would have been a huge disaster if one of us would have gotten into an accident!
Let me explain. We used to have a Grand Caravan that died with a transmission problem and we went on to buy another used Caravan; notice it’s not “Grand” but just Caravan. Since the insurance card still said Caravan the needed change went unnoticed. We have 4 kids, super busy tending to them and we missed. No excuse though. It was a terrible oversight.

This makes reflect on the importance of looking carefully into all these things. Many times we all tend to pay things as we go and we don’t question much.

It’s scary to think that if we would have gotten in a car accident with that car, we could have been found ourselves in a predicament with no insurance to cover for damages, potentially sued, etc, just because we did not make a simple phone call to change it.

Straightening this up is probably the greatest saving of all…

Slaying $100 beast: What we had and what we have now…

Well, in terms of liability everything stayed the same. Our coverage for our liability under “Bodily Injury” stayed 100K for each person involved, 300K each occurrence. This is what my coverage would be if I get in a car accident, someone gets hurt. My insurance will cover that amount.

Under property damage, which would pay damages to other vehicle I wanted to cut back. However, it seems to be a preset with the “Bodily Injury” coverage I mentioned before and there was no additional cost. So I kept that. My reasoning for trying to cut back was the fact that the average cost for a brand new vehicle in the U.S. is 36K. I figured, I could go with half the coverage for property damage (50K, rather than 100K) and save some but it wasn’t possible. So that stayed at 100K as it was.

The Truth

I care less about our cars. That is the bottom line. I don’t brag about my cars or are a topic of conversation unless I am talking about savings, FIRE or if I am bragging about how many miles they have; now that last one is a badge of honor,

To me our cars are temporary vehicles to go from point A to point B. They are old cars that have served us well, but I have no emotional attachment with them.

This came up as I was talking to our agent and we were going through what they call comprehensive coverage. If you look at your policy, which I highly recommend, you will find a section that says “Uninsured Motorists Insurance Limits.” Under this section you may find the comprehensive insurance coverage; at least with Allstate that’s how they call it. Basically, it means that you will be covered for some categories in the given case that the other driver’s insurance is not enough to pay.

Now, what they call comprehensive coverage is kind of camouflaged in the same section. Our agent explained to me that this is what would cover us if a branch falls on the car and breaks the windshield, or the car is in a hail storm (it just happened a week ago), the car gets broken in or hit by a lightning, etc. Well, the problem is that there is a deductible that comes with that coverage and it is $500. It is also costing us $20. Not much, but I like how $20 look in my account.

The other money pit was the auto collision insurance for uninsured motorist. In other words, if I get in a car accident and the other driver is at fault and his/her insurance is not enough to cover my damage my insurance will kick in. Sincerely, I am not interested in this for the same reason I mentioned before. We have old cars. The most we could get for our cars is around 2K and this coverage was costing us $114.

Finally there was the “automobile medical payments” for underinsured motorist. This works in a similar way as the “auto collision.” In the given case I get hurt or one of my car passengers if the other driver at fault is underinsured to cover medical expenses my insurance would kick in and over my medical expenses. This sounds great and plays with your emotions too, but we have a terrific insurance policy with my school district. If I end up in a hospital due to a car accident my health insurance would pay. So, auf wiedersehen with that too!
There were few other fees that were eliminated with the comprehensive insurance change.

So, our new car insurance monthly fee will be $40 instead of $100.

Latest update

Since I started writing this post and looking into the numbers something didn’t seem quite right. I was told I was going to pay $40, but looking at the statement for the next billing cycle it says 320.58. Divided by 6 months it comes up to $53. $13 difference.

I had to call again to clarify and this is what’s happening. For the next two months we will pay $40, after that it will be $53.

Bummer! Still god savings but not as good as it once seemed.

However, in the conversation my agent told me that I could get a 10% discount if I pay six months in advance instead of installments. That would bring my premium to $288 for six months ( $48 monthly in my budget).

But wait there is more. If I go paperless, they will give me another 5% off. The premium would be $272 every six months ($45 in my budget or insurance bucket).

Car Insurance Before After
Pemium $600 $320
10% Discount for paying 6 months   -$32
5% Discount for going paperless   -$16
Total $600 $272
Six months savings   $328
1 year savings $656
Cost opportunity for 20 years at 8% return $32,421

Side story

As I was looking into all this, I had to go into our van glove box to get the policy number from the insurance card. Sure enough the one I found was expired. I told my wife to make sure she had the updated one. At some point she had to leave, the kids are fighting over who sits where, who walks out the door first, etc. She forgets about the card.

Five minutes later, she calls me to tell me she was pulled over because one of the headlights wasn’t working and she has no insurance card. Really? I couldn’t make this up.

Luckily, since I went through all the trouble of creating for the first time my login with our insurance company I was able to pull it up right away on the screen, take a picture and text it to her. We got only a warning ticket.

Can we call that a $150 savings?

Conclusion

This is still unfolding and hope the savings remain the same through the year.

The discount was not as good as I thought it was at first but saving $656 a year I think it is still good enough to be happy about it. I think it is terrific. Especially when I never can find where to cut more than what we already cut.

The lesson though, is we all need to find the time within our busy schedules to scrutinize our expenses. There are hidden fees everywhere, and we just pay them sometimes because we don’t question them in the first place. We get used to paying the same amount month after month and we never look back to unveil hidden fees or things that we simply do not need or want to pay for.

Fees that sometimes are disguised with a “recurring fee” label or “billing origination fee.” A cloud synapsis fee or any other bullshit they can come up with to charge you more. Companies know exactly how to play these word games and appeal to your emotions to achieve their ultimate goal: take the most they can from you.

Another lesson from all this is the importance of staying on top of anything that has potential to become a legal issue or lawsuit against you. All it took me to figure out exactly what I have in my coverage was a phone call and a bit of time. Logging you’re your insurance company website will provide you with most of the information you need to know.

Last but not least, like the cool dude with the mohawk ( J. Money, that is) says: Challenge every single expense.

Have you been able to rack up any good savings after reading other blogger’s recommendations? Feel free to share any mega savings you’ve gotten or over-sighted for years.

*** Disclaimer: This post is simply my opinion based on my own experiences. By no means this intends to be a recommendation of what you should do. I am not a professional or financial adviser and take no responsibility for other people’s actions after reading this. Seek professional advice.***