Welcome back to the second installment of Millennial Housing Diaries!
I feel like sentiment surrounding this series has been mixed—while there have been plenty who said their morbid fiscal curiosity was satisfied, a handful were put off by the fact that the previous entrant(s) received part of their down payments as a gift.
Look, I get it.
But the principles of fairness aren't applicable in life.
It would be unfair if life were a zero-sum game in which we're competing with one another for the same prize. In reality, we're all just trying to take the breaks we can get to improve our situation. As envious as I am, I don't believe it's right to shame people for their financial good fortune—that doesn't do anything to further financial transparency.
In the end, if you KNOW someone only purchased a home because they were given the down payment, that should (in theory) make you feel BETTER about not being able to do so yet.
But if people are afraid to divulge that (massive) detail for fear of being ridiculed, they won't—and the rest of us will feel like there's some money mystery we're unable to unlock in our quest for home ownership.
That being said, this week's post features two people whose commentaries tickled me—they're glad they have homes, yes, but the process (and sometimes, the ownership itself) is NOT all it's cracked up to be.
Single 23-year-old male in Tuscaloosa, Alabama
Income at time of purchase: $55,000
Down payment: 10%, or $23,305 (combination of gift from parents and unused college fund money)
Sale price: $230,250
HOA: $225/mo. (this is based on % of property owned. Two businesses own 51% and the residential units are split based on size for the 49%. Mine is largest so I pay most, but I also have a larger vote.)
Property taxes: $1,400/year
Other expenses: Electricity (use programmable thermostat, water included HOA dues), cable/WiFi, owner’s insurance, cleaning when lazy
Other non-fiscal expenses: Guests are fun but cumbersome and expensive (and you have to clean up after them).
"My decisions were mostly based on location and size. Most of the places I looked with a realtor were 3BR/2BA or bigger, and I didn’t need that. I currently don’t have a roommate and can still pay monthly payments of $1,200 (thank God) but with a bigger house, I would have to have a roommate or two. Location was the biggest draw (downtown, so I walk a lot—which saves money).
The main thing I'd tell someone looking to buy is that you are your own landlord, so you have to fix anything that breaks—including sh*tty appliances.
I've received three pay raises since I started working (about $4,000 total), so I split the "extra" money into savings, investments, and mortgage so NONE of it touches my bank account. These auto-transfers are great because they guarantee I won’t spend it. This also means I’m paying more than original $1,200/mo., so I should finish paying the mortgage early."
Married 24-year-old female in Huntsville, Alabama
Income: $75,000 before taxes (husband’s salary didn’t apply because he had just started a new job in a new industry, so they would only consider his part-time gig income, which was a couple hundred per month. That being said, his credit history was longer so we put the loan in his name.)
Down payment: 5%, around $8,000 (a stipend from an internship that I never touched)
Cost of home: $170,000
Type of home: Single family, 1800 sq. with .75 acres of land
Location: Huntsville, AL area
Mortgage: FHA* (explained in article below)
Total monthly payment: $925
No student debt
"So we, like you, started our home search on Zillow and were fooled by their Zestimates. We looked at 8 houses before we settled on a new build—it was partially complete when we found it so we had a little say in some of the finishes, etc.
We went back and forth on the offer 5 times to get what we wanted. Because it was a new build, we were able to get the builder to pay closing costs (I think this saved around $6k). We also required them to drywall and put baseboards in the garage, cabinets in the laundry. We wanted gutters and a fence but they wouldn’t budge there.
We put in an offer during the start of a government shutdown - which meant our loan wouldn’t be reviewed or approved until it reopened (which was only 3 days, luckily).
We put in a few stipulations, including a home inspection and land survey to ensure everything was as it was supposed to be (do NOT buy a house without this!).
Our offer was accepted beginning of December, but the home wasn’t complete until mid-January. Once the house was complete, we had an inspection. Following the inspection, we had a few things that needed to be fixed. And we had the home reinspected after. This happened twice.
This pushed our closing date right against our closing deadline for the loan application. The bank does an inspection as well to estimate worth—which was a few grand over our offer, so lucky for us we didn’t need to put more down to cover the difference. We literally closed with one day to spare on our deadline.
Home inspections and fees for the bank were a couple grand total.
All in all, the process was absolutely maddening and I wouldn’t recommend it to my worst enemy.
We worked with a local bank which made the process a million times easier and, even then, it was a freaking nightmare. I’m crazy organized and had everything ready from the day we were ready to get serious and there were still unpredictable needs.
I had to get a certified transcript from my school because my salaried work history was less than 5 years. Stupid stuff like that. They needed so much history on our bank accounts—all of them. We had just merged all of our stuff, so that was a nightmare (imagine trying to get history from previous accounts to prove the money for the down payment wasn’t a gift—that requires entirely different documentation). Our loan officer and realtor were godsends.
As for saving and mortgages, we live by Dave Ramsey and this is where we went astray. Renting in Huntsville makes no sense because our mortgage is less or equivalent to what rent would be. We were also keen on the market—we knew mortgage rates were increasing and things were quickly turning into a seller's market, with the new Toyota plant and Facebook data center bringing thousands of new jobs to the area.
Note from KG: Being aware of new businesses and development in your area is helpful when deciding on the timing for this process. For example, Dallas welcomed a giant insurance company and a Toyota plant in recent years, both of which aided DFW's skyrocketing real estate market.
We went with a 5% down payment because we knew the costs associated with home ownership after you get the keys. It was better for us to put less down, than to put some of those new "home ownership" costs on a credit card and pay 20-30% interest on that if we were unable to pay it off MoM. Some of those costs put equity into our home, so for us, the trade-off was worth it.
That being said, we’re able to make WAY above our required monthly payment—so even though our loan is 30 years, we have plans to pay it off nearly 10 years early, if we stay here that long (unlikely).
*FHA is the first-time homebuyer loan: it stands for Federal Housing Administration loan. It allows you to put as little as 3.5% down. Keep in mind, though, the buyer has to pay a fee at closing for using it.
All in all, buying a home is so much more than just a financial annoyance. It takes a ton of time, a lot of paperwork and all of these people only work 9-5. You really have to have a flexible job or a lot of PTO to make it work.
What really annoyed me was that, 75% of the time, you as the buyer have no clue what’s going on. You’ve submitted everything and you’re waiting to learn of your closing date, waiting to learn what rate you’re being locked in with, and everything. It's out of your hands once you’ve given them all the documentation. You have to trust that everyone else is doing their job which isn’t easy—especially as a control freak.
Also: I can’t say how many times I said, “It should not be this difficult,” during the entire process."
*grabs back mic*
These two left me with a few conflicting takeaways.
For one thing, seeing how little they put down made me feel like, "What am I waiting for?" As of right now, I could put down 10% on homes like those.
Then I remember that pesky PMI, or extra mortgage insurance, that you have to pay when you put down less than 20%, and I'm reminded why it's sometimes better to wait it out.
Secondly, I kept comparing my own situation (in Dallas) to theirs (in Alabama). As I'm sure you can imagine, Dallas's market is more expensive (and more inflated). Not to mention the weird idiosyncrasies like property tax that vary from state to state—Alabama's (I imagine) aren't that high, while Texas's are extreme because we don't have state income tax.
Check out this beautiful McMansion you can get in Huntsville for $500k:
These same digs in Dallas would run you at least $2M. In short, markets aren't equal. Or fair.
Lastly, the amount of paperwork and process gives me heartburn. As a self-proclaimed organized control freak, I do NOT like the idea of surrendering my fate to a bunch of lenders, agents, and banks. I remember when I went through the process, I was plagued by this paranoia that everyone was trying to rip me off because I was a young woman. Definitely a distraction.
That's all, folks. See you next week—we may be switching it up a little. Stay tuned.
Welcome, my aspirational friends, to the first Millennial Housing Diary. Today, we'll look at two people: a 24-year-old male in San Antonio and a 25-year-old female in Washington, D.C. You'll see a wide(ish) range of salaries, financial backgrounds, and debt situations.
I'm publishing their accounts of buying a home, edited for clarity and brevity, as well as their answers to my questions. Without further ado... here we go:
24-year-old male living in San Antonio, Texas
Income: $75,400, before tax (plus commission)
Down payment: $40,000 (saved over the course of a year; able to save $20,000 from living in parents’ guest home for a year and received the other $20,000 as a gift because of a full-ride college scholarship)
Cost of home: $291,000
Type of home: Single-family home, 4-bedroom
Location: San Antonio, Texas
APR (interest rate on his loan), or the interest rate on $251,000: 4.625%
Total monthly payment: $1,900-$2,100
No student debt
What he says:
"I was originally looking to move out of my parents' home and into an apartment in a good location in San Antonio, TX, but the price of rent for a 2-bedroom was nearly $1,600 after utilities. (Note from Katie: Ellie and I's rent & utilities for a 2-bedroom in Dallas is about $1,000 each, or $1,795 in rent alone—obnoxious, but not horrifying.)
I couldn't justify spending this much on housing, especially after living in my parents' guest house for free. I also couldn't justify never seeing a return on rent. So I began looking for homes, and the advice I have for anyone else is to educate yourself on the market you're buying in. Watch which houses sell, study the neighborhoods and learn which ones will be able to hold their value or appreciate.
If you're looking at new homes or subdivisions like I was, research the builders. Find out which ones build homes to last. The last thing you want to do is make a hasty decision. If you're buying a house this young, chances are you won't be living in it for longer than 5-10 years (unless you're ready to lock in for life, which I wasn't).
Make decisions with renting out or reselling it in mind. Is it near a good school? How close to shopping/grocery stores are you?
The idea of paying a mortgage consistently without a "quick way out" really scared me. You can break a lease for a cost—you can't break a mortgage. Be sure you have fall-back money, so in case you lose your job or something happens to your income, you can pay your mortgage for at least 4-6 months out of savings in a worst case scenario.
I think my situation is a little bit unique. If I didn't have the commission from work, or parents that could help me with the down payment, I would've had to save for at least 2-3 more years in order to feel comfortable with a down payment."
25-year-old female living in Washington, D.C.
Heads-up from Katie: This one blew my mind a little bit. Their salaries, the cost of their home, and how early in life they were able to make such a huge purchase really astounded and impressed me. She went into a lot of detail for both herself and her boyfriend, with whom she purchased the home. Check it out.
Her job: pharmaceutical sales representative
Her salary: $105,000 + quarterly bonuses based off sales performance (KG: holy shit.)
His job: lawyer, first year associate
His salary: $180,000 + yearly bonus (KG: double holy shit.)
Type of home: 1,170 sf. 2BR & 2.5BA | 2-story unit within a row home (3 units in building total)
Location: Logan’s Circle, Washington DC
Ages at the time of purchase: 24 & 25
Home purchase price: $699,900
Down payment: $85,000 (including closing costs and transfer taxes)
How long it took us to save: 2.5 years
Fixed interest rate: 5.125%
Monthly mortgage payment: $3,300
*The unit above us rents for $3,600 a month and the unit is smaller than ours!
HOA: $211 monthly
Goes towards building maintenance and every unit contributes.
Taxes: $419 monthly in escrow for property taxes
Insurance: $550 yearly/bundled with my boyfriend's car insurance
Total monthly payment: around $4,000 (we pay about $2,000 each)
Student debt? She has no student debt; he has student loans from law school. His minimum payment is $1,100 monthly, but he pays $1,600 per month.
"Although he makes more money than I do, we decided to use my credit score and financials to apply for the mortgage loan. Why?
1. I have no student loans/debt
2. I had a very high credit score
3. He had just finished law school and only had pay stubs from summer employment
*Since we are not married, they would not consider us jointly.
My contribution: $65,000. I would put my entire bonus checks and a monthly amount from my paycheck into a money market account.
His contribution: $20,000.
He contributed a $10,000 salary advance from his law firm. Law firms offer this advance because law students are discouraged from working while studying for the bar exam. He also inherited money from his grandparents to pay for college. Due to scholarships, there were leftover funds.
He invested the remaining inheritance money into stocks and mutual funds while he was in college. His investment portfolio was liquidated for his portion of the down payment. So although this money was “gifted,” he has been personally managing the money for 5+ years.
He "formally gifted" me $45,000 (the original $20,000 for the down payment and $25,000 for renovations) and documentation was shown to our lender. *Note from KG: This "formal gifting" she's referencing is a process in which someone gives you a large amount of money and signs something saying there's no expectation of reimbursement.
We were unable to put down a full 20% so we do have to pay for mortgage insurance. We wanted to live in a high cost/highly appreciating area and we couldn’t justify paying rent. Our mortgage is essentially the same price as if we had decided to rent a unit of equal size, so to us, it's worth it. We plan to refinance once we're married and have paid down part of the mortgage to eliminate the PMI.
(PMI = mortgage insurance you have to pay when you can't put down 20%, the magic number.)
The most recent Zillow search estimates our house to be worth $735,800.
We decided to invest $25,000 cash into the home by renovating the kitchen and half bath. We would not have been able to afford our home if it had been recently renovated (last update was early 2000s). By doing the renovations, we were able to generate some “sweat equity” on top of the property appreciation.
In 2019, we want to renovate the two upstairs bathrooms."
There are a few obvious things that came to light in these two entries.
For one thing, having a wealthy family and no student loans helps a lot if your parents are willing to gift you part of the down payment. The down payment is the obstacle to buying—you probably noticed both entrants noted that rent in their area is comparable to their mortgage payments.
Secondly, if you're in a serious relationship (or married) the burden is split in two. Even if you have student loans (like our second entrant's boyfriend), they aren't inhibitive... if you make nearly $200,000 per year.
Kinda goes to show how crucial it is to consider what, exactly, you're taking out loans for—$1,100/month minimum monthly payments on a loan for a degree in something that hardly makes $40,000/year simply isn't a solid return on investment. Unfortunately, they don't tell 18-year-olds this, and unless your parents were savvy and involved, it's unlikely you had these realizations going into school. I don't think I would've.
Finally, I want to take this chance to say: if you've read this far, you're clearly interested in making good financial decisions. If you aren't raking in $100,000 a year or anywhere close to buying a home, don't beat yourself up over it. Most of us aren't. There are ways for "average" earners to become wealthy, too, and it's rooted firmly in behavioral decisions about money (as we've discussed before).
Just note the little nuggets of wisdom each of your fellow Millennials are offering and allow it to motivate you to save more aggressively—that is, if you even want to buy a home at all. Next week we'll hear from two people who don't think the home ownership life is all it's cracked up to be.
And soon—for my ladies—be on the lookout for posts about how to substitute cheap or free alternatives for things like Dry Bar, facial waxing and threading, getting your hair colored, and more. (In other words, how to be hot without spending your way to the poor house.)
*The first profile feature will be next week, but I decided there was enough background and "takeaway"-style high points to warrant an introduction.*
I was convinced when I implored my Facebook and Twitter network for accounts of Millennial home ownership that it would take me weeks to find a couple.
Much to my shock and delight, I received approximately 15 responses in the first afternoon. Not only could I not believe so many people my age have homes, but so many of them were willing and eager to share all their most intimate financial details with me. #juicy
For obvious reasons, the names of those featured won’t be included, but…just about EVERYTHING else will be. Here’s what I asked people to start:
Age and location?
Do you have student debt?
How much money do you make? (If you’re married, answer for both incomes separately.)
How much did you put down on the home? (As a percentage, a total, or both.)
How much of the down payment was a gift from family and/or residual college fund money?
What was the cost of the home?
How much is your mortgage?
Interest rate (if you know it)?
What about taxes, insurance, and HOA fees?
What type? (Single-family, condo, townhome, etc.)
TOTAL MONTHLY PAYMENT = ?
As you can see, we really got into the details. After going through the process of buying and not pulling the trigger, I wanted to hear about those who DID--and how they did it.
A few major trends emerged, as you’ll see over the next few weeks of entries. For now, my plan is to highlight two different cases per article, paired in a way to show a contrast and illustrate different key points about the process.
One that struck me quickly was that every male who volunteered his answers was single and purchased the home by himself. Every female (except one!) was married or doing so in a committed relationship. It got me wondering… do men place more value in home ownership than women? Is there something else at play here?
Maybe single women who buy homes just don’t care if their experience is showcased on some rinky-dink blog. Imploring your Facebook friends to tell you how much money they earn and how much they’ve sunk into a home isn’t exactly a scientific polling method, but the contrast does bear noting.
Interestingly, here are a few other high points:
Aside from satisfying your curiosity about how your peers are faring financially, you'll probably gain a lot of tangible takeaways. A lot of helpful details and advice came out of this, so selfishly, I feel it was worth it.
We’re going to kick off next week with our first Millennial Housing Diary about a single 24-year-old male who lives in San Antonio, Texas and a 25-year-old female who purchased a home with her boyfriend in Washington, D.C.
See you later—same time next week.
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The other day I was watching the episode of Sex & the City where Aiden and Carrie break up and she’s forced to (attempt to) buy her apartment back from him after realizing how expensive it is to live in Manhattan.
She goes to the bank to get a loan and the teller lets her know she has some $700 in checking and not much more in savings. “Any assets?” the woman asks. Carrie grimaces.
Of course, the show (and this situation, in which a 36-year-old woman would barely have more than $1,000 to her name) is about as unrealistic as a $750/month rent-controlled apartment in the Upper East Side.
But a lot of you were curious, via Instagram Poll, about what I use for simple investing and savings, and where to start.
I’ve covered some of this in the past, but since it seemed to be a popular inquiry, I want to hit the high points.
Keep in mind everything below refers exclusively to my auxiliary investing. My primary investing for retirement takes place in my 401(k) through Southwest, to which I contribute 10% of my annual salary to be matched dollar for dollar.
That money isn't really accessible to me until I'm old and wrinkly (#24Forever), so I wanted to start a few secondary, liquid funds that I could use (ideally, someday) for a down payment on a house.
Before I discuss the software I use, I want to talk about two things you’ll have to accept first: passive investing and having the confidence to manage your own money.
Everything I’ve read about investing says that passive investing is the best bet long-term.
In short, if you “buy the haystack” instead of searching for the needle inside it (the high-performing stock), you’ll remove (most of) the risk from the investment.
This is classic advice from John C. Bogle, founder of Vanguard and inventor of the index fund.
An index fund, rather than trying to cleverly beat the market, tracks the performance of the broader share market over a long time.
I can feel your eyes glazing over, so if you want to dive deeper, check out this article from ING—it’s a super quick read. Otherwise, let’s move on.
This is important because it’s the philosophy you have to buy into in order for everything else I’m about to suggest to make sense for you.
There are other approaches, like actively managed funds and trading your own stocks based on what you think is going to perform well, but then you’ve got to (a) pay people for that and/or (b) deal with short-term capital gains taxes.
Passive investing goes hand-in-hand with another key component of financial independence and building wealth: having the confidence to do it yourself.
Having the confidence to manage your own money
Of course, the alternatives are (a) not doing anything at all or (b) paying someone else to do it. In this scenario, I’d say (b) is the lesser of two evils, but I wanted to share a quote with you from the ChooseFI podcast.
The two hosts, Brad and John, asked their guest (some entrepreneur) what he would have told his younger self about money.
“Hands-down, you need to manage your own money. I spent decades being afraid to understand money. Decades afraid to understand investments. Nobody will manage your money as well as you do because nobody cares about it as much as you do.”
He told a story about his wife’s asset allocations in her 401(k)—she set it up online through her company website and answered a few questions about how aggressive she wanted to be. She set the allocations in the beginning and never really touched it again.
If you have a 401(k) through your employer, you’ve probably filled out a similar questionnaire with the same hesitance and uncertainty as a 10th grader taking the SAT.
He, on the other hand, used an advisor with a fee.
When it was all said and done many years later, her portfolio was 2% ahead of his, and he said that was “all the proof he needed that it was possible to do it yourself.” My guess is that the returns were actually close to the same, but the advisor charged a 2% fee.
I might feel differently once I’ve amassed some real wealth, but at this point in my life, I feel confident that the passive route is something I can do myself for virtually free. If you consider yourself a normal young person with a normal amount of money (all subjective, but I mostly mean you're not a millionaire), it's probably a good starting place for you, too.
All this to say: you are capable of managing your own money and turning your savings into passive investments without needing to know everything about the market.
I use two platforms to invest; both are quintessentially Millennial in that they're a product of the FinTech industry boom and known for their exceptional UIs. I'm going to primarily focus on Betterment today, but Robinhood is the other platform I use to purchase Vanguard ETFs.
My friend Landon told me about Betterment last year, but I had just socked away about $1,500 in a few ETFs in Robinhood so I wasn’t super interested in another platform. It’s “managed,” but by a computer, not a person. So in my mind, it’s a weird crossover between passive and actively managed.
Betterment is interesting, however, because (in my opinion) it acts a little like your company-sponsored 401(k)—you answer a few questions about your timelines, income, and risk tolerance, and it makes the asset allocations for you.
It also offers the following:
Automatically rebalances your portfolio for the optimal level of risk; i.e., adjusts itself without you having to do a thing.
Any dividends get reinvested automatically; i.e., the money you earn gets reinvested so it continues to earn more.
Transfers funds automatically, kind of like auto-savings (I set mine for $125 every two weeks); i.e., you don't have to remember or force yourself to continue adding money to it. In a way, this is a good way to remove the obstacles to saving in general.
Tax loss harvesting
Checks for opportunities to lower your tax bill by selling low to offset taxes on the gains; i.e., if you made money on an asset, but then that asset tanked, you'd still have to pay taxes on those gains—so it sells that asset to relieve you of those taxes and purchases a similar one at a similar price.
The annual fee is 0.25%, or about $25/year for every $10,000 you invest—much lower than most brokerage fees I'm aware of.
I think the true value, however, is how easy it is. It’s perfect for someone who wants to slowly get some skin in the game but doesn’t really care to spend a lot of time (or any fee-destined money) doing it. These are my holdings in Betterment (I didn’t pick these; Betterment did).
The market isn’t great right now so I’m only up about $15 in a couple months, but if nothing else, it feels good to know that I’m (a) automatically saving $250 per month outside of my regular savings because of my auto-transfer and (b) setting myself up for long-term success without having to do anything.
If you want to get started…
Use this link to get your first 3 months managed for free (and then the 0.25% annual fee kicks in).
And if you're looking at those assets thinking WTF... You don't have to know what any of that means in order to reap the benefits. That's the beauty of 2019 and the financial tech industry. Jon Stein (founder of Betterment) wanted to make it easy for people who weren't interested in finance to invest intelligently.
And if you're interested in learning more about Betterment and Jon Stein, the How I Built This podcast about it got me way more comfortable with the idea.
That's it, friends. Nothing fancy, nothing scary—just a little bit of discipline to save some money you'd otherwise spend on brunch, and you can set yourself up for long-term success.
Join me next week for the introduction to a new series called Millennial Housing Diaries in which we dive into the intimate details of REAL, normal Millennials' experiences buying their first homes and how they did it.
The Southwest® Companion Pass has long been lauded as the holy grail of travel perks.
For those unfamiliar, it’s this unparalleled benefit in the airline industry in which you have a designated travel “Companion” for the year who gets to fly. free. whenever. you. do.
If you’re married, this means you and your spouse can travel for the price of your ticket. And if you’re a single guy or gal, you can work out a deal with a friend you want to travel with and split the cost of your ticket to effectively make everything 50% off, constantly. Or if you’re married but your spouse is lame, YOU too can pick a friend and have wild adventures! No judgment here!
All Employees get an automatic Companion Pass for their standby travel, which is how Thomas and I fly everywhere for free. So far, we've done Phoenix, Cabo, Seattle, Atlanta, and San Francisco by plane fo' nothin' (jury's still out on whether or not this is why he dates me).
Here’s the big news:
Starting today (and only through February 11), Southwest is launching a promotion in which you get an automatic Companion Pass when you sign up for the Rapid Rewards® Credit Card and spend $4,000 in the first three months. Oh, and not to mention 30,000 flipping points (that's enough for round trips, plural).
I know I’m prone to dramatic statements, but you guys, this is the biggest thing since sliced plastic. I can’t wait to hear what the ChooseFI guys have to say about this one.
I don’t make commission or get any credit for you signing up for the card, I’m just genuinely excited about all the people who read my posts and ask for tips on traveling cheaply to get their hands on this offer.
It’s the best way for people to travel all over the domestic United States, Mexico, Central America and the Caribbean cheaply. Hands-down.
But if, for some reason, you don't fly Southwest (what's wrong with you?), may I suggest the Chase Sapphire Preferred card? I'm posting an update next week because I just got my 50,000-point bonus. As someone with a Companion Pass already, this makes more sense for me so I can use the points on hotels instead of flights. Apply here for the Sapphire card.
If you don’t already have a credit card or a good credit score, you may not be approved for the Southwest card, but I’m crossing my fingers for you. Good luck!
As promised, I wanted to follow up with y'all about my experience with the Chase Sapphire Preferred card since I posted a month or two ago about how and why I had selected it as my card of choice for all things travel rewards.
If you recall, one of my (naïve) concerns was that I wouldn't be able to meet the spend threshold of $4,000 in three months in order to get the lucrative 50,000-point bonus that had attracted me to the card in the first place.
To get around this, I paid our entire rent ($1,800) and ate the annoying $33 credit card fee one month to get me close to halfway there, then did Christmas shopping and about a month of regular spending on the card (plus two National Championship tickets—R.I.P., Alabama's 2019 hopes).
Turns out Spendy McSpenderson had no trouble reaching that threshold after all.
And wouldn't you know it, I was in an Uber on the way to San Jose when I logged into my bank account to peruse all the different Uber and Lyft charges I had racked up since setting foot in the Bay Area when I saw it: the miraculous point bonus, just sitting in my Chase portal, waiting to be devoured on free travel.
I won't fake maturity here, I was pumped beyond belief and loudly announced to Thomas and the Uber driver that I now had nearly $700 in travel funds at my disposal--just for putting my spending on this tiny piece of plastic.
Cognizant credit cards can be really problematic for people who don't budget, I'm still convinced this is the smartest way to travel. Why the hell wouldn't you just pay for your stuff that you were going to buy anyway and can afford to get hundreds upon hundreds of dollars of free travel out of it?
Now I plan to wait until Southwest begins flying to Hawaii and use my points to book a few nights at a resort. Free flights, free resort... free Hawaiian vacation 2019. Now that's a deceptive affront to frugality I can rally behind.
And for those of you without free flights, there's always the Rapid Rewards Credit Card that's offering the Companion Pass right now through Feb. 11 (free flights for a friend of your choosing, effectively splitting the cost of your tickets in half).
You can always transfer your Sapphire points to participating airlines and their codeshare partners and redeem them as "miles," too. For example, 50,000 points at Southwest would get you several round trips.
If you'd like to get this card and have been helped by my posts and experience with it...
I'd really appreciate it if you used my referral link upon signing up. A little good karma would do you good, no?
Cheers and thanks for reading. Stay tuned for when I actually redeem travel with the points—I'll let y'all know what (and where) we choose!
Much like resolutions to lose 20 pounds and stop swearing, I figured it’d be worthwhile to make a money resolution that I’ll keep for two weeks and then feel guilty about abandoning for the remaining 50 weeks of the year.
Kidding—I think a “reach” resolution is a good idea, because even if you don’t get all the way there, you’re going to be a lot closer to your goal than if you hadn’t set one at all. Aphorisms out of the way, here’s what I’m gunning for in 2019. Strap in, people, we’re getting lofty.
The lofty objective: Hit $50,000 in net worth before I turn 25
(I turn 25 on Dec. 22, 2019, effectively the end of the year.)
Keep in mind two things here. If you’re worth (or were worth) hundreds of thousands of dollars at 25 already, I assume you either started your own company, somehow managed to finagle a bitcoin victory, or inherited money from your family.
I did none of the above, so my net worth upon starting my average salary job was approximately a few thousand dollars of savings.
On the flip side, I have no debt. No student loans, no interest-accruing credit card debt, etc.—essentially, I started at net zero. Not a bad place to be.
To me, $50,000 in net worth (across all accounts—checking, savings, 401(k) money I can’t touch, a few different investment portfolios of my own making, etc.) is a pretty aggressive goal, considering it means I’ll have to save and earn more obsessively than ever before in 2019.
Whether that means taking on more Sculpt classes, discovering another stream of income I haven’t yet considered tapping into (announcement on this front coming soon), or getting even more crafty with the way I spend, I don’t think it’s impossible—it’ll just require the very simple equation of income > spending, by a lot.
Luckily, we live in the age of the Worldwide Web, where people have chronicled every possible avenue for spending frugally and saving aggressively. Join me, friends, and set your own financial goal. Here are the two major ways I plan to approach mine:
Tactic #1: Taking another, more critical look at my overall budget
Here’s where I currently stand with my spending limits—numbers I used to almost consistently go over. If you’ve never set a budget before and you need a benchmark of where to start, consider this radical transparency for your benefit! Adjust accordingly. Or, download the free budgeting tool on the side bar of this page.
Rent & Utilities: $1,015
Restaurants & Bars: $400
Gym: $120 (this budget is retired now since I don’t pay membership fees)
Personal Care & Shopping: $200
Total monthly spend, if perfectly on-budget: $2,455
Admittedly, when I look at this list, it doesn’t paint the picture of someone who’s depriving herself. $400 for restaurants? $200 for shopping? This isn’t indicative of someone who's spending really consciously (and yet, how EASY it is to spend this money month after month).
I’m going to make some adjustments where I see possible in 2019 to set a few tighter limits and cut down where I see tendencies to overspend. Stay tuned for where I net out.
To meet the goals I'll outline below, I need to cut about $235 out of the budget above and shift it to savings every month.
If you’re looking at this outline like, Holy shit, how does she know how much she’s spending in these categories? How did she even set these limits to begin with? This is ridiculous. Check out one of my first money posts about budgeting here. It might help you get on the right track for 2019 and decide a reach goal of your own.
Tactic #2: Not getting myself into an egregious budget hole
I started giving a genuine damn about money in May 2018 (I know this because that’s when I started my asset tracking spreadsheet), and I was already a couple thousand dollars over budget in multiple spending categories.
Through a combination of finding extra freelance work, taking on more classes at Corepower, and selling clothes on Poshmark (all while cutting way back on spending), I—little by little—got successfully back on track to close out 2018 in the black.
In 2019, I want to REALLY commit to being consistently under budget, not over—so I can save in excess of the standard 20% savings benchmark.
Ideally, I’d like my take-home pay "save rate" to be closer to 30%, separate from the money I’m saving in my 401(k) at a rate of 10% of my salary, for a total savings rate of 40% (plus our Company 401(k) match).
Hitting $50,000 in net worth is truly only possible if I stay on or under budget, consistently, and keep finding new ways to supplement my take-home pay through active or passive income streams.
Quick definition moment:
Active income stream: Money that requires constant work to continue earning a paycheck—e.g., my actual salaried job, teaching yoga, etc.
Passive income stream: Something that requires an upfront investment of time or money but then pays out over time with no additional work; e.g., selling an eBook, Airbnb-ing or renting your apartment (to an extent), etc.
Thanks to finding frugality late in the year, I was able to cut back on a lot of wasteful spending habits.
And if you're wondering how I tracked my progress every month in 2018, the tool that helps me is Mint’s “rollover” budget capability—I let overages (and underspending) roll into the next month for an excess of spending or some excess funds. This helps me see the overall picture of my budget so going WAY over-budget in the previous month doesn’t get wiped clean.
It's truly just math. And although budgeting isn't sexy, it actually CAN be fun once you have a concrete goal determining how and where you save. By setting up parameters and learning to live within them comfortably, your money functions to free you—not prohibit you.
If I know how much I need to save in order to hit my goal, I just have to work backward. Then it’s just a matter of follow-through. You can do the same thing. Maybe your financial goals are more aggressive—maybe you're already in the six-figure club and you're trying to hit seven.
Or maybe you just want to pay down a debt that's been hanging over your head. Whatever it is, I've found capturing the overall picture first is the best place to start. And when BETTER to start than Jan. 2, 2019?
If you need to look back at your expenditures for the year and get an idea of how you spend in order to make your budgets, you can download your data from your credit card company or checking account to see how the categories break down. It's eye-opening.
And now's a great time to start tracking all your assets, a process I outlined and explained a few months ago. Check out the original post for a refresher and make your own!
What's your finance goal this year? Let me know!
Most of the time, being really rich is great (not that I’d know, but I assume).
Right now, I’m thanking my unlucky stars that I wasn’t fabulously wealthy when I took a sudden interest in investing $1,560 of fun money in a few Vanguard funds.
Because had I been really rich, I probably would be down a lot more money than I am right now (because I would’ve invested a lot more “fun money”).
I sure am feeling it in my 401(k), though; I track that balance month-over-month since Southwest matches at a very generous rate and it used to climb a lot faster than it is right now in my aggressive allocations. This is definitely not my "fun money," it's a sizable portion of my income that I absolutely need someday.
In short, the stock market is in a period of ‘corrections.’
The NASDAQ Composite Index hit an all-time high of 8,109.69 on Aug. 29 of this year, and is now—and this is an industry term—in the shitter.
Here's a blurb from an awesome daily finance newsletter I read that paints a nice, snarky picture (excerpted on Dec. 21):
It was another face palm-inducing day on Wall Street, where volatility has become as commonplace as Patagonia vests. Let's survey the damage.
Rather than trying to get into the nitty-gritty stuff (head to the MarketWatch link above for that), I want to talk about how I’m feeling about money and investing right now in the midst of this low period, and the implications for someone’s hypothetical impending retirement.
A big market drop when you’re 24 and have a couple thousand dollars invested is mostly a ‘shrug it off’ annoyance. Who cares? You don’t need this money for decades. If you just started investing this year like me and dipped a proverbial toe in the water, you might feel a little discouraged after seeing things reach an all-time high then drop lower than you started.
After all, here’s what my Robinhood balance looked like when I started (ignore the chart, just look at the numbers at the top):
There I was: optimistic, ready to roll—wanting to cut myself a slice of that free money pie. And for awhile, it seemed too good to be true. Here's what it looked like when things were riding high only a few months later (I was convinced investing was magic and I had found the secret to free money):
That was (mostly) it's peak for me. A nearly 11% increase. Alas, now we're here (this screenshot was taken on Dec. 20; who knows what'll happen by the time this gets published):
Wah. $108 (almost 7% down) for the year.
UPDATE: It's Dec. 26 and I'm down to $1,430.61, -8.29%. On Christmas Eve at the low point, I was down almost 13%.
Like I said, this isn’t enough money to really care about. It’ll pick back up. I’m not concerned. But it definitely woke me up to the reality that, had I invested my entire net worth in the market, I’d probably be a little more rattled.
It made my guaranteed 4% APR interest checking account with the credit union look a whole lot more attractive, because that account has paid out hundreds of dollars in interest over the last few months.
It’s almost akin to gambling—wanna go for a potential 8% (or higher) return with a risk of an equivalent loss (or worse), or go for a guaranteed 4% return? This is an oversimplification that depends on a LOT of factors like allocation and timing, but I think the analogy stands.
That’s the benefit of being young—timing doesn’t REALLY matter. You know you have all the time in the world (practically speaking) for things to rebound, if you’re saving the investments for later in life.
But if you’ve been planning to retire in a month or two and you’ve got hundreds of thousands (potentially millions) locked up in the market and there’s a big 8% dip with no recovery in site…well, that looks a little different.
It’s risky stuff. Overall, it’s probably a safe bet to place, and absolutely better than saving money in low- to no-interest savings accounts, but nothing’s ever a guarantee. Average returns—even if they’ve caused your investments to grow by leaps and bounds for decades—can be wiped out in a big market crash.
I know people personally who lost hundreds of thousands of dollars in 2008-2009 and took years to recover (I remember in middle school my parents told me, "You can go anywhere you want for college! Even Harvard! We've been saving for college for years!" and after 2008, it was, "OK, pick a state school,"). Roll tide.
The consolation is that they likely wouldn’t have had that much to LOSE in the first place had they not played the market, but timing matters A LOT when you’re going into retirement and banking on that nest egg being intact.
So while things are shitty right now, that means it's the best time for young people to BUY, BUY, BUY diversified index funds! They're cheaper than they've been all year, right now. Like a Black Friday sale on stocks.
And then, for the love of God, don't check your Robinhood accounts for a few months. Let it ride. If you want to start your own "fun money" side account in Robinhood, use this referral link and we'll both get a free stock (usually they're small stocks, but I know a few people who have gotten a free Apple stock and that's pretty cool).
Join me next week on Jan. 2 for my 2019 Financial Resolutions—we're getting specific about goals and how I plan to get there.
Quick note from Katie: Haley is a dear friend of mine and, if you recall, the young woman responsible for igniting my interest in investing. She sent me a spreadsheet of her investments and from the moment I opened that document, I was hooked.
Because Haley has a wealth of knowledge to share and works in the finance industry, I want to use this platform as a way for HER to reach you, too. Her content below has been edited to fit the format of my blog (short paragraphs, an onslaught of em-dashes, etc.), but is truly hers.
A theme that rises to the surface in Haley’s piece is spending a lot of money at once because of a lack of time—this is something we intend to delve into later. Whether you’re someone with a lot of free time who doesn’t make much money or you’re working 80 hours per week and earning a high income, this discussion is an interesting one we want to tackle in 2019.
I learned a lot from this and can’t wait to start getting cashback for my daily spending.
Thanks for reading. Enjoy!
Similar to Katie, I have a passion about personal finance and education. I graduated college with savings that amounted to less than my current weekly salary and parents super enthused to get me off every plan possible (except my cell phone, which I dutifully transfer money for each month).
Katie and I bonded over investing and our friendship definitely peaked when I followed her advice and took a new razor from my spin studio instead of subscribing to Billie. Hopefully these articles are helpful enough that I can continue to do a few more on my favorite thrift websites, buying a car (a large possibility in 2019) and finding a balance between time and money management.
However, the reason I wanted to write was to share easy money hacks that I use to get cash back on top of my credit card (yes – it’s possible!). For full disclosure, I use my Chase Sapphire Reserve for everything and occasionally a debit card if it’s under $5 or I accidentally leave my credit card in the Trader Joe’s credit card machine – something that happened recently.
I started 2018 trying to figure out ways to spend my money more efficiently and maximize my large purchases. I don’t normally have time to shop during the week or weekend, so I normally will order $400-$700 worth of clothing at once, getting multiple sizes of items and returning the difference.
This is where my first favorite website comes in: eBates. Stores pay eBates a commission for driving sales, and customers get a portion of that back. To date, I’ve earned $162.43 just for doing my every day shopping.
At first, I thought it was super overwhelming and was scared I would forget to use it, be disappointed, and then give up. The trick is to install the Google Chrome plug-in—there’s a pop up any time you’re on a website that uses eBates. I’ve been lucky enough to place an order when there’s a 10x cash-back–so if you spend $100, you get $10 for just clicking a button!
eBates also has cash-back in stores, so you can earn while out shopping–I did a Sephora haul and stacked 8x cash back from eBates and Dosh (but more on that later). Earnings are paid out quarterly via check or PayPal and it’s a nice bump each quarter.
While I love eBates for clothing and home goods, Drop is fantastic for everyday items. You pick “offers” and earn points. Right now, I have Lyft, Uber, Whole Foods, Trader Joes, and Target. You can also add other offers that change weekly, but some only work through the Chrome button.
If you really wanted to get into the proverbial points-weeds (Katie, I know you will), you could determine the value of points vs. eBates and work off that. For right now, I’m happy getting points on my every day purchases without much work attached. I’ve been using Drop for less than a month and already have enough for a $10 Amazon gift card.
Ibotta is definitely the most time-intensive of the four that I use, but still takes me less than 5 minutes a week. You upload your receipts from grocery shopping and get cash-back based on items.
I normally do it when I get home from grocery shopping—and all major retailers are included. While it may be more arduous than the other three, I’ve earned about $40 using the app since September, which isn’t too bad for maybe 10 total minutes of work.
Note from Katie: This is a perfect example of why I love these money life hacks. If you take your annual salary and turn it hourly, you may not even make $40/hour (that's about an $83,000 salary). To make $40 for 10 minutes of work is equivalent to $240/hour, or almost $500,000/year. When you think about the time/money equivalencies, you can see how these seemingly insignificant points/cash earners are more than worth your time.
Finally, last (and kind of least) is Dosh. Dosh is similar to Drop in that you link your credit cards and receive cash-back on offers. The one downfall to Dosh is the offers aren’t super applicable to me–the first few that come up are Pizza Hut, Forever 21, and Mattress Firm.
However, there are some diamonds in the rough, like World Market, Sephora, and Walmart. As I mentioned earlier, I did a Sephora haul before I started my new job in July and stacked 4% cash-back on Dosh and 8x cash-back on eBates – just for spending money I was already going to spend.
While there is a little work involved to get started, I would highly recommend any and all of these cash-back programs. I’ll never say no to extra money, especially when it’s automated and requires no work on my part. Do you use any of these? I’m going to peer-pressure Katie into using them and am excited to see her thoughts!
Has anyone else seen the documentary Stink! on Netflix? Although its monosyllabic and exclamatory title makes it sound like it’d be a whole lot of fun, I can assure you, it’s anything but.
If you haven’t seen it, I’ll save you 91 minutes.
Essentially, it delves into all the toxic shit in your household cleaning products, clothes, and even health & beauty items—ingredients that the EU banned that are still allowed in the U.S. because nobody regulates them (the FDA just deals with food and drugs, per its name, it explains).
I sat there in front of the TV, foot tapping, side-eyeing my new slew of 99¢ body wash and generic, orange-scented dish soap. Turns out the cheap fragrances they use in the products (hence the aptly named “Stink!” title) are known carcinogens and mutagens that mess with your genes over time and can upset your hormone levels causing all kinds of chaos in your body.
Worse, manufacturers don't have to disclose the ingredients. They can simply slap "fragrance" on all of it and call it a day, making it impossible to know what chemicals you're really dealing with.
Great, I thought, as I looked down at the sweatshirt I was wearing that had been recently washed with $4.99 knockoff Gain detergent. What’s extra money in an IRA if you’re dead from mutated genes?!
I kid, of course—a fatalistic attitude is literally the stupidest mindset with which to approach money—but it raises an interesting discussion about frugality vs. quality in your purchases.
Is it worth it to buy the super cheap, low-quality version of something if it’s (a) unhealthy, (b) doesn’t work properly, or (c) will break soon and require you to replace it? In theory, no. But it’s hard to know ahead of time where it’s worth it and where it isn’t—where you’re paying for quality, or where you’re paying for a brand name and the marketing department’s salaries.
It’s hard to reconcile wanting to get an incredible deal that satisfies your love of saving money (like my 99¢ jug of body wash or free SoulCycle disposal razors) with buying stuff that’s actually GOOD for you.
In some cases, the bare minimum gets the job done. When I look around my kitchen and bathroom, I see things that fall into this category, but not many—paper towels being a standout item where, no matter how cheap or expensive I buy, they work exactly the same way and I can’t tell a difference (toilet paper, however, is a different story).
But in other cases, I do notice a difference.
The cheap body wash smells really good (which is, after watching Stink!, almost concerning), but is almost water-thin in consistency. Once you get over it not being thick and luxurious, it’s honestly fine. It does the job. It doesn’t leave a fragrance on your skin or leave you soft and supple like other products do, but hey, it was less than a dollar.
Then you’ve got your main offenders: the household cleaning products.
These are the products I’ve historically spent more on because the higher quality, natural products’ packaging is cuter (I was a sucker, OK?!) and I got freaked out by washing my dishes and counters and other things that touch my food with soaps and sprays that burned my nose when I inhaled (Windex is HORRIBLE; the ingredients are appalling).
I purchased the HONEST Company’s (Jessica Alba’s brand) multi-surface sprays in the tangerine and lavender scents, the Mrs. Meyers dish soaps in lavender and rosemary, the Mrs. Meyers hand soap in lavender and honeysuckle, the lavender laundry detergent from ECOS, and the Method dishwasher pods.
To be real with you, this stuff was definitely overpriced. You think Jessica Alba is concerned with our budgets? No. She’s got trainers and drivers to pay. She’s going to charge $5.99 for a bottle of glorified flower water and laugh at us poors trying to do something good for our health.
Mrs. Meyers is pretty pricey too, something I didn’t realize until I saw how little laundry detergent you got for $15.99. I’m sorry, but when there’s a $4 alternative on the bottom shelf, I can’t bring myself to spend that much.
Where’s the line? What's the balance?
Here’s my two cents: something that’s dirt, dirt cheap is probably that cheap for a reason. Unless it’s on clearance, it’s probably because the ingredients in it aren’t very high-quality.
Do you need a frankincense & myrrh-scented hand soap with flecks of real gold and fairy dust? No. But is it maybe worth an extra dollar or two to wash your hands with something that isn’t loaded with chemicals and artificial smells? Up to you.
I found a site called EWG’s Healthy Living that ranks consumer products for categories like:
It breaks down each ingredient, the amount of information known about said ingredient, and the level and nature of any concern. To determine a good balance, I searched for the cheaper “natural” brands that I see in that aisle and compared grades with price.
And if you’re really trying to satisfy both your health-conscious and financially independent sides, you can use the DIY household cleaning recipes found here. I'm going to try making my own products (scented with essential oils instead of fragrances).
High upstart costs, but I imagine it'll be relatively cheap to maintain and make it all in bulk. That's the good news—in some ways, sustainability and frugality go hand in hand. Using a dish towel that you wash once weekly to clean up spills in your kitchen instead of roll after roll of paper towels (cheap or not) will be far less expensive and wasteful in the long run.
I’m not here to tell you what’s worth your money and what’s not (although I can pretty safely assure you a $20 laundry detergent is not). I’m here to commiserate with you, fellow budget-conscious health nut: the quality vs. frugality struggle is a real one, especially when there are health and environmental implications to consider.
I hate spending money, but when Sam Cat gets on the counter and eats scraps of food off it, I’m pretty damn happy I cleaned it with an all-natural, non-toxic cleaner instead of Windex or Lysol.
Be conscious of the price you’re paying and what that money is going toward—quality or branding. When in doubt, select a product that has a price point somewhere in the middle, and do your research (sometimes as simple as turning around the bottle).
At the end of the day, trust your gut. As a conscious and frugal consumer inundated with price points and products constantly, you likely have an accurate pulse on what's overpriced.
It’s not silly to pay more for a healthier option, as long as you’re not just paying for trendy “green” labeling.
The young woman's money guide for all the things you're too embarrassed to ask your friends. Build the life you thought you were too broke to afford through managing your spending habits, travel hacking, and simple, smart investing.
Full-time Brand marketer at Southwest Airlines, part-time Yoga Sculpt teacher, occasional Waffle House Model and reformed materialist.
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