At the risk of showing my cards at the outset of this post, the two most crucial components of traveling are strategic budget prioritization and travel rewards hacking.
I included a third powerful travel hack for getting extremely cheap international airfare ("$400 to Melbourne in the summer" cheap) in my Money, Honey newsletter. Be part of the #FrugalFriendshipClub and subscribe if you're interested!
This sounds simultaneously underwhelming and obvious, but these two things can—many times--make the difference between a young person bleeding their bank account dry to travel once or twice a year, OR traveling frequently with relative financial ease. Sounds great, right?
If you follow these steps, your next trip will happen within three months or less.
A lot of young people say they can’t afford to travel, but then (and I mean this with NO judgment, please trust that) they eat out for lunch during the week and go to bars every Friday and Saturday night.
It’s not that they can’t afford to—they’re just prioritizing their expenses inefficiently.
The second category I see and hear about most often are those with substantial loan debt. Whether it’s credit card or student loan debt, these people are being responsible in the sense that they’re prioritizing paying their loans over (or, perhaps, feel their loans somehow disqualify them from) traveling.
The only type of person that I’ll go out on a limb and say this article doesn’t apply to (or shouldn’t, for the time being) are those with immense credit card debt. If you know credit cards pose a self-control issue for you, I’m going to ask that you opt out of the second half.
However, the first part—the prioritization—applies to everyone.
Prioritization of spending (again) sounds incredibly obvious. OBVIOUSLY, you should spend your money on the things you care about. Duh. (And if you're tempted to scroll past this part, I ask you: why did you click on this article in the first place? If you're not saving enough to travel right now, give this part a chance. It's half the math equation.)
The choice between a $12 açai bowl for breakfast on a rough Monday morning and going to Seattle for a long weekend doesn’t feel like a direct comparison—that’s not a “one or the other” cost/benefit analysis, in most of our minds. Nobody buys breakfast being like, "UGH, I'm sacrificing a weekend trip for this smoothie."
But if a trip to Seattle is $500 for the weekend (it is) and you’re spending $150 per week on restaurant food (not a hard task, since that’s only $20 per day), that trip to Seattle could be paid for in a little more than three weeks of forgoing your Chipotle burrito bowl and bringing your lunch to work.
I would challenge you, if you don’t budget, to look at your credit or debit card statements for last month and add up how many charges went into the “Restaurants & Dining” or “Alcohol & Bars” categories. I guarantee 9 out of 10 of you will be utterly blown away by how much you spend without realizing it. I know I was before my #FinancialAwakening.
(For the record, I don’t think there’s anything inherently wrong with restaurants and bars—it’s just a virtually painless way to get hundreds of dollars more per month out of your budget, since it’s entirely discretionary.)
In other words, it’s a lot easier to stop spending $200 at the bar every month than it is to stop paying $200 on your student loans.
If you’ve made it this far and you’re like, KG, that sounds literally horrible and I don’t want to deprive myself, bear with me. You have two options.
If you want to squeeze more experiential value out of your money without actually earning more, that money has to come from somewhere. Sacrifices may be involved, but it doesn’t have to feel like deprivation. I get it: But KG, I want to live like an Instagram model both ON the private jet and off! In which case, your options are:
I don't make the rules! I just write this blog!
I used to spend between $500 and $600 a month on restaurants and bars without batting an eye. I didn’t even feel like I was spending that much.
I was doing what (I thought) were totally normal and not-at-all-unreasonable things for a young person who was making good money. Eating a lunch or two out during the week. Starbucks every morning. Dinner out on Friday and Saturday night. Brunch on Sunday.
Not surprisingly, each $5 or $15 or sometimes $30 charge quickly accumulated, and before I knew it, I had sunk $500 into my Restaurants & Bars budget with little or nothing to show for it save for a few Instagram Stories of my food that nobody cared about.
But last month, I spent $140 total on restaurants and bars. I only eat at restaurants on the weekends now (it's a treat!), I don't go to Starbucks, and I tend to pick cheaper meals out than I used to when I DO eat out, like grabbing $6 Chick-Fil-A on a Friday evening instead of an $18-$25 restaurant experience.
Here’s the crazy part: I didn’t feel at all deprived. If anything, my life felt simpler. There was no decision fatigue clouding my judgment. I didn’t feel like I missed out on anything. I still ate food I loved—it was just food from Trader Joe’s.
Instead, I went to Mexico last month and spent that saved $350 on my nonstop American flights. $350 on flights to Mexico vs. $350 on food. Prioritization. Your decision.
I think you probably get the point, so that brings me to my second point: travel rewards hacking.
The travel rewards hacking game is helpful for and applicable to everyone, but especially those with student loans—because it doesn’t involve saving money (maybe you don’t even have an income to save in the first place yet).
If you haven’t read my post yet on the Chase Sapphire Preferred card, open it in another tab and do so after this.
Essentially, you can stack the acquisition bonuses from different travel credit cards to pay for part or all of your travel.
A lot of these cards have very low annual fees, relatively speaking (Sapphire Preferred is $0 the first year and $95 after that). If you’re a travel hacking newbie, I’d recommend getting the Sapphire Preferred card, then three months later getting the Southwest Rapid Rewards Plus Card ($69 annual fee).
Why three months? Three months is the time you’ll need to hit the spend threshold on the Sapphire card—you have to spend $4,000 within the first three statement closings to earn 50,000 points, valued at between $685 and $1,000 depending on how you hack it, and there are tricks involved with maximizing your return on points (I definitely lucked out in my point redemption for Cancun).
The Southwest card only requires you to spend $1,000 in three months to get 40,000 points, so if you think you can work toward both thresholds simultaneously ($5,000 in three months), go for it.
Apply for the Sapphire Card here to start working toward your 50,000 point bonus (I've linked my referral code in the hope that you've found value in this article and are willing to give me a small kickback for writing it—hey, transparency, right?).
Use the card to pay your rent for two months and call it a day!
[It's worth noting that these are considered premium credit cards and therefore favor applicants with already established credit, so if you have bad credit or no credit, it's unlikely your application will be accepted—in that case, I'd suggest reading my starter post about credit cards and begin building credit now.]
The Southwest card is the best airline card (not that I’m biased) because Southwest points are so valuable. For example, my roundtrip to Hawaii cost about 6,000 points when it was on sale, and the point bonus on the card right now is 40,000. It buoys between 40,000 and 60,000, so sign up when it’s at least 50,000 (that's what I'd do if I were you).
So you can use the Southwest points for the flights, the Chase points for the hotels, and bada-bing, bada-boom—you’re traveling for free. It sounds easy, because it is. (We'll get into annual fees and credit cards more broadly in a future post.)
And for those ambitious jetsetters out there like, but KG, I want to travel ~abroad~, do what my friend Abby does—use your Southwest points to fly to the major U.S. international airport hubs (JFK, LAX, DFW) and book an extremely cheap international flight from that airport instead.
You’re going to pay WAYYY less for a flight to Thailand out of LAX than out of, say, Nashville (in this hypothetical, you live in Nashville—yeehaw), but you can fly Nashville to L.A. on Southwest for a few thousand points.
Observe Nashville to Bangkok on American:
Yikes. Nearly $2,000. Now, let's look at LAX to Bangkok on the same dates:
$1,000 less. So how are you getting to L.A.? On Southwest, for 6,000 of your 40,000 points (look at the yellow Wanna Get Away column):
And for those of you who are scared of credit cards… your credit score is based on several factors, including length of credit, credit utilization, payment history, and recently opened accounts, among other things.
So while your “recently opened accounts” score may go down slightly by opening two new cards in six months, your credit utilization score will go up because you’re now utilizing a smaller amount of your credit line. Consider this hypothetical:
You have one card with a $10,000 credit line. You typically spend $3,000 per month. You’re utilizing about 30% of that total credit line.
Now let’s say you open a Sapphire card with a $12,000 limit and a Southwest card with a $10,000 limit.
Your total credit line now is $32,000, which means if you continue to utilize $3,000 a month (i.e., your spending stays the same), your new utilization is about 10%, compared to your former 30% utilization. (The lower, the better.)
Sometimes I think we get so overwhelmed and intimidated by personal finance and money management in general that we just throw our hands up and stop paying attention--that doesn't have to be you.
Tips like these are the ones I feel most passionately about sharing because they are so. damn. easy. and fairly obvious, and yet... it feels like most people my age aren't aware of these strategies and perks or don't believe they're impactful enough to commit to them.
Your best bet is combining them. Reprioritize your spending so you can reallocate $800 of bullshit money over the course of a few months, then use Southwest points to get yourself to a major hub (if you don't already live there) and book a cheap international roundtrip ticket with those savings.
Again—it's all about prioritization of spending and hacking the travel rewards game to work for you. Do both effectively, and you could be out there in no time.
Let me know if you end up moving forward with re-budgeting or signing up for the cards. Combining the two strategies is absolutely your most potent option.
Thanks for reading!
Welcome back to my channel! Just kidding. Welcome back to Money, Honey, your one-stop shop for fiscal guilt trips and inspiration alike.
This will be the third (and final, I believe) Millennial Housing Diary, and in my opinion, I’ve saved the two most interesting for last.
If you submitted a housing diary, I want to say—thank you so much for trusting me with those intimate financial details. I appreciate your willingness to share, and I’m conflicted with feelings of pride and envy surrounding your ability to buy a home.
Today’s diary looks at two people who have two big things in common: they bought their homes as single persons without help from their parents and with student loan debt.
I think these are the two most inspirational—and one of the entrants gave some other financial heads-ups, too (I think that ended up being my favorite part about this series).
A single 25-year-old male living in Oklahoma City, Oklahoma
Income: $145,000 pre-tax (2016)
Down payment: 20%, or $60,000 (it took me two years to save)
Cost of home: $300,000
Type of home: 3-bedroom ranch-style home
Location: Oklahoma City, Oklahoma
Mortgage: Yes, 30-year fixed
Taxes: $3,400/year (property tax is super low! Best thing about Oklahoma)
Insurance: $1,750/annually (no escrow account – paying with credit card also!)
Total monthly payment: $1,160/month
Student debt? Yes, $29,000 (Paid off ~1 year of graduating, with credit cards for all the points!)
What he said…
“I closed on my house back in January 2017—one of my friends actually owned it right before me. I was over there all the time, so I already knew it was the perfect house for me. I’d been casually looking at houses and found nothing I liked, but once she mentioned that she was thinking about selling it, I told her I would buy it immediately. I feel like this is very different than most people’s first-time house buying experience.
As a side note, this was right after Donald Trump got elected and interest rates were already starting to increase, so I immediately starting shopping for rates. I wanted to get a 30-year mortgage, and with interest rates so relatively low, it was a good way to keep my monthly payments low and take advantage of the tax breaks from the interest expenses.
The main thing I wanted to avoid was the dreaded PMI. My only advice to any millennial buying a house, would be to always pay 20% down. If I would have put $50,000 down instead of $60,000, I would have ended up paying almost $7,000 in PMI over 5 years, assuming I didn’t make any additional principal payments. It seemed like a waste of money to me. The only way I think it may be worth it is if you can guarantee your house will appreciate in value more than what you are putting towards PMI.
I felt really strongly about 30-year compared to 15-year when choosing my mortgage term. I can’t deny that there are intangibles to paying off your house early. However, even if you have the means to cover your monthly payments for a 15-year, I think that it is always best if you go with a 30-year term. Here’s the math:
My mortgage rate was 4.125%. When shopping for rates, I was able to secure a 15-year mortgage with a 3.65% interest rate. I think my monthly mortgage payment for a 15-year loan was ~$600/month more than my 30-year. That is $600 per month I could put towards an S&P 500 Index that returns on average 10% per year, instead of my fixed mortgage rate.
Bottom line is, mortgages are cheap! It’s all about how you maximize your return on your money, and you can also have immediate liquidity if you needed the cash.”
A single 25-year-old female living in Minneapolis, Minnesota
Income: $75,000 (pre-tax)
Down payment: $10,000—I think it took me about a year to save up (no help from parents)
Townhouse in a Minneapolis suburb; 1,600 sq. ft.
Interest rate: I can't quite remember, I think 4.5%
Total monthly payment: $1,200
*Note from KG: This friend of mine is 35 now, so this entry is from 10 years ago. Her hustle is indescribable. She works full-time, teaches yoga almost every day, and has an 11-year-old daughter.
What she said...
"I had minimal student loans and paid them off by 30. [Meaning she bought the townhome with 5 years of payments left.]
I knew I was going to buy because I wanted stability for my daughter. So a friend recommended a mortgage lender to me, who ended up being great. We went through all my finances and the pre-approval process, which made me feel comfortable that I could actually afford it.
Then he connected me with a realtor that was easy to work with, patient, listened to what I wanted, etc."
I love that these two entrants both had student loans and got no outside help, especially because only one of them was making a fairly ludicrous salary.
The second entrant makes it especially obvious just how within-reach home ownership really might be for some of us, if we're willing and/or able to just put 5% down. Conversely, the first entrant makes really good points about doing the math surrounding some of these scenarios.
In his example, he makes the point that your money really may be better off in an S&P 500 index fund than paying off an aggressive 15-year mortgage term. Moreover, he makes the solid point that a PMI really only makes sense if you have reason to believe (risky) that your home will appreciate quickly and significantly enough to offset that expense.
I'm still learning how to apply that type of math to my own decision-making in all areas of my life; fleshing out different scenarios (some of which are based on assumptions) to make better, more sound decisions.
Did you notice the first entrant mentioned paying for all this stuff on a credit card to get points? He's a savvy one, and we'll be checking back in with him in the near future—he has 13 credit cards across which he distributes his regular spending for #MAXIMUM #RETURNS.
(If nothing else, I hope that case study will show you why credit cards are not [read: don't have to be] scary and irresponsible.)
Lastly—and perhaps the most important takeaway—is that, within reason, there's really no singular right way. Every entrant had a different approach. Some started with a lender and went through pre-approval, then started looking. Others started on Zillow. Still others bought from friends or family.
Some put 20% down. Some didn't even put 10%. All feel that their way worked for them. (Although... there are definitely a lot of WRONG ways; see housing market crash 2008).
A lender will almost always approve you for way more than you should actually be spending. If you're thinking about buying, explain your plan to a few trusted adults (like, 50 years of age or more) in your life and see if they spot any watch-outs or call-outs. Research your market.
Our last entrant pointed out that she bought a home because she wanted stability for her new daughter. Sometimes, buying a home extends beyond financial reason and the benefits far surpass your ROI.
I hope you enjoyed this series. If you'd like more housing diaries, let me know—I have several I never ended up posting. If not, we'll be moving onto credit card strategy and more philosophical discussions around frugality.
If you missed my initial post about why I chose the Chase Sapphire Preferred card as my starter travel rewards card, I recommend going back and checking that out before diving into this. (And if you don’t have a credit card at all, you may want to read my initial credit card post about why building credit is essential as a young person.)
Now to the juicy stuff: how I redeemed my 50,000-point acquisition bonus (after spending $4,000 in three months; easy if you can put rent on your credit card) for a resort valued at approximately $1,100.
(Keep an eye out for my next travel rewards post about the American Express Platinum card—I just got it in the mail and I’m currently working toward my 100,000-point bonus. Once we cover why the Platinum is my next move, I'll write a follow-up post about ducking annual fees and being strategic without hurting your credit.)
First thing’s first
When I got my acquisition bonus, the Chase Ultimate Rewards portal valued it at approximately $683. Not bad, I thought, I’m sure I can get a few nights at a hotel for that much.
But my “points strategy” changed as I began exploring the portal. Rather than using them incrementally over time (5,000 here, 8,000 there) as I spent weekends in various U.S. cities, I started to think about how spending $200 or $300 here and there wasn’t too financially taxing.
In other words, I budget for a few hundred dollars a month in travel expenses, so it doesn’t really bother me.
Spending several (like, MANY) hundreds of dollars in one sitting, though, definitely hurts, and I couldn’t see myself throwing down $500+ for an international-style trip without some serious planning.
So, my strategy was: blow the whole wad in one sitting for a soul-crushingly awesome experience that I would not otherwise pay for.
Being the slave to spreadsheets that I am, I began combing through the Ultimate Rewards portal and keeping track of the frontrunners. I had already decided on Cancun, which, looking back, was solely because of the flight loads that weekend—a factor that was later rendered moot since I purchased the flights anyway.
But Thomas and I had a lot of fun in Cabo last year, so I thought the other side of Mexico may be fun—especially since Mexican tourist destinations offer a LOT of inexpensive all-inclusive options, by far the best route.
I wanted to go for three nights, but realized I would probably be spending a little bit out of pocket to do so. The Ultimate Rewards portal is powered by a third-party booking engine (Expedia, I believe) so you can see all the hotel listings, their amenities, the price in USD, and the point redemption.
I found several 4-star results that looked pretty good, but most of them would require me to spend all my points and $100-$300 extra to cover all three nights. I didn’t feel stellar about any of them, so I kept searching for a few days and decided to go for a weekend instead.
That’s crucial—give yourself time to plan. I’m big on finding and booking everything in one day since I’m usually traveling close-in (within the week), but having a couple days to weigh my options, read TripAdvisor reviews, and stare at my spreadsheet fantasizing helped a lot.
*Major key on weekend trips: pick the first flight there and the last (or second-to-last) flight back. We had basically all of Friday (because we landed at 11), Saturday, and Sunday, because we flew out around 6:30 p.m. It helped us make the most of a two-night excursion.
The magic of transferring points to partners
Right as I was about to book a 4-star resort with iffy food reviews, I noticed a resort that looked stunningly beautiful—and stunningly out of my price range. I’m sure you know where this is going.
The resort was listed at 44,000 points per night (about $550) in the Ultimate Rewards portal: the Hyatt Zilara Cancun. Someone had mentioned to me that, every once in a while, the travel partner (in this case, Hyatt) will list properties at a lower point value on their own site.
So I moseyed over to Hyatt’s site with very, very low hopes. Then I saw it—the Hyatt Zilara, listed at 25,000 points per night. In other words, I had enough points to cover two nights completely at 50,000 points total, vs. the 88,000 points it would cost in the Ultimate Rewards portal.
I was thrilled. I double- and triple-checked the rules, validating via The Points Guy that the transfer coefficient was 1:1, then I quickly transferred 50,000 points to Hyatt and booked the Zilara. As I was checking out, the Hyatt receipt said the final cost was $1,100 or 50,000 points.
It’s a pretty unique thrill to earn 50,000 points for doing your regular spending and being told that’s worth $680, but it's an entirely different thrill deriving an $1,100 value from those points—especially since the Sapphire card has no annual fee the first year, effectively being cost-free ($95 after the first year—we'll get into the annual fee game in a few weeks).
Always, always check the transfer partner (Chase's full list is here). Make sure you’re getting the best deal on Ultimate Rewards. You usually are, but every once in awhile, you'll find a gem.
The Sapphire Preferred card is literally a no-brainer if you have good credit and want a free vacation (*and you’re paying off all your cards every month with no debt!*).
All-inclusive resorts are an insane value—cutting corners to save money when you’re going to a country like Mexico will just downgrade your vacation. I have to say: staying in a 5-star resort with incredible food and incredible accommodations made me realize how, in a lot of cases, you get what you pay for (or rather, spend points on).
Lastly, and perhaps the best takeaway of all… money is only valuable insofar as it allows you to live the life you want to.
Taking a vacation with a loved one is the most valuable, memorable way I’ve ever found to spend time, and I’ve never regretted the money I’ve spent on travel—I can’t say the same about my Louis Vuitton bag, expensive jewelry or fancy clothes. I've made plenty of regrettable purchases in my past, and none of them were the experiences I had traveling.
If you found value in this article or this blog and you want to sign up for the Sapphire card…
I don’t get paid (obviously) to write this blog or publish content, so if you’re planning on signing up for the Sapphire Preferred card, I would really, really appreciate if you’d use my referral link to apply—I know, I know. A shameless ask. But if you’ve derived any value at all from my efforts, that would be an amazing way to support my weekly posts. Let me know if you do so I can properly thank you.
Happy travels, my friends!
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!
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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