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!
Talking about money as a means to solving a problem was a mindset shift that made a big difference in the way I spent.
This might feel a little basic or over-simple for something that’s just math, after all—but personal finance is just that. Personal. We buy things to fix real or perceived problems. When money is our go-to fixer for everything, it’s easy to fall into a mindless trap of swiping, tapping, or inserting a chip to alleviate negative emotions the second they arise.
Think about the last time you were bored out of your mind. What did you do? Was your solution to make up errands for yourself? Wander the aisles of Target? Invent a project that didn’t really exist that ended up costing you $40? $60? I’m WAY too familiar with this.
It’s because spending money is, in some ways, a time-filler. It’s something to do.
Isn’t it amazing (and horrible) that we live in a world (or rather, the first world) where we have so much damn free time on our hands that our invented tasks involve trying to think of things to buy?
(Ever heard that old joke about how we work to afford the car that drives us to and from work and the house that we never spend any time in because we’re…at work? Kinda makes you reevaluate the value of your time and money.)
Lately I’ve been practicing ~creative solutions~ to things I otherwise would’ve just run out and bought on the spot at the first excuse for a Target run.
“Borrowed” personal care stuff from the gym bathroom
Sam Cat has this really hilarious yet simultaneously concerning habit of stealing our razors from our showers. For real—we’ll come home and both of our razors are sitting in the middle of our family room floor. It’s like he’s trying to send us an ominous message.
Anyway, he ruined my good razor and the last good blade. I was fresh out.
I almost bought another set of razorheads (an annoying expense) until I was showering in the bathrooms at SoulCycle the next morning and noticed the giant vat of disposal razors free for the taking.
Well, my friends, I go to Soul three times a week (complimentary thanks to studio reciprocity), so my cheap ass just uses a fresh disposable razor every time and takes it home with me. I use it for the next few days/week and then replace it. Bada-bing! Creative (cheap!) solution!
The same went for Q-Tips. I was fresh out around the same time and decided that I’d just snag an extra couple from our studio restroom for a few weeks until I was at Kroger and could get the big pack for $1.29. Ordinarily, I would’ve walked next door to CVS immediately and paid upwards of $3 for the convenience of the downtown location.
Obviously, I’m not delusional—I’m not saving hand over fist on things like this, but I think it perfectly illustrates that mindset shift from “fix a problem with money immediately” or look for a free, creative solution instead.
Making household items go further
I went through this phase (can y’all tell I’m big on phases?) where I was SUPER paranoid about toxins and chemicals in my beauty and household products.
(I’m going to write a post soon about balancing frugality with buying quality products and why I think sometimes the money you save on the dirt-cheap product isn’t worth the environmental or health impact.)
So I spent around $5 on a bottle of Jessica Alba’s HONEST Company multisurface spray. It smells like lavender and makes me feel fancy, you know? But it’s expensive, and I clean A LOT, so I was running low.
The ~Old KG~, before my reformed materialist days, would literally GET EXCITED for products to run out so she could run out and buy a new one—try a new scent, give a new brand a spin—it was always fun. You know when something is almost out (but not totally) but you’re antsy to replace it so you just chuck it in the trash and go ham at Target? That’s the struggle.
But now that I’ve trained myself to HATE spending money, I decided to make a simple yet frugal decision—add about a cup of water to the solution and make it last longer. I was concerned it might dilute it too much, but I honestly can’t tell a difference.
Prolonging the life of your household cleaning products to save money is MAYBE the most adult thing you could possibly do, besides your taxes.
Fixing what I already have instead of taking every opportunity to buy new
I’m pretty clumsy with my stuff. I’ve shattered countless glasses and mugs, especially when I reach that caffeine high PINNACLE state of existence early in the morning where I’m teetering the line between effectively energized and at risk of a heart attack.
I was walking at work with my laptop in one arm and my Starbucks travel coffee mug (with my FREE APARTMENT COFFEE, holla) dangling from the other, and I banged it into a wall.
The beautiful, painted ceramic outer layer of the cup shattered to the floor, but to my surprise, the inner component—the cup itself—stayed together. The lip of the cup still had about an inch of ceramic covering attached, enough to hold and drink from.
Have you picked up on the narrative theme of this post yet? OLD KG would’ve gone to Starbucks on her lunch break and bought a replacement—because that’s just what you do when you have money to buy new shit. You buy. New. Shit.
Nope, got creative. Slid a koozie (roll tide) on the ceramic inner piece to keep it insulated, and continued using the travel mug.
Coincidentally, the very next week, our onboard coffee partner Community Coffee dropped off hundreds of free "Southwest & Community Coffee" tumblers, free for the taking. I've noted this before, but it's amazing what happens when you just...wait...and don't RUSH OUT immediately to buy a solution to the problem right in front of you.
Same goes for my riding boots from high school. I received them as a gift and wore them so much in college that the heels wore off down to where they screw into the rest of the boot. I wanted to just drop a few hundred dollars on nice, new riding boots, but found out there are these novel things called COBBLERS (welcome to 1732!) who can re-sole and fix up your boots for, like, $20 so they’re practically new again.
Cooking for friends instead of enabling expensive brunches
Fresh off an especially intoxicating Saturday morning SoulCycle high (thank you, Valentina), I was under the spinfluence and remembered my friends had talked about getting brunch the night before.
My friends aren’t high rollers, but I knew I probably wouldn’t be able to get out of brunch for less than $20 at just about anywhere in Dallas.
So on my way home, I stopped at Kroger and bought half a dozen donuts, bagels, eggs, bacon, English muffins, two bottles of champagne, and a jug of orange juice. $40.
I sent a picture to our group text and invited everyone over. Because my friends are great, they offered to Venmo me for some of it, but I honestly just enjoyed knowing that I was getting a TON OF VALUE for my $40 instead of a small plate of food for $20.
I still have lots left over for breakfast for the rest of the week, too, and we had a blast sitting around in our pajamas instead of jockeying around with valet and parking, getting dressed and presentable, and the other annoying accoutrement that accompany a brunch out on a Saturday morning.
THE MAIN TAKEAWAY
It’s about making the money that you work hard for, work harder for you—so when you get your credit card statement at the end of the month, you’re not like, “Shit, I have nothing to show for this huge balance.”
It’s not all sunshine and savings, though—I also spent $50 on a haircut this week.
You can see how it may seem contradictory if I’m scrimping in some areas yet spending somewhat frivolously in others. But that’s the point—you’re making conscious decisions about what’s worth it, and where you can find alternatives.
And while I did ask Thomas to cut my hair for me to save that money, I’m not sure I’m at the point where I’m ready to sacrifice my ends for frugality’s sake. Maybe someday.
I’ve joked about my newfound love of consumer minimalism and personal finance (and its sudden, monopolizing presence on my site) a little before, acknowledging that it was a jarring shift from articles of old.
But as I unearthed more and more in this personal finance/financial independence community, I felt this compulsion to share this information with my peers—people like me who, previously, never thought about money beyond, “Can I afford both pairs of leggings AND pay my credit card bill tomorrow?”
After all, I think most people my age who make poor financial decisions do so out of merely not knowing any better. It’s a combination of a few factors, I think:
I felt like I was discovering all these secrets and philosophies that were utterly mind-blowing. At the risk of hyperbole, it was completely changing the way I thought about my income, the way I spent, and the path to wealth and freedom.
It was only a matter of time, though, before someone took enough offense to my efforts to leave a lengthy, rude—and unsurprisingly anonymous—comment, insisting I was unfit to share the knowledge I was learning with others.
If only the Internet had a Mansplain Blocker® for finance bros of this condescending breed.
After all, being a young woman trying to talk about money is the fastest way to invite the remarks of, “You don’t know what you’re talking about.” (If you’d like to fire up a gallon of tea and peruse, here you go.)
For the record, I always welcome constructive criticism of the polite variety from those who are well-intentioned. Someone who intends to ridicule, condescend, or demean? I have no tolerance for that.
As the first person to poke fun at my actual career in marketing, rather than finance, I can freely admit I am not—have never been, and will never be—an expert (at anything except disassembling kitchen cabinets to extract a trapped feline).
But I am happy to read the books, listen to the podcasts, scour the articles, and have the conversations that you don’t have time (or don’t want) to have about your money and how to make it work harder for you. I intend to learn with you and share those findings along the way.
I want to bring you back the absolute best of what I come across—especially the stuff that works for me.
However, that doesn’t mean my way is the best way.
To paraphrase Nietzsche, “This is my way. What is your way? THE way does not exist.” Sure, there are certain recommendations that are fundamentally accepted. There are certain “best practices,” like contributing to a 401(k), that are pretty safe to lean on. But how you do it? That’s up to you.
Because here’s what I took away from the comment blitzkrieg:
The fact that someone who works in finance says that only people with a degree and four different licenses are capable of learning about and discussing finance is a sign that sometimes things are intentionally confusing—or made to seem that way—to discourage others from getting their hands dirty.
But they’re not. They don’t have to be. We live in the decentralized age of information where anything you could ever want to know (and 1,000 different interpretations of it) are a few keystrokes away.
If there’s anything I want you to take away from my site, it’s that you don’t have to study finance professionally or get certifications to make basic, good decisions with your money or to learn the fundamental, 30,000-foot view.
FPAs who behave that way give the rest of them a bad reputation—I know a handful personally (some of whom reached out after seeing his comments) who said this is a larger conversation we need to start around money with young people and opening the door for the discussion is a really positive thing.
One valid (although horribly delivered) accusation was a lack of proper sources. I never included citations for fear it would make my blog feel like your junior year research paper—but moving forward, I'm going to include a little footnote with further reading in case you're interested.
Working with a financial planner may be a great idea for you--but the way you save and spend habitually comes from something deeper. It’s a philosophy, and it can be emotional.
Money, for most, is really tied up in self-worth and shame. Guilt from over-spending, anxiety from not having enough saved, a feeling of inadequacy… these are things we don’t talk about, because it’s embarrassing and taboo to do so. So we don't, and our future freedom suffers.
The day I posted the article about Health Savings Accounts, I received a surprising amount of messages from friends, acquaintances, and strangers, saying the timing was great since they had recently received communication from their employer about setting it up, and now they felt empowered to do so.
I ran into someone the following day who told me she loves my money posts because they make her think differently about how she’s going to get out of debt and start saving in earnest. After going toe-to-toe with Señor Anonymous, this was the precise brand of validation I needed.
So thank you to those of you who read—and thank you for reaching out and telling me you raised your 401(k) contribution rate to 10% or have sworn off over-spending thanks to the impulse buy worksheet.
Even if only a few people feel more comfortable facing their finances or talking about them openly, I’ll be happy.
So let’s keep the conversation going. If there’s something in particular on your mind, reach out and let’s talk about it!
And no, it’s not “When Katie realized she couldn’t afford to buy," but good guess.
Feeling compelled to purchase a home is an urge fraught with emotion.
There’s a sense of ownership and empowerment that renting can’t offer in the same way buying does.
If you drive through the quaint-yet-inexplicably-impossible-to-afford areas of your town longing for the day when you and bae can pose for an Instagram next to the SOLD sign in the yard, today I’m going to encourage you to consider this decision a little differently.
This is especially poignant for people in their 20s who feel like they need to at least think about buying to be considered Successful Young Adults™, but can't imagine it becoming a reality without fancy financing. Well, my friends, shrug off that pressure and read on.
After all, it’s just math.
Ew, math. Right? Wrong! Math is sexy when it makes you rich!
Of course, I’m talking about the 1% rule.
In essence, the 1% rule functions on two sides of the same coin.
As an owner…
If you can rent out your real estate for at least 1% of its total value, it’s (generally) considered a good investment.
I was never fantastic in math class and loved a good example, so here we go.
Someone who owns a home valued at $200,000 would need to charge at least $2,000 in rent monthly to indicate profit.
As a renter…
If you’re paying rent that’s 1% or more the value of a home you could afford, you should consider buying.
So let’s say you’re (comfortably) paying $2,500 in rent (which—if this is you—why are you reading my blog? YOU should be blogging about how you afford $2,500 in rent! TEACH US!). That means you could “afford” (a relative term, I’m learning) something priced at $250,000 or lower, assuming your current residence is indicative of how the market works in your area.
But not so fast...
Like I said, it’s math.
If your rent is $897 per month like mine, it means the equivalent in purchasing would be a home that’s $89,700—a laughably low price for an area like Dallas with Texas-sized appreciation. But if I were paying $897 a month in a market where there were loads of $90,000 homes sitting around, I'd consider buying!
(Side note, a quote I heard in one of the podcasts listed below: Buying in a hot market is generally a poor plan since it usually means the majority of the appreciation has already happened.)
The good news about the 1% rule is that it doesn’t rely on appreciation in order to work—sure, appreciation is great, but it doesn’t have to happen in order for your investment to be considered fiscally sound.
Because hey, real estate (like anything) can become a bad investment if things don't go your way.
That surprised me while I was researching for this post. The average number varied a little bit (keep in mind, we’re talking nationally—not in anomaly markets like New York, San Francisco, etc.), but the average 10-year rate of return on residential real estate that I found most was between 6 and 7.5%.
The average 10-year rate of return for the stock market was between 8 and 10%.
Of course, these numbers are based on the past and don't predict the future. But they're a good place to start for argument's sake.
While nothing’s ever a guarantee (both the stock market and housing market are infamously volatile and inherently unpredictable environments), it’s not impossible that your money will go further in diversified index funds than in a home right now, especially if you can't afford to put 20% down.
I want to include a little background on this 'money down' business, in case this is extremely foreign to you. I never understood or looked into any of this before I was interested in buying, so it stands to reason that others my age may not really know either. And if you do know, don't be an ass. Just come along for the ride and enjoy my beautiful Google examples!
When you buy property, you have to put down a 'down payment.' The rest of the cost is a loan from the bank, which you pay over time—that's your mortgage. There are different types of mortgages with different interest rates, but some lenders will allow you to put as little as 3% down (to entice new buyers).
While low down payments make home ownership more accessible, it means you're paying off more of the home's value in a mortgage--with interest.
If your eyes just glossed over, stick with me.
Back on my example grind, let's use a mortgage calculator to illustrate:
20% down on a $250,000 home
Your monthly mortgage payments would be $955. In total, you'd owe $343,739 on your $250,000 home (plus your $50,000 down payment).
This doesn't take into account property taxes or HOA fees, which are high in some areas and can tack on another several hundred dollars per month.
Initially on my condo hunt, I saw those $955 monthly payments and was like... holy shit, I can TOTALLY afford that! Unfortunately, that's not the whole story. When all the other fees and taxes were factored in, those monthly payments often crept up over $1,500.
3% down on a $250,000 home
In this scenario, you owe the bank $242,500.
Your monthly payment on that loan is $1,158 (rather than $955) and the total you owe on your $250,000 home is $416,784.
So while the down payment is way more accessible, you're paying close to $200 more per month and owe $73,045 more in interest.
What's right for YOU is your decision, and if you're OK with paying more over time for something in order to have it now, then that's entirely your financial decision.
However, if you're able to sock your money away to grow in diversified index funds until you have enough to make a 20% (or more!) down payment, you'll spend substantially less in the long run.
While home ownership is emotionally appealing, it's sometimes more lucrative to invest in the stock market instead of the real estate market. It's just math, and real estate is just an investment vehicle—use the 1% rule to determine your best bet.
My research & Recommended Reading
If your company’s healthcare plan is HSA-eligible, drop everything you’re doing and start contributing to it. Yesterday. Do not sleep on the Health Savings Account!
Let’s back up, shall we? If you’re like, WTF is an HSA and WHY should I care, allow me to cover the basics.
If you have a high-deductible health insurance plan, you’re eligible for a Health Savings Account. The HSA is a tax-free vehicle intended to be used for medical costs. Let’s say you hit up the dermatologist and your health insurance is all, “Deal with your acne yourself!” You can use funds in your HSA to pay for your zit cream.
There are some obvious tax benefits to utilizing your HSA, and I've found myself grilling both friends and coworkers about whether or not they're maximizing this hidden gem.
For one thing, the money you contribute reduces your taxable income. The maximum annual contribution for an individual is $3,600, so if you put $3,600 in your HSA, it reduces your salary (in the eyes of the IRS) by that much. If you’re someone who’s right on the cusp of a higher tax bracket, this might be a good way to skirt the higher tax dig.
For example, if you make $40,000, your tax bracket is 22%. If you contribute $3,600 annually to your HSA, the IRS thinks, “Okay, this person makes $36,400,” thereby lowering you to the 12% tax bracket.*
*Note that the progressive tax system means your income is divided into brackets and taxed appropriately; being in the 22% bracket doesn’t mean your entire income is taxed at that rate—just the amount that exceeds the previous bracket’s upper limit.
Here’s a great graph from NerdWallet that illustrates this principle more clearly:
Moreover, the money you put in goes IN tax-free and comes OUT tax-free (so if you’re like, Hey, I’m going to pay for this zit cream with my money either way, this is a way for you to avoid paying ANY TAXES on that money). The HSA can be used as an investment vehicle—something I’m still digging into and figuring out within my own Optum Bank portal and will follow up on in a future post.
But let’s say you’re someone who literally never has health issues. UTIs? Never heard of them. Glasses? 20/20 vision. You’re the walking picture of health.
You probably won’t ALWAYS be, so any money you save in this account can be used for medical expenses 30 years down the road because you tweak your back playing with your pet robot (not to be confused with the FSA, which resets every year and is a raw deal, in this expert’s opinion).
If you retain your invincible status to old age, once you’re 65, the HSA functions as a regular IRA (Individual Retirement Account) and will be taxed in your tax bracket when you take it out (but it went in tax-free and GREW tax-free, which is #YUGE).
It’s kind of a win/win.
You don’t have to contribute anything crazy—definitely take care of your 401(k) and contribute up to your company match first (and if you’re not doing that, start doing it—last week).
But if you’ve got a few extra hundred bucks hanging around each month in your checking account, direct them to your HSA instead so they can grow and help you avoid taxes. Woohoo! #FederalGovernmentWho?
The HSA functions as a regular IRA (Individual Retirement Account) post-age 65, so even if you don't use the un-taxed money for medical expenses, it can be withdrawn at your regular tax rate as retirement income.
Undoubtedly, one of the best feelings is buying something on Amazon that sharply undercuts what you’d typically pay in a drugstore or supermarket.
Conversely, one of the most annoying feelings is when you overpay on Amazon and see that same item on the endcap in Target for one-third the price.
I beat myself up for three days over what I thought was a wise purchase—toilet paper and paper towels on Amazon with a coupon. It looked like it was Prime, so I was thrilled to worship the free overnight shipping gods and felt I had outsmarted the CVS next door and their laughable markups.
I must not have been paying close attention at checkout, because at later inspection of my receipt, I noticed I had paid $5.99 in shipping.
What the expletive?
These household goods were Prime Pantry, not Prime, some other godforsaken magic voodoo Amazon service for which I (a) had not paid for previously and (b) had not noticed while checking out. My fault, for sure, but still incredibly aggravating that my total for six rolls of toilet paper and the equivalent in paper towels had cost me upwards of $17.
(I realize this isn’t that big of an expense; I’ve spent $17 at a taco place for lunch before, but it was the principle of attempting to do something in order to save money and inadvertently wasting it that made me feel like the world’s worst online shopper.)
To rub salt in the Bezos-inflicted wound, I was in Target the next day picking up protein bars and saw their new Smartly line of ultra-cheap health and beauty products. Paper towels? $1.19 for two rolls (or $3.57 for the amount I bought). Toilet paper? $0.99. No f***ing shipping costs in sight!
I practically kicked over the display, I was so pissed (but not before I picked up a $0.99 body wash that smells like an attractive man).
Whatever, lesson learned. I won’t buy household products on Amazon again unless I can confirm (and confirm again) that they’re significantly cheaper than their generic, store-brand cousins.
There are, however, some things I’ll never buy in a store again after seeing how much more cheaply I can get them on Amazon (if you’re one for DIY furniture, Amazon is a great resource—check out my “Chic Bedroom on an Entry-Level Budget” post for my entire bedroom under $1,000).
Keep in mind these aren’t mind-blowing, slap-yo-mama differences. When the store price is $30, even a $6 break represents paying 20% less. So while $6 may not sound like much, you’d take a 20% coupon to the store if you had one, right?
Moreover, recently I’ve noticed Amazon offering coupons right in the product description portal. Between an additional 15% and 30% off, usually you can save more on top of the initial undercut price.
For the most part, it’s beauty products, but there are a few outliers I love.
It’s a 10 Hair Products
You’ll pay roughly $1.62/oz. for the It’s a 10 conditioner at stores like Target (a 10-oz. bottle is about $16.19) vs. $0.91/oz. on Amazon. I buy the 33-oz. pump-top bottle for about $29.88 and it lasts several months. The same bottle is $44.29 at Ulta.
I’ve been using this conditioner for a couple years now and I’m obsessed with it. I deviated (like a moron—never abandon a beauty regimen that works!) and was so annoyed by the other products that I returned them and went back to this one.
Absolute difference: $14.41
Percent difference: about 33% off
My holy grail purple shampoo that I recommend to everyone, the Joico Color Balance Purple Shampoo
For $26.66 on Amazon, you can get the size that’ll set you back $33.99 at Ulta. And it’ll come delivered to your door, rather than require you to tempt yourself by walking through the other 400 sq. ft. of beauty products that you don’t need.
Absolute difference: $7.33
Percent difference: about 22% off
ONE Protein Bars
In the aforementioned Target story, I was stopping by the new Preston Center location to pick up a four-pack of these bad boys (1 gram of sugar and 20 grams of protein—can’t beat it, and they taste incredible).
Due to poor planning, I had to pay *gasp* full price for a four-pack, or $7.99. It makes WAY more sense to buy things like this on Amazon because you can buy them in bulk (i.e., more than a mere four days’ worth) for less.
This story illustrates a separate point that’s served as a major takeaway during my shift toward a ~reformed materialist consumer~ lifestyle: a little planning goes a long way. Small amounts of discipline and thinking ahead make for a pretty easy life.
But because I hadn’t planned for my expensive protein bar habit, I spent full price. Blah.
Instead, I like to buy them on Amazon—a 12-pack for $17.49. That’s $1.45 per bar vs. $1.99 per bar at Trader Joe’s or in the Target four-pack.
For the same amount (12) at Target or Trader Joe’s…
Actual difference: $6.39
Percent difference: about 27% off
The Birthday Cake flavor (my favorite) is on sale right now for an additional 30% off, so I got 12 bars for $12.24 (half off the price I’d pay in store) with free shipping thanks to bae, Amazon Prime.
As my paper towel/toilet paper debacle illustrated, Amazon isn’t always cheaper. But if you typically buy products at pseudo-specialty stores (Whole Foods, Ulta, GNC, etc.), you could probably find the product on Amazon for cheaper—and maybe with an add-on coupon, too.
Of course, you can’t overstate the convenience of next-day free delivery with Amazon Prime. I think paying for convenience is a little fruity-First-World, but if you’re paying less for MORE convenience, I don’t know why you’d trek to the store anyway and risk buying a bunch of other shit you don’t need or fighting the masses in crowded parking lots.
Check out these categories of things you buy regularly and make the comparison:
Protein shakes & bars
Happy online shopping, Cyber Monday friends! While I'm not encouraging you to buy things you don't need, I DO encourage you to buy the stuff you already use and need for less.
P.S. Anyone have the Amazon credit card? I know it gives you an automatic 5% back. Thoughts?
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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