So it’s been a year since I signed onto the MMM train; at the time I kicked myself for not discovering the group earlier. I still do, but I’m glad I didn’t wait any longer than I did. So now that we’re 12 months in, how are things shaking up?
If you recall, the first order of business was taking advantage of any tax deferred accounts. This meant things got kind of lean towards the end of 2015, but it also meant I was able to max out the 401k up to the federal limit. If I had to live on Ramen to do so, I’d do it again in a heartbeat. Everything not put there gets taxed at your AGI, plus the state tax, and if you spend it, better tack on sales tax, too. In the end that dollar only has about 75 cents of buying power, even in your savings account. While a simplification, you just worked 10 hours of your 40 hour week for free. Not only did you do it for free, you will never get that time back. Scale that out to 25% of the working year, and….
Don’t have a 401k? You likely qualify for other pre-tax savings plans.
Next step was investing in an IRA. Nice thing about a Roth, if you need the money in an emergency, the contribution portion can be withdrawn at any time without penalty as it’s post-tax money. You can’t make up for the lost cost-opportunity of pulling that money out, but it is a legit option. Roth or tIRA, see which one is right for you.
There was some pain and work involved.
The next goal was to reduce fixed costs. I sat down with my insurance man…several times…and sharpened the pencil; coverage is now appropriate and we moved a couple cars over to take advantage of bundling discounts. A pain in the ass for sure, but I’ll be sitting down with him again in a month to revisit. If I don’t like the numbers, I can always take my business elsewhere. You’d be surprised how much money can be ‘found’ if you talk turkey.
Other fixed costs; I had a car I was making payments on. A 2009 Sky Convertible. My newest vehicle…working A/C, impressive gas mileage, fun to wind out. It had been on various trips to MN and even New York, but I had a note on it and as is the case with new cars, eventually it would cost me major bucks. Sold that off before it would eat me alive. No more car payments.
Some very uncomfortable phone calls to the farmer renting my land, and lots of paperwork at the FSA office to get us into a CRP program. This also meant a conversation at the Assessor’s Office to get us squared away for farming changes. And it’s not as easy as shuffling paperwork. Both C and I have spent untold hours on the tractor rotary cutting 47 acres of grass and weeds so the prairie has half a chance.
Taxes: Such changes have implications, but there are likely credits and deductions you qualify for that aren’t caught by H&R Block nor a computer program...because to qualify, action is required on your part ahead of time to take advantage of such. The biggest takeaway for me was that if you wait to look at your tax situation when taxes are due, you’ll always be behind the 8 ball. I admit, this is a rather daunting topic, but the question becomes, at what level of effort are you okay with sitting in a cubicle vs. taking action. If you look into it right now, you still have 4 months for course correction.
Flexible Spending. Based on a rolling 12 months from the year prior to the most recent 12 months. Groceries and adult beverages: We don’t scrimp here, but the local grocery stores put almost everything on sale on a given rotation so it never makes sense to pay full price. If there’s a sale, I stock up and ride it out. This takes almost no effort and keeps the spend under $200/mo for two people. If I’m out of state and see a good deal, I’ve been known to buy a few cases of libations which really adds up in savings over the long run. Plus I send in the rebates.
Fuel costs are down, due to a combination of pump price, but also due to a little planning. I have to drive into town for work anyway, might as well make the most of it.
How about plugging those leaking holes? I know people here at work that buy both breakfast and lunch in the cafeteria DAILY. That way madness lies. According to my records, in the 12 months prior, I paid for lunch at work 20 times during the course of the year. That’s less than once every 2 weeks. For the most recent 12 months? I cut this number to 1, and it was for the outdoor car show with coworkers.
And coffee? 71 times at $1.18 now down to exactly 10 cups over the year. And I ate outside the office 4 times at a total cost of <$10. So roughly, a $20 bill took care of lunch and coffee for the last 12 months. I can live with that. Yes, I am still drinking coffee every morning, it just means I have no excuse not to clean the percolator and load the basket each day. And I still eat lunch at my desk, I just don’t “treat” myself to the overpriced cafeteria. Is my quality of life somehow reduced due to those decisions? Not that I can tell.
I was a debit card man up until this time last year. It made record keeping easy as all transactions were in one place and I could be completely up to date in 5 minutes. Plus, as you know, credit cards are evil. Well, so much for that. There are folks that take CC churning to new levels, scoring travel miles and cash rewards by being savvy on the latest offers. I decided to stick my toes in the water and took advantage of several cash back rewards cards and can honestly say it was worth the juggling. The Citi Double Cash is my go-to for most purchases but each card has their advantage. For example, there will always be something I need from Amazon, so having that card as a tool in my belt makes good sense. I will always buy groceries, so why not take the 7% bonus for 3 months and 2% for the other 9? It’s free money.
Additional “opportunities”. I try to routinely list a few items on eBay for a little ‘fun money’, branched out into other services for RR Central, and doubled down on our energy costs by going solar. Interestingly, as time rolls on, the state and fed tax credits continue to decrease so it makes sense to get this plant in now. As of August, we are online and producing and just crossed the 1 megawatt/hr production threshold. Yes, payback time is in YEARS but the tax credits are arguably more valuable now during my working years when we’re in a higher tax bracket, so that’s bonus 1. And every dollar I save not giving to the utilities for electricity can be put in pre-tax savings, so that’s bonus 2. Oh yeah, did I mention clean energy? Plus they look cool.
No, I am not riding my bike to work from where I live; I don’t have a death wish. No, I am not trading my ‘gas guzzling’ vehicles; I see the automobile as more than just transportation. Yes, I actually bought a project car earlier this year that I can spend time working on when I’m out of the rat race. Perhaps not the most opportune timing, but the fact that I could see the car in person rather than as photos on the internet, and that I wouldn’t spend 25% of the purchase price transporting it on a carrier, weighed heavily into my decision. I don’t plan to stop such insanity anytime soon.
Wow, so I guess I did make some changes in the last 12 months. In my estimation, quality of life is exactly the same, but now I know each day I spend at work gets me one day closer to a goal; something tangible. C is onboard and has made similar changes with her spending and investing as well. Do I recommend it? Hell yes.