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Could You Live on $800 a week?

Recently on Real Time with Bill Maher there was a heated political debate (is there any other kind?) between those members of the panel.  One of the guests, Nicolle Wallace, believed that the minimum wage was fine where it is and that the government should let businesses decide what employees should be paid.  Then Mr. Maher posed the question, “Could you live on $800 a week?”,  Nicole Wallace look shocked and answered jokingly yes, immediately responding with “of course not”.  Keep in mind that $800 per week is $20 an hour which is far beyond the $10.10 that was being talked about.  $800 per week is about $42,000 per year which is not a king’s salary by any stretch, but also represents a much greater standard of living than our current minimum wage earning families.  Nicolle Wallace laughs that she cannot live on what amounts to double the proposed minimum wage and apparently sees no problem with this reasoning.

On the surface these words and actions may not seem overly callous, but to me they cut deep.  People who have no trouble following this line of thought obviously have a sense of entitlement that I cannot fathom.  Ms.  Wallace sees $42,000 a year as a paltry sum of money that the mere mention of living on that amount is laughable.  From her vantage point everyone is paid what they are worth and she is worth more.  She would never even have to entertain the notion of $42,000 a year, much less the $21,000 per year that closer represents the proposed minimum wage.  She imagines that the only people who make minimum wage are high school kids and those too lazy to go out and get “a real job”.  Perhaps those people making less than $10 an hour enjoy making such a small sum of money and find it hard to give up such a great gig.  These people are not only earning these low wages, but expected to live off them and often support a family.  I’m sure they would relish the opportunity to make $800 a week, not laugh at how living on it is unrealistic.

If I was posed the same question I would respond affirmatively because I know that I could survive on $42,000 per year.  However, if someone asked if I could live on $400 per week I would honestly say that I could not do it.  If I were asked additionally if I think everyone should be paid at least enough to make $400 per week I would agree and find it difficult to argue otherwise!  I think I am setting the bar pretty low at half the wage you scoff at the idea of being able to live off.  The minimum wage needs to be a wage that is large enough to cover necessities, including health insurance and food.  If you are viewing twice the proposed minimum wage as not enough to cover your life expenses, but feel comfortable with others trying to support a family on that do some self reflection on why you feel so entitled.

Do not get it wrong or try to spin my words, I am not saying that everyone should be earning enough money to own a yacht or be Jay Gatsby.  I am not even advocating a wage that supports lighting imported Cuban cigars with $100 bills (much less $1,000 bills).  However, in a civilized society we should at least have some minimum standards in place for those citizens who go to work for us every day.  Not only do these workers make more in their jobs, they are less reliant on government supplementing income and have more money to spend in the economy.

I look at money as a necessity for life in the same way that I view drinking water.  If someone asked me if I could live on 4 glasses of water per day and I say, “of course not”, it seems like I have a pretty good barometer of what should be the minimum available to sustain their life.  If I was then asked if half that amount should be the minimum water consumption I feel confident that I would want people to earn an amount of water that would at least support their life.

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How I earned 6% Cashback and 20 points per dollar on Spending this year

 

“Daddy, can we fly on a plane someday?” A simple question set forth by my daughter January of this year. As a father and husband I wanted nothing more than to book a flight to some beautiful destination at that moment. Unfortunately, in my capacity as the personal financial planner I am much less flexible. Absent a wealthy philanthropist deciding to sponsor our family sometimes we will not be afforded certain luxuries.

 

 

A few days later my brothers returned from a ski trip and my mother suggested that we take a big family ski vacation during Christmas Break. In the same way that my daughter’s idea to fly on a plane sounded fun, this also sounded great. However, my mind slipped back into the “how can I make this happen” mode. Obviously to even consider this kind of endeavor we would need to tighten our purse strings and save as much money as possible. We would need to purchase at least 3 plane tickets, which would cost at least $300 each. At this point I stumbled upon credit card offers that may help my family out.

 

 

I have been a long time user of a couple different cashback reward cards and feel that these are fantastic. The first card I signed up for was an American Express Blue Cash Preferred Card that would earn me $200 sign up bonus and 6% cashback on any grocery purchases. At this point I figured that I would buy gift cards from Kroger and use the extra $200 bonus to pay for these. This card also has a 0% intro rate for 12 months so it was nice. This card is very nice, but is only part of my overall spending strategy. It seemed that the more I looked into credit card offers the more benefits I found.

 

 

After that card I found the Chase Sapphire Preferred Card which has a 40,000 point signing bonus which can be used as a statement credit and be worth $400! I signed up for this card as well, met the spending and got the bonus points.

 

 

My biggest score of the year I will be writing in more detail about in a few days, but I was able to sign up for 2 Southwest credit cards. This netted me 106,000 points which are good toward about $1,908 worth of flights, but it actually gets better. When you earn 110,000 points in one year you earn a “Companion Pass”, this allows me the opportunity to bring a companion (my wife) along with me for free on any trip I book. Even if that flight is booked and paid with points. This effectively doubles the value of my points.

 

 

So far this year, as of 7/30/2013, my wife and I have racked up many miles, points and cashback. These have been earned through cashback portals and credit cards. In cashback alone we earned more than $775 in cashback. Even after paying the $75 annual fee on my AMEX we have earned over $700 cashback this year on our AMEX, Discover, Gas Reward Card and TopCashBack. We earned nearly 6 cents back on every dollar spent. We used this money to purchase a computer, which I built.

 

 

Even more amazing is our return on points and miles! We have earned over 400,000 miles! Even if you value these at only 1 penny each this means we have $4,000 worth of travel in our future. However, 235,000 of these miles can be used toward Southwest, which means they are worth about 1.8 cents per mile (doubled to 3.6 cents per mile with Companion Pass)! If we used all of these for flying Southwest we could get as much as $8,460 worth of travel on those 235,000 miles. Most of these points and miles came from bonuses and they all came from spending money normally. We earned nearly 20 points per dollar spent. That is like getting a 20% (or more) discount on everything we bought, even after finding the lowest prices.

 

 

In order to maximize our points per dollar spent we focus our credit card spending on those cards that provide the biggest payoff. I have a 6% Grocery Card, 5% Gas Card, 2 points per dollar on restaurant and travel. Even with these bigger returns my focus is on meeting spending limits on individual cards that offer big bonuses. If I need to spend $5,000 in 3 months to earn 60,000 points this is far more lucrative than the 5% or 6%. So if I am at the grocery and have not hit my $5,000 amount I will use the card with a spending goal rather than a 6% grocery card.

 

 

Using credit cards has been very lucrative for us this year and we look forward to taking many enjoyable trips at a deep discount. The use of credit cards inappropriately can be very dangerous. If you do not have the money to spend in cash, then using a credit card for spending is out of the question as well. We pay off our bills every month and have not paid any credit card fees over this amount of time. Also be sure to not bite off more than you can chew. For instance if you spend $1,000 a month normally do not sign up for cards that will require you to spend $4,000 each month in order to get the bonus.

 

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Identifying and Stopping Your Disguised Luxury Category

When you read the word “Luxury” what kinds of things immediately come to mind? Yachts, diamonds, private jets, private islands and other extravagances likely take shape in your mind’s eye.  All of these items are fine examples of luxury in celebrity terms.  The term luxury to the common man does not need to be quite as lavish.  The term luxury as I am addressing it concerns an item or service that is not a necessity.  Food is a necessity, but dining out is a luxury.  Clothing is a necessity, but $100 jeans are luxuries.

Looking over budgets of other people and examining my own spending habits I have picked up on a strange trend.  It seems like almost every person has at least one category where they are unfazed by their spending.  We all share a common category, in gasoline, that relates to my observation.  We can buy fuel efficient vehicles and change our driving habits, but ultimately when it’s time to fill up our gas tanks we pay whatever price is asked of us.  This is because gas is viewed primarily as a necessity.  In my family I have found this category is food.   I can go back and forth in an internal dilemma with myself before making a $15 purchase, but for some reason spending $15 on food never really phases me.  My wife has the same ability with food, but also has no trouble buying new clothes even when she would not spend otherwise.  Other people may smoke a pack of cigarettes every day, even though this is a $1,500 per year luxury they don’t even flinch.

The main point in finding these categories that you spend easily is to allow yourself to prevent unnecessary expenditures.  This is the category that needs more vigilance to keep expenses at bay.  Also, you can use these categories to buy other great things.  For instance, at one point I had a phone that would shut down, not get service much of the time and just be generally inefficient.  I wanted a new phone that was $250, but found the expense to be excessive.  Then I looked at my spending and realized that I could cut my food spending by $10 a day by eating at home more often.  After one month that would save me $300 compared to the previous month’s spending.  Even though each meal only lasted for a few minutes I had no problem spending that money, but a phone that I use everyday needed to be justified.

I try to evaluate what is important to me on a regular basis and can create short term goals for myself.  If I can cut these menial luxuries then I will have money to spend on the luxuries I really enjoy.  If I could save $10 on food or cigarettes I would have an extra $3,650 every year that I could put toward new phones, vacations or other aspects of life that are more fulfilling than spending money to fund bad habits.

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The Most Important Financial Tip (and Weight Loss) You Will Ever Read

 

 

The most important financial tip (and weight loss) you will ever read! This same advice can be generalized to other aspects of your life and help you there too!  This one tip can even help you manage money, lose weight, reduce stress and become a more informed person! This sounds like a late night infomercial claim made by a greasy guy (probably sporting a pony tail) in a cheap suit, but it’s actually the truth.  For my money this is a tip that I would be absolutely lost fiscally if I did not do this.  The answer of course, as you have probably guessed, is winning the lottery.  Then when you win the lottery hire a dietician and personal trainer and you will look great!  Unfortunately there is no easy fix such as this that is 100% foolproof even having great sums of money (I’m looking at you M.C. Hammer and Mike Tyson) is absolutely useless if you do not follow my real financial tip.

Make that cheddar

 

Let’s imagine that we have some weight to lose.  You go to your doctor and say, “I’ve been trying to lose weight for a month and have not lost a pound”.  Assuming that this doctor does not go immediately to some weight loss drug or recommend lap band surgery what will she need to know?

She will ask, “What have you been doing to lose weight?”

You will obviously reply, “I have been eating really good and working out”.

At this point is where there is a problem because your data are flawed.  Many people who are unsuccessful at losing weight or reshaping their body do not know what “eating really good” is in the first place.  I remember for about 3 hours 10 years ago I had a six pack.  This was achieved through disciplined exercise and eating.  I remember at a work potluck I remained in my office.  One of my co-workers came into my office devouring a giant slice of cake, “Hey you need to get some food back there”.

I said, “No thanks, I brought a lunch.” As I ate my grilled chicken breast and broccoli secretly wanting to eat some cake and other baked goods.

She responded, “Come on, you don’t need to eat that, you’re not even fat”

This exchange was immediately reminiscent of the old Head and Shoulders commercial where the woman says, “You use Head & Shoulders?  But you don’t have any dandruff?!?!?!?” and the guy says, “Exactly”.  Knowing that his lack of dandruff was due to his diligence in choosing a shampoo that kept his scalp flakes at bay.  Equally important when I lost weight and had a six pack was making my goal and sticking to it.  I knew that eating healthy food and exercising were very important to implement my plan.  However, when I was starting I did not realize how unhealthy I was in the first place.

It is impossible for a doctor or accountant to develop a plan for you based on “I have been eating really good and working out”.  We need to have a detailed account of what we have been doing as it relates to the aspect of our life that we would like to change.  If you come to your doctor with a baseline of all the foods you have consumed and exercise you have done she can help you from there.  It is too easy to say that you have been eating really good, but leave out the Coke you drank or maybe you are eating “Fat Free” cookies thinking that these are healthy snacks.

Using Financial Software

Since May 2004, I have tracked every dollar I have earned and spent.  This is the most important financial tip I can share!  With more information available one can make better, informed, decisions.  If I am not tracking my spending and spend a few bucks on lottery tickets every few days that is no big deal.  Where did all the money in my wallet go?  If I am recording every dollar I will see that I am spending $500 a month on lottery tickets, then I know where I need to cut expenses.   This is a drastic example and I would hope that if you are spending six thousand dollars a year on lottery tickets that you are at least cognizant of this wasteful spending.  This record keeping is useful in multiple ways.  Obviously it allows me to track the money I have made and how that money has been spent.  In many ways it also acts as a personal diary.  I can look at a few consecutive transactions and recall specific events of a day from nearly 10 years ago.  Sure, I already have a fantastic memory, but if I allow myself a few pieces of information it allows me to be transported back to that day (YMMV).

Why I Started this Record Keeping

In May of 2004 I bought a new computer and had a free copy of Microsoft Money.  I found myself constantly opening my wallet and thinking, “Where did my money go?”, I usually did not have an easy answer.  Sometimes I could retrace my spending, but usually I just let it rest.  Once I had the program and more financial responsibilities I decided to give it a try.  Although I spent less money in 2004 it was actually more labor intensive to track.  Most of my expenses were paid with cash which is not exactly optimal for recording expenses.

Recording Cash (Tip)

One trick that I developed at that time was to create a category called “Cash” and whatever amount was in my wallet was reflected in this account.  The first few transactions I would laboriously track all of my spending down to the penny.   I quickly learned that this was not time efficient, nor was it a viable option for long term spending.  I decided to devise a rounding system that worked for me.  If I went out to the grocery and purchased a soda that was $1.06 and I handed them two dollar bills,  I would record it as $2 and then put the change in a jar.  If I paid with one dollar bill and six cents of change I would record it as $1.  I only treat dollar bills as money for the sake of recordkeeping in my wallet.  I found that this minimalizes the work involved in recording money spent.  It also acts as a form of savings by never spending change, even quarters, I was saving a fairly substantial amount.

Recommendations

I personally use Quicken, but mostly because it was very easy to import my data from Microsoft Money which I used because it was included with my computer.  Mint is a very good free internet based platform that even includes an app for your phone.  If I were just starting out with keeping my data I would start here.  The most important thing is that you keep it in whatever manner is most conducive to you actually doing it.  You can have the most advanced financial software developed by NASA, but if you never use it then it is useless.  If you would use a notebook or ledger on the other hand you should definitely use that instead.  Maybe I am too trusting, but I link all of my banking accounts into Quicken and Mint and download these transactions every few days.  I then go through and categorize spending appropriately.

Using Data

Once you have data on your spending you will be able to use this to implement changes nearly immediately.  Another funny phenomenon happens by virtue of your own awareness you may actually spend less.  You start to make the decisions up front about purchases you may regret.

This same thing happens even more when you are trying to keep track of what you are eating. You look at the number of calories per serving and rethink even eating it.   If you are losing weight write down what you eat and round up on the servings you are consuming.  These kinds of data are not only important for getting help from others, but greatly improve self reflection.  It’s easy to say I don’t spend much money on food, but when I break down spending it becomes a little more clear.

 

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