Archive for July 2009

Out Of Sight Expenses

When our daughter was born, I went around telling everyone that my baby cost $10 because that was all I had to pay out-of-pocket.  That was ten years ago when 100% payment HMO plans were hugely popular.

Have I ever said I used to be broke?

I made ridiculous statements like this because I failed to recognize the out of sight expenses.

While it was true that I paid only $10 out of pocket for my daughter's birth, I later connected back to reality and discovered that the birth cost substantially more than that.

I failed to recognize the out of sign expense of: payroll deducted health insurance premiums

I had actually paid over $200 every two weeks for three years with little to no use of the insurance.  I had actually paid more than $15,000 to the health insurance company for my daughter's birth.

Have you looked lately at your "out of sight" expenses?  What "set it and forget it" expenses are you paying for?

Here are a few that I regularly see:

  • Taxes
  • Health insurance
  • Disability insurance
  • Accidental Death and Dismemberment (AD&D)
  • Auto insurance
  • Home insurance
  • Property taxes
  • Car payment

Did you know that companies recognize our "set it and forget it" behavior?  They know that most people are not going to pay close attention to these costs, so they use it to their advantage and push through price increases that are largely unnoticed.

Save money by checking out the "Top 5 Ways To Save – Without Selling Anything" section of our Next Steps site.

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Savings Spectacular: Baby Sangl

Regular readers of JosephSangl.com know how much I love visual ways to track paying something off or saving money to avoid debt altogether.  We call them Savings Spectaculars and Debt Pay-Off Spectaculars.

With the miracle of Baby Sangl comes the lovely large medical bills.  We could sit around and pretend that the bills are not going to show up.  We could ignore the obvious.  If we choose to ignore the obvious, we will end up in a financial mess.

Let me clarify, this is NOT an event that qualifies for use of the Emergency Fund!  Why?  Because we have been given SEVEN MONTHS notice!  This means that Baby Sangl is moved to "Known, Upcoming Expense" status.

Since Baby Sangl is a Known, Upcoming Expense, we must save money NOW!

So we will start a new feature at JosephSangl.com – The Baby Sangl Savings Spectacular.

Welcome to planet earth, Baby Sangl, where your big sister, mom, and dad can't wait for you to arrive – debt-free!

(Obtain your own Spectacular HERE!)

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How Much Money Do You Need To Retire Well

Do you know how much money you will need to retire well (independent of Social Security)?

There are many ways to calculate an estimate, but I really like the Retirement Nest-Egg Required calculator that we have placed in the FREE TOOLS section.

To calculate your number, you will need to know two numbers:

  • The annual amount you want to live on at retirement (in today’s dollars)
  • The number of years until you retire

Suppose one wants $50,000/year (today’s dollars) during retirement and plans to retire in thirty years.  Punch the numbers into the Retirement Nest-Egg Required calculator and this is what you will see:

Because inflation erodes the spending power of money, the annual amount we want must be adjusted.  Using an assumed inflation rate of 4%, one will need $162,170/year in thirty years to have the same spending power of $50,000 today.

At different rates of return, you can see different amounts that need to be saved.  Eight percent is a common rate of return on investment that financial planners use.

What is your number?  Are you going to achieve it?

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INCOME – OUTGO = EXACTLY ZERO

In I Was Broke. Now I'm Not (you can read the intro HERE), a key principle that I share is the following fact:

INCOME – OUTGO = EXACTLY ZERO

I am debating holding a free seminar in Washington DC about this fact (maybe my representative will invite me).  It seems that we have COMPLETELY neglected it!

This is a not a political statement.  This is purely a statement of fact.

I submit my evidence:

  • The national debt (which continues to increase – view it LIVE)
  • Unfunded Social Security (My Social Security statement says that I can expect to only receive 70% of the stated benefits)
  • Tax revenues are way down so the "fix" is to raise taxes – not cut programs
  • When the OUTGO is clearly more than our INCOME, we have decided that this is not OK.  The cure?  Spend nearly $2 TRILLION dollars – using debt!

I am a simple person.  This means I have to look at this in a simple way – using my own life as a learning tool.

Simple lessons I have learned …

  • When I run short of funds, I have to stop spending or I will incur debt!
  • No matter how much money I have, I possess an uncanny ability to spend ALL of it.
  • When I run short of funds, I have to cut out spending – even on things that I really want!
  • If my OUTGO does not include "saving money for emergencies and known, upcoming expenses), my financial plan will fail when emergencies happen or when the known, upcoming expenses occur.
  • I have NEVER seen my bank account balance go up when I "saved money" at the store.
  • Huge debt is always a recipe for disaster.
  • A balanced budget requires sacrifice and compromise – from me, my bride, and my daughter
  • It is never fun to say, "NO!"  Especially to something we care a lot about.

What are your thoughts?

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148 Days Until Christmas

A friendly reminder from your corner personal finance website, JosephSangl.com:

As of today, July 20, 2009, there are 148 days until Christmas.

Have you started saving?

More specifically, have you started saving for the following?

  • Presents
  • Christmas travel
  • Christmas Cards
  • Postage
  • Decorations
  • Giving to the less fortunate

Even better, have you begun shopping for or making the presents you will be giving away?

I know that I obtain much better deals when I am not under time pressure.

Jenn and I save for Christmas every single month because it is a Known, Upcoming Expense.  We also save for other Known, Upcoming Expenses like vacation, annual insurance premiums, etc.  We used the Known, Upcoming Expense Calculator to determine how much we should save each month/pay period.  You can too – HERE.

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