Saturday, October 28, 2017

How to increase your saving and investing rate

I first started working when I was around 16 years old.  My parents told me that if I wanted money, I would have to go work for it.  I’ve done many odd jobs and side hustles such as building computers, selling jewelry, product reselling, tutoring, being an information desk attendant, paid chauffer (before Uber!), and more.  What my parents never taught me was that I should try to save some of the money that I make.  I kept telling myself that I would start saving money “once I started my career.”  The thought of investing my money for greater returns never even crossed my mind.

From high school to college to graduate school and even after first starting my career – I was terrible with my finances.  Whatever money I made, I somehow ended up spending.  It didn’t matter whether I was making a little bit of money or a lot of money.  I never tracked my spending.  Sometimes I would even make purchases on my credit card, and then wait to get paid so that I could use my paycheck to pay off my credit card bill.  I was always one month behind – and it felt awful. 

While I was always good at making money, it took me decades to get good at saving money.  Once saving more became second nature, investing more was simply the next step.  It took a long time, but we have finally reached the point where we are comfortable with our finances.  Today I am going to talk about how you can start saving and investing more.    

Hide your money (from yourself)
Back when I had poor spending habits, whether I had a small paycheck or a large paycheck, I always ended up spending most of it.  I would always find myself just barely getting by.  My rent, bills, food, and entertainment expenses would all somehow get paid, but I was never thriving financially. 

Most of us will find a way to make our finances work and live on the amount of money that ends up in our checking account.  This is where hiding your money from yourself can work extremely well.  You are your own worst enemy when it comes to saving more.  If you hide money from yourself in your savings and investments accounts, you can spend everything in your checking account and still manage to hit your saving and investment goals.

There are several easy ways that you can hide extra money from yourself including: splitting paycheck direct deposits, increasing retirement contributions, and automatic investments.   

Split your direct deposit paycheck into separate accounts
Many companies that offer paycheck direct deposit can also split your paycheck into more than one bank account.  Instead of your entire paycheck going straight into your checking account, you can split your paycheck into one deposit into your checking account and another deposit into a savings account.  This is one of the easiest ways to effortlessly save more. 

To split your direct deposit paycheck, you can contact your HR department to have them set aside either a percentage of your total paycheck or a set amount into a separate bank account.  I recommend having your employer deposit enough money to cover your regular expenses into your main checking account, and then putting the rest into an online savings account.  Online savings accounts tend to have better interest rates.  I recommend and use CIT Bank, which offers an amazing rate.  Since your money is held in an online bank, this provides a barrier to hopefully discourage you from raiding that account and spending down the funds.  

Just like with retirement contributions, if you automatically save a portion of your income in a separate savings account, you will be less likely to spend it.  Every time you get a raise or bonus, you can increase the amount that goes towards your separate savings account.  Even just increasing your savings rate by 1% each month can add up to a huge difference over time.  Since the amount of money that goes into your checking account will tend to be stable over time (while the amount of money that goes into your savings increases), you can easily avoid lifestyle inflation.  If you don’t see all this extra money in your bank account, you won’t be tempted to spend more over time. 

Splitting your paycheck allows you to save more without exerting any discipline.  

Increasing your retirement contributions
If you have access to them through your employer, 401K and 403B retirement accounts are the easiest way to automate your investments and accumulate wealth.  Retirement account contributions come directly out of your paycheck and are immediately invested pre-tax.  You simply select a percent of your gross income or a set dollar amount to contribute with each paycheck.  Investment contributions happen automatically so you don’t have to do anything when you receive your paycheck.  This allows you to put more money right away into your investments to let them compound and grow over time.  Retirement contributions decrease your gross income and may lower your tax liability.  Investing in your 401K is a win-win.      
Who wants to pay more taxes?!

Many companies offer an employer match up to a certain percentage of your contributions.  This is free money and you should never say no to the company match.  For example, if your company offers a 4% match on your contributions, you should be contributing at minimum 4% of your paycheck into your 401K.  Saying no to an employer match is like turning down a pay raise.  When starting off, I recommend slowly increasing your 401K contributions by 1% at a time.  If you increase your contributions by 1% every month, you will hardly notice the difference in your paycheck – and by the end of the year, you will now have a 12% contribution rate.  If you find yourself struggling to manage on that 1% increased paycheck deduction, then you can dial it back for your next paycheck.

Generally, 401Ks should not be accessed until you are 59.5 years old or you may be subject to a 10% withdrawal penalty as well as income taxes.  There are several ways to access the money sooner without penalty (and less taxes) such as through a Roth Conversion Ladder or with Substantially Equal Periodic Payments (SEPP).  See this Mad Fientist post for much more detail explaining how to access your retirement funds early.       

Automate your investment contributions
Vanguard makes it easy to set automatic contributions into your IRA, taxable or 529 accounts, with minimum purchase amounts as low as $50.  You can set your contribution rate to coincide with payday, that way a portion of your paycheck automatically gets invested.  You can also set your investment contributions to take place at the beginning of the month, every 2 weeks, or any other schedule that suits you.  This removes the discipline it takes to regularly invest in all market conditions. 

Why automatic investment contributions are so important
The market is volatile, and no one can consistently predict which direction the market will go on any given day.  If the market is going up, you may be tempted to avoid investing.  If the market is going down, you may be tempted to over invest.  Automatic investing simplifies your investing so you don’t over-think your investment timing.  Studies consistently find that those who dance in and out of the market end up performing far worse than those that just stay the course.  Fidelity investments did a study of the portfolios that performed the best from 2003 to 2013.  They found that the best performing accounts were from investors who were dead! 

Saving more doesn’t just mean spending less on something
When many people brag about saving, they like to say things like “I saved 20% off this new outfit,” or “I used this coupon to save $20 off this pair of headphones.”  Don’t forget that when you save money on purchases, it’s just spending less money and still decreasing your account balance.  If you spend all your time trying to chase the best deals out there, you will spend more time exposed to marketers trying to get you to buy more stuff.  Don’t let getting 50% off of something turn into paying 50% more for something you may not have needed.  Browsing deal sites regularly exposes you to so many other deals on things you didn’t even know you wanted.  Instead of trying to resist the pressure of advertisements and sales trying to get you to consume, avoid being exposed to marketing in the first place. 

Instead of thinking “how can I buy this item on sale?” consider “do I need this item at all?”  Buy what you need, when you need it and don’t obsess about the costs.  You’ll save much more this way in the long run.

Bottom line
The formula for financial success is an easy one: earn more, spend less, and invest the difference.  Hiding money from yourself can work wonders to increasing your saving and investing rate.  I track all of my spending with Mint and ClearCheckbook.  I track all of our investments with Personal Capital.  We are currently saving 50% of our income and investing much of that savings.  Our goal is to save 75% of our income.  Start now and work on slowly increasing the amount you save and invest.  Your future self will thank you. 

Tuesday, October 17, 2017

Free 3 night hotel stay in Carlsbad thanks to Chase Ultimate Rewards points

With our second baby coming in December, we decided to take one more small family vacation before our family of 3 becomes a family of 4.  We both scheduled a Friday off work next month and will head out to Carlsbad on Thursday afternoon.  Carlsbad is a city near San Diego, and is about an hour drive away from our home.  The city is located right next to the Pacific Ocean and beautiful beaches.  
Carlsbad is also home to Legoland theme park, where we will be visiting.  Since our son loves running around and exploring, we think he’ll have a great time at Legoland.
Legoland has a water park

Legoland Sea Life Aquarium
Opening in 1999, LEGOLAND theme park has more than 60 rides, shows and attractions based on the Lego toy brand.  There are several rides without any age or height restrictions that our 2.5 year old son should enjoy.  I’ve read that LEGOLAND offers a lot for kids of any age, without going on every ride.  Legoland has a water park and an aquarium as well.    

When looking for hotel stays near the theme park, we had only a few options to choose from.  We have a ton of Chase Ultimate Rewards points, which transfer to IHG, Marriott, Ritz-Carlton and Hyatt hotels - however none of their hotel offerings are near LEGOLAND.  There is a LEGOLAND Hotel, but the rates are quite expensive.  The next best option was for a hotel stay at the Grand Pacific Palisades Resort.  
The Grand Pacific Palisades Resort is a 5-minute walk from Legoland, and offers a free shuttle to the theme park as well.  They also have a fun family pool and kid’s splash pad.  Reviews on Tripadvisor for this hotel are great.

First, I went to the hotel website and found that the cost of booking a 3-night stay would be $497.86.  
Then I went to and found that the cost of a 3-night stay would be $577.70.  

Since we have a ton of Ultimate Rewards points, I decided to check out what the Chase Ultimate Rewards travel portal had to offer.  

The Ultimate Rewards travel portal can be used just like any other travel booking site.  You can search for flights, hotels, rental cars, and activities.  Chase makes it extremely easy to redeem your points.  You can choose to use as many or as little points as you’d like to discount the cost of your travel.  The price of our hotel stay through the Chase travel portal came out to be $460.31, and we booked it with 30,687 Ultimate Rewards points.  
Thanks to my Chase Sapphire Reserve credit card, each Ultimate Rewards point redeemed on the travel portal is worth 1.5 cents when using the travel portal.  With other Chase cards such as the Chase Sapphire Preferred or Ink Preferred, each point is worth 1.25 cents.  This is a much better value than redeeming our points for cashback at a rate of 1 cent each point.   

Thanks to the Chase Ultimate Rewards program, our hotel stay will be paid for with points.  We can’t wait for our upcoming family vacation next month!  Travel hacking with credit card points allows us to live a rich life as we strive towards financial freedom

Monday, October 9, 2017

80,000 bonus points with the Chase Ink Business Preferred credit card

As you all probably know by now, Chase Ultimate Rewards points are my favorite credit card rewards currency.  These points are exceptionally versatile and valuable.  They are very easy to earn from big sign up bonuses as well as category purchase point multipliers (such as the  Chase Freedom 5x categories).  Ultimate Rewards points never expire.  Ultimate Rewards points can also be shared with a spouse or significant other if you live at the same household address. 

The Chase Ink Business Preferred card is currently offering 80,000 Ultimate Rewards points after getting approved and spending $5,000 within 3 months.  This card offers 3x points on travel, shipping purchases, internet, cable and phone services, as well as advertising purchases made with social media sites and search engines.  There are no foreign transaction fees for purchases made outside of the United States.  The card does have a $95 annual fee, which is not waived the first year.    

Ink Preferred travel and purchase coverage
Like most credit cards, the Ink Business Preferred offers trip cancellation and interruption insurance.  The Ink Preferred also offers auto rental theft and collision damage when renting for business purposes.  One unique benefit of this card is cell phone protection: you can get up to $600 per claim in cell phone protection against theft or damage when you pay your monthly cell phone bill with your Ink Preferred card ($100 deductible and maximum of 3 claims per year).  Purchase protection coverage protects your new purchases for 120 days against damage or theft up to $10,000 per claim.  Extended warranty protection extends your purchase manufacturer's warranty by an additional year.
Not long ago, the Ink Business Preferred card was offering a whopping 100,000 point sign up bonus online and in branch.  At that time, neither my wife nor I could apply for the Ink Business Preferred card due to the Chase 5/24 rule.  See below:

Chase 5/24 rule
The Chase 5/24 rule was created to make it more difficult for credit card “churners” to frequently sign up for credit cards to get signup bonuses.  With the 5/24 rule, Chase will deny your credit card application if you have opened 5 or more credit cards from any bank within the last 24 months.  Even authorized user cards count under the 5/24 rule.  There are ways to circumvent the authorized user issue such as removing the account from your credit report or speaking with a Chase customer service rep.  There are a few Chase cards that are not subject to the 5/24 rule including the British Airways Visa, Hyatt Visa, IHG card, Marriot Business card and the Ritz Carlton Visa.  However, once you get approved for those cards, they will add to your 5/24 count.

Applying for a Chase Business credit card
Once we found out that my wife was no longer under the Chase 5/24 application restriction, we knew that her next credit card would be the Chase Ink Business Preferred card.  She already has the Chase Freedom and Chase Sapphire Reserve cards.  Since we own a rental property together, my wife’s business is being a property manager. 

Business credit cards allow you to keep personal and business expenses separate.  This helps when doing taxes or adding up business write-off expenses.  As long as you don’t default on your business credit, it will not have an impact on your personal credit rating.  Since business credit cards are not reported to your personal credit report, they are not counted towards 5/24.

If you are a business owner, you can apply for your business credit card with your business name and tax identification number.  Many people are concerned about applying for business credit cards, especially if they don’t have an established business or LLC. 

There are many businesses that qualify for a business credit card.  If you sell things online (eBay, Craigslist, etc), you are a sole proprietor of your own business.  If you tutor as a side hustle, that’s a business.  If you bring in any income on the side, that could potentially qualify your side hustle as a business.  There is no need to apply for a business credit card under a legal name of business – you can apply as a sole proprietor and use your own social security number on the application.   

When you apply for a business credit card, it’s important that you are honest on your application.  Do not make up a business name that you aren’t going to use.  Don’t lie and over-inflate your annual business revenue.  Most credit card companies want to approve you for a business card.  You can get approved for a business credit card even if you are a sole proprietor and are making a small amount of annual revenue.

I’m happy to report that a few days after my wife submitted her application for the Ink Preferred card, she received the following email that congratulated her on getting approved:

Using your Chase Ultimate Rewards points
Redeeming Ultimate Rewards points is extremely easy.  You can redeem them for cash as a statement credit or deposited into your checking or savings account at a rate of 1 point equals 1 cent.  You can redeem them for gift cards or shop with them at  You can redeem Ultimate Rewards points through the Chase Ultimate Rewards travel portal at a rate of 1.25 cents per point (or 1.5 cents per point with the Chase Sapphire Reserve card). 

The best redemption value of Ultimate Rewards points is usually achieved by transferring your points to one of the eleven Chase travel partners.  These points transfer at a rate of 1 point equals 1 partner mile/point.  Chase airline travel partners include: British Airways, Air France, Korean Air, Singapore Airlines, Southwest Airlines, United Airlines, and Virgin Airlines.  Chase hotel travel partners include: IHG, Marriott, Ritz-Carlton, and Hyatt.

We’ve transferred our Ultimate Rewards points into our Southwest, United, Singapore, and British Airways accounts many times already.  

Our best recent redemption of Ultimate Rewards points was towards free round trip flights to Japan from Los Angeles on Singapore Airlines Business Class.   
I wrote about our flight to Japan here and our flight back home here.  Being able to experience premium air travel was a priceless experience for my family.  It was such a great way to start and finish our vacation.    

We’ve also gifted our Ultimate Rewards points to family in the way of booking them free flights.  I recently booked my father free business class flights from Taiwan to Japan with British Airways Avios and from Japan to Los Angeles with Singapore Airlines KrisFlyer miles, all transferred from Ultimate Rewards points.  He has never flown business class before and I know he will enjoy an amazing experience.    

Here are some other ways you can enjoy your new Ultimate Rewards points from the Chase Ink Business Preferred card:

You can book a 1-way flight from Los Angeles to Tokyo on Singapore Airlines Business Class for 85,000 KrisFlyer miles and $23.60.  This is an 11.5 hour flight where you will be pampered the entire time with amazing service, delicious food and unlimited alcohol.  Singapore Airlines Business Class seats convert to completely flat beds in the sky to help you get restful sleep on your flight.  
You can book two 1-way flights from Los Angeles to Paris on United Airlines for a total of 60,000 United miles and $11.20. 
You can book a one way domestic flight on Southwest Airlines for as little as 2,330 Southwest Rapid Rewards points during one of their frequent sales.

I just logged into my Chase account and I have over 250,000 points just itching to be redeemed:  
An extra 80,000 points will be a welcome addition to our stash of points. 

With Chase Ultimate Rewards points, the possibilities are endless.  You can use the points towards airfare, hotel stay, cash back, or even gift travel to your friends and family.  Saving money on travel helps us live a rich life as we continue to strive towards financial freedom.

You can sign up for your Ink Business Preferred card here (we will earn 20,000 points for the referral).  I recommend checking your credit score for free with Credit Karma.  You can refer Chase credit cards to others from the Chase Refer-A-Friend website here.  
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