Saturday, August 25, 2018

Financial ignorance will bite you in the ass

It’s clear that financial stress can have serious consequences on our well being.  A study from Fidelity found that stress from debt correlated to an increase in weight gain and lack of sleep.  A 2015 study by SunTrust Bank found that finances are a leading cause of stress in a relationship.  A survey done in the UK found that money worries was the leading cause of marriages falling apart.
To avoid the stress of dealing with finances, many people simply look the other way.  Is financial ignorance really bliss?  When I speak with people who do not contribute to their 401K, IRA, or savings, they often tell me that they will worry about their retirement later.  For many of these individuals, they truly believe things will somehow just magically work out.  I’ve heard many reasons (excuses) people don’t save.  I’ve said exactly the same excuses in the past.
“I’ll save for my retirement when I start earning more income.”  Lifestyle inflation often accompanies income increases.  Many can and should save at any income.  Time in the market to allow your money to compound is incredibly powerful.  Try to arrange your life and your finances in a way which your future self can thank your past self.
“The stock market is so confusing.  I need to do more research before investing.”  It’s better to start investing earlier even if you don’t know everything about investing.  Let’s face it, you will never learn everything there is to know about investing.
“I have too many bills to take care before I start investing.”  It’s definitely hard to come up with extra money if all your income is owed towards payments (auto loan, credit card bills, cable television, expensive cell phone bill, eating out regularly, etc).
“You only live once.  I want to live for today and will worry about retirement later.”  It’s certainly possible that a freak accident or medical condition can cut one’s life short.  The more likely outcome is that your life will be long, and you need to plan accordingly.
What happens if you spend your entire working career living paycheck to paycheck and ignore contributing to your future retirement?  New research has found that the people 65 and older are filing for bankruptcy at a rate of 3 times more than in 1991.  12.2% of bankruptcy filers are now 65 or older, up from 2.1% in 1991.  For older Americans who are broke and nearing retirement, bankruptcy may seem like the only option to get out of financial trouble. 
Some researchers suggest that the explosion of bankruptcies are largely due to vanishing pensions (replaced by 401K savings plans) and increased burdens on individuals to save for their own retirement during their working years.  The rising costs of health care, stagnant or declining incomes, and inadequate savings are pushing these older Americans off a financial cliff.  Many older Americans receiving Social Security checks still end up working because they don’t have enough retirement income to support their lifestyles. 
According to the Employee Benefit Research Institute, the median household led by someone 65 or older had liquid savings of $60,600 in 2016 while the bottom 25% of households only had a liquid savings of $3,260.  These individuals are barely hanging on.  A lost job or emergency health problem and this small financial cushion can be wiped out.
We are all vulnerable to live changing financial disasters like unexpected health problems, job loss, divorce, or death in the family.  I’m pretty sure most Americans, especially those that have worked all their lives, never expected the need to depend on bankruptcy just to survive.  I’m a big supporter of having a safety net to make sure people don’t starve in their old age or go bankrupt due to the insane cost of healthcare.  I’m not sure how exactly to fix the problem, but I’m sure many of us recognize that there is a problem with the current health care and Social Security system.   
I have to wonder if some of these Americans really prepared the best they could during their working years.  In 40+ years of working, was it impossible to set aside any money to reserve for the future?  Were many of these individuals just practicing financial ignorance?  Let these sad stories be a cautionary tale for those thinking that their retirement will just magically work out.  Often times, it doesn’t.  Would you rather save for your own future?  Or depend on meager government subsidies to keep your expenses covered?

We try to save and invest as much as possible to reach financial freedom as soon as possible.  Part of what motivates us is an anxiety of not being prepared for our future.  As we get older, I would hate for us to be a burden on our children or our government.  We want our children to thrive financially and not feel obligated to take care of us financially.  We don’t want them to be dragged down by our poor preparation for our own retirement.  We choose not to be ignorant of our finances.

Wednesday, August 1, 2018

Side hustles July 2018

The great thing about doing side hustles to generate extra income is that you can hustle on your own terms.  The more hard work, time, and creative effort you put in, the more extra money you can make.  You can hustle as little or as much as you want, whenever you want.  It’s your extra money, and you can choose how you want to spend it.  Instead of focusing on what ideas don’t apply to you, try focusing on different side hustle ideas that you can implement to work for your situation.

Once a month (usually on the 1st), I like to post a short summary of our personal and financial situation for the previous month.  Here I’ll share some of what’s been going on with our lives and our side hustles. 

Welcome to August!  How was your July?  This was one of our busiest months.  We spent almost every weekend getting together with friends to explore, eat food, and celebrate birthday parties.  
We took our son to the local children's museum where he got a chance to explore and play
Bounce houses are a great way to burn off energy!
Our so still loves running around every chance he gets.  When it's not too hot, we go for walks regularly.  He has been having a lot of fun at our local playground and jungle gym.  
It’s been quite hot here in Southern California.  We are lucky to have access to our community pool (since we pay homeowner’s association dues).  Our son loves splashing around in the water.  Our friend also invited us over to their home to go swimming.  
As soon as life settles down a bit with our baby, we will get swimming lessons for our son.    
One of our big wins this past month was that my wife was able to snag a free Pottery Barn teepee off one of her mommy Facebook groups.  
Our son loves his new little teepee!  This saved us $179, not that we would be spending this amount of money on him though!
It’s been a joy watching our children grown.  Our daughter just turned 7 months old.  It’s amazing how fast time flies.  She can sit up, eat solid foods, and burp on her own.  Abby has warmed up to our daughter.  
I love seeing our kids play with each other!  There are times when things get very hectic and crazy at home, but it keeps our lives exciting.
Here’s our monthly summary of side income that we have generated in the previous month of July.
Cash Back
On 7.2, I received $10.23 deposit in my Discover Cashback Checking account.  This is a 1% cash back on my mortgage payment for our rental property mortgage, which allows for debit card purchases.
On 7.23, I received a $20 statement credit in my AMEX SimplyCash business credit card.  The 10% cash back on purchases made at Staples is still going on (up to $100 in total statement credits until 11.30.2018).  I used my credit card to buy $200 worth of Amazon gift cards.
On 7.25, I received a $24.50 statement credit in my AMEX SimplyCash business credit card for cash back earned with normal purchases. 
On 7.29, I received another $20 statement credit in my AMEX SimplyCash business credit card.  I used my credit card to buy $200 worth of Amazon gift cards, earning 10% back.  We mostly use Amazon to purchase everyday items, saving us a trip to the store. 

Survey Income
On 7.2, I received a $50 Amazon gift card for doing a medical survey from GLG. 
On 7.12, my wife received a $30 Amazon gift card for doing a Amazon Preview survey.
Rental Income
On 7.5, we received a net profit of $430 from our rental property.

Side Jobs
On 7.9, I received a check for $325 for teaching at the local university. 

Miscellaneous Income
On 7.4, I received a $5 Amazon gift card from MyPoints.
On 7.12, I received a check for $674.44 from consultation income.

Monthly Totals:
We earned $74.73 from cash back
My wife earned $80 from survey income
We earned $430 from rental income
I earned $325 from my side job
I earned $679.44 of miscellaneous income

All of this totals $1,589.17 from our side hustles for the month of July.  It’s great to bring in this extra income while having a fun and busy month.  I don’t see our lives getting more relaxed any time soon, especially as our kids get older.  I'm constantly on the lookout for other opportunities to boost our income.
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