Tuesday, August 22, 2017

I Got An Extra $1,000!

I recently have heard folks talking about what they would do with some unexpected additional money. J Money asked his readers "What Would You Do With an Extra $1,000?" I generally don't spend too much time thinking about these type of hypotheticals, but this week it became my reality. I got a call out of the blue informing me that a $1,000 check was on the way to me!

This clearly isn't something that happens frequently, and sadly isn't something I'd recommend anyone try to replicate. There is a story with a lesson that goes along with this check.


Rewind to 2014


In the second half of 2014, we were doing a lot of home renovation projects. We had a large bonus room we were converting to a bedroom and adding a bathroom to it. At the same time, we were also remodeling an existing bathroom. The project started in last August and by early December we were getting close to being done. Normally we're a bit faster, but my wife had a baby in this window and she's the handier one in this duo.

Part of the bathroom work involved moving the toilet to a different part of the bathroom. Shortly after the toilet was installed in the new location, we went on a week-long vacation to introduce our new baby to our family. We had a great time on the trip but when we got home, we were greeted by water running out of the garage. Not good.

The brand-new supply line for that newly repositioned toilet sprung a small leak. Normally this wouldn't be a big deal, but it must have gone on for several days. This was also an upstairs bathroom, right above the kitchen, and when I entered the kitchen the ceiling had fallen to the floor. Welcome back from vacation, right?

The Cleanup


This was a pretty emotionally draining time for us. We had a newborn, and weren't getting much sleep already. We were so close to having our house put back together and then this. Now we had to rip out carpet and worry about replacing warping wood floors. We had some money saved up, we just didn't really want to spend it on all these additional projects. I spent that first night and the entire next day ripping out soggy carpet and trying to dry things out.

Submitting an insurance claim wasn't actually my first thought. After all, I was the one who installed the toilet supply line. What if I did something wrong and they said they wouldn't cover the damage? I went back and forth for a day or two before a co-worker reminded me that this is exactly why you have insurance. It doesn't matter whose fault it is, so long as it was an accident. We called our insurance and they stepped in were a huge help.

If you've never had to deal with a homeowners insurance claim, here's how it goes. They first bring in a restoration company. In our case, because the water was clean water and not sewage, the cleanup was mostly just drying things out. This involved several dehumidifiers and fans placed throughout the house running 24/7 for almost a week.

Our kitchen was a pretty much unusable as they tried to salvage the wood floors by sucking out all the water. This was our kitchen for a week or so:


The Repairs


Once our house was completely 'restored' and dry, we were ready to start actually fixing things. The adjuster had come through and identified the cause and everything that had been damaged. He ran some fancy software that quickly spit out an estimate of how much it would cost to repair/replace everything.

In pretty short order, we got deposits to our bank account and were able to start putting things back together. We ended up spending a little bit more than our insurance gave us since we upgraded some things from what they were before the damage. For example, we upgraded one room from carpet to hardwood floors, and ended up replacing the majority of our carpet instead of just the section that was damaged. As much as possible, we did work ourselves. Placing rolls of insulation in the floor joists in the crawl space is simple and only took three hours, but I saved $500 doing it myself.

Our insurance policy had a $1,000 deductible, meaning we had to pay $1,000 before the insurance kicked in. I didn't actually have to pay anyone, the insurance just paid us $1,000 less than what they estimated the damage to be. As part of the adjuster's research, he also took the faulty braided supply line with him to send to a lab to see what went wrong. At the time, we were told that the insurance company was going to attempt to recover costs from the manufacturer if they found it to be improperly made. If they were successful in getting anything back, the first $1,000 would go to pay us back our deductible.

3 Years Later


I don't talk to my insurance company often. Whenever I did, I would ask about the status of getting this $1,000 back. A few months after the incident, I was told that it was tied up with lawyers in a class-action suit. Having been involved in other lawsuits at work, I knew this meant it would take a long time.

Maybe 18 months after the event, I was told that the company that made the supply line had gone bankrupt and the odds of recovering anything had gone down substantially. At that point, I mentally wrote it off.

Imagine my surprise then, when my insurance company called me the other day and asks how I wanted to receive the payment. I was like, Cash Please!

Image result for wayne's world cash gif

So Now What?


So, I've got an extra $1,000 I wasn't expecting. Now what? For me, it's pretty simple. I'm not going to go out and buy anything I wasn't already planning on getting. If I want something bad enough, I fit it into the budget and I buy it. I don't need an excuse of having extra 'found' money to do so.

In this regard, I like Dave Ramsey's baby steps, which says that you focus on whatever step you are on in the wealth building process. We are on baby steps 4, 5, and 6 (save 15% towards retirement, save for kids college, and pay off the house early), but are taking a quick breather to beef up our emergency fund (baby step 3). We have enough cash in our emergency fund for any typical emergency but want to make sure we have enough to buy a new car on top of our normal emergency fund amount.

All that to say, this money is just going into our savings account since that's our area of focus. Once that's beefed up enough, every extra amount goes straight to the mortgage.

So that's my recent surprise and my boring plan for what I'm doing with it. I hope you can find some extra money, too, I just don't recommend this path for finding it.

Tuesday, August 8, 2017

9 Things We've Done to Save Money (Some crazier than others)

We've done some crazy things in our day to save money. Some were done out of necessity at a specific time and others have become ingrained into our lifestyle. It's easy for me to downplay those that are a part of our firmly established routine and to think of them as nothing special. Yet, as I interact with and see the behaviors my neighbors, co-workers, or family members I am reminded that some of the things we do aren't 'normal'.

These habits have helped us grow our net worth. An even greater benefit is that they have greatly contributed toward our overall sense of contentment. Some of these we don't do anymore, but some we do. So in no particular order, here are 9 things we do (or have done) to save or spend less money.

Garage Sales


We recently hit up a nearby garage sale where there had to have been $10,000 worth of kids clothes. Everything was a high-end brand name and a lot of things had never been worn. By garage sale standards, the prices were a little high, but for $50 we got what would have cost >$250 in stores and everything is basically brand new. If only my feet were a little smaller, I could have got some handmade Italian leather shoes for just a few dollars. Our entire neighborhood isn't so flashy, but having neighbors with expensive clothes and flashy cars is a natural byproduct of living in a neighborhood like the one we do. Their waste is our gain.

On the other side, we try to be really selective about what we bring into our home and to shy away from short lived "trendy" items as to not be having the need to have garage sales of our own.

Get Multiple Quotes


In our house, we do a lot of home improvement projects. Lately, it seems that we're about 50/50 in terms of doing the work ourselves or hiring it out. (Rules of thumb: We always hire out drywall - it sucks. We never hire out painting - it's easy to do ourselves and my wife can spend the time to get it to her exacting standards. She's not been impressed with many "professionals" work).

Sadly, there are some real boneheads out there amongst residential subcontractors. Take, for example, the guy we had come to our last house for a drywall estimate. We were finishing our basement and had done all the work ourselves up to the point of drywall. He walked around the basement, saw what needed to be done, leaned back with his thumbs in his belt loops, and after taking a deep breath pronounced "Yup, I'll get 'er done for $3,500". No measurements were made, nothing was written down, just 3-minute walk through and a 30-second mental estimate. The contractor who got that job actually did some math and did it for just under $2,400. Always get multiple quotes.

Thrift Stores


To this day, we have spent very little on brand-new clothes for our four children. We only really buy clothes for our oldest son and daughter and the other kids get hand-me-downs. Most of the clothes we buy for them come from consignment stores or thrift stores.

(Side note - in our town we actually only have donation centers for Goodwill. We have to go to the next town over to be able to buy stuff from Goodwill. Our town is definitely the demographic of Goodwill donors, not shoppers).

Nowadays it seems that most families don't have more than two children, so there are often plenty of perfectly good clothes that kids outgrow where there isn't a sibling to hand them down to. Most of what we buy at thrift/consignment stores is for the kids, but one of my favorite ties is a Brooks Brothers tie I got for $1 at Goodwill.

Packing Lunch


When we were getting out of debt and paying our way through graduate school, I think I probably went several years without going out to eat for lunch at work. Not only that, but the lunches I did eat were pretty pathetic. I think I've eaten enough Michelina's frozen lunches for a lifetime. We've also packed meals for road trips and flights to avoid the need to purchase food on the go.

Even now that I'm no longer paying for grad school I continue to pack my lunch, but now I eat a lot healthier. I do eat out at work on occasion now, but when I do I try to make it a networking lunch and use it as an opportunity to maintain relationships with people I don't work with every day. Making this sacrifice early in my career had a compounding effect on our net worth and ability to save, but now has become a money saving habit.

Carpooling


When we were both working, my wife and I carpooled to work for over two years. We had sold our second vehicle and worked close enough to each other that we didn't have to get a second vehicle or pay >$1,000/yr for a parking pass at her job.

Currently, I have a couple of co-workers who live nearby and have carpooled with them, but it's not a regular occurrence and it's more a convenience thing than a cost savings thing when it does happen.

Takeout vs. Dining In


For years, we almost never ate out to ensure having enough money to pay for grad school. Now, we still don't eat out much, but it's because we have four kids and taking them all to a restaurant just sounds like it's own special form of hell. But we still want to eat good food without making it ourselves every once in a while. Our latest tradition is that I will pick up take-out on my way home each Friday.

This isn't really an area of saving money, but I have learned that at most restaurants the folks that handle take out orders get paid a little bit more to compensate for not getting tips. Knowing that, I have no problem skipping the tip on a takeout order. Boom - 15% savings. My kids are picky eaters too. Unless we're going to a pizza place, any restaurant food we buy for them is a waste of money.

Avoid Tolls


There are certain cities where toll roads are just a part of life. Just driving into Manhattan or crossing the Golden Gate Bridge will cost you a decent chunk of change. This can come as a surprise to folks visiting from smaller parts of the country where all roads and bridges are free, but to locals it's just part of living in a big city.

One city that I've found particularly egregious for tolls is Orlando. The worst is the one toll booth that you HAVE to go through to get in/out of the airport. Or do you? On your favorite navigation app, you can simply turn on the 'Avoid tolls' option and find ways around those pesky tolls. Note that this isn't always recommended since your time is worth something too. One time we were driving from Orlando to South Florida and decided we wanted to save the ~$12 toll and avoid the Turnpike. We made it, but it probably tacked on 90 minutes to our trip. Next time we'll just pay the toll.

The Orlando airport toll takes just a couple of minutes to avoid and doing so gives me a sense of accomplishment, even though it only saves $0.50. Note that this isn't always recommended since your time is worth something too. One time we were driving from Orlando to South Florida and decided we wanted to save the ~$12 toll and avoid the Turnpike. We made it, but it probably tacked on 90 minutes to our trip. Next time we'll just pay the toll.

Learn to Sew


This is an area where all the credit goes to my wife. I'm not talking about making your own clothes. I know people who do that, but the cost/benefit doesn't make sense for us. For me, I regularly will need buttons reattached, hems to be redone, or even holes patched in my pants. My wife has taught herself how to sew and now I don't need to go anywhere to get clothes repaired.

It blows me away that I meet people who won't even attempt to repair clothes. It's just seen as easier to replace something that only needs a simple fix. We draw the line at socks. If my socks get holes, they go in the trash.

Wal-Mart Parking Lots vs. Hotels


Here's one that I haven't seen anyone talk about before. Now, it's been a few years since I've done this, but I've taken a few cross country road trips with only me in the car. When I'm by myself, I hate spending ANY money on hotels. All I really just need a place to lie my head down for a couple of hours before getting back on the road. Enter the Wal-Mart parking lot.

Did you know that most Wal-Mart parking lots allow for overnight RV and Semi-Truck parking? Regular cars are allowed too. It isn't often the best nights sleep as the semi trucks leave their engines running and the flood lights stay on all night, but it's completely free. I'd compare it to sleeping on a plane, which I've done more times than I can remember. My favorite part is that I can walk in at any time of the night if I need to brush my teeth or use the bathroom. In the morning, I grab a donut, a banana, and am back on the road before the crowd.

I've even met some cool people doing this. The most memorable time was driving through South Dakota and sleeping at the Wal-Mart closest to Mount Rushmore. This was near the time of the huge Harley Davidson rally in Sturgis and there was a caravan of RV's and motorcycles that had formed a circle in the parking lot and they were up all night having a good time.

Note: this would never fly if I was with my wife and kids. I'm not sure I'd suggest my kids do it either, but I'd probably do it again.

 

There are a lot of other things we do that didn't make this list. At the end of the day, I think it all comes down to being deliberate in your spending. You'll be served well if you find ways to do things yourself rather than automatically hiring someone.

Wednesday, August 2, 2017

July 2017 Net Worth Update

I can hardly believe July is already over. The year really seems to be flying by. In the month of July, I finished reading seven books, vacationed to both Florida and Hawaii, and somehow we managed to grow our net worth another $12,800 to $680,980.

If you're looking for a good read, the best two books I read this month were:

Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall by Neil Barofsky

A Splendid Exchange: How Trade Shaped the World by William Bernstein

July 2017 Net Worth Overview




Cash


As you can see, our cash balance continues to be stagnant, and this months excuse is a trip we took to Hawaii. It was totally worth it (left 3/4 kids at home!), and we snuck it in before school started. With school starting, we'll be staying put for a while and should see our cash start to grow in September (we're finishing up a backyard patio in August or September). At least our cash is paying a whopping 1.1%, right?

Investments


Again we continue to do nothing different or special with our investments. The S&P 500 was up 1.93% in July and we continued to invest. I keep about 1% of our investments available for more speculative, risky investments and one of those investments is Amazon. I've always said that I love the company but hate the stock but decided to buy some early this year on a dip in the $740 range. I still hold it and continue to be surprised at how much it's gone up, despite recent declines.

Cars


Nothing new to report here, but Kelley Blue Book periodically shows an increase in the value of our SUV. Tesla launched their new Model 3 last week, and I now have a somewhat renewed desire to buy one but my little Corolla keeps chugging along so nothing planned here.

Side note - when we went to Hawaii, we couldn't reserve a rental car online since the trip was planned at the last minute when we found really good flights. As a result, the cheapest car we could rent was a BMW 7-Series (non-luxury SUV's and Minivans were available but even more expensive).

So for a few days, I went from driving a $3k 2005 Corolla to a $85k+ 2015 BMW. You know what's crazy though? I didn't like it. The gear shifter was confusing, the doors always took two tries to close, and I didn't figure out how to unlock the doors without the key fob until the second day. There were other issues, but you get the idea.

Sure, it was roomy and comfortable, but it was a really big car to navigate through crowded streets (Waikiki is awful, it's much more enjoyable out of the city). The island was also too small to really test out the powerful engine. My takeaway though was that I don't get much enjoyment out of driving a really nice car.

Our Hawaii rental where we went to see a beautiful sunrise.

House/Mortgage


We continue to pay extra on the mortgage and our home value increased slightly, boosting our equity by $3,700. Our next door neighbor is getting ready to sell, that should help us gauge our own value. His house is smaller and needs some updates but he's got great neighbors so it should sell quick, right?

We need our net worth to increase by $4k per month to hit our goal of $700k by year end. The concrete patio should be the last big house project for the year and travel will slow with school in session. Next year I'll be excited to really start making a big dent in the mortgage.