Teachers Stacking 10's

Author: The T.A.

  • 5 ways to start the Financial Conversation with your Family.

    5 ways to start the Financial Conversation with your Family.

    Now it the time to have those conversations about money with the ones that you love. 

    A year ago, one of our firsts posts was discussing the importance of having money conversations with your family. It is challenging to have those financial conversations with the people around you. Often people can be ashamed and consider it a blow to their ego when comparing bank accounts. But now, a time of uncertainty is the perfect time to have these conversations. Some tips to start these conversations on the right foot. 

    1. Talk proactively – No one can control the previous money mistakes that we have made. We have all made several. I make financial mistakes almost weekly, and that’s okay. Don’t dwell on the past but instead frame your conversation as it applies to the future. Saying things like, “What bills and debts do we needs to pay down this month?”, “How much do you think we could afford to invest?” “How much do you think we should budget for groceries next month?” All of those kinds of questions avoid looking at past financial mistakes and focus on future expenses or investments. 

    2. Don’t compare bank accounts – Net worth is a very nice stat for individuals to track to monitor overall financial well-being. But what might be a good spot for you won’t necessarily be a good spot for someone else. Directly comparing salaries, bank accounts, investments, etc. has a way of demeaning one person or the other’s accomplishments. Just because my friend pulled in over 6 figures last year doesn’t mean that he is more successful than I am. It just means his incoming revenue from salary is higher. Instead talk about where people have their money stored. Is it in a savings account (bad)? Is it invested? Are they investing it wisely (for instance not spending money on speculative marijuana stocks)? What are their interest rates for their debt? What are their plans to pay off that debt? All of these are conversation starters that focus on actions people can take not just focusing on the dollar amount in their accounts. 

    3. Talk about the impact of a lost job – The Covid-19 quarantine serves as a great reminder that we need to have a plan ready should we lose our primary source of income. What a great time to have those conversations now. Things to bring up, “How long can we survive without our primary source of income?”, “What assets could we sell if we had to?”,”What could potentially be an alternative source of income for our family?”, “Should something happen to one of us do we have insurance or a will in place?”. Times like these provide us an all to real example that our day to day lifestyle can be temporary. It is better to prepare for those dire times now while we are relatively safe. 

    4. Learn what costs are essential in your life – As society strips down all to just essential businesses in operation we can also do the same in our financial life. What a great time to see what you physically must spend money on versus what is just fun to spend money on. During this time I have realized how much money I spend eating out, traveling, going to breweries, etc. These are all hobbies of mine and I’ve known that I spend money on them but during this quarantine I have felt first hand how much I have truly spent on them. It’s leading me to question how much I am spending. Yes I will go out to eat in the future and yes I will travel and go to microbreweries, but now I am aware that I can curb those things. It also has me realizing how much I am spending on gas and purchases I make in the gas station. Use this quarantine to talk with your family about what expenses you can permanently remove from your day to day lives. 

    5. Find a financial mentor – As you are talking about finances and reading through various websites and books it is important to also find a person that you trust that you can look to as a financial mentor. This person doesn’t have to be perfect. Just someone in a similar situation as you that is open to discussing finances. It’s helpful to have that person in a similar walk of life to bounce ideas off of. The Professor and I chat finances daily. Most of it is nonsense about what the markets are doing or what we think the future might hold but it’s helpful to have the person to bounce ideas of investments off of and someone that will tell you when a purchase you’re considering is stupid. Also a good idea to chat with someone from a similar walk of life. Conversing with a friend who’s income and expenses are ten times greater than yours might just lead to frustration. 


    There you have it, 5 ways to start that financial conversation at home and ways that we can use what we are experiencing during shelter in place to help curb our spending and grow our net worth beyond The Covid-19 outbreak of 2020. 

    Stay Safe and as always…

    KEEP STACKIN!

  • The Inevitable Crash is Here!

    The Inevitable Crash is Here!

    THE SKY IS FALLING! THE MARKET IS CRASHING! CATS AND DOGS LIVING TOGETHER! WHAT SHOULD I DO????!?!?!?!

    Step 1 – Relax. DO NOT SELL YOUR STOCKS!

    As with anything during these strange times of the corona virus, it is really important to weather the storm. It is a time for patience not panic. We are hoping to clear up some of the big financial questions that we are all asking at this time. 

    First up – What is a “market crash?”

    A market crash is a bit of an exaggerated term. It truly means that the overall value of all the stocks in the market have dropped a significant amount. Currently, in this last full week of March 2020 they are down 33% since the market’s high a few months ago. For many of us, it looks like our investment are way down. There is some truth to this. The index funds I bought in February for $300 a share are now worth closer to $225 a share. So on that investment, yes I am currently behind. But it is important to note that I have purchased a lot of index funds over the years at a variety of different price points. While it does seem like I have lost a lot of money in the short term, I am still up overall. I bought those same index for $160 a share in 2014. So overall, still ahead and I have been collecting dividends on those shares for the past 6 years as well. So despite these times of record losses, I can still sit here and joke around and smile because I understand that this “crash” like all crashes is temporary. 

    What is a correction? What is a bear market?

    Hopefully, as a teacher you aren’t tuned in to the daily back and forth of the stock market. Following the daily ebbs and flows can be draining and can take away from our overall goal. And that is to invest for the long term. If you have been following the talking heads, there is a lot of current talk about a correction and heading into a bear market. A correction is a natural process that occurs in the stock market. Stocks often times are over valued because of record profits and many people buying in when times are good. As a country, the USA had been riding an inflated market for most of Trump’s presidency. President Trump is a business man so much of his team’s focus has been to ensure stock market growth. This lead to a lot of confidence in the economy and lots of buying in the market driving the prices of everything way up. At some point we knew it wasn’t going to last forever. Many individual stocks and funds had become over-valued. Insert an event of uncertainty (A global pandemic) and we get the return back down to normal. Sometimes the correction can send the Stock Exchange into what’s called a bear market. It’s impossible to say for certain if this virus will launch us into a bear market but a lot of people smarter than us say that is likely the case. What does a bear market imply? A bear market is a 20% drop in stocks from their all time high, so yes, we are currently in a bear market. The question that we don’t know the answer to is how long with this bear market last. That will really depend on how long this coronavirus pandemic lasts. It may be surprising to here, but as a young investor, this drop in the market greatly excites me. It will really open the door for our generation to get into the market at a low point and see our wealth accumulate. It’s just unfortunate that it took a crisis like this to cause it. More on that later. 

    Why you can’t “time” the “crash”.

    Many times, I find myself walking the professor back from the metaphorical financial ledge. He is an aggressive investor and wants to accumulate wealth in a hurry. Who can blame him! He doesn’t have a much time as I do to sit back and let those index funds grow. He and others often talk to me about, “Oh if I only knew that this crash was coming I could have sold!” or “Why did I buy those stocks right before the downturn.” Or the best yet, “I don’t want to buy any now until I know it’s hit bottom and is on it’s way back up.” To all of those out there thinking things like this… NO ONE, NOT EVEN PROFESSIONALS CAN TIME THE MARKETS! SO GET THAT IDEA OUT OF YOUR HEAD! Absolutely no one can predict the short term day to day transactions of the markets. Especially not us. So now is a great time to stick to your monthly plan of investing. Whatever you do. DO NOT SELL! It is the worst time to sell your stock, and it is a move of panic. Leave that money in there. The one thing that we can predict about the market is that over time the market goes up. It might not be for a couple of years but it always goes back up. What a great opportunity for us to accumulate some cheap index funds!

    What about the different payment options that are being made available for my mortgage, student loans and other expenses.

    NO.

    If you still have paychecks coming into your household and you don’t have to defer those monthly expenses, don’t. The only thing those are doing is delaying your debt. You’re better off staying on whatever plan you have to pay that debt down versus trying to have more disposable income in your pocket while you are stuck twiddling your thumbs inside. If you don’t have a stable paycheck coming in currently, then obviously you should use common sense. Look at your budget and see if you can afford to keep paying those things or not. 

    Step 2 – Use this crash to your advantage

    At some point, the market will stop falling. It will level off as society moves back to its normal ways in the future, and the market will have a chance to start growing again. This Bear market should be seen as a golden opportunity for us a few years away from retirement. The inflated prices have come crashing down and have now been made more affordable for us future investors. We now have a chance to get in on the bottom as the nation’s economy rebuilds. 

    How to invest during a crash?

    Stay the course on whatever investment plan you have currently been using. For me, it’s a great time for index funds. relatively low risk and always go up in the long term. I just bought another batch with my last paycheck. And with the cheap prices I was able to afford more than I have purchased in a long time. Here at Teachers Stacking 10s, we are a big fan of Vanguard’s system. No particular reason why we just think it is easy to navigate. I have been purchasing more low cost index funds(<.04% fees) during our quarantined time here. There are other stocks out there that can be good buys. There is just more uncertainty with those in these current times. In general, I suggest index funds or something that pays a high dividend. But that’s a conversation for a different time. BUY INDEX FUNDS!

    What to do during the crash?

    Many teachers around the nation now have some extra free time that we aren’t used to. Use it to “Sharpen the Axe”. Now is a great time for reading, research, studying all things finance related, things that you never had time for. Use this time to read a personal finance book. We can recommend a lot of them! Check out the rest of this website plus our other favorites that you can find on our home screen. Take this time to go through your family budget and what your goals are for the future. We have a unique opportunity here to come out of the quarantine as more intelligent investors. Let’s use this time to our advantage. 

    All finance related inquiries a side. I truly hope this post find you well. We are living in weird times and I believe the nation is realizing how important that role of a teacher is. It’s a great time for all of us to step up and do what we can in our districts to continue to prove our value to society. Thanks for all that you do and spending time to read through our financial advice. Feel free to comment below with any questions or concerns you have during these strange times. 

    As always…

    KEEP STACKIN!

  • Trials of Adulthood – Replacing a Hot Water Heater

    Trials of Adulthood – Replacing a Hot Water Heater

    Using a small amount of intelligence and elbow grease to save yourself hundreds…

    I recently had the joy of my hot water heater going out. In the middle of a stretch of -20 degree days… 

    Finally, I was hit with the number 1 argument everyone always gives against buying your own home, the, “Well, What if (enter miscellaneous household appliance) goes out? You’re going to have to pay to get that replaced.” Yes, after all these years of owning a house, a crucial appliance quit functioning. Now what? 

    Clearly, my first step was to panic. At 5:15 in the morning when you realize the shower is never going to heat up it is a natural instinct to panic and assume the worst. After a 30 second shower, I was able to get to school and immediately begin to research the price of new hot water heaters. I automatically assumed the worst. 

    Later that night, I was able to gather my senses and relight the pilot light for the heater. A process that intimidated me for no other reason than gas + fire = bigger fire, and I had never worked with a hot water heater before. I felt victorious until I was unable to keep the burner lit for an extended period. It seemed as if my worst fear had been realized. I was going to have to call a professional. After doing some quick calling and internet research, I found a company that could come out after a few days for the sweet price of $129 just to check out what the problem might be. Not having a ton of experience, I assumed this was the only route I could take. However, after I started asking around, I found perhaps the problem was one I could solve myself and possibly for considerably cheaper. 

    After a quick stop to Home Depot and some help from the Ron Swanson-esque employee, I picked up the $12 thermocouple that I was hoping would solve all of my problems. After taking care to turn off and disconnect the gas from the heater, I followed some simple instructions from the #1 youtube video on replacing a thermocouple. Roughly 15 minutes later I had the water heater up and running and had to crack a cold one to celebrate being able to take hot showers again after 3 days of freezing ones.

    A month later and everything is still running smoothly, piping hot water and more money in my bank account. 

    Moral of the Story – Don’t get blinded by the frustration caused a problem. Stop and look for a solution. Who knows, It could save you time and money as well as give you an immense feeling of accomplishment by being a problem solver. 

    KEEP STACKIN!

  • 5 ways to grow your net worth in 2020

    5 ways to grow your net worth in 2020

    In 2019 I was able to increase my net worth by $32,000 but only took home roughly $40k from my paychecks… How is this possible? It’s actually a lot simpler than you think. There are a few basic steps that we can all take in the new year to grow that net worth number. It’s really the only number that I am constantly paying attention to as a metric for my personal wealth. 

    Step 1 – Tracking your net worth. I like the app Personal Capital to track my accounts and every day expenses. My favorite feature of the app is the home screen that tracks your net worth for you! Looking at it everyday makes you aware of how much you have and plays a part in gamifying the process for you. Currently, I am down to just recording it annually. I started by recording every month in order to make sure I continued growth. Being aware of what this number is and the impact transactions have on it, has to be your first step in financial independence. Very few people out there will innately acquire wealth. We must be aware of where we stand in order to grow. 

    Step 2 – Owning a house. This one should have a big asterisk beside it. Owning versus renting is not a one size fits all decision. There are a lot of things to consider about your own situation but for me it looks to be a profitable experience. My mortgage payment is half of what the average rent is in my city. I bought an affordable fixer-upper in a popular part of town. As I slowly renovate rooms to modernize the place the property’s value is holding steady and my monthly payments are slowly going converting into equity. Whenever it is time to sell, I’ll likely make some money off of that. Whereas with renting, I can guarantee that I won’t make any money. One thing that is nice about Personal Capital is it automatically pulls your houses estimate from Zillow to keep tracking this for you. I’m able to follow the ebbs and flows of the market, and it gives me a very rough idea of what my property should be worth.

    Step 3 – No New Debt. Of course I say this after saying it can be profitable to buy a house! Housing is one of those expenses that you can expect from life. You’ll always have to pay for a place to live. When I talk about no new debt I talk about avoiding loans and payment plans for items you can live with out. Jewelry, electronics, furniture, renovations, all of these things can have payment plans that turn into debt that hangs over your head and pull that net worth down. Always try to make decisions that limit new debt. Pay outright for small things. These little debts add up much faster than you realize. Try to avoid them and seek alternatives if you can. 

    Step 4 – Pay down your existing debt. We all have debt in some way shape or form. Make sure you are taking active steps to pay yours down. Don’t miss a payment ever and prioritize what debt you have. 

    1st – Pay down any of those credit card debts that are wracking up. 18% interest can suffocate you for years if you are just making the minimal payment

    2nd – Car loans – depending on your interest rate take care of any vehicle or personal loans.

    3rd  – Student Loans – While these interest rates are high, federal student loans do not transfer should anything happen to you. In the event of death student loans are wiped out… Unlike your other debt

    4th – Mortgage – If you have recently purchased a house or refinanced you are probably sitting at a nice interest rate (something below 4%). At that rate I don’t feel that it is essential to throw down loads of money to pay that debt down. Yes it would be nice to own your house outright but at 3% interest you are better off putting that money to work in index funds that are returning at a 6-7% rate!

    Step 5 – Invest. Some of us out there are fantastic at saving money. They are frugal and always save more than they earn. But they never take that next step of putting that money to work for them. It sits stagnantly in a savings accounts at their local bank earning fractions of a percent in interest. This was a viable strategy for your grandparents due to the high savings accounts rates of the past but that time is no more. According to the FDIC, the national average interest rates on savings accounts is at… Wait for it… .09%!!! What a waste! In modern times the purpose of a savings account, if you even have one, should be a rainy day fund. A quick source of money that you can access immediately to cover repair costs on large items on your house or vehicle. A savings account is no longer a great tool to build net worth. Instead you should be putting those dollars to work for you in LOW COST INDEX FUNDS. Check out our resources on them. Challenge yourself to invest incrementally more each year or each quarter or maybe even each month. It is crazy how fast that net worth can snowball!

    Make these steps happen as soon as you can. We are all bad about putting things off thinking there will be a more convenient time later. Make these steps today so that your net worth can start its exponential growing process!

    KEEP STACKIN!

  • HSA 101

    HSA 101

    Everything you need to know about what might be one of the best investment tool to add to your portfolio.  

    First things first, if you are single and under the age of 26, you should be staying on your parents’ health insurance plan. Typically this makes the most financial sense. Sometime right before that 26th birthday you’ll be looking for what kind of health insurance you should be getting. I would suggest getting a high deductible plan with an HSA.

    ​

    What is an HSA? An HSA is a Health Savings Account. They were created in 2003 in order to help out people that had a high deductible health insurance plan. For young people, it makes a lot of sense. Typically, young people don’t need the more expensive plans with better coverage but much higher premiums. In my 8 years of employment, I have only recently gone to the doctor for a cholesterol check. Other than that I haven’t had the need to schedule a doctors appointment. Therefore, it wouldn’t make a ton of sense for me to pay large sums of money each month for a high end health insurance plan when I don’t need one. Enter the high deductible plan. First up, a deductible is the amount of money you have to pay out of pocket before your insurance kicks in. For us single young people that are healthy, our best bet might be going with a high deductible plan with that HSA account. 

    HSA accounts are Triple Tax Advantaged – meaning…

    1. It is put into an account pre-taxed – When you contribute to your HSA it comes out of your check before taxes are taken out. We haven’t discussed a lot about taxes here on Teachers Stacking 10’s but whenever we can lower our taxable income that is a big win! There is a limit to your contributions however – $3,550 for single and $7,100 for family plans. ​​

    2. The gains on that account are not taxed – Your HSA can be invested. I have recently switched my HSA from my local bank into a Fidelity HSA account. This means I can have take those couple thousand dollars and leave it sitting in index funds to grow. On top of that I will not be taxed on those gains! Unheard of. 

    3. The money is not taxed when you spend it. You can spend your HSA on anything related to medical expenses… This is the current list as to what qualifies for a medical expense – http://www.hsabank.com/hsabank/learning-center/irs-qualified-medical-expenses. So long as you are spending that money on medical expenses you never have to pay taxes on it! 

    So rather than spend a lot of money each month for a health insurance plan with a big premium I have gone with the high deductible plan. My current deductible is roughly $5,000. I know that seems like a lot. But since I am a healthy person without any kids I don’t have medical expense. Instead I have chosen to bank up my HSA for the emergency where I might need to use that big time deductible. The main benefit of that is more money is at my disposal while still being covered in the event of a catastrophe.  

    Health care is pricey. But using an HSA we can help offset some of these costs

    If you decide that an HSA is right for you, where should you open an account? 

    The decision as to where to open your HSA does carry some significance. During the initial stages of my HSA, I simply opened up an account with my local bank. It has been a smooth process. No problems with the deposits or setting up an account, and they provided a separate debit card for me to use on qualifying purchases, which have been low. So for the most part the money just sits there, gaining .15% interest. Yes that is a fraction of a percent interest which translates to a couple of bucks a year… OUCH! Recently, the account has grown and I have decided that the minor conveniences are not worth the dollars that I throw away each year in interest. With about $2,000 in my account the difference is roughly $3 a year interest compared to $140 if that were invested in Index funds. That is reaching the point of interest earning me a free check-up at the dentist every year. I CAN’T MISS OUT ON THAT! 

    So enter FIDELITY. After a lot of research in various sources time and time again I came across Fidelity as the most recommended vendor for HSA accounts. A couple of things have stood out to me about them. 

    1. They do not have a minimum cash holding balance before you can invest. What this means is that some vendors require that you have an amount ($2000 cash) that must stay in your account and is not invested. Thus you invest on every dollar past that minimal required amount. Not great for me. Yes, I have some money in my account but I’m in no rush to start socking money away into it. Fidelity doesn’t do this. The first dollars you deposit with them can be invested. This pleases me.

    2. A wide variety of low-cost index funds to choose from. While it is true that Vanguard is the god father of the index fund, Fidelity also has some very good options with a very small expense ratio, some below .03%! This is big to all for my investment options to keep those expense ratios down. On paper those percentages can look small and be easy to miss, but over the lifetime of your accounts can add up to thousands of dollars!

    ONE DRAWBACK ​

    The Fidelity account won’t have a debit card. To keep an HSA in an investment account, you lose the ability to immediately pay your bills with that HSA while you are still in the office. Instead you pay using your credit card or checking account, then later if you would like to reimburse yourself for that expense you can deposit that money from your HSA into your checking. It’s important here to keep a copy of the receipt. I usually just save a digital copy to show proof of the expenses you are covering with that money. Remember, an HSA is tax free so the IRS likes to keep it that way. So long as you have the receipt of purchase you’ll be just fine.

    So the Fidelity HSA experiment has begun. I’ll be keeping an eye on how my investments grow and seeing how convenient the account is to access when I need it. Overall I’m excited to put more money to work for me gaining that compound interest! Check out the expected growth of $2,000 over 20 years below. $7,739 vs. $2,061!

    So it’s important for you to start looking at the numbers for yourself. If you have a lot of reasons to go to the doctors frequently (aka kids) maybe the high deductible plan isn’t the right fit for you but for the rest of us it is definitely worth considering. I have roughly $2K sitting in my HSA which is invested in index funds which are currently earning 7% per year, think about how that can grow! To me in my situation that makes much more sense. 

    KEEP STACKIN!

    ​

    ​

  • Is Disney+ Worth It?

    Is Disney+ Worth It?

    How the latest from the entertainment giant has me questioning how many streaming services are too many?

    Tuesday marked the release of the latest streaming service, Disney+. Disney became just the latest entertainment company to release a service emulated after Netflix’s staple model. Being a huge Star Wars and Marvel nerd I found that trying out Disney+ was a must for me and.. HOLY COW IT IS NEAT! I spent the first hour perusing all of the titles available. After the trip down memory lane perusing old titles that I had completely forgotten about or didn’t know Disney owned, I settled into the 

    After cranking out the first episode of The Mandalorian, I started to think about exactly how many streaming services I currently pay for each month. I have always considered myself frugal when it came to my entertainment needs. Long ago I cut the cord from cable and relied solely on Netflix and Youtube, undoubtedly a cheaper alternative. But as the years have passed and I have continued to add streaming services to my monthly bill it has come time to question exactly how many do I need and what am I willing to spend each month for my at home evening entertainment. THIS CALLS FOR A SPREADSHEET!

    A Look at the 2019 Streaming Services

    Here’s a quick side by side look at today’s most popular streaming services available to purchase. Many of these are viewed as alternatives to cable. Each have their pros and cons.

    Streaming Service

    Cheapest Price

    Deluxe Price

    Typical Annual Price

    Pros

    Cons

    Netflix

    $9

    $16

    $156 / year

    Movies and Original Content. Ad Free

    Waiting for content. Losing content

    Hulu

    $5.99

    $50.99

    $480 / year for ad free live TV

    Can play live TV and Sports

    Expensive

    Disney+

    $6.99

    $6.99

    $60 / year (special deal)

    Ad Free. Original Content

    Limited to Disney Owned Products

    HBO Go (or add on)

    $15

    $15

    $180 / year

    Great Original Content and Movies

    Expensive for what you get

    Amazon Prime

    $12.99

    $12.99

    $119 / year

    Part of the Prime Delivery

    Content isn’t the greatest

    Sling TV

    $25

    $40

    $300 / year

    Live TV

    Limited Channels

    CBS all access

    $5.99

    $10.99

    $72 / year

    Live TV and Sports

    Not a lot of extra content

    Youtube Premium

    $12

    $12

    $144 / year

    Ad Free. Download videos

    Music is separate. Average content

    ESPN+

    $5

    $5

    $60 / year

    Can bundle with Disney and Hulu

    Not great extras

    Apple +

    $5

    $5

    $50 / year

    Cheap

    Does is have anything?

    Totals…

    $103

    $175

    $1621 / year

    Lifetimes worth of content

    That’s a hefty price point

                            So as you can see, having all the world’s content and your fingertips is far from free. But where do you draw the line?

    Take a look at all of those available options above. It’s important to prioritize what streaming services serve you best. At an additional $100 per month for the basic level subscriptions to these streaming services it would almost be cheaper to get a basic cable plan. These pricing also have a way in creeping up from year to year increasing your annual expenses. And this does not take into consideration the opportunity cost of these monthly plans. Setting aside that money in the proper index funds means it is growing at 6-7% and generating dividends. So in reality, spending $1,000 per year on streaming services adds up. I enjoy Netflix as much as the next person but I’ve had that account for 8 years now, that’s roughly $1,200 I’ve paid for one streaming service!  

    Personally I don’t seem myself getting rid of every single streaming service I am currently subscribed to. But the addition of Disney+ does make me stop and consider what I want to purchase moving forward. One way I’ve been able to keep cost down is sharing the service and pricing with other family members. Cutting your costs in half or in a third makes it easier to justify the spending. Still it’s important to curb some of that spending. Do I really want to pay $15 a month for HBO now that game of thrones is over? Is watching march madness really worth the $6 a month for CBS all access. These are the frugality questions that we should be asking ourselves in all aspects in our lives not just entertainment.

    Ultimately you need to decide what brings you joy and what that amount of joy is worth to you. I’ll definitely be keeping Disney+ for the year but might reconsider in the future. Remember when deciding what to pay each month you are taking away from the pot of money that you could be saving for investments or for other aspects of life that bring you joy. For me paying hundreds per year to stream certain TV shows at night might just not be worth it. 

    The choice is yours, prioritize your spending and as always

    KEEP STACKIN!

  • Am I an Idiot for Buying a New Car?

    Am I an Idiot for Buying a New Car?

    Sort of, but not FULL IDIOT

    For many of us, car shopping is one of the great frustrations in life. You spend weeks if not months researching and searching for options only to either spend too much money or end up with something that is unreliable. The finance community has all kinds of feelings and opinions on purchasing vehicles. I don’t know that there is a one size fits all model for your car shopping experience, but there are definitely some bad car-buying decisions that can be made. The following is a walk-through of my decision-making process resulting in my ultimate purchase of a (gasp) brand new vehicle.

    Much of the F.I. community would be appalled at my decision to buy a brand new vehicle. For the typical person, it might not have been the best decision to fit their lifestyle but after my debate and research, I do feel that it was the best decision that fits my lifestyle.

    The old reliable Toyota Camry

    Transportation Priorities

    1. Fuel-Efficient
    2. Reliable
    3. Storage Space
    4. Okay for winter conditions
    5. Longevity

    Fuel Efficiency – My number 1 priority for a vehicle is its fuel efficiency. I want to be as environmentally conscious as I can as well as saving money on the monthly gas bill. I commute 70 miles a day and travel a lot in the summer and on weekends. Having a gas guzzler just doesn’t make sense to me. This rules out any kind of truck and really anything with 6 cylinders in general. My target while searching was 30 MPG.

    Reliability – I need my vehicle on a daily basis and I don’t have a realistic backup. Additionally, I have very little knowledge when it comes to mechanical workings under the hood. I can do the basic maintenance myself. After that to fix something I would need a solid youtube tutorial plus a lot of free time, which is something I don’t have during the school year. I am envious of those of you with that skill and are able to drive around ridiculously old cars that are cheap because you have the skill set to keep them functioning. However, I do not currently have that ability so this essentially ruled out any of those ultra-cheap and old cars.

    Storage Space – I have spent the last decade of my life driving the hand-me-down family sedan. I made the decision that I would like to have some more potential for storage space. Once again I spend my summers travelling in my vehicle. It would be nice to not have to fill it up to the brim ever road trip I take. Likewise, I enjoy my outdoors activity so a more accesible backend is what I was looking for. Essentially this narrowed the search to vehicles with a hatchback.

    Snowy Conditions – Living in the North does bring about its limitations. Like I said I drove the family sedan fine in the winter for a decade. However, I had to always be conscious about snowfall and storms and it is nerve-wracking driving a 2-wheel drive vehicle on snowpacked roads. Had I ever had an accident? No. Was I ever stressed driving? Yes. So for this, I was really hoping to get something that had 4 wheel drive. It was my last priority but it was definitely on my wish list. It also made me hesitant to buy an electric vehicle. Last year we had several days below the -20 degree mark and I park outside. Current battery technology is astounding but I did not have faith of that battery holding up the same 10 years from now.

    Longevity – I am not a car guy. I don’t like constantly searching for cars. Hence my being okay driving a hand-me-down Camry for 10 years. In my search I was hoping to find something that I could get several years out of. I put over 20,000 miles a year on my vehicles and I wanted something that I could drive for at least 5 years. In my mind this ruled out many vehicles that were well over that 100,000 mile mark. Yes there are brands with great reputations for running well beyond 200,000 miles but there are also brands that have the habit of wearing down and starting to be problematic once they get over 150,000.

    Before all of the hardcore frugality types start tearing some things apart I would like to make it clear that up until this point I reached 270,000 miles on my slowly decaying toyota camry. It’s missing 2 door handles, the AC only works on certain settings and it doesn’t like that cold weather. I’ve reached the point where I have lost confidence in being able to drive it across the country in the summertime. Also, For the extremist out there thinking that why am I wasting my time driving to work rather than get a closer job and bike or walk for a commute saving thousands I will say you are correct but that isn’t what fits my lifestyle right now. I enjoy the place that I work at and I enjoy the city I live in. To me, that is worth the extra money every month.

    And the winner is…

    The 2018 Subaru Forester. Cheaper than the CRV Rav 4 with similar fuel efficiency and reliability. More reliable and better-predicted longevity than the Ford or Chevy equivalent.

    The reason I ultimately chose the newer vehicle boiled down to 2 things. The Vehicle had 0 miles on it and was under warranty for the first 60,000. and I was able to get 0% financing. To me this was big. 0% financing meant that I would pay ZERO INTEREST for my car. At that point, I decided that I would get a new car. The only thing to decide was how much I wanted to put down.

    I determined the amount I could put down based on how much I could pay each month. I felt comfortable with a $500 monthly payment for 4 years. To achieve this I put $4,500 down. Technically I would have been better off putting that into an account to gain interest but that’s not how my habits work. I was better off putting that money down on the car and keeping that $500 a month car payment.

    HOW ON EARTH DID I JUSTIFY BUYING A NEW CAR? It’s a terrible investment right? depreciates as soon as you leave the lot. All of this is correct. I justify the brand new purchase with the idea of how I drive cars. My plan is that I won’t be looking for a new car again until the 2030’s. If I can get 12 years out of the vehicle, all of a sudden that $500 a month payments turns into $165 a month. Much more reasonable and definitely something to consider when car shopping. To me it’s worth the bad investment to not have to worry about my daily ride to and from work. Ultimately I would like to have a much shorter commute, allowing for me to have a cheaper car that barely gets driven but for today that’s not what is most practical.

    A year later…

    Well, it’s been a year since I bought the Subaru Forester and I have to say I enjoy it a lot. Some things that I have noticed…

    1. I put a lot of miles on vehicles…
    2. 4 wheel drive is a nice perk but it doesn’t mean you don’t have to be careful driving in ice and snow.
    3. Cars made in 2018 definitely ride differently than cars made in 2001.
    4. Extra cargo space has made traveling more convenient and less stressful.
    5. I’m averaging 33.0 miles per gallon since purchasing the vehicle.
    6. losing out at $500 a month that I could be investing hurts. But it is manageable knowing that it is a temporary cost.

    So overall a positive buying experience. And like I said, while it as not been fun paying $500 a month for a car payment I know now that I can do it and still have enough left over to invest. Meaning once I pay off the vehicle that will free up another $500 a month to invest.

    I think buying a new car was the right choice for me at the time. It could also be the right choice for you or maybe it’s not. When buying try to take your own bias out of it and create a checklist of your priorities, just like I did. Then see what types of car fits your needs the best. Until then,

    KEEP STACKIN!

    I feel less like an idiot now seeing JL Collin’s post!

  • How to Avoid the Sneak of Lifestyle Inflation

    How to Avoid the Sneak of Lifestyle Inflation

    “Be careful on what size of house you buy because you’ll end up buying enough crap to fill it” – Papa T.A.

    In the fall of 2015 I purchased my first house. I had been bouncing around to different apartments and rental houses for the previous 7 years, all the while paying someone else to live in their place while they generated some nice passive income from me. Finally, I decided enough was enough and purchased my first home. A small, 2 – bedroom house that was over 100 years old and in need of several cans of fresh paint. As I was looking at houses I remember my father, a life-long frugal man, comment, “Be careful on what size of house you buy, because you’ll end up buying enough crap to fill it.” Being in my 20’s and used to the annual purge that comes from switching apartments I thought there was no way I would ever fill an entire garage, 2 bedrooms, a basement and all of the storage that came with it. Fast forward to 2019 and low and behold I have managed to fill my small 2 bedroom house with crap.

    While many human beings do this same thing with their own homes I think it is far more dramatic with our Paychecks. Think back to a time when you first started working. Go look at those old paystubs and see what you were able to live off of when you first took that teaching job. How many started below $40k annually? How many below $30k? Yikes. Yet we, for the most part, were able to pay bills, enjoy life, take vacations etc. on that smaller amount of money. in 2019, I make considerably more than I did in 2012, On average $500 a check more, Yet I still find myself feeling financially stressed at times. How is this possible? Making $1,000 more per month yet still have financial stress? The answer is Lifestyle Inflation.

    Spending that bonus check before you’ve seen it!

    Lifestyle Inflation is when our monthly expenses slowly creep up to match our added income. Sometimes it shows up as an immediate purchase shortly after or even before an expected raise or bonus comes in. Think, Clark W. Griswold spending his Christmas bonus on a swimming pool before even seeing if he got an bonus or not. Other times it creeps up on you in small extra expenses that consistently add up. For myself, this manifests in craft beers and Amazon purchases. 22-year-old me had no problem walking past the local 6-packs to grab the Buschlight for a fraction of the price, He also would’ve laughed at me for being an amazon prime member because why on Earth would I be buying that many things online, there wasn’t any more room in the apartment! Small expenses like this continue to add up until you hit that stress point again and you’re right back to where you started financially; stressed, not saving anything, and assuring yourself that if you just made more money that would be the answer. Well, I have news for you, if you don’t confront the lifestyle creep no amount of income will ever be enough. Case in point – Had a conversation with a friend of mine who is in the private sector. Making well over what a teacher would make. He is fixed on the idea that once he gets his next bonus then he’ll really be able to start paying down his student loans and truly investing. He says that as he makes $80k a year. However, his rent is triple what my mortgage is, he likes his new cars and nice watches etc. So simply getting more money for most of us won’t save us from that financial stress. You need to FIGHT THE LIFESTYLE CREEP!

    So how can we fight this? Auto investing is a great first step. Schedule a transfer to your savings account or your investment account shortly after your payday. For me, it’s the next day. So many time I don’t even see the full amount of that paycheck in my account before a couple of hundred dollars are pulled out and put into an account that I won’t spend down. Another great way is to up your increase to your 403b. This is a pre-tax contribution so there are some additional benefits for choosing this route. It is harder to access this money in a pinch so I tend to only increase my 403 contributions slightly each year. Similarly, you can increase your contributions to your HSA account. Basically, save first, not last. If you choose to look at your account at the end of each month and save whatever is left it’ll always be less than if you were to set an amount to get taken out of to start with. In addition to saving first, you should just be aware of that inflation creeping into your life. As you are online shopping or getting your groceries for the week don’t forget about your frugality just because you got paid yesterday. Evaluate your financial decisions based on the happiness those purchases will provide you. Don’t buy a $250k house just because that’s what your friend did, think about what will make you happy. A big house with a big mortgage payment with all kinds of rooms to start accumulating your own collection of crap. Or a smaller house with a smaller mortgage payment and some money to invest or to travel or to do whatever it is that brings you joy.

    So take some time and look back at those early checks to see what you used to be able to live off of. Figure out how much you want to start auto-saving even if it’s $50 just start. Lastly, look at what you are buying and how much joy that purchase is bringing you and decide for yourself if it is worth it or not.

    Keep Stackin!

  • Teaching and the F.I.R.E. Movement

    Teaching and the F.I.R.E. Movement

    Teaching and F.I.R.E… is it even possible??

    The short answer is yes, but it might not be as early as you hope it is.

    In 2014, like so many others in the the Financial Freedom movement, I discovered the ways of Mr. Money Mustache. If you’ve never heard of him before, do yourself a favor and check out his blog. It is fascinating. He shows the math on the possibility of early retirement. He was able to retire in his early 30’s in part due to his savings rate and his investment into index funds. He is definitely on the Mt. Rushmore of the F.I.R.E. movement, and I continue to read every new post that he publishes on his blog. F.I.R.E. (Financial Independence and Retiring Early) is an intriguing concept… Save way more than you spend, put those savings dollars to work for you, then once you have enough saved up retire from work and live off the dividends and interest you are generating. Thousands of Americans today are working towards this idea of financial independence, meaning they have enough money saved up that they no longer require income from a job to pay their lifestyles. Is it possible for teachers to achieve this pie in the sky dream? The answer is yes. 

    Working towards financial freedom as a teacher​

    The whole idea for this blog was born out of the financial independence movement. How can we make smart money choices in order to become more independent. We quickly found out that teachers have some unique roadblocks when it comes to achieving financial independence that many of the popular FIRE writers weren’t addressing. That’s where we come in with our experience and insight. We also prefer the idea of financial freedom over financial independence, due in part to a chunk of your retirement being controlled by the state. 

    Step 1 – Spend less than you earn. Budget. It’s not a difficult concept but a very challenging practice. You need to spend far less money than you earn if you wish to ever be anywhere close to you financial freedom. The big time FIRE writers boast a savings rate of 75%! Quite frankly, that isn’t achievable as a teacher. Yes, inevitably someone will post a case study where someone was able to achieve this by living in their buddy’s spare basement room and eating nothing but ramen but living a comfortable lifestyle has some baseline costs. For example, after taxes I typically bring home about $2,800 a month. Of that, $500 is auto-invested into a variety of accounts. So roughly an 18% savings rate. Not great but I was also stupid and bought a new car recently (it’s sweet!) but that payment has eaten up the other $500 that I would typically be investing. I have found that I can live very comfortably (I probably go on vacation too much and spend too much money at breweries) on roughly $2300 a month. The difference between us teachers and the rest of the FIRE community is that our salaries will never start out at the same lucrative level that other industries do. Because of that, even though we have the frugal part down we can’t get the same savings rate they are able to achieve. So an early 30’s retirement is nearly out of the question, but our date can be earlier than what the government tells you it has to be. It just won’t be as shockingly early as some of our other FIRE friends.

    Step 2 – Put that Money to work for you. If you have all of your life savings in a savings account at your local bank right now, that is okay. At least you have money saved up! However, if you choose to leave all of it there, you will be missing out on hundreds of thousands of dollars long term. The stock market is an intimidating place to look at when you are first starting out. I know I was scared to put any money in anything until I had a good friend point me in the direct of index funds. Index funds are much safer than betting on a particular company’s stock, instead they are a small slice of 500 companies or more worth of stock. With index funds, you are betting not on the success on a single company but on the longer term success of the market. Much safer and tested and true over the course of decades. The rate of return is variable, but many of the models consistently have index funds returning 7-8% per year. That’s better than the typical fraction of a percent interest you are probably earning in your savings account. So keep money in your savings account (I like to have roughly $2,000 cash on hand for emergencies) and start putting the rest to work for you. Here at Teachers’ Stacking 10’s we like and use Vanguard as our brokerage site. We don’t get any commission for saying that we just believe they have an easy to use interface, low expense ratios and a trusted reputation.

    Step 3 – Repeat each month. Once you save more than you earn and start putting that savings to work, you are well on your way to financial freedom and ahead of many of your peers. As you become comfortable with it, try to increase your automatic investments. I am at the point now where I can comfortably live off of $2,300 a month, so whenever my paycheck exceeds that amount, I just automatically put it into my Vanguard account. Over the course of several years, this adds up and pretty soon your interest and dividends are quite significant.

    Step 4 – Retire! As your compound interest continues to grow exponentially, you will reach a point where the interest in your accounts exceeds the cost of your lifestyle. At that point you may be ready to retire. On paper it really is that simple. In reality there are definitely some things you need to consider once you approach that date (health care, pension, social security, etc.) but we’ll worry about these once you get there. This concept or rule is considered the 4% rule. Once your lifestyle cost = 4% of your invested wealth in theory you should be capable of living of your interest and dividends. So for me, living off of $2,300 a month that magic number would be $690,000 ($2,300 per month x 12 months x 25). That’s the goal. Does this mean once I have $690,000 saved up I can retire off of that forever? Probably not, but it does mean I have some freedom, it means that I can easily cover my planned monthly expenses forever. 

    That’s it. The shorthand on how to achieve Financial Independence and retire early. Like I was saying there are some other variables that complicate matters; pension, social security, health insurance. All of those things are nuanced pieces to the puzzle but to start out, just focus on those first two steps and repeating them: Save more than you spend. Put that money to work for you. You’ll be shocked at how fast that wealth can accumulate. Maybe not as fast as your early 30’s but fast enough that you’ll have freedom in your finances and in your career. 

    Keep Stacking!

  • 5 Ways to Automate Your Finances

    5 Ways to Automate Your Finances

    We all know how busy life gets Once August and September roll around. Do yourself a favor and takes these 5 financial steps now to help automate your finances for the upcoming school year.

    1. Set up an automatic deposit into a savings account with a decent interest rate. 

    At the very least start having money automatically pulled from your checking account into a decent (greater than 1% interest) savings account. I started just by having $50 automatically transfer at the start of each month. It sounds small but pulling that money out of your checking account each month adds up in a hurry. If you are like me, I tend to spend whatever is in my checking account. It is crucial for my savings to have that money come out right away to the point where I basically never see it. I forget the fact that I am saving money first. 

    2. Check to see that you are getting a real interest rate on your savings account. 

    Four years ago I, like most people, had a savings account through my local bank. Turns out that savings account was earning a whopping .05% interest… What a waste! Currently I have a capital one 360 account (affiliate link). It’s not extravagant but it earns 1% interest. That is 20x the rate of my local bank! You can find some banks out there that will offer up to 2.5% but as long as you are up over that 1% mark at least your money is doing something while it is sitting in the bank. Personally, I don’t keep a large sum in a savings account. I prefer to have that amount invested, but it is nice to have a little cushion in cash available. 

    3. Increase your contributions to your investment accounts (403b, HSA, Roth IRA, etc.)

    You should have some kind of an investment account that you contribute money to. At the start of each school year, I slightly increase the amounts I contribute to each of those accounts. I like for my increased contributions to match whatever my raise will be for the upcoming year. I have figured out the monthly allowance that I can live very comfortably on ($2,600). At the start of each school year, I will increase my 403b, HSA and Roth contributions so that my take home each month is roughly $2,600. Doing this prevents me from getting the lifestyle inflation that comes from earning more money and beefs up all of my investment accounts. 

    4. Automate your bill paying

    Paying your monthly bills can be time consuming, and if you’re like me, another thing that you can potentially forget. Go through all of your accounts – Internet, Electric, Gas, Trash, Mortgage, Car Payment, Student Loan, etc. and set all of those bills to auto-pay. It might be nerve-wracking at first but in the long term it saves you a lot of time and mental energy to automate all of those bills. Typically, if you go under account settings there will be an option to auto-pay. For me it has freed up time and has reduced the amount of stress in my finances. Knowing that my bill will automatically be withdrawn from my checking account is one less thing I have to worry about during the school year. 

    5. Establish a preferred way to track your spending

    If you aren’t tracking your spending and your net worth, then you aren’t paying attention to the number 1 factor in your journey to your financial freedom. There are a lot of services out there. A lot of great ones are free. I personally use Mint and Personal Capital to track my spending and my net worth. I feel like those do a nice job of tracking all my finances. I like having Mint to track my day to day expenses and I primarily use their monthly spending categories feature. I use Personal Capital to track my net worth. I feel that it does the best job tracking all of my accounts collectively and giving me an accurate look at what my net worth is and is the site that I reference when I set my net worth goals for the year. 

    After all of that is said and done, I still like to use a spread sheet that helps track spending and net worth over time.

    Keep Stackin!