frugal living

Is Cable Worth $17,000?

/ John / Leave a comment

What do you pay for cable? Do you have Netflix, Hulu, Or Amazon Prime as well? If you were to tally up all your TV subscription based cost how much would it come to?

The national average now for cable is around $100. Here we average spend $o. We do have Amazon Prime which we will consider whether to renew in July when it expires, but we don’t pay for TV service thanks to an brother/uncle who covered Netflix for the year for our kids’ birthdays.

The math of $17,000

100/mo

10 years/120 months

7% compound interest (if you invest that money in your Roth IRA, that is tax free growth)

The total is $17,200 in 10 years. Is cable really worth it?

So what are your options? We have tried a number of different streaming players and found that Roku gives you the most streaming options. We also use Apple TV and I like it as well.

You don’t need cable. 100 channels–80 of which you don’t actually watch. Is it not worth sacrificing your future opportunities to travel, own a house, or give generously? Cut the cable, read a book, learn something new. You have a choice:  sacrifice saving, giving, and learning opportunities or watch the 200th episode of The Biggest Loser. It’s up to you.

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Emergency Funds

/ John / 1 Comment

What is an emergency fund? How much should I have in my emergency fund? Where should I keep it?

What is an emergency fund?

It is simply cash that you have available in an account in case of an emergency. Emergencies can range from a car breakdown, a trip to the ER, a water heater going out, or maybe a water line breaks in the yard. The new iPhone coming out or a new outfit at the store are under no circumstances an emergency. You may feel like they are an emergency but don’t confuse passion and desire with necessity and need.

How much should I have?

This number can vary, but most advisors and bloggers would make the case for 3-6 months income and I would not argue.  I won’t argue with you if you want to have a year. I think you should really look at the next question if you are going to have that much available and maybe have a multi tiered approach. A survey from late 2015 found that over half (56%) of Americans had less than $1,000 in their checking and savings account combined. Nearly 25% have less than $100. That is crazy. No wonder so many people are so close to the edge of the cliff. Think about it:  It is likely that half the people in the restaurant while you are eating out, if they lost their income tonight, they would not have enough money to last a week.

We have an emergency fund of about 3 months at this point. I am pretty comfortable but I could see us moving to 6 month eventually. We have other priorities to accomplish first. The amount you have should be based on your comfort level. If you have never had an emergency fund, $1,000 would make you really comfortable. Job stability, comfort level, expenses, proximity for family support are all things that you should consider when determining how much you should have.

Where should you keep it?

An emergency fund is not an investment. It is a safeguard from disaster. Looking to maximize returns on this money is not the goal. We keep our money in a couple different places and I will explain why we do.

  1. Our checking account– We keep more than a month worth of money in our checking account. This means that unless something crazy happens we now have the money in checking to make all our budgeted purchases all month. No worrying if we can pay that bill before our next paycheck. (we could pay them all on the 1st if we wanted).
  2. HSA– We have about a month of expenses in our HSA. This is only for medical  expenses but for us this makes sense. We have five very active kids and this provides safety if there is an injury.
  3. Savings/Roth IRA– We keep just over a month of expenses in our Roth not invested in the stock market. I know people will scream about never taking money out of retirement but hear me out. We are not to point of maxxing out a Roth every year. This provides us extra retirement saving while still providing security. I will go into much more detail on this eventually but 2 quick points.
    1. Why does this work? All contributions to a Roth IRA are made after-tax. You were already taxed on this money and you will not be taxed if you withdraw it. Again you can withdraw contributions only without penalty or tax.
    2. This is our 3rd line of defense. I hope that the money that is there is there for good.  I hope that I never have to take it out and in time I can invest it more aggressively. It is already there so any interest or earnings are tax free.

We are in the process of moving our accounts to Fidelity. They offer a checking account, Roth IRA, an HSA, and tons more. I like the ability to transfer money within Fidelity in a single day and I am not tempted by seeing a larger balance in various accounts. I spend based on my YNAB categories. I also have no need to go into my personal bank in over 2 years. I am entirely comfortable with an online bank at this point. They also reimburse all ATM fees so if I need cash it won’t cost me anything to get it.

Are you part of the majority of Americans who have less than $1,000 in the bank? Or, you have a year worth of expenses in savings? Wherever you fall in between find a level you are comfortable with. If you are not comfortable with where you are, start saving. Skip eating out the entire month. How much could you save? I bet it is more than you think.

Comment in the notes what the goal is for your emergency fund.

Do you spend too much on groceries?

/ John / 2 Comments

Today was grocery shopping day for the week (yes, I said the week). We plan and shop on a weekly basis to help save money on groceries. There are numerous reasons I think this can be beneficial financially some of them that immediately comes to mind are:

  1. We have a plan for the week. We are not governed by a whim during the week
  2. We are less likely to go out because we have a plan and we know what we are going to eat every day.
  3. We can take advantage of buying ingredients for more than one meal (5 pounds of chicken, 3 pounds ground beef and vegetables can be purchased and not wasted.
  4. We can buy extra when things are on sale and plan meals to use them on.

There are many more things that can be said and many more strategies that I will get into eventually but here are some details from our first 2 months of 2017.

  • Total spent including eating out was $1230
  • Total number of days 55
  • Cost per day 22.36
  • Cost per meal/person- $1.06

We ate out 4 times in those 2 months with all 5 kids and we eat a TON. A few numbers from last week: 15+ pounds of fruit, 7 pounds of ground beef, 2 pounds of chicken and more. My 2 year old eats more than some adults and we still spent just over a $1 a meal for 2 months.

How much would that be for a family of 4? $90/week including all eating out.

Save just $10 a week and you could end up with $7,520 in a savings account in 10 years or nearly $21,000 in 20 if you invested it.

Are the 2 boxes of Keurig coffee worth that much? Make up your Continue reading →