The Most Effective Way to Avoid Burnout

Burnout doesn’t really have an official definition. But it can be characterized by bouts of depression, hopelessness and feeling flat from being stressed out at work.

Anyone can experience burnout, but it is pretty common among high income professionals such as doctors, lawyers and dentists.

Doctors are especially prone to feeling burnout out from work. Depending on the specialty, the rate of burnout can be anywhere from 30-40%. This is a popular article by a surgeon in Australia about the particular reasons physicians are feeling stressed and burnt out. Pretty fascinating read.

Burnout is real. So how do we address it? There are a number of ways including increasing morale and decreasing administrative tasks so professionals can actually focus on their job.

But this being a personal finance blog, I’m going to propose a financial way to help deal with burnout. And it’s pretty simple: Make enough money and have a plan for it.

Money = freedom

There are lots of ways people deal with burnout. And most of them involve escaping to something else like alcohol, food, television or medication. All valid ways to deal with stress and burnout.

Valid, but not very effective. In the end, burnout is largely due to lack of control. You can’t control your hours, your co-workers, the weather etc.

Most people also can’t usually control how much money they make. While money isn’t everything, I feel it plays a huge role in the potential for burnout.

Let’s say a doctor is being forced to work hard 80+ hours a week with very little sleep. His salary is $50,000/year. I guarantee you that doctor will start looking for the exits real soon.

How about he magically gets a raise to $500,000? He will definitely stick around that job longer despite the hard work. But he may start looking elsewhere after it just gets to be too much.

Now how about he gets a raise to $5 million? That will be the most loyal doctor you will ever see and burnout will be the farthest thing from his mind.

While this is an extreme example, it does show that if financial security is there, the risk of burnout will decrease. But we all can’t just pull a lever and make more money appear. Increasing income is a long term process that takes some trial and error. But for someone who is staring burnout in the face, time is one luxury that they don’t have.

So the focus should shift to what you can control. Specifically, how you spend your money and your overall financial plan.

Focus on what you can control

People who are stressed usually spend money to make themselves feel better. But it’s only temporary, and then you have less money. Which makes you more stressed.

So the first thing I would recommend is to find your biggest spending leak and plug it. Whether it’s eating out, drinking out or shopping, you need to cut the spending or risk facing burnout.

If you successfully do that, you will have some extra money every month. Now comes the important part: Make a plan for that money. You don’t need a full on financial plan that has retirement projections for multiple scenarios. That will come when you have more time and money.

Just make a simple goal for that money. For example, if you have an extra $200 every month, set up an automated savings plan into a Roth IRA. Or if you need some more in your emergency fund, send the money there every month.

The important thing is to do it and make it automatic. This will be a nice first step to financial independence and allow you to take back some control in your life. Which will eventually help minimize your chances of burnout at work.

Once you’re able to save more money, and hopefully make more as well, you can continue to take some more control by adding more money to your existing plan. Or you can make new goals such as saving for travel, a home or even working a little bit less.

Now that’s real control.

Burnout is Real, but not Inevitable

I have to admit, working in a corporate environment is tough. While I have thankfully never gotten to the point where I just want to walk off the job, I have experienced stressful situations which can make me wonder what I’m doing with my life.

But money can be a good motivator. And if you have a plan for your money that will eventually lead to financial independence, you will be able to tolerate a lot.

Obviously, if you are in an overly stressful and toxic environment which is affecting your health and well being, you should find an exit plan. But having a solid financial foundation will let you make the best decision for yourself and your career.

Share

Don’t Laugh at the Latte Factor

If you need this every day, then you don’t value money.

Some personal finance concepts will live on forever. Pay Yourself First is one of them. Debt Snowball is another one. And of course from uncle Dave Ramsey himself, “Live like no one else so you can live like no one else.”

But the one I want to talk about today is the Latte Factor. It’s a term that has been in the personal finance lexicon for over a decade now, but it is still somehow a polarizing subject.

David Bach first officially introduced the Latte Factor in his book The Automatic Millionaire. This was actually the first personal finance book I ever read and sparked my interest in the subject. A really good book for people at any stage in their finances.

In the book he talked about the ability to give up spending money on something and redirecting that money into savings. The example he gave was of giving up your daily latte. Thus, the Latte Factor.

The numbers are actually pretty amazing. Say you spend $4 every day on a delicious latte. (I worked at Starbucks for years so I know there are many people who do this.) Now instead of spending $4 every day on a drink, take that money and put it into an investment account.

Here’s what happens. If you put that daily $4 into a retirement account that gives you a modest 6% return, you will have $1,547.60 in one year. Not bad at all!

But if you keep doing it, the numbers get crazy. After 5 years, you’ll have $8,723.97. 10 years? $20,398.60. How about we jump to 40 years? How about you have $239,509.62! Just from giving up your little $4 addiction, you can rack up thousands of dollars pretty fast.

So why do so many people have a problem with the Latte Factor?

Overly Sensitive Coffee Lovers

Like I mentioned before, I worked at Starbucks during high school and college. It was at a new store in the mall and from the day it opened, it was packed every day. To say Americans are addicted to coffee is an understatement.

I would see the same people come in day after day for an expensive coffee and a pastry. This would easily be $7 a day. And this was 15 years ago. Starbucks is more expensive and this country is more addicted to sugary coffee and snacks.

So there certainly is a large part of the population that spends close to $10 a day at expensive coffee houses. (By the way, a daily $10 habit can turn into almost $600,000 after 40 years at a 6% growth rate).

And after reading criticisms about the Latte Factor, most people just seem to be mad at the idea of taking away their lattes. They say if you enjoy your lattes and they make you happy, keep them! Don’t let some cold financial guru tell you to stop your habit.

These people are not looking at the big picture. It’s not just lattes that are a candidate for the chopping block (which they should be since most lattes have unholy amounts of sugar). It’s anything you buy that isn’t essential and doesn’t bring you happiness.

Let’s make a list: cigarettes, alcohol, donuts, expensive cell phone plans, expensive car loans, fancy groceries, fancy shaving cream, movie theater food, airplane food, soda, bank fees, non-library books, barely used gym memberships, and so on.

Long enough list for you? Most people have many little expenses like this. Imagine cutting just half of them out and putting it towards your investment plan? I hate the saying, but you’d definitely be living your best life!

Conclusion

If drinking an over-caffeinated beverage spiked with sugar every day really makes you happy, don’t let David Bach or anyone else say you can’t have it. Just realize that you love lattes and high blood sugar more than money and continue to feed the addiction.

But try to look outside yourself and find out what non essential expenses you can cut or minimize. Once you can do this, funnel that savings right into your investment accounts and watch your wealth grow year after year with the additional latte flavored rocket fuel.

And with today’s technology, it’s easier than ever. When you pass by the coffee shop and have the urge to scarf down that overpriced scone, just pull out your smartphone.

Simply sign into your investment account, transfer that $5 from your checking account, and walk away with a smile knowing you are fueling your wealth and some billionaire CEO.

Share

How to Lose Friends and Scare Away People

red stapler

Many people have read the popular book How to Win Friends and Influence People by Dale Carnegie.  This book came out way back in the 1930’s but is still read by many today.  This book can teach you how to effectively network and connect with people to form meaningful relationships, in both your personal and business interactions.

It’s one of those books that teach you new things every time you read it.

But this post is not about all that syrupy good stuff.  This post is about the exact opposite. I will share a guide that will make sure you stay unhappy and stuck in your dead end job for a very long time, or even lose your job altogether.

It outlines the steps you need to take to ensure that you can effectively alienate both your family and friends while being scorned by co-workers at the same time.  It’s a rare skill to be able to lose friends AND scare away people, but I’ll show you how it’s done.  (This is all sarcasm by the way. Well most of it)

1.  Be late.  For everything.  It is said that time stops for no one.  It’s time to prove them wrong.  There are many places and people that expect you to be on time.  Your boss and your clients.  Mom and dad.  Your spouse.  Even your kids may expect you to be on time so they’re not stranded in front of school in 20 degree weather.

What gives them the right?  Take your time wherever you go and in whatever you do.  Deadlines and panicked phone calls from your children can wait.  You have more important things to do.  Time is a limited resource, so keep as much of it for yourself as you can.  (Reality: Pick your kids up if needed.  Don’t make your wife wait.  Ever.)

2.  Networking is for dweebs.  Who has time to network when there are so many shows to watch on Netflix?  You love your current job, but not that much, so talking to others in your field and keeping current on your skills should be the last thing on your mind.

Besides, who wants to be one of those guys that’s always shaking hands with people and smiling?  Not this guy.  (Reality:  Yes, you should make sincere and strong relationships with those people in your industry who make more than you or know more than you.)

3.  ALWAYS pass the buck.  Don’t be the “go to” guy in your workplace.  People will be asking you to do all kinds of stuff that you frankly don’t feel like doing.

If a client asks you to do an urgent project, first try to convince them that it’s not really that urgent, and if that doesn’t work, ask them to give the project to what’s his name down the hall.  (Reality: Try to be indispensable to your clients and supervisors.  They’ll greatly appreciate it because they’ll have to do less work.)

4.  Read a lot less.  There is this perception out there that successful people read a lot.  While this may be true, it certainly doesn’t sound like fun.  Reading hundreds of pages of material relevant to your field will take the excitement out of everything else in life.

If you know so much about your area of expertise, where are you going to get the rush of possibly making a bad decision?  Leave the reading to the librarians.  (Reality: Keep current on your field by reading relevant blogs or journals.  You’ll at least know when your field will become obsolete.)

5.  React to EVERYTHING.  All those people you work with and those clients you serve are out to get you.  Whether it’s your bobbleheads, awesome desk chair or even your red Swingline stapler, the world wants to see you pay and take your things.

This is why it is very important to react to every little thing.  And react HARD.  Throw objects, swear loudly, storm out of the room and, ideally, all three at the same time.  Every little sideways glance and convoluted comment that could be about you needs to be addressed.  These people will not stop until you’re out on the street.  (Reality:  People don’t have time to worry about you so don’t go crazy about everything.  They’re too busy worrying about themselves.)

These are my top 5 ways of being an anti-Dale Carnegie.  I’m sure there are many, many other ways I could think of to lead you down the path of the social pariah, but all this typing is hurting my fingers.  If you would like to share your own ways of losing friends and scaring away people, please feel free to share in the comments.

Share

An Easy and Inexpensive Way to File Your Taxes

Most people file their taxes online nowadays.  I have for the past 4 years.  The fact that I actually enjoy doing my own taxes is icing on the cake.

If you have a fairly simple tax return that has a low chance of being audited, filing online is a lot cheaper and easier than going to an accountant.  All you have to do is wait for all of your paperwork to come in, prepare your beverage of choice and take an hour or so to complete your return.

And if you are owed a refund or owe Uncle Sam some money, you can usually take care of that right away online.  In today’s streamlined and app friendly world, filing online is just the most convenient option for most people.

And when there are so many people filing online, competition will increase.  Everyone knows the big players like TurboTax and H&R Block.  How can you not know them since they are advertised everywhere?  I’ve used both TurboTax and H&R Block and both do a great job.  But they are also both on the pricier end of the tax software spectrum.

As technology and software becomes more sophisticated, more players have been appearing on the tax software scene.  Some are pretty bare bones but can offer very competitive pricing (sometimes even free!).  While others are just TurboTax clones that fizzle out after a while.  Time has filtered out some of the weaker companies, so there are a number of good options out there.

This year, I did my taxes with a company called FreeTaxUSA.  It sounds like a spammy company name, but they’ve actually been around for a while and this year they have taken their tax software to the next level.  And their pricing is incredible.

Federal returns are free.  State returns are $12.95.  And this is the case no matter how simple or complex your tax situation is (though if I had a full fledged business as my main income source, I would probably use an accountant.)

Here’s my review of my experience with FreeTaxUSA

Disclaimer:  I have no financial affiliation with FreeTaxUSA (FTU).  I wish I did but maybe next year.  This will actually be one of the few non-biased tax software reviews you will see on the internet.  

Navigation

TurboTax is known for its easy to navigate menus and streamlined interface.  They ask you tax questions interview style and you enter your numbers as you go along.  Ease of navigation is one of the big reasons TurboTax is the most popular tax software out there.  But FTU is very close behind.

There is actually very little difference between TurboTax and FTU when it comes to navigation.  FTU asks very similar style interview questions and will flag you when something doesn’t seem right.  It’s easy to find what number should go into what box on each form and then move on to the next section.

The menu is very clean and easy to navigate as well.  Income, deductions and filing options are clearly separated.  The only restriction I found is that you can’t jump ahead to the next section before completing your current section.  I didn’t find this as a big problem though since it helps keep you on track.  You can jump back to previous sections you have completed of course.

I actually found the interface a little easier and cleaner than TurboTax.  So ease of navigation is a huge plus.

Support

Having customer support is an important part of doing taxes.  When you have your own personal accountant, you can pepper them with as many questions as they have time for.  This support is what causes many people to hesitate doing their taxes with software.

Nowadays, online tax programs really excel in customer support.  You can always email an expert and get an answer, but many companies even have live chat or the option to have your return reviewed by a CPA.  So you’re never alone.

FTU has email support, but unfortunately no live support options.  I can’t comment too much on this because I didn’t really use the support services.  Our return is easy enough and I live and breathe this stuff anyway so I can find my answer pretty quickly if I needed too.  But for those that really value someone being available to help you throughout the filing process, TurboTax and HR Block are better options than FTU.

Pricing

Where FTU really shines among the competition is the pricing.  It’s a flat rate of $0 for your federal return and $12.95 for state.  No matter how complicated your return may be.  If you have out of the ordinary things like foreign accounts or large investment income in your kids name, you may be out of luck.  In cases like that I would want to see an accountant anyway.

But for the vast majority of Americans, the pricing would stand.  And it makes a huge difference.  Since we own a home and have some stock sales, the total with TurboTax would have been $59.99 for federal and about $35 for state.  That’s a total of $94.99 for TurboTax compared to $12.95 with FTU.  That’s a no brainer of a decision to me.

There is one totally free filing service I know of with Credit Karma.  But their interface seems clunky and they haven’t gotten very good reviews.  FTU is a very good product that has gotten great reviews, so $12.95 is an absolute steal.

Conclusion

With technology getting more and more sophisticated and streamlined, filing taxes online has never been easier.  While the big boys like TurboTax and H&R Block are always a great option, it’s worth it to see what other companies are up and coming in the tax software world.

FreeTaxUSA is definitely one of those companies.  I was able to do my taxes with no problem and it was a great experience all around.  I was able to get my refund direct deposited into my checking account very easily as well.  It’s not much different than TurboTax but it is much cheaper.  Very hard to beat $0 for a federal return and $12.95 for a state return.

It may not be the ideal solution for people who need live support or have very complicated returns.  But I believe the vast majority of people could save a lot of money having their taxes done with FTU.

Again, I have no financial affiliation with the company.  Just giving my honest review.  Click here to go to their home page and check it out.

Share

Easy Ways to Winterize Your Home and Save Money

This is another guest post from my friend Anum Yoon who blogs over at Current on Currency.

Today’s practical post will discuss ways to save money by making your home more efficient in the cold weather.  Floridians and Texans, find another article!

The winter chill has set in. There aren’t too many parts of the country that have escaped the bitter cold and snow. You don’t want to go outside unless you absolutely have to — maybe a quick run to and from the car.

If you’re not a fan of winter, this is going to be a long three months or so. You’ll be inside more, and the only good news is that you’ll have more time to do some the things around the house you may have been putting off.

Also, winter isn’t a booming season for construction, so you might be able to get some discounted prices on materials or projects. Take a look around the house and see which rooms need your attention most.

Winter is a good time of year to attend to your DIY projects or hire out the ones that require professional help. Here are a few investments you can make in your home this winter to improve your living space and add value to your home.

Have Your Furnace Serviced

If your furnace is going to die, it’s probably going to happen on a weekend in the middle of the coldest part of winter. That’s just the way it goes. Better to pay to have it checked now than to pay a lot more later.

Hire a reliable, trusted professional to service your furnace and hot water tank yearly or as recommended. They will make sure both are in good working order and that the filters have been changed for optimum performance.

A professional service can identify any potential problems or maintenance issue before they cause you problems in the winter. If they recommend replacement, feel free to seek a second opinion, but don’t delay too long.

You don’t want to risk being without heat and all the problems that can cause. A new furnace will increase your home’s value and may generate some return on your investment at the time of sale.

Update or Replace Insulation

Your furnace is working hard to heat your home. What a waste of energy and money if the heat is escaping through your roof, wall spaces, or cracks and crevices throughout your home.

If you are confident in your abilities, it might be simple enough to add a few rolls of insulation in places where there is an apparent need. Another idea is to have a professional come out and inspect your insulation.

They may discover leaks you weren’t aware of. Some companies use tiny pieces of insulation that they can spray into your attic. These pieces fill in all the open cracks and areas where leaks can occur.

Other spots you can attend to yourself include the electrical outlets, hot water tank and hot water pipes. You can purchase DIY insulation kits for these areas and accomplish your goals with minimal effort. You can also caulk windows and doors and add weather stripping to stop cold drafts and leaks. The less cold air coming in, the less money going out.

Buy an Energy-Efficient Garage Door

While you are insulating the rest of your house, you might want to consider your garage as well, particularly the door. When that garage door comes open, it’s the biggest open space into your home. All that cold air comes rushing in and hits the outside walls of the interior.

While you have to open and close your garage door, you can cut down on energy costs by purchasing an insulated, energy-efficient garage door. You can keep the inside of your garage at a more consistent, comfortable temperature. It will make any garage projects more tolerable, even in the winter. Your furnace won’t have to work as hard to compensate for the cold air seeping in. It makes sense to have an insulated garage door even if it isn’t attached to your house.

Purchase Energy-Efficient Windows

You know if you have good windows or not. If your rooms stay relatively warm in the winter, they are quality windows. If it feels like the wind is blowing through your living room, your windows are either in poor condition or you left one open.

Investing in Energy Star rated windows will cost a lot of money, but it will save you an average of 12 percent on energy costs. You also may qualify for an energy rebate from your local utility company or state government for making the investment and saving energy. In time, they will pay for themselves. Rotting, drafty single pane windows will continue to deteriorate and, at some point, you will be forced to replace them.

If you think you might be selling your house soon, consider new windows a wise investment and selling point. There is no guarantee you will recoup your money, but your house will be more saleable than your similar neighbor’s house with old windows. Regardless of your intentions, it’s money well spent. It would just be nice if all that money could buy you a better view, too.

Hook up to Smart Thermostat

Instead of wasting money and energy heating your house while you’re at work, hook it up to a smart thermostat you can control online. You can set up a schedule so your thermostat lowers the temperature while you’re gone but starts heating back up before you come home. If you encounter a change in your schedule, you can just log in and make adjustments from your desk at work.

A smart thermostat potentially will save you money, but more importantly, it will give you the ability to control your energy use. You need to look no further than a family member to realize we all have a different idea of what a comfortable temperature is. You’ll still fight over the thermostat.

Improve Your Home This Winter

Things break down, and they don’t always work the way you want them to. But generally speaking, money invested in your house will make it more appealing, more comfortable and more valuable. Plus it’s your home. What better place is there to spend your hard-earned money? Winter will pass before you know it. Wouldn’t it be nice to go into spring already having accomplished some household projects for the year?

Share

Do Some Charity Before It’s Too Late

For most people, the end of the year is usually a time to take it slow and spend your days with family and friends.  Work takes a backseat until the start of the new year.

Working in the optical world is the complete opposite.  It’s a madhouse!  Appointment books are full and patience is thin as everyone and their mother (literally) is scrambling to get eye exams, glasses and contacts before their insurance benefits and flex spending dollars reset.

(This is one reason I favor Health Savings Accounts over FSA money.  HSA accounts are portable and never expires.)

But there is one other thing people should be rushing to do during the last week of the year…GIVE!  Give away to charity that is.

Giving to charity is something we should do anyways if we have the means.  The rich hoarding wealth is one of the main problems in the world today.  But if you’re eligible for a tax deduction, it can save you some money come tax time along with that warm and fuzzy feeling.

And with the next tax law coming into effect in 2018, many people should be looking to maximize charitable contributions this year.

Standard or Itemize?

Here is the official IRS statement on charitable contributions:

You can only deduct charitable contributions if you itemize deductions on Form 1040, Schedule A (PDF)Itemized Deductions.

To be deductible, you must make charitable contributions to qualified organizations. Contributions to individuals are never deductible. To determine if the organization that you contributed to qualifies as a charitable organization for income tax deduction purposes, refer to our Exempt Organizations Select Check tool. For more information, see Publication 526Charitable Contributions and Can I Deduct My Charitable Contributions?

What this means is that if you want your charitable contributions to be tax deductible, you need to be able to itemize your deductions.  Common itemized deduction expenses include mortgage interest, state and local income taxes, property taxes, medical expenses and, of course, charitable contributions.

If the total of these expenses is greater than the standard deduction, than you would save more money on taxes by choosing to itemize your deductions.  If itemized deductions don’t exceed the standard deduction amount, you should go with the standard deduction.

For tax year 2017, the standard deduction for single filers is $6,350 and for married filers it is $12,700.  With the new tax plan that takes into effect in 2018 (thanks Trump), single filers will see a standard deduction of $12,000 and married filers will jump up to $24,000.

Contribute to Charity…Now!

Meaning that those people who normally take the standard deduction and don’t come close to meeting the necessary expenses in order to itemize…rejoice!  Your deduction will almost double with no effort on your part.  For these filers, the charitable contribution deduction never applied anyway.

But there will be many people who can itemize deductions in 2017 but won’t be able to in 2018.  For these people charitable contributions will be deductible for 2017 but not 2018.  That means they can deduct charity to their heart’s content for the last week of the year since they won’t be able to next year.

There are many things that can count as charitable contributions.  Cash is the easiest thing to donate, but you can also donate clothing, furniture, stocks and even your time.  Make a list of a few charities that resonate with you and contact them to see what is deductible.

All charitable contributions must be made in 2017 to be considered deductible when you do your taxes in April.  So take advantage of this last week to get that charity money in.  Just like FSA dollars, this time it’s use it or lose it!

Share

Ways to Decrease Your Utility Bill

This is a guest post from Anum Yoon, who is a prolific and excellent writer in the personal finance sphere.  You can find out more about her at her blog Current on Currency.

Today’s post will feature ideas on how to keep your utility bills low.  With winter around the corner, these tips could save you a lot of money.  Enjoy!

Temperatures are starting to drop. We are closing our windows now and thinking about turning on the heat. Whether you love winter or hate it, you are going to pay more to keep warm when the snow starts to fall and the temperatures drop.

The same is true for those in warm-weather climates. When the heat rises, so do the air conditioning bills. We have no choice but to heat and cool our homes to maintain our comfort, but there are a few things you can do to keep your utility bills from burdening your budget.

Check Your Settings

Are you scalding your hands when you wash them? Are your vegetables freezing in the refrigerator drawer? Check the settings of your appliances to make sure you aren’t overworking them and wasting energy, which results in higher bills.

Your hot water tank doesn’t need to be set any higher than 120 degrees. This is hot enough for dishes and laundry and certainly hot enough to wash your hands. Manufacturers and installers typical set them higher, and you may not have looked at or paid attention to the settings. Consult your manuals for more information.

Your refrigerator should be set around 37 to 40 degrees and your freezer at 5 degrees. Anything colder than that is unnecessary, and you will be wasting energy and potentially freezing your food in the refrigerator. Some refrigerators have known cold spots, but many people just set them too low.

Replace Incandescent Lightbulbs

Old lightbulbs use a lot more energy than new halogen, CFLs and LEDs. Depending on the specific type, these bulbs use anywhere from 25-80 percent less energy. These bulbs are more expensive than their predecessors, but last many years longer and will save you money over the long term.

Purchase Energy-Efficient Appliances

When it is time to get a new refrigerator, freezer, washer or dishwasher, look for those marked Energy Star compliant. These appliances can use up to 75 percent less energy than older models, which can add up to hundreds of dollars in annual savings. Even if your old refrigerator still works well, it might not be a bad idea to consider replacing it for overall savings.

(Note from TBP: Check with your local utility company to see if they provide credits for upgrading your old appliances to Energy Star models.  Many will also haul away the old appliance for you.)

When you use your appliances, make sure they are full before you run them. They will use just as much electricity washing a few items as they will a full load. Be wise and economical with your energy use and save money doing so.

Use Your Garbage Disposal Properly

The garbage disposal is a modern convenience that many take for granted. It’s not a magic hole through which anything can pass. The garbage disposal uses a lot of electricity to grind up wasted food items into tiny bits small enough to pass through the drain. Sometimes they clog, and through misuse, break. You can save money on electric bills and expensive repairs by observing some of these do’s and don’ts

Do

  • Turn on a heavy flow of water before flicking the switch. The garbage disposal needs water to do its work and will overheat without it. Continue to run the water after the grinding stops in order to thoroughly clean out the drain.

 

  • Every few months, put ice cubes down the drain and grind those up. This will help clean out the inner workings of the disposal. You can also add a lemon peel to help freshen the scent. Disposals often smell bad because they have rotting food stuck inside them.

 

  • Have your kitchen drain snaked out every few years. This will prevent clogs and possible repairs.

 

Don’t

 

  • Put grease down the drain. The grease will harden in the water and create clogs throughout the drain. Just save grease and fat and discard it in the trash can.

 

  • Grind up big food items that can be thrown in the trash. It’s a waste of energy and it puts unneeded stress on your disposal.

 

  • Put rinds, potato peels, rice or pasta in your disposal. These items should be thrown in the garbage and never put into your drain. The garbage disposal doesn’t do well with these items and will usually clog from them.

Add or Replace Insulation

Is the air you are heating or cooling escaping outside through cracks and gaps in your windows or attic? Proper insulation will keep that air inside and prevent your home from feeling drafty. This will save you money, as your furnace or air conditioner won’t have to work as hard to maintain your desired temperature.

Add weather stripping to doors and windows. Caulk up holes and cracks you can reach. If you are comfortable doing so, add another layer of insulation in your attic, or hire a professional to inspect and assess what your house needs.

Check for Leaks

Leaky pipes, toilets which run nonstop and sinks that drip constantly all waste water and cost you money. Fix these leaks yourself or hire a professional if you are uncomfortable doing so. If you aren’t sure you have a leak, you can check your water meter. If all the water is off, there should be no change in the meter after two hours or so. But if there is, you may a have a leak somewhere in the house.

Invest in a Smart Thermostat

If you are going to be gone all day, don’t waste money keeping your home at an ideal temperature when you can’t enjoy it. You can program a smart thermostat to have your home at the temperature you desire by the time you get home and give the furnace a break when you aren’t there. Some can be programmed and accessed online, in case your plans change.

There are lots of little things we can do to save on our energy costs. They don’t have to be major projects like replacing all the windows or installing a new roof — although these will help, too. You just have to properly maintain your appliances and be conscious of the energy you are using. Even making a minimal effort will lower your bills during extreme weather months and keep more of your money in your pocket.

Share

Sweat the Big Things. Part 3: Taxes

This is Part 3 of my three part series about housing, transportation and taxes.  These are the three things which I believe can make or break your finances.

Part 1 discussed housing and Part 2 talked about transportation.

In this Part 3 of this series, let’s save the best for last and talk about taxes!

In my experience talking with fellow doctors and professionals, the subject of taxes usually comes up.  But many people misunderstand taxes.  It is most likely the single biggest expense you will face every single year.

You need to get it right!

Depending on which state you live in (California *cough cough*), your entire income can be taxed at 50% if you’re not careful.

Everyone has to pay taxes.  There is just no way around it.  So it really pays to find out ways to keep your tax rate as low as possible.

While the tax code is pretty complex, there are two main things that most working professionals need to understand to avoid paying too much tax.

PROGRESSIVE Tax Brackets

If you understand this chart, you are far ahead of most Americans when it comes to understanding the tax code.

We all pay federal income tax.  Most of us pay state tax too, but that can vary between states.  So I will just focus on the federal brackets for now.

This chart is important and understanding it will give you a good idea about how much tax you will pay.  More importantly, it will drive some financial decisions throughout the year that will help you minimize your taxes.

The first thing to realize is that the tax brackets are progressive.  Meaning that the more income you have, the higher your tax rate will be.  But our entire income is NOT taxed at the highest rate.  Just the limits spelled out by the tax brackets.

As an example, a new doctor makes $200,000 the the first year out of residency.  Looking at this chart, he might be horrified to learn that he will fall in the 33% tax bracket.  That means he will owe $66,000 on his $200K income!

This is actually incorrect and it is how many people think the tax system works.  The doctor’s income does put him in the 33% bracket, but the entire income is not taxed at 33%, just the portion above the lower limit.

So according to the chart, our doctor would pay 33% on the part of his income above $191,650, which is $8,350.  His total tax would be 33% of $8,350 + $46,643.75 from the previous brackets.  The amount of tax owed is $49,399.25.  That’s a lot of tax but still sounds a lot better that $66,000.  In reality his tax would be even lower with the standard deduction and other deductions available, but there isn’t enough space in this post to get into that.

So with the progressive tax brackets, our entire income is not taxed at our highest bracket only the last dollars we make are.  How can we use this to our advantage for tax planning?  Reduce the amount of last dollars we make!

And by far the best way to do this is by contributing to a tax advantaged account.  This could be a 401k, Traditional IRA or even an HSA.  Money contributed to these accounts are taken off the top of our income, so we are not taxed at our highest tax rates.

In the case of the doctor, if he contributed just $10,000 to a 401k that year, his highest tax bracket would become 28% instead of 33%.  That’s thousands of dollars saved in taxes right off the bat.  We should be saving for our retirement anyway, but it’s nice to be able to save on taxes every year in the process.

Know Your 1040

 

 

The tax code can be difficult to navigate, but the IRS gives you some clarity on the 1040 form.  That is the form we all have to file for our personal taxes, and having a basic understanding of it can really help reduce your taxes.

The 1040 form provides a summary of our taxes.  It lists your income as well as any credit and deductions you receive.  It is a great line by line playbook of how taxes are paid in this country.  Knowing the ins and outs of this form gives insight on why you pay the amount of tax you do.

It would be too involved to go into each line of the 1040, so I will just mention a few things about the place where you get the biggest bang for your buck: above the line deductions.

The higher income you have, the more tax you will pay in general.  So you want to get that income as “low” as possible.  That doesn’t mean you work less or start slacking off.

What we need to do is make as much money as we can, and then try to make it look a lot less on our taxes.  This sounds shady, but it’s totally legal.  And above the line deductions are the best way.

The “line” I’m referring to is line 37 of Form 1040, which lists our adjusted gross income (AGI).  We are taxed on our AGI and not our actual earned income, so making this number lower is key.  And lines 23-36 tell us how to do just that.

Not all these lines will apply to everyone.  But find what applies to you and work on that.  For most working professionals, deductions for IRA contributions and the student loan interest deduction are two easy ones.  Check with your tax professional to see where you can maximize your deductions.

Know thy taxes

The last thing I would recommend for everyone is to find your tax return from last year and take some time to sit down and go through it line by line.  It is an enlightening exercise to see how certain calculations for deductions and credits are made.

And if you don’t like looking through your tax return as much as I do, then sit down with your CPA before the year is up and see where you can find ways to minimize your taxes.

Taxes are definitely complex, especially if you have a business.  But if you sift through the complexity you will be able to find ways to reduce your taxes that many people don’t think about.  Just be careful not to reduce them TOO much so the IRS doesn’t come poking around!

Share

Equifax Hack and the Botched Response

Equifax, one of the big three credit reporting companies in the country, was recently hacked.  The company states that 143 million people were affected.  Which means a lot more people were most likely affected since they are probably reporting a conservatively low number.  They are a business after all.

The population of the US is a little over 300 million.  Meaning almost half of the citizens in the country had their vital information compromised.  What type of information was stolen exactly?

According to Equifax, your name, birthday, address, social security numbers, drivers license numbers and credit card numbers were all compromised.  So essentially all the information a hacker would need to sign up for any type of account.

I miss the days of hackers targeting Home Depot.

So what should we do?  The first thing we should NOT do is listen to Equifax.  Here are 2 reasons why:

1.  They set up a bogus help website that only helps themselves.

Soon after the hack was made public, Equifax set up a pretty crude looking website called equifaxsecurity2017.  That just looks like a fake URL off the bat.

On the site you can check if you’re “potentially impacted” by entering the last 6 digits of your SSN and your last name. Yes, you can check if your information has been compromised by entering even more information.

Once you enter that info, it will say you have been potentially affected.  No matter what you enter, it will say you are potentially affected.  Which means they have no idea if you are potentially affected.

But wait, there’s more!  If you’ve been affected, you get a free trial of TrustedID Premier, the credit monitoring service offered by Equifax.  You’ll get a free trial for a year and then be charged after that if you want to keep it.

So not only did they set up a dubious looking website to get even more of our information, they are trying to take our money after a massive data breach.

Please do NOT sign up for this service.  There are many ways to monitor your credit that are free and easy that I will mention at the end of the article.

As far as the second reason we shouldn’t listen to Equifax:

2.  Equifax execs sold their company stock before the hack was made public.

Like something out of Wolf of Wall Street, three Equifax executives sold their stock in the company before the hack was publicly disclosed.  The official company line was that they had no idea the data breach had occurred.

While I’m a cynic by nature, any rational person could see that is a bald faced lie.  How any executive of any company could not know that their company was exposed in the biggest data breach known to man makes no sense.  Let alone three executives.

While some conciliatory reasons were given such as they didn’t know, and they didn’t sell ALL of their stock (aka these guys are a lot richer than we can imagine), the fact is that this deceptive action did occur.

Because of this, I will have nothing to do with this company or their “TrustedID” program.  And if there ever is a class action lawsuit that I can be a part of, I will be sure to sign right up.

What You Should Do

So what steps should we take to ensure we don’t become victims of identity theft?  Unfortunately, there is no way to completely prevent ID theft.  These hackers are much smarter than us or any company out there.  Like a good defense in football, we need to prepare the best we can and react accordingly:

1.  Monitor your credit reports.  This can be done essentially for free through services like Credit Karma and Credit Sesame.  They will send you an alert whenever there is a change on your credit report.

The best thing we should all do is look at our credit reports.  Go to annualcreditreport.com and request a report from all 3 bureaus (yes, even Equifax).

2.  Submit an initial fraud alert.  This tells any business to take some extra steps to identify you in case there is an application submitted in your name.  This usually means you have to talk to someone when you apply for a credit card or bank account.

Some people say submit a credit freeze, but I don’t think this is necessary since hackers tend to sit on this information for a long time before they act on it.  You won’t be able to apply for any new accounts during that time either, so that’s your call.

3.  Submit your taxes early!!!  Most Americans are procrastinators when it comes to filing taxes.  Many even file extensions because they don’t want to do it by April.

Don’t do that next year.

Tax filing fraud is on the rise, and with this data breach it could potentially be a huge problem for the 2018 tax filing season.  We get most of the forms we need by February.  Once you get the necessary paperwork, just go ahead and file.  Especially if you’re expecting a refund.  Don’t let the government hold on to your money interest free!

Be vigilant about your credit and identity!

Share

Sweat the Big Things. Part 2: Transportation

This is Part 2 of my three part series about housing, transportation and taxes.  These are the three things which I believe can make or break your finances.

Part 1 discussed buying a house.  This post will talk about the costs associated with transportation.

Don’t do it. Just don’t.

In my last post about buying a home the smart way, I mentioned that buying a house will most likely be the most expensive transaction of your life.  Coming up in second place is buying a car.

Buying a certain type of home can be a status symbol.  A sign that you’ve “made it.”  That you’re finally a grown up and don’t have to be ashamed about inviting your friends over anymore.

But I would argue that a car can be more of a status symbol.  If you drive through a nice neighborhood, you will be admiring the homes but you’ll also be looking at what’s parked in the driveway.  You’ll be thinking about the guy with the Tesla in a much different light than the guy with the old Civic.

And this is why cars can potentially destroy your finances.  There is such an emotional attachment to certain cars that it can cloud the judgement of even the most savvy and cost conscious consumer.  Someone coming in the car buying experience with eyes wide open can easily be led astray by an experienced salesman.

They’ll come in for a slightly used Toyota and leave with a brand new Lexus.  Along with a large shiny monthly payment.

There are two principal ways cars can wreck your finances.  Cost and time.  Let’s look at both of these and find out how you can minimize both.

You’re Not Paying For Just a Car

Whether buying or leasing a car (which is another discussion altogether), everyone looks at the monthly payment as the cost of the car.  We live in a paycheck to paycheck society where monthly payments are the barometer of affordability, so this makes sense.

Unfortunately, cars cost more than the monthly payment.  Just like buying a house comes with extra costs, so does buying a car.  Those extra costs come in the form of gas, maintenance, repairs, insurance premiums, parking and tolls.

The average monthly car payment has risen to $509.  With the associated costs that becomes over $700 per month.  The average price of a car sold in the US is over $30,000.  There are car loans that stretch to 7 years nowadays.  This is insanity and will keep you from accumulating wealth for a very long time.

And let’s not forget the almost immediate depreciation you get with a car.  At least homes generally go up in value at the rate of inflation.  Cars lose value as soon as you sign on the dotted line, and they keep going down after that.

So you have a hefty down payment along with a monthly payment.  And add ongoing associated costs to that.  AND the vehicle is losing value over time.  Sounds like a huge money sink to me.

But lots of people really need cars.  If you’re one of those people, like me, you need to do as much as you can to minimize all of these outlays.

Get the cheapest and safest car for your needs that is reliable and gets great gas mileage.  As long as you stay away form luxury cars and getting a bigger car than you need, you’ll be better off than the majority of Americans.

If you want to be wealthy, an expensive car will be a huge obstacle in that journey.

Death by Commute

Another overlooked part of driving is the cost of commuting.  And I’m not talking just about money.  Your health and your time, and sometimes your soul, can all be taken from you because of your commute.  Commuting can literally kill you.

I can attest to this personally.  At my first employer I was commuting less than 10 minutes each way.  I filled up the tank twice a month.  I could go home and see the family for lunch if I wanted.  Life was good.

Then I got a “promotion” which had me driving 35-40 minutes each way.  Sometimes in heavy traffic.  Life was not so good all of a sudden.  I could physically feel myself getting more stressed and I started to have more neck pain.  I had to wake up earlier than before and had less time to spend with my family.

And car maintenance issues started to crop up.  The AC randomly stopped working.  I was hearing strange new sounds coming from the engine.  And all this in just a couple of weeks of my new commute.  I was also definitely less happy at work than I was before.

The only plus was that I could listen to podcasts more often.  But it’s not really a plus since I could have just woken up earlier and listened to them before.  So pretty much nothing but negatives with this longer commute.

The new commute actually compelled me to look for a new job.  And thank goodness I did since I found a new position at a different company for more pay and a commute similar to my original short one.  I noticed the differences almost immediately.  The job was more fun, the neck pain disappeared and driving was kind of enjoyable again.

Finding a new job is one way to reduce the negative aspects of commuting, but there are others.  Public transportation, telecommuting and carpooling are some other ways.  Get creative and find what works with your current situation.

I really appreciate my short commute and it’s going to take a lot for me to give it up!

Conclusion

In my last post about housing I mentioned the Latte Factor.  It showed how you can cut out your morning coffee and invest those savings to grow some money.  Applying this to car buying really makes the Latte Factor not worth the effort.

Kelley Blue Book allows you to look up the 5 year cost of ownership of any car.  This takes into account the car’s price and along with registration, insurance and maintenance.  It’s a great apples to apples comparison to see how much cars really cost.

A 2017 Lexus ES 350 has a 5 year cost of ownership of $54,071.  A 2017 Toyota Corolla comes in at $34,286.  That $20,000 difference can send your investment accounts skyrocketing.  Both cars seat 5 people and are reliable.  And the Corolla owner can keep getting his lattes everyday.

This is a real and significant difference that can make or break your finances.  The Lexus might turn a few more heads, but the Corolla owner will be wealthier.  And if he invests his money wisely, he will be FAR wealthier.  Don’t let your ego get in the way of being rich.

Share