Category Archives: Purchasing

Stop Wasting Money With These 5 Tips

Get your finances off on the right foot this year and stop wasting money! These 5 tips will help you spend wisely and boost your happiness!2017 and is here, and with a New Year comes new resolutions. I’ve spread my focus thin over the past six months beginning when I established 30 goals on my 30th birthday, so I won’t be making a list of personal resolutions for 2017. However, the holiday season has gotten me thinking about how I can stop wasting money. It’s tough to acknowledge, but I have been far more wasteful with my spending habits over the past three months.

After much thought, I present the following 5 ways to stop wasting money and achieve your financial goals sooner. I hope they will help you and me to be wiser with our spending in 2017!

5 Tips to Stop Wasting Money in 2017

1. Brew Your Own Coffee

Coffee is inexpensive to purchase yourself, yet its price skyrockets when you pay Dunkin Donuts, Starbucks, or the local coffeehouse to brew it for you. At minimum, a cuppa Joe on the go will cost over $1, while the same cup brewed at home will cost pennies.

2. Minimize Shipping Costs When Shopping Online

Yesterday, I ordered a complete set of seven Star Wars movie posters for our nearly-finished theater room. I shopped for the best deal I could find online, and when it came time to checkout, I was faced with many shipping options. In the end, I chose free shipping because I thought ahead in advance and ordered my items before I actually needed them.

While online shopping is simple and time efficient, it is often more costly because many people elect to pay a fortune in shipping costs in order to receive their items within 1-3 days. By shopping in advance, or taking advantage of Amazon Prime which comes with free two-day shipping on thousands of items, you can stop wasting money on shipping costs.

3. Skip Expensive, High-Calorie Appetizers

I enjoy greasy appetizer platters just as much as the next guy, but at $8 and nearly 3000 calories, I nearly always regret my indulgence. Sure, $8 won’t make me significantly richer; no, I won’t likely nickle-and-dime my way into developing a million dollar investment portfolio. But I can stop wasting money on appetizers by acknowledging that I have better options. And besides, appetizers generally leave me unable to finish my meal without a strong effort.

4. Cancel Your Newspaper Subscription

Currently, my wife and I pay for a Sunday subscription to The Chicago Tribune. Shameful confession time: the edition from last Sunday is still sitting at the end of our driveway as I write this on a Wednesday. I may as well just burn my subscription fee every month, as I’m clearly not reading the paper.

Like any good American, I find my news from the most trustworthy source: my Facebook NewsFeed.

In all seriousness, I need to stop wasting money on a newspaper that I do not read, especially when free news is available online. My sources of choice have long been The Detroit News and The Detroit Free Press, both of which are available via mobile app.

5. Stop Buying Lottery Tickets and Betting

My thoughts on the lottery system are very divided. On one hand, proceeds from the lottery in my home state of Illinois support education and indirectly pay my teacher salary. On the other, I know that dozens of my dear friends are wasting their money on a daily or weekly basis. I myself have only indulged in NCAA basketball tournament pools, which is admittedly different than the lottery (I also won the entire tournament and collected $900, but I digress. . .), but I plan to stop that this year, as well.

While a potential big payday is theoretically always just one ticket purchase or bet away, the odds of winning are microscopically small. In my opinion, the lottery system offers false hope to the hopeless; it is essentially a tax on the poor. Stop wasting money on lottery tickets and use the money saved to invest in index funds.

Saving Money Can Be Easy

Finally, if you’re looking for a helpful, easy way to ensure that you save the money you are no longer wasting in 2017, look no further! I use Digit to save money automatically each month towards upcoming purchases. In the fall, we used our savings to travel to Las Vegas for a much needed vacation! I can’t recommend the app enough, particularly for those who are prone to overspending.

Open your own Digit savings account for free today!

What are the primary ways you need to stop wasting money in 2017? How have you wasted money in the past?

13 Simple DIY Home Inspection Tips

In today’s internet-driven world, home buyers have become more savvy than previous generations. Zillow, Trulia,, and a dozen or so other websites have made the process of window shopping for homes much easier. Pictures, virtual tours, and a wealth of data are available with the click of a mouse. And the average buyer can net plenty of experience living vicariously through other buyers’ experiences as showcased on the DIY Network and HGTV. Shows like Holmes Inspection have even inspired buyers to conduct their own DIY home inspection.

Yet the average realtor, myself included, can share countless stories of buyers who look at all of the wrong things when touring a home the first (or second . . . or even third!) time. I have had clients tell me that they were not interested in a home due to objections over carpet, basic landscaping, and even paint color. Other clients have happily fallen in love with homes once they mark off the “non-negotiables” on their list: granite counter tops, stainless steel appliances, and an open concept. I understand exactly what it must be like to host House Hunters or Property Virgins.

No home buyer should skip a professional home inspection. But you can save time and money by following these 13 DIY home inspection tips ahead of time.As a realtor, I am bound by a code of ethics which was designed long ago to protect consumers. I do my best to educate them regarding what to look for when touring a home, and I am quick to point out both obvious and subtle defects, as well as signs of possible latent defects. Most realtors who wish to protect their clients will do the same, especially if they want to keep a job long-term. However, not all realtors are so honest, as selling you a home as quickly as possible may determine whether or not they are able to pay their mortgage premium next month.

For the buyer who is represented by this kind of realtor, the process often goes something like this:

-Tour home, fall in love with aesthetic properties, develop emotional attachment to the home.
-Discuss pricing and comparable sales, make an offer, conclude negotiations and sign the contract.
-Schedule a home inspection with a professional home inspector.
-Begin picking out furniture, paint colors, carpet, etc., for the new home.
-Attend (sometimes) the home inspection with inspector, discover a lengthy list of problems which must be addressed.
-Enter state of sadness/depression/panic, question why the realtor did not notice or disclose all of the problems diagnosed by the home inspector.
-Either A) negotiate with the seller regarding necessary repairs or price concessions or B) cancel the transaction.

Sometimes the process goes much more smoothly. Sometimes it goes much, much worse, especially if the home buyers foolishly opt to skip a professional home inspection.

Avoid Home Buying Heartbreak and Hassle: Perform a DIY Home Inspection

In any real estate transaction, the most critical parties are typically the home inspector and the attorneys. As a buyer, they are your last lines of legal defense; they serve to protect you from danger and hours of stress and hassle.

To be clear, I would never, ever recommend that a client skip out on an independent, third-party, professional home inspection, even when buying a brand-new home through a builder. With that said, I believe a prospective buyer can save himself a great deal of time and money by looking out for the following problems and defects in advance of the home inspection by performing a DIY home inspection during a home tour.

The following DIY home inspection tips are not an exhaustive list. They may not apply to every home and location, and should be considered on a case by case basis. Again, do not skip a professional, independent home inspection in an effort to save money!

1. Take in the big picture

When Mrs. Superhero and I were searching for our first home, I was still a real estate amateur. We fell in love with a home which we had toured on a weeknight in February, so it was naturally dark during our tour. When we arrived for the inspection a week later, we met the inspector at the edge of the driveway. After introducing himself, the inspector said, “So, you know you’ll need a brand new roof ASAP, right?” Ouch.

Examining the full exterior of the home during daylight hours is an easy DIY home inspection tip. Look for damage to the roof (missing shingles, bowed eaves, rotting soffits, missing gutters), siding (missing or damaged shingles, encroaching landscaping), and the entire yard. Do not neglect to examine the same components in the garage, whether it is attached or detached. Also, examine the driveway for large cracks, potholes, etc. Note concerns on a checklist and document them with pictures on your phone or camera so you can address them during a possible future home inspection.

2. Test the garage door

It can be a bit uncomfortable to operate a garage door which does not belong to you, but this is an easy check that everyone should perform unless explicitly instructed not to do so by your realtor or the homeowner. Yes, your inspector will check it, too, but it is wise to check for problems yourself.

3. Open and close all interior and exterior doors

During your tour, you are naturally going to enter and exit all rooms in the home. While you’re doing so, opening and closing all doors is a simple step that some home inspectors may overlook from time to time. If you catch a malfunctioning door which requires re-hanging, you may save yourself money at the closing table.

4. Inspect the furnace, air conditioner, and water heater

When examining these items, look for evidence of maintenance dates on the exterior of the appliances. Inspect for any signs of leaking or irregular noises. If the furnace or air conditioner are not running during your tour, it is usually acceptable to temporarily adjust the thermostat to evaluate their level of functioning. Note: Do not attempt to turn on an air conditioner unit during the winter.

5. Examine all ceilings and walls for water damage

Admittedly, looking for water damage may be one of the toughest DIY home inspection tasks on this list. However, savvy homeowners are becoming increasingly skilled at hiding signs of water damage rather than rectifying the underlying problems. Any signs of discoloration, sagging, or unexplained lines near joints where dry wall may have been taped should be noted and addressed with the home inspector.

6. Check out the basement

More and more homeowners are searching for basements, in my experience. Yet many of them don’t check out the basement when touring a home if they learn that it is unfinished. You should examine the foundation for any major structural concerns, such as cracks, as well as examine the basement ceiling for obvious issues. If a basement is finished, you should ask your realtor to inquire as to whether the work was performed with permits. This may seem like no big deal to many people, but depending upon your city or village ordinances, a buyer could be on the hook for any un-permitted mechanical, electrical, structural, or plumbing work completed without a permit.

7. Examine the grade around all exterior walls

In the past five years, flooding has occurred in all 50 states, according to This cannot always be prevented, yet many home floods are caused by improper grading around a home’s exterior. Examine exterior walls to ensure that the soil is graded in an appropriate manner (slopes downward away from the home). Also ensure that downspouts are adequately extended away from the home’s foundation.

8. Test all light switches

This is an easy DIY home inspection item to cross off your list, and you’ll be glad to know if any light switches are wired improperly.

9. Inspect windows for signs of moisture

If you see fogging or condensation on windows, this is a sign that the windows may require replacement or repair. These items can be very costly, so you will want to be sure that your home inspector addresses them in his report.

10. Test all sinks and toilets

Invariably, home buyers feel uncomfortable evaluating the function of sinks and toilets. When you’re preparing to make arguably the largest purchase of your lifetime, pushing past some discomfort is a must! Begin by running all sinks individually for 3-4 minutes; this will reveal any draining problems. Also, check under vanities to ensure that drains are properly vented. Lastly, flush toilets in all washrooms while the sink is still running and listen for any odd sounds in the plumbing.

11. Evaluate Your Surroundings

I have heard countless horror stories from buyers who fell in love with a home only to face some harsh realities on moving day. One buyer discovered unappealing power lines running through their side yard. Another buyer shared that they hadn’t noticed a large water tower in their backyard because it had been digitally removed from all marketing photos online. And another buyer did not notice that a train ran right behind their backyard and shook the entire house several times a day. Be on the lookout for these unsightly hazards and more!

12. Visit Local Schools

While the value of a professional home inspector cannot be emphasized enough, buyers must inspect local schools themselves. Do not simply rely on reputation, recommendations from well-meaning friends, or scores from third party websites. Review state report cards, attend a school board meeting, and arrange for a brief tour of the school. In most areas, your property taxes largely go toward funding local public schools, so you want to be sure your investment is worthwhile.

13. Talk to Potential Neighbors

During your examination of the home’s exterior and yard, aim to strike up a conversation with your potential neighbors if they are also outdoors. Ask about their impressions of the neighborhood, schools, and neighborhood and community amenities. If you’re feeling brave, ask, “Would you buy your home again today if you were given the chance to do so?” Any major red flags revealed during this conversation may lead you to reconsider the home purchase (or seek a closing credit to build a bigger fence!).

Don’t Take the Home Buying Process Lightly!

For most people, a home is the largest purchase they will ever make. Do not enter into such an important decision without careful consideration of the condition of your potential new home! Review your notes from you DIY home inspection and compare them to the report provided by your professional home inspector. With careful consideration, you will avoid hassle and heartbreak and find the home of your dreams.

What additional home inspection tips do you suggest?




Surprising Holiday Spending Trends in 2016

Every December 1, to the dismay of people who plan ahead, the average consumer is startled to realize that Christmas and Hanukkah are in December this year. These consumers quickly form an emergency plan to pay for their must-have gifts: Visa, Discover, and MasterCard to the rescue!

The warm fuzzies of the holiday season provide a perfect buffer against any feelings of remorse or regret over this spending at the time. Face it – it’s hard to feel bad about buying the family the latest curved 4K television when you’re drinking a gingerbread latte as Jose Feliciano belts Feliz Navidad over the mall sound system. Life continues to be good in the lead-up to New Years Eve, but at midnight, as The Ball drops in Times Square, the proverbial ball drops in your stomach, too. You stop and think – I spent HOW MUCH on the holidays?

2016 looks to be a record-setting year for holiday spending. Consider these factors before your plan and complete your holiday shopping.

Average Holiday Spending

A recent survey by the Rubicon Project revealed that Americans plan to spend an average of $1,175 this holiday season. This is a 12% spike over last year’s figure.  Average spending per child, for families with children, is expected to be $495. Rubicon also reports that the largest areas of spending are projected to be technology and experiential gifts.

In the absence of an unlikely 12% increase in income, such an increase in spending is alarming. The Consumer Confidence Index increased in September 2016, but this hardly seems like a good reason to drop what would be the equivalent of a mortgage payment for many families on food, decorations, and gifts.

So what gives?

Spend Early, Spend Often

As a child, I remember sitting around with my cousins on Thanksgiving and poring over toy catalogs. I circled items which I wanted on my wish list, and Mom took care of the rest. The next day, before Black Friday was a great day to get assaulted at the local Wal-Mart, Mom went shopping with my aunts and grandma.

Today, Mom would be accused of child abuse by many people for having failed to secure my Christmas gifts prior to December 1. Increasingly, more and more people are beginning and completing their holiday shopping far in advance of the holiday season.

A recent Forbes article features an interview with a millennial which illustrates this trend.

Erin Dunphy, 25, started her holiday shopping this summer. She says it’s better for her wallet, and starting early better accommodates her work schedule.

“It really helps to spread out the spending that I want to do and really start to look at the things or experiences I want to give to others,” says Erin. “Also, August through February is my busiest time at work. So I make sure I try to cross things off my list early in the process.”

Erin also uses shopping early as a way to stick to a budget. She puts away money for the holidays well in advance, which guarantees she isn’t draining her bank account as the holidays approach. It also spaces out her spending, and ensures she’s not paying sizeable holiday markups on her purchases.

“I start saving early so I have a little stash that I know is for others. Buying now means if something goes wrong, I can pay for it all and not feel like I have to choose between [buying] presents or fixing my car if it were to break,” she says.

While it is easy to appreciate the ambition and mindset of goal setters like Dunphy, starting early can have its drawbacks, too. In the absence of discipline, it can be easy to tack on last-minute gifts for the people on your shopping list, especially as retailers slash prices in the final days leading up to December 25.

Starting early may seem very smart, but there is a reason that the spiders, pumpkins and cobwebs come down on November 1 only to be quickly replaced by Christmas trees, white lights, and tinsel:

Retailers look to gain an edge by measuring early shopping trends and adjusting pricing and marketing plans accordingly to maximize their profits.

Often retailers seek to build customer loyalty by providing incentives for your early purchases. After all, if you shopped early for that pair of Beats by Dre headphones for your son, you may be willing to come back for the latest FitBit for your wife, especially if you have a coupon.

‘Tis the Season to be Thrifty

Does this mean you shouldn’t shop early? Maybe, maybe not. It means you should know the market value of the items on your shopping list, do your research, and aim to pay the lowest possible price for those items.

It goes without saying that you should allow your budget to dictate the items on your list, not the other way around. If you’re prone to the temptation to overspend, leave your credit and debit cards at home and carry cash safely in your front pocket. Spend only what you must, not what you can. Don’t allow legalism or petty family traditions to lead you into spending set amounts; spend what you feel is best. Chances are good that your family will appreciate the gesture regardless of how much you spend.

During our marriage, my wife and I have never failed to create a unique budget for our holiday spending. By putting our plan in writing, we have managed to avoid a great of overspending. We haven’t been perfect, as we’ve splurged a bit on each other and certain family members over the years. Yet talking about a plan, writing it down, and acting upon it has helped us to ensure that we don’t engage in reckless holiday spending at the expense of our other financial goals. We know we will never have to sit back in a destitute life of retirement and think, “Well, at least we had good Christmases. . . ”

The holidays have become a vast showcase for American excess over the past several decades, but participation in the game is optional. Stuff may make you happy, but a life of excess is not likely to lead to a life of happiness and lasting fulfillment.

Will your projected holiday spending align with expected holiday spending trends in 2016? How do you plan for your holiday spending?




Want to Treat Yourself? Use This Guilt-Free Financial Method

Greetings from sunny Las Vegas, Nevada! This guest post, “Want to Treat Yourself? Use This Guilt-Free Financial Method,” was contributed by Dave at FinancialJiuJitsu. At FJJ, trainers Dave and Don are constantly learning new things about finance and want to share their stories with you to help you out! They realize that a lot of people interested in getting ahead do not have a huge amount of money just sitting around, nor would they need a huge amount of money to be happy.

When it comes to your finances, the temptation to treat yourself can be fierce. If you want something new, follow this advice and remain guilt-free.

Want to Treat Yourself? Use This Guilt-Free Financial Method

So a few months ago I’m browsing Craigslist looking at classic cars. Or junk cars if you prefer. In California we have a smog system which only allows cars of pre-1975 vintage to be exempt. Reading between the lines here that means that if you like hot-rodding engines or working on anything that you ever want to be fast, it has to be pre-1975. Hence my search criterion. The 200$ minimum eliminates the dealers and people who list their 12,000$ cars for 12$. There should be a law against that type of abusive false advertising but I digress. . .

When it comes to your finances, the temptation to treat yourself can be fierce. If you want something new, follow this advice and remain guilt-free.
My typical search when bored

Long story short I find some killer deals, like I always do. And again like I always do I ask myself the question:

“Do I really need another hot rod project?”

Of course I do! But last time I checked, remember this was from a few months ago, I still had a 1973 Lincoln Continental Mark IV with a 460 in the driveway. Having another vehicle whose function is even slightly similar to the weekend cruiser/ engine build project in my driveway would be unnecessary end even cumbersome. The amount of time and effort it takes to keep a classic vehicle ready to enjoy and drive is not trivial. So doubling that even if one of them is “complete” at the moment is absurd. And then there is this quote from Jonny Depp which is relevant:

When it comes to your finances, the temptation to treat yourself can be fierce. If you want something new, follow this advice and remain guilt-free.

Of course we car guys know that we are capable of so much love when it comes to cars. We could leave one in the woods to turn into a rust bucket after 20 years and if someone asked us if we loved that car, we would say yes. We will also say we love cars that we see passing in the street or cars that we only just met. Ah the heart is a fickle thing but I digress…

The solution to this dilemma is, of course, coming to terms with your inner desires and understanding yourself in a deeper fashion and blah blah blah whatever leave this site and try to find some more click bait

Here I will stop and say that at Financial Jiu Jitsu (FJJ) we have promised to give you insightful ways on how to actually handle your affairs, and we will not always spout trite garbage in your direction. This isn’t Facebook or Twitter where everybody has advice, but it is rarely unique or even slightly insightful. So let me mansplain this for you in a conclusive fashion:

  1. You want something cool

  2. You already have something cool

  3. What do you do? Go to our site and do some soul searching.

We say: If you want to avoid guilt, get on with your life, and buy something totally savage all at the same time, just sell something first.

In this instance I Immediately posted the following:

When it comes to your finances, the temptation to treat yourself can be fierce. If you want something new, follow this advice and remain guilt-free.

And within a month it was sold. The article is here and it was not a very profitable flip but it was a very educational build for me.

Now – you know what the kicker is? I still haven’t bought another car and that sale happened about a month ago. In my 20’s I would have not had the patience to even wait until this car was sold to buy another and get started all over again. And in the interim my driveway would have been clogged, I would have been fixing 2 cars at the same time (inevitably with the classics,) and I would, of course, have been tempted to lower the price of the car I had for sale to attract more buyers. In this case I avoided all of those problems and more by following some simple advice:

If you want something, sell something first.

When it comes to your finances, the temptation to treat yourself can be fierce. If you want something new, follow this advice and remain guilt-free.




Jiujitsu Financial

Readers, how do you treat yourself within reason? Do you sell something before buying something new? Save and pay cash or leverage credit? What’s your method?

A Different Kind of Saving For the Future

Close your eyes for a moment and visualize your future. Perhaps you see a beautiful home with a wrap-around porch, a white picket fence, and children playing happily in the yard. Maybe your vision includes a cruise around the world, hiking in the Austrian Alps, or climbing the Great Wall of China. No matter the specifics of your vision, this can be a fun and inspiring mental exercise.

In reality, most people are keenly aware that most dreams come at a cost. As a result, we plan, scheme, make do, and go without in an effort to save money and make our dreams an affordable reality.

When it comes to saving money for the future, following Stephen Covey’s recommendation to Begin With the End in Mind is critical. However, if you’re reading this post with the hope of learning how to better save money for future expenses or plan for your retirement, you’re reading the wrong article. This isn’t  about that kind of saving.

This article is all about saving money with the ultimate intention of letting loose a bit and having fun with money. In fact, it will focus much more on future spending than on present saving.

Recently, I have read many articles which have clarified my vision of how, when, and why I will spend my future discretionary income and earmarked savings. In no particular order, I would like to present to you a wide variety of items (and their price tags, when possible) which have caught my attention in recent days and worked their way into my future plans and/or dreams.

Most people are keenly aware that most dreams come at a cost. We plan, scheme, make do, and go without in an effort to save for the future.


Rising Future Technology

It’s no secret that today’s technology is changing by the minute. Much of today’s cutting-edge technology will be discarded or revamped within the next six months. The average person intuitively knows this to be true based on perception and experience. However, it is important to note that data also supports this finding.

According to analysis by The Emerging Future, LLC, which is based upon Ray Kurzweil’s historical trends of exponential growth, the rate of technological growth is ever-improving. Consider, for example, the following chart, which articulates the projected thirty-two fold increase in current technological ability over a five year period beginning in 2012.

Most people are keenly aware that most dreams come at a cost. We plan, scheme, make do, and go without in an effort to save for the future.
Credit: The Emerging Future

While the notion of this kind of advancement is exciting, the prospect of technology becoming one thousand times more advanced in the next ten years is nearly mind-boggling. Expand the projection to 20 years, and technological advancements are projected to be over one million times more advanced. As you can see from the chart below, The Law of Accelerating Returns really makes its mark beginning sometime around year 16.

Most people are keenly aware that most dreams come at a cost. We plan, scheme, make do, and go without in an effort to save for the future.
Credit: The Emerging Future

Interestingly, I first learned of The Law of Accelerating Returns in a very practical way. When I was in fifth-grade, I learned to play chess and quickly became enamored with the game. I devoured over 50 books on chess strategy and eventually learned to play the game (and defeat opponents) without sight of the board. While my friends were preoccupied with other interests and pop culture, I became hooked on reviewing the 1996 and 1997 six-game chess matches between the World Chess Champion Gary Kasparov and IBM computer Deep Blue.

Most people are keenly aware that most dreams come at a cost. We plan, scheme, make do, and go without in an effort to save for the future.
Kasparov vs. Deep Blue (Credit: Mentalfloss)

Naturally, I assumed, perhaps due to youthful naiveté, that Kasparov would crush Deep Blue. In 1996, the Champion won the match 4-2. However, a year later, the computer improved greatly and defeated Kasparov 3.5-2.5. Though many chess experts blamed the loss on uncharacteristically-poor play by Kasparov, artificial intelligence had defeated human intelligence.

I note these historic chess matches because they serve as a poignant illustration of exactly how far artificial intelligence has come in the past 20 years. While it was once impressive to witness a machine defeating man in the world’s most-complex game, today technology is capable of much, much more. This is where dreams, saving, and spending come into play.

 Autonomous Vehicles and Tesla Motors

Beginning around 2008, Tesla Motors began the production and sale of its Tesla Roadster, the first automobile to use lithium-ion battery cells. The Tesla Model S sedan was unveiled in 2009 and hit the public streets in 2012. Last March, CEO Elon Musk unveiled plans for the Tesla Model 3, which is set to debut in 2017 at a base cost around $35,000.

Most people are keenly aware that most dreams come at a cost. We plan, scheme, make do, and go without in an effort to save for the future.
2017 Tesla Model 3 (Credit: Motor Trend)

When I read reviews and watch videos on the Model 3, I tend to have a very different reaction than many people. Yes, I am simultaneously intrigued by the vehicle itself and disgusted at its price; yet, on the other hand, a part of me considers the impact that the Law of Accelerating Returns will have upon Tesla vehicles’ performance and cost over time. Interestingly, Musk himself believes that future Tesla models will continue to become more and more affordable. He also believes that his company is currently only six years away from achieving an autonomous vehicle (i.e. its driver can go to sleep and awaken having arrived at his destination).

While I don’t plan to spend $35,000 on a Model 3 next year, I hope to be in the market for a future Model 7 or 8 at the hopefully-low cost of around $22,000 (my optimistic prediction) ten years from now.

It’s time to start saving!

Flying Robots

I will never forget the day I learned that Amazon was working on a plan to deliver packages via drone; it was certainly an intriguing idea. Naturally, I was even more impressed when I viewed the following video some time later.

Though it seemed like a far-off fantasy at the time, the use of Unmanned Aerial Vehicles (UAVs) is just around the corner. According to Business News Daily, the Federal Aviation Administration recently passed new rules on civilian drone usage. The rules, called Part 107, go into effect on August 29, 2016, and will allow for unlicensed pilots to legally operate drones as long it weighs less than 55 pounds, is monitored by a remote pilot, and flies at a maximum altitude of 400 feet.

In my estimation, it is only a matter of time before further research verifies the safety of drone operation, thereby making UAVs more-accessible and usable by the average Joe. A quick look at current options on Amazon led me to the $495.00 DJI Phantom 3 Standard Quadcopter with HD Video Camera.

It could come in handy for real estate business, right?

Augmented Reality

By now, you’ve surely heard of the Pokemon Go craze sweeping the world. The wild popularity of the game is attributable to two phenomena, in my opinion: nostalgia and augmented reality. The latter, commonly referred to as AR, pushes the limitations of graphics to a new level by blending reality with computer-generated elements.

An article on predicted the rise of AR games like Pokemon Go. It provides more detail and insight than is practical or possible to share in this space, but the possibilities associated with this technology are fascinating. In the future, AR may be used in advantageous ways by medical professionals, military personnel, and educators.

I, for one, cannot wait to don a pair of AR goggles and walk the streets of Chicago while my goggles take me on an architectural and historical tour of the city.

The Lilium

As if AR, self-driving vehicles, and drones weren’t exciting enough, a group of German engineers have raised the bar even higher with the development of a conceptual electric plane called LiliumTouted as the first-ever vertical take-off and landing jet, the Lilium is projected to reach speeds of approximately 250 miles per hour.

As of the date of publication of this article, the Lilium is expected to be made available for purchase in its initial public rollout in January 2018. It is certainly not without its limitations, including the required training and licensure in order to legally operate the Lilium, but if we are to trust the Law of Accelerating Returns, perhaps the technology will be become both affordable and easy to use by 2040.

The Perks and Rewards of Exponential Growth

While the above examples are certainly fun to dream about in the present, many experts believe that we can scarcely begin to imagine what will be possible in the next 10, 20, or even 50 years as a result of the exponential growth of technology. Perhaps a 50-year old FinanceSuperhero will become the market leader for the sale of smart homes or stay busy planning a family vacation to the Moon.

Whether these examples serve as fuel for your dreams of financial independence or new and interesting topics to discuss around the water cooler, one thing is clear: for those who are pursuing early retirement, there will be plenty of ways to spend their hard-earned dollars.

Do you think about future “fun” purchases like those above when dreaming of financial independence and early retirement? Have you budgeted or planned for any similar purchases or experiences? What technological advances do you most hope to witness in your lifetime? 


The Thirty Day List

Like many people, I lived in the dorms back in my college days. After surviving one semester with The World’s Worst Roommate™, I was fortunate to be granted a housing change. My new roommate, Erik, was everything one could hope for in a roommate: he picked up after himself, showered daily, loved to play table tennis until all hours of the night, and could binge watch TV like a pro.

Among the many shows Erik and I binged on, Married With Children was our favorite. Can you blame us? Ed O’Neill played the role of Al Bundy, a henpecked husband, broke shoe salesman, and father of two, to perfection.

Brief digression: It is a crime that O’Neill never won a Golden Globe for his performance as Al Bundy, though his career has been unquestionably validated by countless nominations and awards for his performance as Jay Pritchett in Modern Family.

Al BundyIn one memorable scene, Al’s wife, Peggy, has just returned home from a lavish shopping spree. Al takes a look at the bills and delivers a typical, priceless line:


I hope one of these bills is for a coffin, because your shopping is killing me.



While MWC was a slapstick, controversial comedy which often crossed the line, this particular money fight between Al and Peggy hit the nail on the head in terms of its value as a social commentary.

Research supports my assertion. According to a Huffington Post article from 2014, a survey showed “that 70 percent of couples argued about money more than household chores, togetherness, sex, snoring and what’s for dinner.” Furthermore, survey records that the focus of 46% of all money fights was “frivolous purchases.”

I suspect that 54% of surveyed couples were not being entirely honest.

Top 5 Money Arguments
Graph credits to Huffington Post and

A Simple Solution

Last fall, I volunteered as a co-facilitator for a popular personal finance course. I have always enjoyed engaging in financial discussions with others, despite the general unwillingness to do so in most people (link to advocation of open discussion of finance article), and serving as a group leader satisfied that urge while also providing a platform to help people and sharpen my own knowledge.

During our session on purchasing, a student in my group shared that she and her husband had previously been through several fights about spending over the years. I braced myself for a plea for advice, but what she said next surprised me.

“We found a solution that has stopped most of our money fights.”

Chatter among the group instantly ceased. Each group member, including me, was eager to learn this couple’s secret.

The Thirty Day List

In the moments which followed, we learned a lot about this couple’s experiences. Throughout their marriage and subsequent ushering of two children into the world, this couple had fought about many purchases: vehicles, clothing, electronics, and even groceries. Matters were not made any easier when the couple encountered financial hardships. In order to reduce and (hopefully) eliminate fights about frivolous purchases, this couple implemented a procedure that they called “The Thirty Day List.”

They outlined the rules as follows:

  1. When considering a purchase over $50, write the item and cost down on the list and date it.
  2. Provide a brief rationale regarding the item’s utility and importance.
  3. Revisit the rationale in 30 days. If it still sounds like a good idea at that time, purchase the item.

Naturally, many students (budget nerds) were in favor of this approach, while other students (free spirit spenders) were against the restriction associated with this process. However, as the couple explained how it worked for them, the tone of the room shifted toward acceptance of this uncommon procedure.

The Benefits of the List

Among the benefits of the list which were described that day include the following:

  • The List often prevents unnecessary purchases. Sometimes you don’t buy the item because you realize don’t really need it.
  • The List eliminates susceptibility to high-pressure sales techniques. When a smooth talking salesman is rolling out every tactic in his arsenal to get you to purchase that new refrigerator with built-in social media access, you don’t even have to feel bad saying “no” because you are acting on a matter of principle.
  • The List causes you to wait, and sometimes this nets you a better deal. Patience puts you in a position to negotiate a great price. This extra time also allows you to thoroughly research a product, weigh the pros and cons of the purchase, and make a careful evaluation.
  • Similarly, after waiting 30 days, you retain the willpower to reject a bad deal. What is a few more days? You are in control and have the power to walk away.

Why It Works

The Thirty Day List works in many situations because it leads to communication. When a couple collaborates to generate a unified position, a meeting of the minds and melding of ideas is often the result. However, this does not always happen quickly.

In such cases, a couple must take a step back and view the possible purchase from a wider perspective. By considering the purpose of the purchase from a variety of perspectives, the tone of communication shifts from one which is adversarial to one which is inclusive of both partners’ values.

Related: See Values and Budgeting Part One and Values and Budgeting Part Two

Finally, the List provides accountability for larger purchases. It provides a framework and protocol which eliminates one partner from “going rogue.”

Why and When It May Be Hard or Impossible to Implement

While the Thirty Day List may seem faultless in theory, it can be more difficult to implement in actual practice. After all, we live in a society in which it is easier and (often preferred) to ask for forgiveness after the fact rather than seek permission in advance. Many people would agree that this is a terrible way to act within your marriage or other committed relationship, yet that doesn’t stop some people. If this is your preferred practice, the List won’t work well for you.

The List is also not a good idea when you find yourself in a housing search, especially in a seller’s market. Often times, you will need to be poised to make quick decisions. This shouldn’t be a surprise, however, as when you are in the midst of such a search, you know the rationale and utility for the purchase.

Make the List Work For You

Perhaps the greatest feature of the List is that it can be modified to fit your circumstances. A high school student with a part-time job and an annual income of $1,200 and a married couple with a combined annual income of $500,000 can successfully use the List to their respective advantages. The figures may need to be modified, but at the end of the day, the principles remain the same whether zeros are added or removed.

If thirty days is too cumbersome for you, modify it the procedure to fifteen days instead. Following the Know Thyself Superhero Principle is the best course of action when designing a List which will work for you and support wise purchases.

Readers, do you have a procedure similar to The List in place to assist when making significant purchases? Do you and your spouse or significant other routinely fight about purchases?

Protect Your Future With Sinking Funds

My earliest job as a child was mowing the lawn. One hot Michigan summer afternoon, Superhero Dad decided it was about time for me to contribute to yard work beyond raking leaves in the fall. After a few minutes of coaching on how to prime the gas line, start the engine, empty the mulch bag, and operate the self-propelling mechanism, Dad headed inside and left me to get to work.

Our lawn was average for our neighborhood: one-third acre in size, trees and other obstacles galore, and dusty. I quickly learned to hold my breath when emptying the bag into the backyard compost pile.

After approximately two hours of navigating countless twists, turns, and bumps, and contemplating the treasures I could purchase with my new income, my work was complete. Like any self-respecting nine-year old, I marched up to Dad, who was reading the newspaper in his recliner.

“I’m done,” I said, extending my open hand in anticipation of a rich payment.

“OK. Let’s go take a look,” Dad replied.

After touring the yard and noting the deficiencies in my work, the long-awaited moment finally arrived. Dad reached into his pocket and presented me with a crisp $5 bill.

I don’t recall experiencing any exuberant emotion at the time, though in hindsight, $5 was probably a fair lawn-mowing rate for a nine-year-old boy in the mid-1990s. But I do remember walking to my bedroom, closing the door, and slipping Mr. Lincoln into a manila envelope in my night stand.

Envelopes Everywhere

Like many of my earliest financial lessons, I learned the practice of safe-guarding my money in envelopes from Superhero Grandpa. Grandpa had envelopes for everything, each with a hand-written label, secured behind the solid walls of his safe.

I didn’t know it at the time, but several of Grandpa’s envelopes were intended to save for future purposes. Among the purchases made from one of Grandpa’s envelopes was one of the last vehicles Grandpa purchased: a brand-new 2008 Honda Accord EX-L. The story of how Grandpa walked into the showroom with a brown bag full of cash one day after test driving an Accord is one of my all-time favorites.

My 2008 Honda Accord EX-L
My 2008 Honda Accord EX-L

One year after Mrs. Superhero and I were married, Grandpa approached me and asked if she and I would be interested in buying the Accord; he had already gotten the itch to purchase a new vehicle. We were desperately in need of a fuel-efficient vehicle and had been saving money for months.; yet, at the time, purchasing the vehicle would have been a bit of a stretch.

After a few months passed, we finally had enough money saved to purchase the car. My hand trembled a bit as I sat down to write Grandpa the largest check I had ever written (at that time).

“Can you take me out for a ride in your new car?” Grandpa asked me.

“Of course,” I said. “Where are we going?”

“The bank,” he replied.

Moments later, we arrived at the bank. What I anticipated would be a short, unremarkable trip turned out to be lengthy and memorable.

“I want to cash this check,” Grandpa informed the teller.

The teller examined the check and flashed a stunned look, first at Grandpa, then at me.

“Sir, I have to recommend against keeping this much cash on hand. Would you like to make a deposit into your savings account?” she asked.

“No. I want the money,” Grandpa retorted.

After the teller’s acquiescence and subsequent counting of many $100 bills, Grandpa and I exited the bank. I was terrified that we would be jumped, robbed, and left for dead in the parking lot. Luckily, my worries were unfounded, and Grandpa and I arrived safely back at the house.

True to form, Grandpa immediately removed his new stack of cash from the teller envelope, placed it in a manila envelope, and locked it in his safe, but not before counting it once more, just to be sure it was all there.

The Sinking Fund: An Update to Envelopes

I did not know it at the time, but Grandpa had just added to his always-growing portfolio of sinking funds.

For readers who may be unfamiliar with the term and its application in personal finance, a sinking fund is an account designed to save for specific future purchases. A sinking fund is different from an emergency fund, as its contents are earmarked with an anticipated purpose, while an emergency fund exists to cover unanticipated expenses.

While Grandpa’s approach was commendable, it is advisable to maintain sinking funds in a savings or money market account which is separate from your emergency fund. If you are able to meet minimum balance requirements, it may even be wise to open separate accounts for each sinking fund. You do, however, want to be sure that your money is not eaten away due to senseless fees.

As an alternative, provided you have a sufficiently-funded emergency fund, you could invest your sinking fund money in CDs if you know you’re not likely to need it during the term of the CD. You should be certain that investing the money and losing access to it for the duration of the term will not cause undue hardship.

The Sinking Fund Test: Do I Need a Fund For _____?

The number and type of sinking funds you maintain should be tailored to suit your individual circumstances. The following guidelines and questions are intended to spark careful thought and consideration.

What items are nearing the end of their anticipated utility? (In other words, what items are likely to breakdown or require repair in the next six months to five years?)

What degree of difficulty would be posed if you were expected to live without these items for a set time period?

What upcoming purchases and expenses can you reasonably anticipate and begin saving for with a sinking fund? (Hint: Christmas is in December this year!)

In summary: If an item is likely to soon need replacement or repair, you need a sinking fund for it. If you can’t live long without this item, you need a sinking fund for it. If an expense is anticipated to be due within the next six months to five years, then you need a sinking fund for it.

FinanceSuperhero recommends that you organize your sinking funds based upon priority (Ask: What is likely to break first?) and fund them according to your ability to do so each month. Develop a rough calculation of the projected cost for the item in question and divide that total by the number of months remaining until the expense is anticipated; this is the amount you should budget to save within the sinking fund each month.  Again, place funds in a simple money market account or high interest bearing online savings account, depending upon the amounts in question.

Among many other possibilities, the following items deserve your consideration when developing a list of necessary sinking funds:

  • Vehicle replacement
  • Christmas and birthday gifts
  • Vacations
  • Home repairs (roof, HVAC, sump pump)
  • Home renovations (basement renovation, kitchen and bathroom remodeling, sizeable landscaping or the addition of a deck or patio)

Readers, do you utilize the sinking fund approach? For what types of purchases do you maintain sinking funds? Where you do maintain your sinking funds?

The Superhero Guide to Maximizing Your Tax Refund

Tax refund: Next to the words “pay day” and “debt free,” these are my two favorite finance-related words. Whether my annual tax refund is a modest sum or a mid-size windfall, I am always happy to see my refund directly-deposited into my checking account.

I will not debate the merits of adjusting withholding to maximize your monthly income in lieu of a refund in this space. I have my reasons for continuing to maintain my withholding at its present rate to receive a refund, which I will share at a later date. Many of you will have equally valid reasons to adopt the opposite approach.

Assuming you have a tax refund coming your way, you are on the precipice of a great opportunity.  As a Superhero, you must know that with great opportunity comes great responsibility! In accordance with the Superhero values of Order, Precision, and Maximization, the following flowchart will help you to answer navigate the waters of a tax refund and make significant progress on your financial journey. I recommend following the steps in numerical order.

Superhero Steps to Maximizing Your Tax Refund

1. Give a Portion of Your Tax Refund to a Charitable Organization

It should not come as a surprise to you that I am suggesting giving as the first step. As previously mentioned, Mrs. Superhero and I have placed Giving at the top of our monthly budget. Giving aligns with our values, and helping others provides us with much more satisfaction and enjoyment than buying more stuff or eating delicious food.

Mrs. Superhero and I strongly believe that giving 10% is the best way that we can make a societal contribution prior to reaching financial independence (at which time we will significantly increase our giving). We have always done this, dating back to the time when we faced a mountain of debt, and we continue to do so today, even though we are mere months away from carrying no debt other than our mortgage.


As I mentioned, we believe helping others is the most satisfying use of our money. Giving is also a strong reminder that money is not something to be hoarded out of greed. We want to value money and practice good Stewardship, but we also want to remain far removed from the love of money.

Many people reject giving in favor of keeping their money strictly to themselves. Ironically, it is usually these same people who senselessly give their money to big banks and other financiers in the form of outlandish interest payments on cars, boats, and other stuff. Personally, I would rather give in a meaningful way.

Even if you give 1% of your tax refund, you will help others and begin to change the way you view money.

2. Increase Your Savings

After supporting societal progress by giving, use your tax refund proceeds to improve your liquid savings. Unless you are an extremely high income earner or have a stable passive income stream, you absolutely must have an Emergency Fund. If you do not have one, consider this a full-blown, alarm-sounding crisis that must be addressed immediately! Statistically-speaking, there is close to a 100% chance that you will experience some form of an emergency within the next decade, so be ready!

While I recommend maintaining an Emergency Fund of at least 3-6 months of minimum living expenses, you may also wish to establish an Opportunity Fund. I do not specifically recommend amounts or figures for this fund, and you may wish to skip it entirely in favor of moving onto Step 3. However, an Opportunity Fund could allow you to make a fun, somewhat impulsive decision without any accompanying feelings of guilt or regret.

3. Defeat Your Debt Once and For All

After you have given and increased your security via your Emergency Fund, you are fully-prepared to take on the primary villain standing in the way of Financial Independence: Debt.

The sooner you eliminate your non-mortgage debts, the sooner you free a significant portion of your monthly income and simultaneously gain the freedom to invest in tax-advantaged retirement accounts. Both the Snowball and Avalanche methods are valid means to achieve debt freedom. For the purposes of this post, I am less-concerned with the method you implement to eliminate your debt; just get it done. Your tax refund may be just the push you need.

4. Invest in Tax-Advantaged Vehicles

Upon donning your Debt-Free cape, the real fun can begin. If you are free from the shackles of debt, the next optimal use for your tax refund is to maximize your retirement contributions. For the purposes of this limited space, ensure you are maximizing employer-offered plans, specifically if they offer a match, and then move onto your Roth IRA and Traditional IRA.

5. Contribute to Your Children’s College Funds

If you do not have children, skip ahead to Step 6. If you have children, you need to learn the nuances of the Coverdell ESA (Education Savings Account, also nicknamed the Education IRA) and 429 plan. The ESA has income and contribution limits (currently $2,000 per year), but I recommend you start with the ESA in most circumstances, if eligible. The important thing to understand is that minimal contributions to these vehicles will place you in a position to send your children to college without the burden of student loans if you begin early.

6. Destroy Your Mortgage Debt

Pause with me for a moment and imagine a life without a mortgage payment. What could you do with an extra $1,000 per month? $2,500? $5,000. I just felt an overwhelming sense of peace typing these words. The next time I visit my doctor and have my blood-pressure checked, I am going to visualize the wonders of a mortgage-free life to improve my numbers.

For the average family, mortgage interest represents the second-largest expense that they will pay in their entire lifetime. In some cases, total mortgage interest paid on a 30 year mortgage can be approximately 75-80% of total principal, even at today’s advantageous interest rates! The peace I felt moments ago has now been replaced by an angry adrenaline rush. I want to crush my mortgage as soon as possible! Using tax return funds to accomplish progress on an annual basis could shave several years off your mortgage, especially if you are already paying extra on principal on a monthly basis.

7. Invest in Non-Retirement Funds and/or Real Estate

If you have made it to Step 7, please allow me to offer my congratulations. With no debt whatsoever, healthy savings, and kids’ college covered, you are poised to generate significant wealth. At this stage, you may have achieved Financial Independence, depending upon your lifestyle.

I recommend using tax refund money to invest in simple index funds at this stage. A modest tax refund sum is enough to get you started with many index funds. Adopt a long-term approach, relax, and watch your money grow.

Similarly, this is the time to invest in real estate, if interested. Becoming a landlord isn’t for everyone, and paying a property manager could eat into your net profit from owning a rental property. However, a rental property can yield some of the highest annual investment returns if managed well and purchased at prices below market value.

8. Maximize the Principles of Contribution to Improve Your Home

At this stage, true fun begins. When you are financially well-poised for the future, a tax refund represents an opportunity to both invest and add joy to your life simultaneously. This is the time to make improvements around your home which increase your happiness and feature a high return on investment.

Good examples: new front door, landscaping, kitchen or bath remodel, walkway lighting

Bad examples: swimming pools, basement refinishing, utility sheds

9. Build Sinking Funds for Bucket List Items

Last, but not least, comes additional saving for specific purchases. If you make it down to Step 9 when determining how to implement your tax refund, you are an authentic Superhero. I recommend establishing separate sinking funds for a variety of priorities, such as vacations, new car purchases, secondary homes, or major home additions.

The purpose of a sinking fund is to plan for future purchases which are far off in the future. At this stage, you do not want to be fooled into getting back into debt or be caught off guard by large, necessary expenses. With a sinking fund, you won’t be financially caught off guard when your house needs a new roof, your furnace fails, or your vehicle sputters and dies.

Final Thoughts

Again, I established the Superhero Steps to Maximizing Your Tax Refund with the Superhero values of Order, Precision, and Maximization in mind. I am confident that you will not fail to cover all of your bases by following these steps. Depending upon where you are in your journey toward Restoring Order to Your World of Finances, you may wish to skip steps or modify the order. For example, renters may wish to place saving for a home down payment in the Steps. As always, let your values guide your decisions at every step of your journey.

Readers, did you receive a tax refund this year? Are you currently awaiting a refund? How did you allocate the funds?

Five Reasons Why Everyone Should Have a Budget

A few weeks ago, I was lamenting the cost of graduate school with a friend over coffee. I commented that I had no idea why so many people were willing to go back to school for an MA or MBA and happily load up on debt that would have to be factored into their budget.

Yup, I said the b-word. My friend winced, as if I had just kicked him in the shin under the table.

For reasons I will forever struggle to understand, the word budget is a major taboo in today’s culture. Of course, I have never let that fact deter me in the past, and I wasn’t about to let it in this conversation, either.

“You do have a budget, right?”

“No. . . Budgeting just isn’t my thing. Besides, I’m always going to have debt anyway. What’s the point?”

Sadly, this attitude isn’t all that uncommon today. Chances are, you have also had similar conversations with friends, relatives, co-workers, or maybe even your neighborhood barista.

This, my fellow Superheroes, is a tragedy. With proper budgeting, there is no reason that the average person today cannot retire a millionaire and live a life of financial independence.

Five Reasons to Budget

While there are far more than five reasons everyone should have a budget, today I will present five reasons. My intention is to make you think and simultaneously stir your emotions. After reading this, please do not go another day without having a budget in place for your family.

  1. A Budget is Easy to Create

I am convinced that the average person’s aversion to budgeting stems from the budgetary failures of both federal and state government units. They ask, “If they can’t figure it out, how am I supposed to do it?” In my home state of Illinois, for example, our elected representatives and Governor have consistently demonstrated an inability to play nice and do what is best for their constituents. Ironically, the Illinois General Assembly recently enjoyed a vacation after months of accomplishing nothing.

With a Superhero mindset, you can do much better. Let’s walk through the basics of a simple starter budget:

  • If you have an understanding of addition, subtraction, basic fractions, and can operate a calculator, you can do a budget. Grab a pencil, a legal pad, and get started.
  • List your income from all sources at the top of the page. I recommend using net income, commonly referred to as “take home pay.”
  • Gather information on your fixed necessity expenses: mortgage/rent, utilities, and medications.
  • Gather information on your flexible necessity expenses: food/groceries/toiletries, clothing, and fuel/transportation.
  • Gather information on your discretionary expenses: restaurants, entertainment.
  • Calculate the total of your expenses and subtract this figure from your total net income. If you are spending more than you are earning, something must change.  First of all, aim to reduce unnecessary discretionary spending. Next, explore ways to reduce/eliminate restaurants, save on groceries and toiletries, and formulate a plan to reduce fuel/transportation expenses through well-planned travel. If you have money remaining at the end of your budget, it can be used to build your emergency fund, pay off your debts, and give to organizations/individuals in need.
  • Lastly, examine your fixed expenses and explore all avenues to reduce them. This can be done by paying off debts, thereby reducing your monthly obligations, negotiating rent/refinancing your mortgage (especially if your mortgage is 3-5 years old, you may be missing out on historically low interest rates), and reducing your usage of utilities. Any additional cash you can save is equivalent to receiving a raise.

Note: I realize that this guide to a simple starter budget is basic. We will dive into the nuances of a more detailed budget in a future post. Your starter budget will be approximate. That is OK. The goal is for you to establish a wide lens view of your current income and spending. When assembling future, more detailed budgets, we will use budget software, such as EveryDollar, to add precision to our process. If you prefer, you can jump to this step rather than the old-fashioned paper and pencil method outlined above.

  1. A Budget Puts You in Control of Your Money

Superheroes, you work hard to earn your income. I know I do. Without a budget, it is difficult to keep your income inline. Each dollar you earn in your lifetime is like a tiny employee that is ready to work for you. You wouldn’t hire an employee for your department or business and fail to provide her with a detailed purpose and role. If you did, you would be a poor boss. Employees need guidance and structure to succeed, and your money is no different. Put those dollars to work by assigning them a unique role. That begins and ends with a budget.

  1. A Budget Requires You to Pay Attention to Your Money

With several Mr. Washingtons working for you, suddenly doing exactly what you tell them to do, things begin to change. Suddenly, you notice that your grande non-fat no whip latte costs you $7 each morning. You may even experience a bit of pain upon realizing that this equates to $35 per week and over $1800 per year.

Is this worth $1800 per year?

Noticing details like this is just the beginning when you maintain a monthly budget. And when you start to pay attention, innocent trips to the ATM don’t seem quite so innocent anymore. You begin to think twice before you spend because you understand the ramifications of departing from your plan, a point which segues nicely into the next reason to budget.

  1. Operating Without a Budget is a Missed Opportunity

Though the US government prints money like it is going out of style, you and I know that money is a finite resource. Each of us has a limited number of working years, and logically, our earned income is similarly limited as a result. Do not let any of it go to waste. You must be intentional to be successful.

Today, more and more people strive to out earn their stupid spending. They work long hours to pay for cars, boats, and summer beach homes, yet they are too busy working to enjoy the fruits of their labor. I am not condemning hard work, nor am I saying that you should not have nice things. However, as Chris Hogan puts it, “I don’t want nice things to have you!” If you do not have a budget, your hard-earned money is likely being wasted on buying things you don’t need to impress people you don’t even know. The longer you continue this way, the longer you are missing out on what Albert Einstein dubbed the Eighth Wonder of the World: compound interest. And in this case, being late to the party isn’t fashionable; it’s foolish.

For example, consider the following scenario: Ben and John are both 20 years old. Ben begins investing $250 per month in index funds, and he continues until he is 30 years old, at which time he never invests another cent, allowing compound interest to grow his money until retirement at age 59 ½. John decides to lease a vehicles for $250 per month during this same 10 year window, and wisely snaps out of it when he reaches age 30, at which time he begins investing $250 and continues until age 60. For the sake of argument, let’s assume that both gentlemen invest in similarly-performing index funds, which average a 10% return each year. Surely John must catch up to Ben? Take a look below:

  Ben’s Investments John’s Investments
Age Contribution Interest Balance Contribution Interest Balance
20 $3,000.00 $300.00 $3,300.00 $0.00 $0.00 $0.00
21 $3,000.00 $630.00 $6,930.00 $0.00 $0.00 $0.00
22 $3,000.00 $993.00 $10,923.00 $0.00 $0.00 $0.00
23 $3,000.00 $1,392.30 $15,315.30 $0.00 $0.00 $0.00
24 $3,000.00 $1,831.53 $20,146.83 $0.00 $0.00 $0.00
25 $3,000.00 $2,314.68 $25,461.51 $0.00 $0.00 $0.00
26 $3,000.00 $2,846.15 $31,307.66 $0.00 $0.00 $0.00
27 $3,000.00 $3,430.77 $37,738.43 $0.00 $0.00 $0.00
28 $3,000.00 $4,073.84 $44,812.27 $0.00 $0.00 $0.00
29 $3,000.00 $4,781.23 $52,593.50 $0.00 $0.00 $0.00
30 $0.00 $5,259.35 $57,852.85 $3,000.00 $300.00 $3,300.00
31 $0.00 $5,785.29 $63,638.14 $3,000.00 $630.00 $6,930.00
32 $0.00 $6,363.81 $70,001.95 $3,000.00 $993.00 $10,923.00
33 $0.00 $7,000.20 $77,002.15 $3,000.00 $1,392.30 $15,315.30
34 $0.00 $7,700.22 $84,702.37 $3,000.00 $1,831.53 $20,146.83
35 $0.00 $8,470.24 $93,172.61 $3,000.00 $2,314.68 $25,461.51
36 $0.00 $9,317.26 $102,489.87 $3,000.00 $2,846.15 $31,307.66
37 $0.00 $10,248.99 $112,738.86 $3,000.00 $3,430.77 $37,738.43
38 $0.00 $11,273.89 $124,012.75 $3,000.00 $4,073.84 $44,812.27
39 $0.00 $12,401.28 $136,414.03 $3,000.00 $4,781.23 $52,593.50
40 $0.00 $13,641.40 $150,055.43 $3,000.00 $5,559.35 $61,152.85
41 $0.00 $15,005.54 $165,060.97 $3,000.00 $6,415.29 $70,568.14
42 $0.00 $16,506.10 $181,567.07 $3,000.00 $7,356.81 $80,924.95
43 $0.00 $18,156.71 $199,723.78 $3,000.00 $8,392.50 $92,317.45
44 $0.00 $19,972.38 $219,696.16 $3,000.00 $9,531.75 $104,849.20
45 $0.00 $21,969.62 $241,665.78 $3,000.00 $10,784.92 $118,634.12
46 $0.00 $24,166.58 $265,832.36 $3,000.00 $12,163.41 $133,797.53
47 $0.00 $26,583.24 $292,415.60 $3,000.00 $13,679.75 $150,477.28
48 $0.00 $29,241.56 $321,657.16 $3,000.00 $15,347.73 $168,825.01
49 $0.00 $32,165.72 $353,822.88 $3,000.00 $17,182.50 $189,007.51
50 $0.00 $35,382.29 $389,205.17 $3,000.00 $19,200.75 $211,208.26
51 $0.00 $38,920.52 $428,125.69 $3,000.00 $21,420.83 $235,629.09
52 $0.00 $42,812.57 $470,938.26 $3,000.00 $23,862.91 $262,492.00
53 $0.00 $47,093.83 $518,032.09 $3,000.00 $26,549.20 $292,041.20
54 $0.00 $51,803.21 $569,835.30 $3,000.00 $29,504.12 $324,545.32
55 $0.00 $56,983.53 $626,818.83 $3,000.00 $32,754.53 $360,299.85
56 $0.00 $62,681.88 $689,500.71 $3,000.00 $36,329.99 $399,629.84
57 $0.00 $68,950.07 $758,450.78 $3,000.00 $40,262.98 $442,892.82
58 $0.00 $75,845.08 $834,295.86 $3,000.00 $44,589.28 $490,482.10
59 $0.00 $83,429.59 $917,725.45 $3,000.00 $49,348.21 $542,830.31

At age 59 and approaching retirement, Ben will have invested a total of $30,000 and hold a portfolio valued at $917,725.45. John will invest $90,000 over 30 years -three times what Ben invested-yet he will only hold a portfolio valued at $542,830.31! John never caught up due to the avalanche of compound interest that worked in Ben’s favor.

  1. A Budget is Freeing

When my friend claimed that a budget really wasn’t his thing, I immediately realized that he had never experienced the freedom that results from a fine-tuned budget. When you maintain a budget, you have the benefits of:

  • knowing how much money you have at any given moment
  • knowing you do not have to fear a bounced check or overdraft fees
  • no surprises
  • peace of mind that comes from having budgeted for emergencies (a post on the value of the emergency fund and how much you may need is coming later this week)

Surprisingly, the notion that a budget is restrictive is pure nonsense. As a regular listener of The Dave Ramsey Show, I have heard countless “Debt-Free Screams” in which the callers said that planning a budget felt like they had received a raise.  

Lastly, a budget is freeing because it causes you to think.  Thinking leads to reflection, and reflection leads you to consider your values and decide what is most important to you. Value driven budgeting is the key to seeing beyond the numbers and focusing on the why behind the numbers.

What Are You Waiting For?

A budget only takes a few minutes to assemble, but the rewards are potentially without limit. Getting on the right path, understanding your money, and controlling your money are keys to being a Finance Superhero. A budget doesn’t require sophistication, manipulation, or secret wisdom. It requires patience, intentionality, and a desire to be in control of one’s money.

Do you have a monthly budget? How you maintain it? How much time do you spend on budgeting each month? Please share your thoughts on all things budget-related in the comments section below.

The Car Lease – A Formidable Villain

Yesterday, while driving around town to complete errands in my fuel-efficient, three-year-old Hyundai Sonata, I found myself waiting at a lengthy stop light. Naturally, the wait annoyed me to some degree, as I was the only car in sight. However, Moonlight (my wife’s affectionate name for our Hyundai) and I weren’t alone for long, as we were soon joined by a sleek, shiny 2016 Audi A8 Sedan.

2016 Audi A8, courtesy of
2016 Audi A8, photo credit to

While I am admittedly a car lover, I must admit that my interest was divided equally between the A8 and its driver. Why? The driver could not have been a day older than 25, by my observation, and naturally, the Finance Superhero in me could not compute many scenarios in which this young man could afford such a fine vehicle.

I know what many of you are thinking:

  • Good for him! This fellow has clearly done well for himself.
  • Did you strike up a newfound friendship with Mr. A8?
  • Age is hard to predict; maybe this hot shot is older than he looks.
  • Weren’t you jealous?

My thoughts:

  • Maybe.
  • No.
  • Maybe.
  • No.

Jealous? While others may have felt envy, I only felt pity.

Yes, it is quite possible that this driver was closer to 35 than 25. It is possible that he is a new partner at a leading law or accounting firm. However, statistics dictate that it is more likely that he is a 20-something who earns slightly above the median US adjusted gross income ($36,841 in tax year 2013, according to Regardless, I assert that the driver’s income is a variable that pales in comparison to the opportunity cost in driving such a fine vehicle.

I Hope He Likes the Car

Except in cases of significant wealth, the luxury vehicle represents one of the largest financial boat anchors in the lives of Americans. It is a formidable villain capable of derailing one’s budget, dreams of financial independence, and even hopes for a modest retirement.

Let us assume, for the purposes of illustration, that Mr. A8 is leasing his vehicle. The current manufacturer lease offer for this vehicle is $899 per month for 36 months with $4,644 cash due at the time of signing. This represents a total cost of $37,008 over three years, or $12,336 per year! Should I don my cape and rescue this fellow from his foolishness?

What’s that? You’re still not convinced that Mr. A8 isn’t getting a fine deal?

Let’s assume that Mr. A8 utilized the $4,644 cash due at signing on the Audi and instead purchased a much more affordable yet attractive vehicle. For example, suppose he found a deal on a 2004 Honda Accord and stretches his budget to $5,000. In this scenario, he would not have any monthly auto expenses, aside from gasoline and regular repairs. This would free up $899 per month!

How might a Finance Superhero manage these additional funds? Here’s a suggested monthly breakdown (rounding up to $900 for the sake of simplicity):

$400 placed in a money market account as a sinking fund designated for the purchase of a replacement vehicle when the Accord goes to the junkyard in the sky

$500 invested in a company 401k/403b, up the company match, with remaining funds invested in a Roth IRA

 Again, for the sake of simplicity, let us suppose that our 25 year old driver’s investments earn an average return (after inflation, the generally-accepted return figure for the S&P 500 is approximately 7%) and is compounded monthly. After thirty six months, our developing Superhero would have just over $20,000 combined in his 401k/403b and Roth IRA accounts, not including any company matching. Additionally, he would have $14,402.22 saved in his money market account (assuming a very non-Superhero interest rate of .01%) toward the purchase of a future vehicle. If he continued investing this same amount each month until age 65, he would be poised to retire with investment accounts valued at approximately $1.3 million.

I hope Mr. A8 really likes his fancy car!

Common Objections

Despite the fairly simple math above, which clearly illustrates the disastrous opportunity cost of leasing such an expensive luxury vehicle, some people may still wish to raise objections. As a developing Finance Superhero, it is your duty to gently correct people when the following objections are raised.

I need a luxury vehicle for work purposes.

I understand that for many professionals, the appearance of one’s vehicle is of high importance. However, a 3-4 year old Honda Accord or even 10 year old BMW will get the job done. A Finance Superhero uses his brain, remains persistent, saves money, and like Finance Superhero Grandpa, flashes cash to secure a great deal.

I am not handy when it comes to automotive maintenance, so a lease makes sense for me.

Let me count the reasons that this objection rarely rings true. First, in 2016, very few people are capable of maintaining their own vehicles beyond routine fluid changes, brake replacement, and tire rotations. Leasing a vehicle does not eliminate maintenance costs. And no, maintenance is not free with a lease. You are paying for it, as the costs are built in somewhere.

Second, new vehicles are often subject to repairs that will later be addressed by manufacturer recall. Strategically purchasing used vehicles which have already had these concerns addressed and repaired and have already had their 50-60k mile maintenance performed is a much better way to go.

With a lease, I can drive a new car every two or three years.

Listen. You need to make a decision. We are talking about your vehicle or your retirement! Which do you want more? 65 year-old you will want to kick 25 year-old you in the butt for being stupid and leasing a vehicle when you could follow the simple mathematical plan above and still simultaneously fund your retirement AND drive nice vehicles. And 65 year-old you is likely to get that opportunity, as Apple will probably have invented the iTimeMachine by that point. Don’t screw things up for future you!

What are your thoughts on car leases? Does it ever make sense to lease a vehicle? Have you or someone you know ever been burned by a car lease? Share your thoughts in the comments section.