Here we are again, another month, another update!  So you may wonder, why do I track my Net Worth?  For me it is the best method to see if I am on track for reaching financial independence.  I am not too worried about market fluctuation, but I am concerned with the long term trend.  I like to see how my efforts are compounding over time, but it is good to keep everything in perspective as this is figure is subject to the whims of the stock market.  Being the majority of my net worth is going towards reducing debt currently, it is fairly easy to experience growth in my Net Worth as the majority of my free cash every month will be going towards the guaranteed returns of debt reduction.

This month was better than expected because the company that did my roof and siding hasn’t come back yet to get the insurance check or the other half of my deductible.  So my cash may seem a little high, but for the most part everything above my emergency levels are spoken for.  That said, I still could not resist adding a stock to my ROTH IRA in August.  September will probably be a boring month as I will likely pay the remaining $2,500 due on my deductible and pay off that single student at 5.35% interest.  Note that not all student loans will be gone.  Once that loan is gone I plan on adding in my interest rates by the loans on the table.  I am waiting because I am too lazy to recalculate my weighted average % of my student loans as this loan is winding down.  Once that is paid off in September, it should be pretty straight forward for several years.

So this is something new I am adding.  A nice simple chart showing my net worth over time.  Pretty fancy, huh?

How about you, did you make some good progress in August?

I have had a vague idea of when I would become financially independent.  Somewhere between age 46-50 was the general idea.  I can’t say when it will happen for certain, circumstances change, inflation happens, or life events.  But I can say if everything cost wise and lifestyle wise were to move in the same direction as where I am today, that I know when I can retire.  The good news is I am a bit of an optimist and I hope I can create a larger spread in savings, paying off debt, and make a little more income than inflation.  Who knows, if this blog starts to make a little money a couple years into the journey that is all money that will speed up this process.

After reading a detailed post from Big Guy Money on his journey to financial independence I thought maybe I should share my thoughts on the time frame for my journey here. So this post will kind of give you an idea of where I am going now and how I plan to get there.  Kind of like a travel guide subject to changes due to unforeseen circumstances.

How do I know I am on the Right Track?

This is the main reason why I share my net worth.  It is the way in which I can measure my success over long periods of time.  While I am not overly worried about little (or big) fluctuations through the market dropping or increasing, I am concerned that each month I am making a conscious effort in my savings.  Between these two systems I should know that I am headed in the right direction to one day be financially independent.  Once I have 25 times my ordinary expenses I am free to leave my full time day job if I so choose.  That doesn’t mean I cannot work in any fashion, I can just choose whatever I want for how every many, or few, hours I choose.  Or I can even volunteer on a greater scale as I should have more free time to do so.  The fact is when 9+ hours of my day is spent working and going to work, it is hard to get value out of my time.

Where my Money is Going

Loans

I hate debt, which is one reason why I am paying it off a bit quicker.  But I also need to get rid of all my debt before I retire.  Currently I plan on paying off all my debt at age 40.  And being in debt is a pain as I must ensure that I protect my family until we have significant financial assets.  This is why I call life insurance a penalty of debt.  If we were in a more solid financial position this is one more cost that we would not need.  Currently I have a mortgage, one car loan, and student loans that I am contending with.  Once these are all gone my cash flow should greatly increase allowing me to save more in other accounts.  My plan is to first max out my ROTH as loans disappear and then put anything over that into pretax accounts.

Pre-Tax Accounts

Currently we are putting a decent amount of our savings into Pre-Tax Retirement Accounts.  Based on the current amounts about $7,400 a year as well as $2,075 going into a defined benefit pension.  Once Debt is paid off this will likely increase to about $17,000 a year, or more, as we will no longer need as much cash coming into our checking accounts to pay for bills.  Currently this money is all being invested via index funds.

Roth IRA’s

These accounts are building up income producing assets, currently all dividend growth stocks, in which I can use just the income they produce to help fund my retirement.  Currently I plan to invest approximately $5,600 a year into these funds and this amount will increase as loans are paid off upto the maximum allow by law (which currently is $11,000 between the two of us).

Taxable Investment Accounts

It may seem odd that I am putting money into taxable accounts without maxing out the tax advantaged accounts.  There are multiple reasons for me to do so, starting with I need a 5 year buffer between my ROTH IRA and brokerage accounts in order to a ROTH IRA ladder retirement strategy to be successful.  The wife and I don’t gross six figures, and even with raises during this time frame I kind of doubt that we will be grossing that high.  It could potentially be possible to reach that amount of income before we retire, but I am not planning on spreading the gap between my income and expenses more than it is now.  If our income does outpace our personal inflation then we will be able to max out our ROTH accounts sooner and possibly not need as much in our brokerage accounts.  Never the less, brokerage accounts also server as part of our emergency fund.  And investing an average of $1,200 a year into these accounts isn’t going to kill me on the lost tax benefits while still providing liquidity.

The Big Picture

Total Annual Savings and Debt Payments

Right now my plan is to in have at least a total of $27,270 each year going towards the combination of savings and debt payments.  Currently I exceed this figure, but I estimate this a bit lower so that if we have kids in the future we will be able to still reach this goal.  These accounts also do not include the savings I am putting in my HSA account which can also provide a boost for medical costs.  Eventually I desire this account to grow to be self funding where the interest and dividends can pay for the deductible in any given year and there would be no need to contribute anything further.  With a $6,000 deductible that figure right now is $150,000 so I don’t think I will reach an also guaranteed self sustaining health account by the time I retire, but it is possible to continue growing it as long as nothing would arise.

Safe Withdrawal

I plan on using dividends to provide the safe withdrawal for income based on $650,000 assets investing in today’s dollars.  Stock prices fluctuate much more than dividends so it will provide a safer stream of income in retirement.  If interest rate rise again I could consider using bonds as well in the portfolio along with some REIT’s.  I also plan to invest some still in index funds to provide some long term growth and diversity.  Although my total assets by 2030 will be about $685,000 a portion of that is locked up in my defined benefit pension program.

The Assumptions

I did a basic interest calculation for the prior year balance increasing 8% and no gains for the present year contributions.  I also am not counting any interest the pension fund may earn.  It does earn some, but nothing significant and I don’t plan on rolling those funds over the an IRA when I leave either.

Margins of Safety

My major margins of safety in this plan include:

• Social Security – all income from this program will be a bonus
• Pension – at age 60 I will qualify for a pension with my work.  Based on working at my current job for a total of 17 years with only raises matching inflation, this benefit will be worth another $8,100 in annual income once I reach at 60.
• Health Savings Account (HSA) – No figures from this were included as they are not available to withdraw, but will help offset future medical costs
• Earnings from work – if I work at all for an income past age 43 that money will all help in adding a margin of safety

Why I Might Wait to Retire

There are two main reasons why I may wait to retire once I am financially independent.  The first is I would like a larger fund for traveling.  This can be accomplished with maybe two more years of work to build up the accounts a little more to provide enough passive income for international travel on an annual basis.  This also could be supplemented by working part time to fund each vacation, however that would remove that margin of safety.

The second reason is that my wife and I eventually plan to have kids and depends on things are we may decide to earn some extra money to help fund their college educations.  The tricky thing is that systems change and the way things are right now if we could drop our income considerably before they graduate they could qualify for federal grants because our income would be below the point in which assets are counted.  If the system changes this may not be the case, but this will be something to be decided much later in the future.  But to be honest, when I get to this point I should just pull the trigger, because life is just too short.

How about you, what is your plan to reach financial independence?

Time for another weekend roundup!  I am thinking about doing things slightly differently, where I will post more than 5 blogs in weeks that I have had more time to read, such as this one.  But still probably cap it at 7 so it isn’t too extensive.  It is difficult sometimes, there are alot of good posts and content out there being created on a weekly basis, but not always time to read them all!

First off, here are my most recent posts from this week:

The Layers of an Emergency Fund

With this post I went into detail about where my money is to cover emergencies if one should arise.  I go into detail about several different accounts and how they can layer on top of each other to be a more effective emergency fund.

Can a Nissan Leaf Save Me Money?

I did a detailed analysis comparing the costs of a new Nissan Leaf to a slightly used car.

With that out of the way, here we go with the roundup:

Resentment

Jason @ Dividend Mantra put together a very personal post regarding what it is like when someone whom you personally care about resents you for your financial decisions.  This is one reason why I do not go around and tell my family members or friends what I am doing.  If they happen to find the blog and are genuinely interested in making the life changes towards frugality and saving I am more than happy to help them.  They will know it is me if they find it, there aren’t too many Kipp’s around and I have a picture of myself on the about page.

Making Big Life Decisions: The Regret Test

Dee @ Color Me Frugal has a very good idea as to how your should approach decisions in your life.  Ask yourself if would you regret doing or not doing said action.  It is a great post that can change your perspective.

False Frugality

Byran @ income surfer has a very good point when it comes to making purchase decisions.  Let’s say you but a whole pile of clothes or fresh fruit because of a “great sale”.  Well if you don’t need any more clothes or you cannot eat all of the fruit before it spoils was it really a frugal decision or just one that appeared to be?

Debt Payoff: How to Zap Discouragement

Laurie @ The Frugal Farmer has been having a tough time lately.  So she has sought out ways to better her mindset to keep on track to paying off her debt.  These suggestions do not relate only for paying off debt, you can use them for virtually any goal you set out to achieve.  In my opinion, it matters most in what direction you are headed rather than where you have been.

Overcoming FOMO

Do you Fear On Missing Out of life by saving or paying off debt?  If you do then check out Ryan @ Impersonal Finance’s post on how to overcome this issue.  There are so many activities in which we can choose from with are limited time, so why is it that some people gravitated towards the expensive options?

Enjoy the Small Things in Life

Tawcan has a very nice post that should serve as a reminder to us all.  There is much to life to enjoy right now!  Will making your self busier or constantly upgrading your house or car really make you enjoy life more?  Maybe for a moment, but after that will it just be another burden?

No Empire Lasts Forever

Mr 1500 brings up a great point how no business stays the king in their industry forever.  It doesn’t take too far to look back and see many companies facing tough times such as GM going bankrupt wiping out all of the previous shareholder’s equity or blackberry as an example in his post.  Once they were the company who created a phone that was, should I say, somewhat smart.  Now they are collecting dust in the wake of Apple and phones using the Android systems.

Well I hope you enjoy the extra long weekend.  I have alot of visiting family to do with birthday get together’s and the like.  Painting is off the table due to rain, so I will probably be stressed a couple of weekend’s this fall getting those last couple things on my goals list completed.  Oh well, I can’t do either if it is raining.  Hopefully I can take a moment this weekend to get ahead on posting, I have several drafts and the end of the month is coming so there will be updates for things like Spending and Net Worth as well.

I have referred to needing an emergency fund, but I haven’t yet talked about this topic on the blog yet.  When I read financial articles about emergency funds they seem to be this nicely wrapped up basket of money that sits around in a savings account waiting for your call.  I am not going to sit around and say the typical advice that you need 3 to 6 months of savings, because every situation is different.  If you have multiple streams of income, very low expenses, and no debt why would you really need that much just sitting in cash?  Besides, why would you want this money only sitting in, at worst a savings account, or at best a 3% interesting checking account?  But really, what is the “3 to 6 months savings” based on?  Your income?  Your expenses?

Although the reference to layers makes me think of Shrek explaining to donkey that Ogres are like onions in that they have layers, it kind of can work for emergency funds as well.  Your outer layer can fend off scary situations being in cash, that quick instant liquidity in time of need.  But inside, you are more mature and developed than what can be seen on the outside.  You may utilize a Health Savings Account, Brokerage Accounts, and ROTH IRA’s to expand your emergency fund if needed.  If you don’t like onions then maybe you could go with a layered lasagna instead.  Just picture whatever layered food will keep you interested enough to continue reading.

Layer 1: Cash

Cash is a key in the emergency fund process.  My goal is to have enough cash to cover almost any conceivable event.  Such as paying out $5,000 in a deductible.  My old neon collapsing from the rough winters in Michigan, and needing to get a decent used car.  Whatever kind of outlay you consider to be your highest in a short period of time.  I personally desire to have about $6,000 to $7,000 in cash at the end of the month.  One reason is the beginning of the month pulls out a decent amount of cash between the mortgage payment and student loan payment.  So really that end of month balance is basically $1,000 less the next day.  So this balance would keep me with a solid $5,000 to $6,000 ready for any sort of catastrophe.  This amount may not be the best amount for yourself.  You need to decide how much you want to have in cash.  Both my wife and I work, so we would likely still have income if one of us lost a job.  You may not have the same scenario so you may have a greater need for cash.

Layer 2: Health Savings Account (HSA)

Once you have built up a balance in a Health Savings Account you have one area in which you will probably not experience significant financial risk for awhile.  However, while you are building this fund you would be wise to realize that cash may be required to cover the shortfall between your deductible and your HSA balance.  I am still accumulating my HSA balance so I probably should add a cushion into my cash pile until this has grown.  The bad thing about HSA’s are that you are capped annually to how much you can contribute, currently $3,300 for an individual and $6,550 for a family.  The plans maximum out of pocket costs also exceed what you can contribute within a single year depending on your specific plan.  So for myself, I probably should keep a bit more cash knowing this, but I am being an optimist and not planning on getting hurt at least until next year when I can fund more into my HSA.  I can say this somewhat reasonably… I have never had stitches and the last time I have been to a doctor’s office was just over 6 years ago.  I have contemplated that I should start doing my annual checkup though, maybe I should make it a goal for next year?

Layer 3: Brokerage Account

This layer is sort of a mixed bag.  On one hand your brokerage account can produce income through dividends or interest allowing you to need less income.  It would probably be unlikely with having a solid amount of cash you will have to dip into the capital, but it is possible to have a few bad events in a row depleting your cash fund before you could replenish it.  That is why Murphy’s Law was created, right?  Either way, it is great to know you could supplement your income now if needed or reach in and grab some money.  That is one of the joys of saving that you will have the resources to whether real storms that can become a financial storm.  Having a large portfolio could also mean that your need of income replacement is greatly reduced, as your account can create it’s own passive income to help out during a job change.

Layer 4: ROTH IRA Contributions

Let’s be honest, no one really wants to touch their retirement account balances unless if they have to.  Although it isn’t pleasant, the one great thing about using the ROTH IRA is that you can take out your contributions tax free.  Whereas a traditional IRA or your earnings on the ROTH IRA will be faced with not only taxes, but penalties to withdraw.  Having this balance as a backup can help you out in a real bind if all other layers somehow fall through.  Although I do not wish to take out any of my contributions as I plan to utilize a ROTH IRA ladder, it is nice to feel secure in knowing that I can access this money if needed.

Optional Toppings (on your Lasagna or Onion?)

I say these are optional because not everyone can utilize them.  You could get a home equity line of credit to access credit built in your home at a low interest rate rather than taking away from investment accounts.  These equity lines are subject to the whims of your financial institution and many people are debt adverse so they would not like this option.  Further some people do not own a home or do not have over 20% equity currently to be able to utilize this resource.

Another layer of protection can be if you have a 457(b) retirement account.  These accounts operate much like a 401(k) except one key difference is that at separation of employment you can take money out without penalty.  That can be a huge resource for money in the event of a job loss.

What about you, how do you build your lasagna or onion of an emergency fund?

Photo Credit: SOMMAI / FreeDigitalPhotos.net

Obviously, the longer you wait, the closer to financial independence you will should be, which is what some may advocate as the “right time”.  But just how do you determine when isn’t or is the right time if you cannot wait until you are financially independent?  I am not going to cover reasons you should delay being a parent, you have probably heard enough of that.  Instead I am going to cover why there is no reason to delay.

Reasons NOT to wait

You have an Emergency Fund

This one should be obvious, but if you don’t have any savings then how can you handle the more potential ups and downs now that you are caring for another person?  If you can’t take care of your own emergencies can you imagine how much more magnified that will be with a baby completely dependent on you?  If you have this basic fund in place you may need to increase it a slight amount as your monthly expenses increase.

You can survive on only one income

Day-to-day cash flow is king.  You may be stuffing retirement accounts, building equity in your house, but those activities will not feed you (at least not in the short term).  So if that little bundle of joy comes into your life you want to be financially secure.  What would happen if you or your spouse were to lose your job?  Will you be able to make ends meet on only one income?  If you know places where you can cut back if that time ever comes then you are in a good position to not deplete your emergency funds in the short term.  You aren’t just losing one salary when a job is lost, you are also losing all of the associated expenses such as transportation costs, and maybe even day care expenses if you expect to be out for awhile.

You are afraid it will delay early retirement

Of course taking care of another person will be expensive and if you are not already financially independent it will inevitably delay the process as your expenses increase.  But would delaying your retirement date along the way be the only reason that you should delay having a child?  If being a parent would bring you great joy, should you not be a parent while still working hard to achieve financial independence?

You are worried how to pay for your future child’s education

As a future parent you would want to give your child every advantage possible, but where is it written that you must provide for a university education?  Sure it would be nice to and when that time comes if I don’t mind working extra to help go through school without debt that would be nice.  But I feel I should teach my kids to be self-sufficient at an early age.  My wife and I had limited assistance in this area and we have started off with some student loan debt, but the best thing I can do is help teach my kids to manage finances well and understand how burdensome student loan debt can be.  From there I can help them explore the best financial options and make decisions, but where should it be expected for you as the parent to foot the entire bill?  Should this not be considered a luxury item for yourself to pay?

You know what your insurance will or will not cover (and at least HAVE medical insurance)

If you are going to have a child, you are probably going to need medical care.  Beforehand you should take the time to review your medical coverage and see what the costs would be for having a child.  Take the time to build up a fund for these in addition to your emergency fund as you know you will have those expenses coming.  You can potentially use tax advantage accounts such as a Health Savings Account (HSA) or a Flexible Spending Account (FSA) to get the most bang for your buck on these expenses.

You have researched the costs of daycare

If you have researched the costs of daycare in your area (if you are not having a stay at home parent) and know how it comes into your budget.  Don’t forget to include the possibility of using a FSA for daycare.  If not, don’t forget that you will probably qualify for a tax credit and can reduce your withholding accordingly.  If the cost after accounting for the tax break works into your budget, then you are one step closer!

Do you believe having a child will bring you joy and fulfillment?

If you are in a solid place financially, having the things mentioned beforehand, and feel that having a child will bring you enjoyment  then why should you wait?  Yes, every year you delay will add a little more stash to your retirement account, or a little more down on that mortgage or student loan, but if you can continue to live and improve frugally during this process I believe you can not only survive, but possible thrive!  Also, be realistic.  If you are having a child you will know that your savings rate will probably be decreased.  But the fear of a couple more years working shouldn’t be the determining factor.  The determining factor should really just come down to the question if being a parent will increase your happiness.  And if you have a somewhat solid financial footing, then why wait to make the leap?

Photo Credit David Castillo Dominici / Freedigitalphotos.net

Note: I made this post to be an against the trend post.  Most financial advice tends to be to wait, but you may not desire waiting if you will feel empty during the process.  Some things may not be worth delaying, almost everyone striving for financial independence has a few areas they decide to keep during their journey, why should being a parent be any different?

A few things, I decided to start deducting $150 a month from my vehicles net worth (after this month, I had evened it off to $12,900 that way it can be reduced equally).  My ROTH accounts took a beating, mostly because of my investment with Storm Ruger where that individual stock had fallen 10% (and currently down 13% from purchase at the time of writing).  I wish I had more free cash to invest, but I have another $2,500 dedicated this month towards my deductible while also trying to get rid of a single student loan (as you can see by my aggressiveness in paying it off).  To be honest I really don’t like debt, but I feel that after this loan is gone I will be at a good spot to focus on investing while still paying a little extra on the mortgage each month to ensure it will be paid off before I reach 40.  Speaking of the house, I do not plan to move it with the market value as there is no intention of selling it when we reach financial independence.  Maybe sometime after, but those funds will not be available at that time.

How was your July?

It is time to update my income and expenses.  As I previously noted when I first started tracking that I consider everything that contributes towards growing my net worth as savings.  So this would include the principle portions of debt repayments, while not including the interest, or insurance and taxes on my home.  With that said there was a point made that I do not depreciate my vehicles or amortize them in some fashion other than an adjustment to net worth.  This is true… but I am also not including dividends inside my retirement accounts as income, maybe it is currently more skewed that depreciation is greater than that income, but I would hope in the future that this will change.  Anyways, this is a system that works for me and you need to determine a system that works for yourself and helps keep you on track, that is the main goal in my opinion.

Income

• Paychecks: $4,550
• Interest & Dividends: $21
• Credit Card Rewards: $51
• Other: $1,485*

Total Income: $6,107

Expenses

• Health Insurance: $124
• Health costs: $35
• Mortgage Interest and Escrow: $721*
• Car Loan Interest: $23
• Student Loan Interest: $65
• Water & Sewer: $37
• Electric: $37
• Natural Gas: $20
• Internet: $30
• Cell Phone: $25
• Life Insurance: $44
• Trash: $0 (this is paid every 3 months)
• Dining Out: $56**
• Entertainment / Hobbies: $187***
• Personal / Household: $44
• Gas: $237
• Clothing: $0
• Meals: $117
• Snacks & Beverages: $33
• Car Repairs and Maintenance: $39
• Home Repairs and Maintenance: $2715****
• Car Insurance and Registration: $54 (registration for one vehicle)
• Vacation $0
• Gifts: $19
• Misc: $0

Total Expenses: $4,662

Savings Rate 23.7%

During my you only live once post I mentioned that overall I am happy with my spending for this month, which you may wonder why I am happy with only a 23.7% savings rate?  Well.. $2,500 of that was purely related to 1/2 of a deductible for damage to my house during a hail storm in the spring.  Once that is completely taken care of I will have a post related to that and we will see if a $5,000 deductible is really worth it or if it better to pay a higher premium for better coverage.  If I hadn’t of spent that $2,500 I would be looking at a savings rate of 64.6% this month, so now you can see why I am happy with my overall spending.  However, there are a few categories that can use some improve and a few that I want to highlight.

*Other income includes: depositing some change I had into the bank, mileage reimbursement, Hyundai EPA debit card, and the majority of it comes from an escrow refund.  My monthly escrow amount has now decreased by about $83 a month with that first change effective in August (so my mortgage interest & escrow will take a significant decrease starting next month).  I planned on using all of this income as a one-time debt payment and did so against my wife’s student loans.  We are on track to get her highest interest rate loan gone during October and then to start focusing on saving in our ROTH IRA’s as all loans after that are 5% or less.

**We actually dined out 3 times this month, more than what I like to.  Our ignitor in the oven went out on June 30th.  So July 1st I went to get the part and we grabbed out dinner that night.  The other two nights occurred when visiting family in Columbus.

***This includes hosting fees for this website (prepaying gives you the best deal) as well as a few other misc scrap booking supplies for the wife.  I think now that she has her machine and a few things to work with we should be good in this area for awhile.  I hope.

****As mentioned $2,500 of this is for part of a deductible.  The other part of this includes supplies to paint my chimney and materials to work on my back garage door as I referred to in my goals post.

Overall I am happy, we did spend a bit on gas due to traveling out of state.  I think biggest areas for improvement are eating out a little less and buying less snack like stuff (in this category I include only “optional” food purchases, like juice, soda, chips, etc.)  Most of this occurs usually when we are traveling or out late.  This month isn’t looking much better yet but I think I just need to be more intentional in this area.

What about you, are you happy with your savings rate for July?

Photo Credit: adamr/freedigitalphotos.net

Here we are with the first weekend of August and I am quickly approaching one month in the blogging world!  Time just seems to fly by when either you are busy or having fun, or both.  I like to think it is the both part.  Anyways, if you have checked out my posts this week you can cheat and just click on the links below:

Life is Short – You Only Live Once

Choosing a Broker for the ROTH IRA

Earn Money Over 10 Times in a SINGLE Transaction

Now it is time to honor those other great bloggers out there!  I try to keep this list short with just five, but I do tweet articles throughout the week as well.  You can follow me on twitter @FranklyFrugalFI to see them as I find them.  Also the blogroll is a great place to find blogs with great content as well.  Anyways, the articles I want to highlight this week are:

What Would You Do With a Million Dollars?

This was a great hypothetical post from Dee @ Color Me Frugal.  We all like to dream, so why not dream big and ask yourself, What Would You Do With a Million dollars?

Who Wears The Financial Pants in Your Family?

Maybe it is my age or just the people I am around, but I don’t seem to any sexism in who takes care of finances around me, but it seems to be an issue for Holly @ Club Thrifty.  In fact, there are probably more women who I know than men… or some sort of really weird “this is your money and your bills” sort of thing.  That I don’t get, but to each their own.  So are you pants-less or do you wear ‘em?

Benefits of Dividend Investing

Keith @ DivHut put together a very good post detailing out the advantages of dividend investing.  If you are curious as some of the reasons investors go this path check out some of the benefits.

Are You Just Treading Water?

Jason @ Dividend Mantra puts together a great post as to why you need to living frugally.  If you want to be like the average American with a meager savings rate and just tread water your whole life until social security comes and saves you, then you are fine to live that way.  But for those of us that do not want to tread water we need to decide which luxuries are worth saving and which are basically frivolous.

The Easiest Way to Early Retirement is to Fast Forward Life

Zee @ Work to Not Work had a great post about the logic of early retirement.  The concept of our sometimes called “extreme” savings isn’t that much different than a person in their 50’s going “Oh $HIT, I GOTTA START SAVING!”.  But for some reason, no one would think to question the lifestyle of someone in their 50’s hammering down to save, but if you are in your 20’s or 30’s this is considered odd.

I hope everyone has a great weekend!  I haven’t setup an exact posting schedule yet for my blog, but going forward I am looking to do 2 posts a week plus a weekender edition such as this.  I know I have been posting more often as I have started this blog, but I want a schedule that I will be able to maintain long term as well.

Lets say you found an extremely nice fancy camera on Amazon.  You are a camera addict so you don’t use point and shoot cameras, no you want that fancy Nikon camera.

You can simply just pay for this on your debit card and be done with the transaction, get the camera, and be happy with your purchased that you thoroughly researched.  But you are a frugal shopper, and you wouldn’t just pay with a debit card.

1.) Using a Cash Back Rewards Card

You can use a cash back rewards credit card to earn money back on this purchase.  This is a great way to get some money back on the item you were already planning on purchasing, free bonus right?

2.) Where are you buying from?

But what if you owned a part of Amazon (AMZN), if they actually have profits, you would be able to participate in those earnings as well!  You could also take part if you purchased this item at a retailer such as Target (TGT) or Walmart (WMT).

3.) What are you buying?

Well, not just where you get the item, but who manufactures the item matters.  You can own part of Nikkon (NINOY) and make money on the profits or the camera you bought from them!  You can replace this with almost any item and own a part of the company in which makes the item.  You could goto a store with a used Ford (F) to pickup the camera at a one of the retailers.

4.) How is the product getting to you?

If you ordered the product online, chances are it may come via FedEx (FDX) or UPS (UPS).  You can also own those companies and have them pay you to deliver the camera!

5.) Who makes the vehicles that UPS or FedEx ship with?

From what I can tell they use a variety of brands, but in the process I found some used Ford (F) FedEx vans for sale.  Pick up some of their stock or another major car manufacturer to earn profits this way as well!

6.) What fuels the vehicles?

Although you may not be heading over to the store to pick the item up yourself, the shipping company still needs to fuel their vehicles.  Pick up some Exxon (XOM), Chevron (CVX), or a variety of other energy companies to make money on this part of the transaction.

7.) What keep’s the fulfillment centers operating?

Beyond various companies that supply the center and even parts for the vehicles used in this process, chances are the fulfillment center where your camera was shipped from had electricity.  You can make money just on Amazon literally keeping it’s lights on by investing in a variety of utilities such as DTE Energy (DTE).

8.) How does the product get to the fulfillment center?

So if the product is made overseas it needs to be transported by either flight or ship.  Beyond that once it reaches the country it may even trail part of the distance by train through a company such as CSX or Norfolk Southern (NSC).  Beyond that you have airliners and carrier companies that may also be included in this process.

9.) Can you make money WITH the product you buy?

Chances are if you are buying a fancy camera you can get some side hustle money doing quality photos for people you know.  That will help you earn money just for having the product you desired in the first place.

10.) Can you be an expert on the product?

But wait, you aren’t just a regular photographer, you are knowledgeable in this field.  In fact you even created a blog comparing cameras and earn revenue from ads on your blog.

11.) How do you access your blog?

If you have a blog online, chances are you need an internet connections.  You can get DSL from AT&T (T) or cable from Comcast (CMCSA) and own the stock to pay for your internet connection.

12.) Can you make money on other people buying the product?

So with your blog on the camera’s you can get affiliate links with companies and then earn revenue when your excited readers go out to buy the product by clicking on your links.

Conclusion

So there you have it, you can easily make money over 10 times when purchasing an item.  You can even go further and dig into what other kinds of services these companies require to operate, or who supplies the manufacturer, or the parts for the vehicles.  Really there is almost an infinite amount of ways a single transaction can affect your income.  You just need to go out and own some stocks to participate in the earnings, otherwise you are missing out!  And don’t complain about the costs of the product, the system is rigged so that you have the ability to reap the rewards of your purchase almost through the entire process.  At some point there will be privately owned companies in which you cannot participate in the earnings, but the majority of the profits are there for your taking.

Full Disclosure: Long Ford (F) and Exxon (XOM)

Photo Credit: iosphere / freedigitalphotos.net

I know many people complain about the low interest rates in banking these days.  I just feel that people need to know they don’t have to settle if you don’t mind banking online. LMCU, or  Lake Michigan Credit Union (non-affiliated link), offers their members 3% interest on their checking accounts for balances of up to $15,000.

They have a few requirements to earn the 3% interest which include:

• Direct Deposit
• Minimum 10 Debit Card Transactions a month
• 4 Logins a month
• Receive an eStatement

Now LMCU traditionally offers it’s services to the residents of the lower peninsula of Michigan.  Don’t live in the lower peninsula of Michigan you say?  Well they apparently made a work-around that if you donate a minimum of $5.00 to the Amyotrophic Lateral Sclerosis (ALS) Association of Michigan you can still sign up for an account (they make this possible in the signup process).  So if you don’t mind online banking and feel confident that you can meet these requirements, then the $5.00 investment may be worth while so your cash can actually earn some interest.

I feel that this is worth my time to share, because it can help boost many people’s returns on emergency fund balances.  If you have a balance of $3,000 sitting in a “high yield” 1% checking or savings then you are earning $30 a year on these funds.  Switching to LMCU will increase your total interest earned by $55.00 the first year and that is assuming you have to donate the $5.00 to setup the account.  If you hold more funds in your checking or emergency stash you can see an even greater benefit.

If you know of a better checking account then PLEASE SHARE!  I feel that in this community the more we help each other the better off all of us are.  Next month I will have been a member with LMCU for 5 years and they have indeed decreased the interest rate over time.  Sometime before I signed up they used to offer 5% interest and for awhile I was earning 4% interest.  I hope that they will return to these levels if the federal reserve starts to push up the interest rates, but there are no guarantees.  Anyways, I wouldn’t be sharing about them if I didn’t feel like their is value in what they provide.

Note: Credit Unions are Federally Insured through the NCUA.