Buying a car can be a Hassle Free!

For years we needed a third car. We have been driving an old used car with a lot of mileage, and I hate it. It gets me where I need to go, but I’m tired of fixing leaks and broken parts all the time. It’s annoying that I have to take it to the mechanic every time. We end up with only one good car which my wife and I share together. Even when the repairs take care of everything, I know in a week or two it just ends up going back to the shop.

I have finally decided that I am not going to do it anymore. We’ve decided to buy a new car! Fortunately, I have been researching Nissan Sentra for quite sometimes. Sure, it’s slow car but who cares. I only need this car to commute and to give me great mileage. I don’t want something fast that eat too much gas. I kept asking myself, do I want something stylish? Do I want something big? Something economical? Each time I think those things, all I see is a dollar sign flashing in front of my eyes. Finally, my wife and I decided to stay economical. We did!

After I had done some more research online, I knew that I would need some expert advice. Eventually, we went to a local dealership to check out some new models and discussed the quote I received. We talked to the salesman, and we listened to him carefully. He was honest and treated with professionalism were impressive. He had a lot of very helpful suggestions and showed us some nice features like Bluetooth and push-started button.

After a lengthy discussion, we finally decided which model and color. I was expecting this purchase to be a serious hassle, but the experience was almost painless. Everything went smoothly, and now I have a brand new car!

It would be unfortunate if we got a ticket the moment we drove off the lot. So we drove it very slowly with big smiles on our face 🙂

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2016 Nissan Sentra SV

 

Zero based Budgeting works

Make your Budget simple.

Before writing this story, I have to look back on my life in the 20s and early 30s why it was hard for me to save. One of the reasons I joined the US Navy is to help pay for college. And when I became a college student, I worked three jobs to help pay my living expenses. Even with all that, I still accumulated $13,000 in student loan debt in 1996 after graduating from college. It may not be a lot in comparison to today’s student loan balance, but to me that’s huge! Last year, the average college student debt had $37,172 in student loan debt.

How about if you add the credit card debts?

I remember I roughly had a credit card of $4000 balance spread across 5 to 6 credit card accounts. To avoid accumulating lots of interest cost, I’d transfer balances into a new card every 18 months with zero interest rate and pay the minimum. I played this game for years.

It didn’t have to be this way.

We realized debt was our biggest obstacle if we want to live a comfortable life with doing whatever as we please.

We created a zero-based budget in 2015. By having a budget, it gave us the blueprint a road map to pay off our consumer debt. It also gave us permission to spend on other things that were important.

The most important thing we had to do as a couple and making sure we follow the budget works is the constant communication with one another. We have to be on the same page all the time. We tweaked and changed it for months until we agreed on every category. We tracked our budget weekly, and I became a total spreadsheet nerd.

Our typical budget categories breakdown;

  • Housing
  • Transportation
  • Clothing
  • Medical Health
  • Savings
  • Discretionary

There are times our budget category can be way off from the actual expenses. That’s okay. In fact, it happens a lot. As long we are close enough, that’s good enough. I can’t always remember our utilities due dates and amount vary month to month, while others are due on every other month. As long we put an amount for every category, we come pretty close. We like to give ourselves plenty of money to keep us under budget. Any remaining balance we carry forward to the next month’s budget. By having extra cash remaining add another layer of safety net that we might not anticipate on next month budget like unexpected repairs without having to tap into the emergency fund. It helps when you don’t have any consumer debt to service we can allocate where in need the most, mainly the mortgage and savings and some cases towards the vacation fund. That gives us comfort.

Automate your Savings! Automate your Life!

 

Think about some of the biggest financial mistakes…

It’s easy and automatic. Trust me! It works looking back now:-)

I didn’t pay attention much to savings my money in my early 20s. And when I started working full time every paycheck I earned went straight to paying my student loans, credit card bills, car notes, rent, restaurant, gas. By the time, I paid off my bills; I had a very little disposable income to put towards savings, let alone towards an IRA account. I contributed to my 401K, but I made probably small contributions around 3%. All I remember are my stupid mistakes, perhaps laziness on my part. It cost me, and I see it now. When I had extra money, in the end, I spend on eating out with friends.

So when I run a calculation in trying to re-living my 20s assuming I consistently saved $200 a month invested in the S&P 500 Index starting at the end of 1996 to end of 2006. During that period, the S&P averaged return about 10%. So my annual investment of $2,400 a year for ten years would have grown to $43,419 minus inflation.

And if I run that same number ($43,419) beginning of 2007 to early March 2017 that original investment would grow to $127,920 at 8.75% averaged return over that period.

I know…Bummer!

Dec. 31, 2006 15.79%
Dec. 31, 2005 4.91%
Dec. 31, 2004 10.88%
Dec. 31, 2003 28.68%
Dec. 31, 2002 -22.10%
Dec. 31, 2001 -11.89%
Dec. 31, 2000 -9.10%
Dec. 31, 1999 21.04%
Dec. 31, 1998 28.58%
Dec. 31, 1997 33.36%
Average 10 year return  

10.02%

 

(Source)

How we saved of 50% of our income…You can do it too!

 

Background

We reached a total savings rate on average in 2016 of 52%. We achieved this savings rate in the combination of Pre-tax savings & Post-tax savings. For example, in January 2016 our take home pay was $8,625.67 and saved $3,323.67 after expenses.

PRETAX SAVINGS AFTER TAX SAVINGS 2016
Contributions % Saved Net Pay $avings Rate % Saved
$2,280.90 16% $8,625.67 $3,323.71 39% 56%
$3,438.69 23% $13,594.64 $2,500.00 18% 54%
$3,426.46 23% $7,882.19 $1,700.00 22% 49%
$2,681.96 18% $8,556.31 $3,600.00 42% 57%
$3,754.47 25% $7,651.61 $2,100.00 27% 54%
$4,962.09 25% $9,911.40 $1,641.66 17% 45%
$4,860.28 32% $6,799.50 $1,600.00 24% 60%
$4,147.68 27% $7,536.64 $2,200.00 29% 56%
$3,155.88 21% $8,233.88 $2,500.00 30% 52%
$3,193.37 21% $8,183.00 $2,500.00 31% 52%
$3,504.38 23% $11,539.23 $2,500.00 22% 53%
$2,803.86 18% $9,078.15 $1,050.00 12% 34%
**$42,210.02 23% $107,592.22 $27,215.37 26% 52%

**I could not fit in the table above the monthly gross income ($184,793.01)

We would like to continue savings at this rate for 2017, but we know the ebbs and flow of life can be challenging at times. For instance, December savings rate was 34% that’s because of we cash flow all our spending and Christmas.

How did we do it?

Our savings rate also jumps exponentially with no debt. By tracking your spending, every budget items has a name and a purpose. By automating the savings, makes it easier to save even more. We never see the money going into the checking account. Our taxable and Roth contributions are automatically taken out and invested.

New Home

We sold our home last year in September and moved into a new home in October. This home has more in square footage, bedroom, bathroom, and higher mortgage payment with Mello-Roos tax. Our goal is to pay down in 15 years or less. This amount represents about 25% to 50% of our income. We can throw more payments towards principle reductions. It just depends on income coming each month. At the minimum, our mortgage payment is $2,700, but we pay an extra $500 each month to $3,200 or more. In January & February we put an extra mortgage $1,410 & $1,428 extra principle payment. We probably won’t be making large payment until January of 2018.

Expenses

Our total monthly budget expenses with a mortgage are about $6,500 at a minimum. In reality that numbers are much higher since we also have discretionary spending. This part of our budget needs improving. I know we can do MUCH better to try by not adding additional expenses whenever possible.

In 2016, our net pay average about $8,966 a month. That’s $2,466 extra spending in discretionary spending but varies on a monthly basis. We cash flow all of our discretionary spending like; birthdays, vacation, gifts, Christmas, etc. That’s why we carry no consumer debt. We pay everything in cash.

Incidentally, this is when people tells us;

“Oh, why don’t you try to earn points/travel?”

Our reply, “Why don’t we?” No, not really.

I think our biggest fear is not to be able to trust or control ourselves once we start using credit again. We are a Dave Ramsey fans and viewed as “hypocrite.” Many of our friends know who Dave Ramsey is (since we gave them his books “The Total Money Make Over” last year and are familiar with Dave Ramsey 7 baby steps approach.

I admit it’s very hard to change “habit.” Change is difficult once you develop a good habit of paying your bills on-time and complete avoidance of credit card. That just make sense to us. After all, it was our careless used of credit cards that put us in bad financial shape. We’ve done a great job over the years. Because of that our family finance is 180 degrees better that it was ten years ago. Our Net Worth has shot up over the last 4-5 years because of our intentionality towards savings and debt avoidance.

Overcome Fear – Pay your credit card balance every month.

That’s exactly we are going to do.

Our new plan is to challenge ourselves and to overcome our fear. As long as we pay off our credit balance on a monthly basis, we should be okay. We’ll approach it with caution. It’s a start to travel hacking.

 

Monthly Budget – February Update

Summary

Housing 4128.28
Food 386.75
Utilities 654.73
Discretionary 1210.49
Transportation 351.48
Clothing 149.69
Medical & Health 230.2
Savings 3010.91
Total Expenses  $10,122.53

February month was a good month.  We reduced the mortgage principle by paying extra of $1,427.95.  That bring our mortgage balance down to $455,500.  That’s a huge mortgage balance.  But we are intent to follow our goal of paying it down in 15 years or less.

We filed our taxes and received about $3,600.  We saved most of that towards our daughter’s private tuition due in the summer for next school year.

Once again, our taxable savings is phenomenal!

The breakdown looks like this:

Vanguard VWENX 400
Saving 0 2009.09
529 Plan 100
ROTH Vanguard 440
Acorns 61.82
Total Savings 3010.91

We used Personal Capital to track our finances for free. We received a tax refund, as Other income. We also rebalanced and reinvested into other asset class with my wife’s retirement account as Investment Income.

Monthly Budget – January Update

Category EXPENSES
Housing 4198.79
Food 2153.21
Utilities 2078.12
Discretionary 4052.46
Transportation 381.92
Clothing 0
Medical & Health 702.59
Savings 2662.28
Total Expenses  $16,229.37

 

Summary

Our income came to $14,900.54 in January. It exceeded our budget. We had a deficit of about -$1,328.83. Again, that’s mainly due to the water system. We live below our means. So January there was a one-time event that we spent that cause our to go over budget.

Our continued goal is to spend less than what we make every month to build our wealth towards Financial Independence.

Housing

I spent the most towards the extra mortgage payment. Back in October, we bought a four br, three bath model home. We are paying this aggressively with $1433.91 of the extra mortgage payment. I know it a lot, but I am planning to retire at age 55, we’d like to rid of this debt, sooner the better. Hopefully, once we build our taxable account, we hope to make a lump sum payment. With PITI, its comes to $2700.33 a month. Anything above that its peachy!

Discretionary

We spent on a new water system softener with reverse osmosis that cost $5K with installation; hence a big amount. It’s rare we spend this much except if we do it’s usually a one-time thing. The next time, it will be a vacation this summer.

The food was high that’s because we took out $1600 to set aside for January and February. Our food budget normally is $800 for on monthly, and yes we go over that amount by few hundred occasionally. Eating out is $183.01 of that.

Utilities

We included the child care cost of $800 under this category since this amount does not change much. We paid two months in advance for child care cost that normally be around $1200 monthly.

Medical & Health

My wife and I subscribe to a diet program. It’s all about protein and the shakes. You know:-) Together that usually cost us between $63 to $259 a month based on what we need. This price will be steady to around $122 starting in March since we found a cheaper protein shake somewhere else. We also have a gym membership for the family that we pay for $89 a month. Not sure if we plan to continue paying this, but we may not renew it this year.

Transportation

Of the $381, $349 spent on fuel cost; the remaining were for repairs. We own three cars, two used, and new 2016 Nissan Sentra Sentra used as my daily commuter car. We do have any car payment or any consumer debt.

Savings

Here’s the breakdown of our savings for January.

SAVING SPENT
Emergency Fund 100
Savings 0 1428.07
Vanguard VWEAN 700
529 Plan 100
ROTH Vanguard 220
Acorns 114.21
2662.28

 

I don’t plan to keep adding more towards our EF. Our goal is always adding to one of these buckets on a monthly basis. Our goal this year is to max the ROTH account. I’m putting at least $110 a week (weekly deduction from Checking to Vanguard VTSAX & VTHR). The savings account is what we used to set aside money for direct future spending; vacation, private tuition, gift, and Xmas fund. We started with $5000 in the account in January. After buying the water system, it’s now $500 balance.

It’s time to refill the bucket once again!

The goal is to have at least $5k saved before the tuition due in July. I just became a member of Acorn last December, so we saved an additional $60 a month. I like the concept, so I hope to keep this for at least a year see how much we can save through rounding.

I found out, I have Sleep Apnea!

In late December, I found out I have severe sleep apnea.  Sleep apnea is common disorder in which you have one or more pauses in breathing or shallow breaths while you sleep. In my case, I’m consider “severe” where I stop breathing every minute.  This explains it all why I have been so tired during the day lately which include taking a nap during my lunch hour at work almost everyday. This has been going on for over a year.

Apnea means “not breathing”. My doctor told me, “I could die in my sleep” if not treated.  At that point, I gasped for more air to breath in trying to understand this diagnosis.  Anyone who has this condition have to have a machine CPAP to help them breath at night–to achieve a well rested night.  That’s what I have been lacking for years, a well-rested at night.  The only problem is most people with CPAP machine use it very little at night because of how uncomfortable they are to wear at night. Most of them give up.  At first, I was anxious to use the very first night. After a week of wearing them, I felt more tired the next day.  That’s because I keep waking up in the middle of the night and have to constantly adjust the strap in my face in order to breath properly (inhale/exhale) Only to take them off most nights.  It’s seems–it hopeless to keep using it if it meant I get more tired the next day.  So I stop using it for a week now.  But then my doctor recommended that I keep using it for at least 5 hours a day, 5 days a week until surgery.

For now, I have to wear it–in case my health insurance wants to know, how often I use it daily. Otherwise, they might not approve my surgery.

What type of surgery?

It’s called Maxillomandibular advancement MMA.  It’s basically cutting  my jaw (top and lower) to move it forward.  It’s a major surgery which will take months to fully heal.

I began researching this procedure and trying to find out more about it, it terms of the negative side effect post surgery and recovery.  It appears there about 80% success rate to cure apnea. Some website have it in 90% range.  I’m cautious, but optimistic.

 

About Mo-MoneyMan!

Welcome to Mo-MoneyMan!

I hope you will find this site a valuable tool to reach your way towards financial freedom.  I’ll talk about our story and how we got out of debt and how to budget and share them with you.

In May of 2015, we paid off about 43K in debt.  That was a combination of home equity loan, credit cards, car notes, and service time purchase through my work.  What made us realized to pay off our debt was after listening to Dave Ramsey. My wife and I became Dave Ramsey avid listener–that’s when we became aware how much debt we really have accumulated for all 12 years of our marriage. His teaching prompted US to take action to the path of being debt free.

Along the way, we managed to save about $41K in taxable investment through our brokerage account (Vanguard) and saving account.  We used this to pay off half our out debt.  While we used the remaining money we had in our savings.  This created a negative cash flow briefly.  We did not have enough money aside in case of emergency.   So we part ways with my Subaru WRX and sold it for $19,600 and some performance parts that I sold separately. This generated another $1000.

We end up buying a used Hyundai for cash ($3000) that we still own.  It was tough decision to make, but once we were committed, it was the best decision ever! This gave us our 6 months of emergency to cover unexpected expenses $30K.  By August 2015, we have a full funded 6 months emergency, eliminating our consumer debt (except our mortgage), but most of all–the first time of our lives, we control our own destiny and comfortable living.

Hyundai GLS 2002 with 194K and counting.