While recovering from my cardio-thoracic surgery, it’s been a lot of laying low. And not driving, which means not working (as I’m a rideshare-app driver in NYC). BUT it does mean lots of extra time for combing through finances, and I noticed an interesting new slant on things recently. Since the beginning of this year (actually a few months prior to, but I somehow lost track of a few months’ data) I’ve been tracking my net-worth. The process initially began with simply logging into personal capital at the beginning of each month. Then I’d record the figure that’s spit-out at the top. As all of my bank accounts are linked to personal capital, this seemed to be a reliable method.
Whether you are a W-9, 1099, or some other kind of worker, taking time off requires quite a bit of planning in advance. Therefore, it’s important to have a game-plan when you’re faced with a temporary work-respite. Even if you’ll be spending the break on holiday, or doing something else leisurely. Or just burning vacation days to get shit done at home.
Whatever the situation, taking time off from work doesn’t equate to a free-pass on paying bills. So here’s five ways to confront a divergence from the workplace, without burning your savings account up.
When I started making a full-time income through rideshare driving, I realized that it only made sense to continue if I’m bringin in more than goes out each month. Therefore, I got into the habit of tracking where every dollar went. And become obsessed with ensuring that I was on the road enough to “hit weekly income targets.”
Little did I realize how much wasted effort went into scrutinizing every purchase; and much unnecessary self-pressure was applied, as I forwent opportunities to be leisurely on the weekends. After learning about the principles of behavior economics, and finally getting my credit cards to zero balances, did I ease up on being the spending police. Now only one thing matters to my financial picture (in regards to income vs. expenses), and that’s how much my net worth increases by each month. Read more
Most rideshare drivers probably have a checking account. Many might also have a separate savings account too, possibly with a high interest rate. Even fewer drivers are likely to have a retirement account setup, which would need to be done independently (since no rideshare-app companies currently offer 401Ks). And if you’re a rideshare driver that’s currently investing some of your profits into a brokerage account, it’s far more likely that you’re purchasing Exchange Traded Funds (ETFs) or Mutual funds.
These characteristics described are exactly what my financial picture looks like right now. I’m using a business checking account, a linked high-yield savings account, am socking money away into a brokerage account, and have an Individual Retirement Account (IRA). What I don’t do with my rainy day money is buy/sell individual stocks. And especially don’t short-sell stocks through a trading platform of any kind. Here’s why. Read more
During a jog this week, something happened that many joggers have experienced before. I found money on the ground. A small windfall like this sparked an interesting response, which was to put it in my wallet. Where else does this money belong after all? Certainly not on the jogging track at my local park. So why was saving this money an unusual response? Because according to behavioral economics, individuals are more likely to spend money they find on the ground on something frivolous². According to “mental accounting,” a concept coined by nobel prize-winning economist Richard Thaler, people treat money differently depending on extraneous factors like it’s origin and it’s intended use. The theory hinges upon the determinant that money has fungibility – that is, it has properties like being interchangeable, and doesn’t have labels.² For example, $200 found on the ground is considered “free money” that can be spent without reservation (e.g., on a nice restaurant dinner). Even though it’s worth the same $200 that we earn from working our day jobs (or night jobs).
Recently realized just how easy it is to let ourselves be Okay with using stuff that’s easily accessible. And conversely, how difficult it can be to access the stuff that’s tucked away. For example, have you ever shopped at a “buy-in-bulk” big chain like Costco, Walmart, BJ’s, etc.? These chains are great for stocking up on stuff like groceries, essentials, and some even sell liquor and beer.
Well, typically I’m not a big drinker by any stretch of the imagination; however, on one such occasion of doing our monthly buy-in-bulk session, I was tempted to add a gigantic bottle of Johnny Walker to the cart. The reasoning seemed logical at the time. Why not have some bourbon in stock at the house? It’ll be great for when guests are over. And I’m not impartial to indulging in some fine bourbon on sunny afternoons, when i have the day off. Read more
Last week I had a $400 emergency. Actually it was more like a $513 emergency, and was left-out of work for two weeks. Fortunately I’m prepared for a situation like this, because I’ve been funding a small emergency fund. And therefore had to withdraw some money from it. Last year, it was reported that an average of 34% of respondents with an income less than $40k/year would be able to cover a $400 emergency. Which means paying in cash, or using a credit card that’d be paid off by the end of the month.
The average number of respondents who reported being able to “handle the emergency” was higher along higher income brackets (e.g., of those making $40k – $100k / year, 62% responded in this way). Which means that 38% and a full two-thirds (i.e., 66%) of individuals last year, earning between $40k – $100k and ≤ $40k respectively, reported being unable to handle an emergency expense totaling $400. Furthermore, being unable to handle such an emergency expense was related to putting it on a credit card, and paying it off over time, borrowing money from friends and/or family members, or just not paying the expense all together¹.
In the much anticipated sequel to my declining invitations post, this article is taking the notion of extreme saving from a different perspective. Going out to lunch? Getting drinks with friends? Out-of-state wedding invite? All of these events could receive a “yes” response. But it all depends on whether you’re living on a bare-bones budget, or living-large.
Most people would claim that they’re living somewhere in between: If I’m declining multiple invitations (however big or small); if when I hit the “maybe” button on that Facebook invite it means “not a snowball’s chance in hell,” it’s because I’m clenching my wallet (literally?) between my ass cheeks.
Conversely, if I’ve become a regular “yes man” then I’d eventually have to pull the caravan over to the curb, and button-down the money wagons. So this article is geared towards finding that happy medium, to properly build up my Fun Stuff budget category; which means being able to say Yes to more invites (at a moderate pace) down the road, or not.
Part of making, and sticking to, a budget that actually works is having to occasionally decline invitations. Often times our friends, family members, and especially our significant others will make requests upon us, which demand the allocation of our resources.
Have you ever thought, “that sounds like a lot of fun, BUT deep down is it worth the cost?”
Surely this decision crosses our minds multiple times a day. And most of the time, we’re forced to decide upon one of various potential outcomes using the best of our judgement. The extent to which we allocate resources to the chosen outcome (i.e., how much money it may cost) often influences our decision, one way or another; however, depending upon the significance of the request, our ability to comply may be limited.
For example, my brother who lives out of town recently was in-town because he was invited to go to a wedding (and apparently his frequent flyer miles were expiring soon). His ability to decline the invitation (from an ol’ college friend) was somewhat limited; however, the cost of complying with such an out-of-state wedding invitation was probably sufficient enough to warrant a pass this time around. Read more
What if it were possible for anyone to save $1,000,000? Would you want to know how? Maybe that sounds a little far fetched. How about the notion that anybody can save $100,000? Are you interested now? Perhaps, perhaps not. What if I said that it’s possible for both you and I to save $10,000? Now I bet your ears perked up. And finally, let’s both agree that it’s possible for almost anyone to save a cool $1k? Uh-huh. You’re totally on board with it? Cool. Because what most people don’t realize is that the process for saving either $1k or $1M is essentially identical.
It’s just a matter of the degree to which we’re saving money that determines how much we’re able to bank. Let’s look at it another way: Imagine that suddenly it were possible for human beings to forgo the need to sleep ever again. Drink a magic elixir, and you’re devoid of needing any resting period longer than one hour per day. That means the extra eight hours of daytime (or night-time rather) could be put to use towards more productive means. You might work an extra six hours each day, and put the other two hours towards practicing an instrument, for example. Read more