Make Your Money Last Forever With 2 Simple Rules

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Nilus MattiveDear Rich Lifer,

You’re probably familiar with the ‘4 percent rule’ and ‘Multiply by 25’ rule.

If you haven’t heard of these rules, don’t worry! I’ll explain in second.

But first, I’m willing to bet that those of you who have heard of these rules are getting them confused.

Multiply by 25

The ‘Multiply by 25’ rule estimates how much money you need to retire worry free.

Here’s how it works: multiply your annual expenses by 25.

That’s it. Simple right?

For example: if you estimate your annual expenses in retirement will be $40,000, you will need $1 million saved in your retirement portfolio ($40,000 x 25 = $1mm).

If your lifestyle is a bit more extravagant and you spend $70,000 per year, you’ll need $1.75 million ($70,000 x 25 = $1.75mm).

Notice that this rule doesn’t take into account any other sources of retirement income, like Social Security, pensions, rental properties, etc.?

This is because the rule was created for early retirees, who likely won’t have access to Social Security or pension income until later.

Since you will likely have some form of guaranteed income if you’re already close to retirement age, you can easily adjust your annual expenses accordingly.

For example: if you expect to receive $20,000 from Social Security, your nest egg will only need to cover $50,000 in expenses (instead of $70,000). Your retirement goal would then be adjusted to $1.25 million ($50,000 x 25 = $1.25mm).

The ‘Multiply by 25’ rule also assumes your portfolio will generate a 4 percent return per year. It’s estimating that stocks will produce an average return of 7 percent per year.

If that 7% figure is accurate, and we assume inflation keeps pace at roughly 3 percent per year, then your return — after inflation — will be about 4 percent.

Then What is the 4 Percent Rule?

Where most people get confused is assuming the 4 percent rule is referring to the 4 percent return, like we just calculated.

But, the 4 percent rule is only telling you how much money you can safely withdraw once you’re retired, without dipping into your original investment principal.

Here’s how it works: the 4 percent rule states that you should withdraw 4 percent of your retirement portfolio in the first year, and continue withdrawing the same amount, adjusted for inflation, each year after that.

For example, if you retire with $1 million, then in your first year of retirement, you should withdraw $40,000 ($1mm x 0.04 = $40,000). The following year you withdraw the same amount, adjusted for inflation. If we assume 3 percent inflation, you withdraw $41,200 ($40,000 x 0.03 = $41,200).

Depending on how the stock market performed that year, your $41,200 might be worth more than 4 percent of your remaining portfolio or less. The good news is this rule of thumb has been tested over decades. William Bengen, who pioneered the 4 percent rule, tested 30-year spending rates against the historical returns of US stock and Treasury bonds.

Some years the markets went up and some years they went down, but the 4 percent rule takes this into account. As long as you withdraw a steady amount, plus inflation, you shouldn’t run out of money.

Bengen says this rule would have protected your annual income even during 30-year periods that included the Great Depression of the 1930s and Great Stagflation of the 1970s.

What Exactly is the Difference?

The ‘Multiply by 25’ rule estimates how much money you need to save to retire. The 4 percent rule estimates how much you can safely withdraw from that portfolio.

I’ve heard the 4 percent rule is risky

Some financial experts will tell you the 4 percent rule is too aggressive. And that you should be withdrawing 3 percent. They also believe that the ‘Multiply by 25’ rule should really be ‘Multiply by 33’.

There are three caveats to the 4 percent rule:

  1. It’s not guaranteed. Yes, it’s been tested multiple times and it works almost every time. But, a bad market in the first few years of retirement could make for trouble.
  1. Asset allocation matters. William Bergen says your allocation to stocks should be no less than 50 percent and closer to 75 percent.
  1. Don’t forget investment fees. If you invest with an advisor and you’re paying even one percent a year in fees, this can affect the 4 percent rule.

If you’re really worried about running out of money in retirement, then following the 3 percent rule and ‘Multiply by 33’ rule will give you a more conservative estimate. But, which one you choose to follow also depends on your unique situation, risk tolerance, and taxes — all of which I’ll save for another day.

To a richer life,

Nilus Mattive

Nilus Mattive

The post Make Your Money Last Forever With 2 Simple Rules appeared first on Daily Reckoning.

11 Habits You Need to Break Before You’re Broke

This post 11 Habits You Need to Break Before You’re Broke appeared first on Daily Reckoning.

I’m all for treating myself to some of life’s luxuries, but I won’t splurge to the point where it starts to hurt my finances.

Sadly, for a lot of Americans the latter is true.

In fact, the average US adult spends $1,497 a month on nonessential items, according to a recent survey conducted by OnePoll. That’s roughly $18,000 a year on things we can all do without.

The survey revealed that the average person spends about $20 per month on coffee, as well as $209 on dinners at restaurants and $189 going out for drinks with friends.

Survey respondents said they spend an average of $91 per month for cable, in addition to $23 for streaming movies and TV shows. Music streaming services averaged $22 a month, while other apps added $23.

Even the cost of health club and gym memberships was significant, averaging $73 a month, including classes.

One interesting finding was that Amerians make an average of five impulse buys per month – for a total of $109. But, the irony is the majority (58 percent) feel there are other important things they can’t afford…hmm.

The truth of the matter is we all have bad spending habits we need to work on. Today I’m going to walk you through 11 of the worst spending habits that drive financial experts wild.

The good news is that all of these can easily be fixed…

Bad Habit #1: Keeping All Your Money in One Account

I’m always surprised when I hear someone say they only have one bank account. Physically separating your money is the easiest way to set and stick to a budget.

Here’s what you should be doing: 1) Rename your checking account your spending/depositing account. Tie this account to your debit card. 2) Open a second checking account and designate this one to your bills.

Calculate your average bill tally from the 1st to the 15th, and from the 16th to the end of the month, and transfer that amount to your bills account every two weeks. This will stop you from overspending on your debit card because you’ll have already covered your bills.

This two-account setup will save you a lot of time and money by automating your budgeting.

Bad Habit #2: You’re always searching for deals

This might sound counter-intuitive, but searching for sales can sometimes set you further back. Out of the top ten reasons cited for overspending, two include sales: discounted items or “one-time only” flash sales that typically lead to more spending. The expression, I can’t afford not to buy it, couldn’t be more true.

Bad Habit #3: Not Saving “Found” Money

Did a rebate you sent in months ago finally come in? Did someone buy you a coffee unexpectedly?

“Found” money often gets wasted. Anytime you find unexpected money, transfer that money to your savings or bill accounts. You’ll be surprised how much this adds up with minimal effort on your part.

Bad Habit #4: Having Too Many Subscriptions

You sign up for a one-month free trial and before you know it, you’ve gone 6 months without realizing you’ve been paying this whole time. Too many people pay for monthly subscriptions they never use.

Review your credit card statements monthly and highlight any subscriptions you’re not using anymore. Cancel these as soon as possible or mark the next renewal date on your calendar so you know when to cancel.

Bad Habit #5: Keeping Up with the “Smiths”

It used to be you were trying to keep up with the Joneses. Except back then, it was just your next-door neighbor. Now, in an era of social media and 24/7 news cycles, everyone is your neighbor when you turn on your phone.

Don’t subscribe to this keeping-up temptation. What you see being portrayed online is not always a true portrayal of someone’s day-to-day. Set realistic expectations for how your life should look.

Bad Habit #6: Being Too Passive

How many items of clothing in your closet do you own that still have tags on them? Returning items. Calling your cable company to get a better rate. Negotiating a bank fee. These things all take time and a little bit of effort. But it’s time and effort well spent.

A twenty-minute phone call with your internet provider, could save you $15 a month. Multiply those savings by 12 and you’ve saved $180 a year from one phone call. It’s tempting to take the path of least resistance when it comes to your money, don’t do it.

Bad Habit #7: Paying fees

Fees are something I won’t tolerate. Bank fees, ATM fees, maintenance fees, they all add up and they’re all negotiable. If you look at your bank statements and notice you’re paying a significant amount in fees, you need to stop this immediately.

Write down all the fees you’re paying on a regular basis and choose at least three to slash. You might have to threaten to switch providers or change banks, whatever you need to do to get the fee waived.

Bad Habit #8: Not Automating Your Bills

Everyone should be doing this nowadays. If you’re still getting bills in the mail, there’s a good chance you’re forgetting to pay those bills some months or your payments are late.

Use your bills checking account to pay your bills without having to think about it.

You’ll save the hassle of having to remember and you won’t have to worry about paying late fees and other penalties.

Bad Habit #9: Wasting Food

The number-one money-waster is throwing away leftover food. According to a recent study, part of the reason for this phenomenon is that people are bad at reading food labels. Food date labels like “best before” and “sell by” are largely unregulated in the US.

84% of consumers discard food near the package date at least occasionally, says the study. Among date labels assessed, “best if used by” was most frequently perceived as communicating quality, and both “expires on” and “use by” as communicating safety.

Over one third of participants incorrectly thought that date labeling was federally regulated, and 26% were unsure.

Bad Habit #10: Thinking a Budget Means “No”

When you think of the word “budget” what comes to mind? For most people, they think a budget means they have to say “no” to everything. You can’t save for a vacation, if you’re saying yes to brunch with your friends. You can’t save for a new car, if you’re saying yes to new clothes every month.

That’s not necessarily true. A budget doesn’t mean no, it just means you need to start prioritizing your money.

Think of a budget as a pecking order for where your money goes. Whatever is left after the important nuggets get covered can go toward the less important “non-essential” wants.

Bad Habit #11: Ignoring Your Daily Habits

And just because you have a monthly budget, doesn’t mean you’re necessarily aware of all your day-to-day expenditures. If you want to quickly assess your weekly spending habits, run a 10-day budget.

Notice how many small things you didn’t realize you needed to budget for. You want to do this once a quarter for a few reasons.

First, it helps alleviate the paycheck effect, where you get paid and then spend your full paycheck two weeks later. Second, you’ll pay attention to daily fluctuations in your spending and be able to make adjustments as you go.

To a richer life,

Nilus Mattive

Nilus Mattive

The post 11 Habits You Need to Break Before You’re Broke appeared first on Daily Reckoning.

Are Your Retirement Expenses Out of Control?

This post Are Your Retirement Expenses Out of Control? appeared first on Daily Reckoning.

We’ve all seen the commercials with the gray-haired couple sipping champagne on the beach or the grandfather teaching his grandkids how to fish at the lake house.

But financially speaking, how realistic are these depictions of retirement?

According to the latest Consumer Expenditure Survey, produced every year by the U.S. Bureau of Labor Statistics, “older households” – defined as those run by someone 65 and older – spend an average of $45,550 a year, or roughly $3,795 a month.

Obviously, what you spend in retirement will depend on different variables, including the annual property taxes on that lake house, the price of your preferred champagne, and a number of other individual factors, but you get the point.

If I’m being honest, I think spending $45,550 a year after-tax in retirement seems a bit high. Based on a 20% effective tax rate, $45,550 is equivalent to $54,660 a year in gross income.

To generate $54,660 a year in gross income, you would need an investment portfolio of $1,366,500 generating 4% a year.

Is the average 65+ year-old retiree in America a millionaire?

We know that the average 60-69 year-old American has only about $195,500 saved in their 401(k) and only $62,000 if we look at the median 401(k) account balance, so something seems a bit off…

If we take a more optimistic view, however, we can assume that current retirees over the age of 65 likely have some form of pension income as well as a healthy Social Security check, averaging out at around $1,461 a month. Add to that a little financial help from your adult kids and it should all work out in the end.

But the question I’m most concerned with is where is this $45,550 being spent? With less mouths to feed, no daily commute, it seems surprising to me that retirement expenses are this high.

If we dig into the BLS data a little more, we see a monthly breakdown of how households spend their money, on average. Here are the seven major categories you need to plan for:

Housing: $1,399

Surprisingly, housing is the largest expense for the average retiree. With the median American home price at $226,800, spending $1,399 a month on housing is high.

If your house is paid off by the time you retire, you should only be paying property taxes, insurance, maintenance, and utilities. Therefore, it’s obvious that the average retiree still has a mortgage to pay.

With no mortgage, your average housing expenses would tally up to more like $350 a month based on the median home price today. Point being, paying off your mortgage before you retire is going to save you a LOT of money.

Transportation: $615

$615 a month for transportation is another surprisingly high number, especially given the fact that most seniors get discounts on public transportation.

For example, discounts usually start at 50% of the regular adult fare and go up from there. Some cities, like Chicago, even offer free transportation to all senior citizens.

As a senior, spending $7,380 a year on transportation means you either still have an auto loan you’re paying off or it’s a sign you need to find a more trustworthy mechanic. The average transportation expense across all consumers last year totalled $9,761.

Although seniors are paying less on transportation per year than most, it still seems high in my opinion. Most Americans could do with paying less for transportation. Overpaying for a car is one of the biggest financial killers.

Healthcare: $557

It’s nice to see that health care cost averages only $557 a month or $6,684 a year. The average healthcare cost for a working American is closer to $20,000 a year, which is heavily subsidized by the employer.

The horror stories you hear about health care costs skyrocketing in old age are a bit exaggerated, so long as you have Medicare or some type of subsidized health insurance program.

Food: $539

$539 a month for food is not bad compared to the $600 a month for the average individual. With all the early-bird specials and seniors discount shopping days, retirees should be saving money in this category. My advice, stay away from food delivery apps if you want to maintain a reasonable budget here.

Personal Insurance/ Pensions: $283

It’s a bit unclear why this category even exists. 65+ year-olds should mostly be retired, however, the BLS explains this category as households who are still employed, paying Social Security tax, and contributing to Social Security.

In other words, the secret to a prosperous retirement is to keep your spouse working as long as possible! Seriously, having one spouse work late into retirement means you can typically afford more and live better. It just needs to be a situation you’re both happy with.

Cash Contributions: $210

$210 a month or $2,520 a year in cash contributions (aka charitable donations) accounts for around 4.2% of annual gross spend. 4.2% is a respectable amount since the average American contributes roughly 3% of their gross income to charity each year.

Studies have shown that making charitable contributions can improve happiness. Seeing the effect your contribution has made can be powerful so donate while you’re still alive to enjoy it.

Entertainment: $233

$233 a month for entertainment seems a bit on the low end. But when you consider all the discounts and deals that retirees get for being able to attend movies, plays, and museums during non-peak hours, it makes sense.

Not every retiree is taking an around-the-world cruise or flying to the Mediterranean for a weekend. What most retirees are saying is their newfound freedom provides much of their day-to-day happiness versus having to spend money on expensive experiences.

Overall, the average retiree lives a pretty good life. Being able to spend $45,550 a year after-tax is a decent sum given that the median household gross income last year was $63,179. That means the average retiree got to spend close to 87% of the median household income without having to work. Not a bad deal.

To a richer life,

Nilus Mattive

Nilus Mattive

The post Are Your Retirement Expenses Out of Control? appeared first on Daily Reckoning.

How to Tell If You’re Frugal or Just Cheap

This post How to Tell If You’re Frugal or Just Cheap appeared first on Daily Reckoning.

Billionaire investor Warren Buffett is often labeled frugal.

He lives in the same house he bought back in 1958 for $31,500.

He never spends more than $3.17 on breakfast, and up until 2014, was driving the same 2006 Cadillac DTS.

It wasn’t until his daughter told him it was embarrassing that he traded up for the new XTS model.

Contrast Buffett’s frugal lifestyle to this story shared on Reddit a few months ago:

RE: What’s the cheapest/stingiest thing you’ve seen someone do?

My grandmother, as she didn’t own a computer, had to mail in all her bill payments. One month she didn’t get her water bill or it was delivered to someone else by accident. Whatever the cause, her next bill was for both that month and the previous month and included a late fee that was less than the cost of a stamp.

For the rest of her life she skipped the bill one month and then paid both the next because she saved a few cents by using just one stamp instead of two. This was a woman who had somewhere around a million dollars in the bank when she died.

There’s a fine line between frugal and cheap. And I’ll be the first to admit I sometimes toe that line. But for many Americans, frugality is a necessity.

Credit card and student loan debt are at the highest they’ve ever been. On top of that, inflation seems to be outpacing wage growth.

These factors make minimizing spending and reducing expenses that much more critical to the average household.

Nevertheless, it’s easy to take frugality too far. Here are a few telltale signs that you’ve crossed over from being frugal to just plain cheap:

Leaving a Bad Tip or No Tip At All

You know you’re cheap when you go to a restaurant and don’t leave your server a tip. If you think, “well, I’ve already paid for the meal therefore I shouldn’t have to tip,” you’re justifying your cheapness.

Waitstaff rely on tips as part of their income. Legally, they can be paid as little as $2.13 an hour plus tips. If the tips aren’t enough to bring their earnings up to the federal minimum wage of $7.25 an hour, their employers must add enough to make up the difference, but no more.

Instead of stiff-ing your server, you can save money by eating at a buffet or restaurant where you serve yourself. Or, you can save money by picking up your order rather than having it delivered or dining in.

Cheapos Buy-and-Return Shop

Another sign you’re cheap is if you buy-and-return shop. This is when you buy an outfit for a special event, you leave the tags on, wear it and then return it the next day to get your money back.

I’ve seen my cheap friends do this with appliances and power tools they needed for a season or one-off jobs. It’s not cool. Typically, what happens to these returned goods are the stores have to sell them at a discount since they’re no longer new, or they get scraped, adding to the waste in our landfills.

If you can’t afford to buy new, consider shopping at consignment stores or find used tools on ebay or Craigslist.

Rebate Double-Dipping

If you’re buying a product with a $25 mail-in rebate and you think it’s a great deal, you might be tempted to buy two. However, at the bottom of the coupon it usually says one rebate per household.

To get around this, you fill out a second form using a different mailing address, like a PO box. Legally speaking, this is a form of fraud – and since you’re using the postal system to do it, it can be prosecuted as mail fraud.

But even if you don’t get caught, you’re still being extremely cheap and it’s unfair to the manufacturer.

Instead of trying to double-dip your rebates, look for ways you can stack them. For instance, use a discounted gift card to make a purchase using the rebate code. This way, you save on the gift card plus you get the savings from the rebate.

Stealing Supplies

Your boss might not pay you enough, but that doesn’t mean you can pilfer pens, paper, markers, or sticky notes. Sure, these small office supplies might not seem like a big deal but it’s still theft.

The same goes for condiments at restaurants. If you’re stuffing your purse or wallet with ketchup, mustard, sugar or jam packets, you’re not being frugal, you’re being cheap.

This kind of petty theft hurts companies over time. Your company bought those supplies for office workers to use at the office, and taking them home costs the company money – which in turn leaves less money in the budget to pay you what you really deserve.

Similarly, restaurants have to cover the cost of all those condiment packets by raising their menu prices.

Regifting

There’s an art to regifting and it really boils down to thoughtfulness. If your budget is tight and you decide to regift, don’t gift someone you love something they’ve either given you as a gift or have seen you around using it.

Secondhand gifts don’t always have to be your own. If you find a nice cashmere sweater or leather jacket at a thrift store, your brother or sister won’t care if you paid $10 or $150 for it if it’s been something they’ve always wanted. It’s the thought that counts.

The Bottom Line

There’s a fine line between cheap and frugal. If you find yourself crossing over to the cheap side, think of who your cheapness is affecting. You might be saving a few dollars by being cheap, but you risk hurting your relationships and your own savings in the long run if you continue to be stingy.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post How to Tell If You’re Frugal or Just Cheap appeared first on Daily Reckoning.

10 Spending Habits That Can Leave You Broke

This post 10 Spending Habits That Can Leave You Broke appeared first on Daily Reckoning.

I’m all for treating myself to some of life’s luxuries, but I won’t splurge to the point where it starts to hurt my finances.

Sadly, for a lot of Americans the latter is true.

In fact, the average US adult spends $1,497 a month on nonessential items, according to a recent survey conducted by OnePoll. That’s roughly $18,000 a year on things we can all do without.

The survey revealed that the average person spends about $20 per month on coffee, as well as $209 on dinners at restaurants and $189 going out for drinks with friends.

Survey respondents said they spend an average of $91 per month for cable, in addition to $23 for streaming movies and TV shows. Music streaming services averaged $22 a month, while other apps added $23.

Even the cost of health club and gym memberships was significant, averaging $73 a month, including classes.

One interesting finding was that Amerians make an average of five impulse buys per month – for a total of $109. But, the irony is the majority (58 percent) feel there are other important things they can’t afford…hmm.

The truth of the matter is we all have bad spending habits we need to work on. Today I’m going to walk you through 10 of the worst spending habits that drive financial experts wild.

The good news is that all of these can easily be fixed…

Bad Habit #1: Keeping All Your Money in One Account

I’m always surprised when I hear someone say they only have one bank account. Physically separating your money is the easiest way to set and stick to a budget.

Here’s what you should be doing: 1) Rename your checking account your spending/depositing account. Tie this account to your debit card. 2) Open a second checking account and designate this one to your bills.

Calculate your average bill tally from the 1st to the 15th, and from the 16th to the end of the month, and transfer that amount to your bills account every two weeks. This will stop you from overspending on your debit card because you’ll have already covered your bills.

This two-account setup will save you a lot of time and money by automating your budgeting.

Bad Habit #2: You’re always searching for deals

This might sound counter-intuitive, but searching for sales can sometimes set you further back. Out of the top ten reasons cited for overspending, two include sales: discounted items or “one-time only” flash sales that typically lead to more spending. The expression, I can’t afford not to buy it, couldn’t be more true.

Bad Habit #3: Not Saving “Found” Money

Did a rebate you sent in months ago finally come in? Did someone buy you a coffee unexpectedly?

“Found” money often gets wasted. Anytime you find unexpected money, transfer that money to your savings or bill accounts. You’ll be surprised how much this adds up with minimal effort on your part.

Bad Habit #4: Having Too Many Subscriptions

You sign up for a one-month free trial and before you know it, you’ve gone 6 months without realizing you’ve been paying this whole time. Too many people pay for monthly subscriptions they never use.

Review your credit card statements monthly and highlight any subscriptions you’re not using anymore. Cancel these as soon as possible or mark the next renewal date on your calendar so you know when to cancel.

Bad Habit #5: Keeping Up with the “Smiths”

It used to be you were trying to keep up with the Joneses. Except back then, it was just your next-door neighbor. Now, in an era of social media and 24/7 news cycles, everyone is your neighbor when you turn on your phone.

Don’t subscribe to this keeping-up temptation. What you see being portrayed online is not always a true portrayal of someone’s day-to-day. Set realistic expectations for how your life should look.

Bad Habit #6: Being Too Passive

How many items of clothing in your closet do you own that still have tags on them? Returning items. Calling your cable company to get a better rate. Negotiating a bank fee. These things all take time and a little bit of effort. But it’s time and effort well spent.

A twenty-minute phone call with your internet provider, could save you $15 a month. Multiply those savings by 12 and you’ve saved $180 a year from one phone call. It’s tempting to take the path of least resistance when it comes to your money, don’t do it.

Bad Habit #7: Paying fees

Fees are something I won’t tolerate. Bank fees, ATM fees, maintenance fees, they all add up and they’re all negotiable. If you look at your bank statements and notice you’re paying a significant amount in fees, you need to stop this immediately.

Write down all the fees you’re paying on a regular basis and choose at least three to slash. You might have to threaten to switch providers or change banks, whatever you need to do to get the fee waived.

Bad Habit #8: Not Automating Your Bills

Everyone should be doing this nowadays. If you’re still getting bills in the mail, there’s a good chance you’re forgetting to pay those bills some months or your payments are late.

Use your bills checking account to pay your bills without having to think about it.

You’ll save the hassle of having to remember and you won’t have to worry about paying late fees and other penalties.

Bad Habit #8: Wasting Food

The number-one money-waster is throwing away leftover food. According to a recent study, part of the reason for this phenomenon is that people are bad at reading food labels. Food date labels like “best before” and “sell by” are largely unregulated in the US.

84% of consumers discard food near the package date at least occasionally, says the study. Among date labels assessed, “best if used by” was most frequently perceived as communicating quality, and both “expires on” and “use by” as communicating safety.

Over one third of participants incorrectly thought that date labeling was federally regulated, and 26% were unsure.

Bad Habit #9: Thinking a Budget Means “No”

When you think of the word “budget” what comes to mind? For most people, they think a budget means they have to say “no” to everything. You can’t save for a vacation, if you’re saying yes to brunch with your friends. You can’t save for a new car, if you’re saying yes to new clothes every month.

That’s not necessarily true. A budget doesn’t mean no, it just means you need to start prioritizing your money.

Think of a budget as a pecking order for where your money goes. Whatever is left after the important nuggets get covered can go toward the less important “non-essential” wants.

Bad Habit #10: Ignoring Your Daily Habits

And just because you have a monthly budget, doesn’t mean you’re necessarily aware of all your day-to-day expenditures. If you want to quickly assess your weekly spending habits, run a 10-day budget.

Notice how many small things you didn’t realize you needed to budget for. You want to do this once a quarter for a few reasons.

First, it helps alleviate the paycheck effect, where you get paid and then spend your full paycheck two weeks later. Second, you’ll pay attention to daily fluctuations in your spending and be able to make adjustments as you go.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post 10 Spending Habits That Can Leave You Broke appeared first on Daily Reckoning.

The Household Chore That Can Save You Money

This post The Household Chore That Can Save You Money appeared first on Daily Reckoning.

The average household in America consumes 10,764 (kWh) in electricity each year at an average cost of $1,351.

If you have the bucks to spend, you can chop that bill by replacing older appliances with new energy-efficient ones.

But if you’re not ready to trash a perfectly good stove or air conditioner to save a few bucks on your power bill, here are some simple steps you can take without doing an extreme home makeover. 

Let’s start with the most energy-hungry room in your home. The…

1. Kitchen

Most of what we do in the kitchen relates to heating and cooling food. You can’t just stop cooking. But there are things you can do to reduce the amount of power you’re using.

Refrigerator/freezer

This is one of biggest energy hogs in your home because it cycles on and off all day, every day. 

Check the thermostat…

If the thermostat is set lower than necessary, your fridge might be consuming up to 25% more electricity than actually needed.

The refrigerator should be in the 35-38 degrees F range, the freezer 0-5 degrees F.

Stockpile the freezer…

When your freezer is empty and you open the door, warm air rushes in. Then it takes more energy to cool the air that is trapped inside.

So keep your freezer three-quarters full to maintain the proper temperature. That will help cut the amount of time the appliance is actively running.

Maintenance pays off, too…

Dust accumulates on the coils at the rear or bottom of your frig. That can restrict cool-air flow and force the compressor to work harder. Cleaning is an easy job. Just roll out the appliance and vacuum the mechanism every six months.   

Switch to ice trays…

Turn off the automatic icemaker. There should be a switch on the unit or a lever that you can move to shut it off.

I know… it’s nice to hold your glass under the dispenser and have ice cubes fall into it. But the motor inside is an energy hog. By using ice trays instead of the icemaker you could save money each year.

After your meals…

Let hot food cool down and properly wrap leftovers before storing. Hot food in a refrigerator forces the compressor to work extra hard and wastes energy. 

Dishwasher

It takes the same amount of water and electricity to run a dishwasher whether it’s half-empty or full. So run the dishwasher when it’s full.

And since much of the energy your washer uses is from the drying cycle at the end, set to air-dry instead of heat-dry.

Stove/oven

Use your microwave or toaster oven to heat up leftovers. They use less electricity than your convection oven.

Crock pots use less energy, too. Plus they won’t turn your kitchen into an oven.

Cover pots and pans while cooking. You’ll trap the heat inside and cut cooking times by about 10%.

Make sure you match the pan to the burner size. A small pan on a large burner is heating up the room instead of the food.

It takes awhile for burners to cool down. Turning them off several minutes before the end of the suggested cooking time could save you a few dollars each month.

It’s tempting to crack open the oven door to take a peek at your food. But that blast of hot air that hits you is costing you big time. Keep the oven door closed as much as possible. This alone could save you up to $20 per year.

When using the oven, pick the right dish. Ceramic or glass conducts heat more efficiently than metal cookware and will let you turn down the temperature by about 25 degrees.

2. Bathroom

Shorter showers and a lower temperature on the hot water heater thermostat will reduce your energy consumption.

In fact, for every 10 degrees you dial down the setting, you can save three to five percent on your bill.

3. Laundry room

Washing your clothes in cold water can save roughly $66 on heating costs.

Hold off doing wash until you have a full load. Cutting the total loads each year by 25% could save 3,227 gallons of water.

Set the washer’s spin speed on high to reduce the amount of time your clothes need to be in the dryer

and save about $11 annually.

Drying clothes on cold cycles rather than hot ones could cut your bill by around $66 per year.

Cleaning the lint trap in your dryer between loads will help the appliance work more efficiently.

And if you’re really serious about cutting the electric bill, dry your clothes on a line outside or inside on a drying rack.

4. Bedrooms

Rather than only relying on the air-conditioning, turn on the ceiling fans. Fans can make the rooms feel three to eight degrees cooler.

And when you leave the rooms, turn off the fans so you don’t waste electricity.

5. Living room

Like the bedrooms, a ceiling fan can cut reliance on the a/c.

Moreover, during the winter you could lower the thermostat by 5 degrees, reverse the direction the fan turns to push the warm air down, and stay cozy. 

6. Air conditioning

In many parts of the country, the a/c is the top power guzzler. Don’t cool an empty home. If you have a programmable thermostat, set it so the temp can go up a few degrees when you’re at work or out shopping.

And even if you don’t have one, get in the habit of changing the settings before you go out.

Air filters get packed full of dust. And that dust clogs the passage for air that feeds the air handler. The compressor then has to work harder, which means more electricity used.

You can buy throw away filters for $10 or so. At that price, replacing them once a month is a good investment. 

Bottom Line

The 6 suggestions I gave you are only a few of the changes you can make in your home and lifestyle to cut your power bill each month.

Other ideas include: Switching to compact fluorescent light bulbs, sealing up leaks around windows, and using heat-generating appliances, like dryers and dishwashers, at night when the temperature cooler and the a/c doesn’t have to work as hard.

The potential list is huge.

But if you tackle them one at a time, the savings will add up.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post The Household Chore That Can Save You Money appeared first on Daily Reckoning.

What to “Look” for Before You Make This Purchase

This post What to “Look” for Before You Make This Purchase appeared first on Daily Reckoning.

If you’re reading this there’s a good chance you’re either wearing glasses, contact lenses or some combination.

According to the Vision Council of America, approximately 75% of adults use some sort of vision correction. About 64% of them wear eyeglasses, and about 11% wear contact lenses, either exclusively, or with glasses. Over half of all women and about 42% of men wear glasses.

I bring this topic up because I know it affects a lot of you. Consumer Reports says the average retail price for buying a new pair of glasses now is $220-$240. That can be an expensive visit to your optometrist’s office if you don’t have insurance.

The good new is you don’t have to spend that much, especially not if you only need single-vision lenses. Something I’ve seen a lot of my friends and family do over the years that’s saved them big is buy glasses online.

If you’re hesitant to buy prescription eyewear online, let me dispel some of the myths about the process and lay out exactly what you need to know.

Don’t Let the Bad Apples Ruin the Bunch

In 2017, The New York Times ran a story about a man named Vitaly Borker who ran several cheap online eyeglasses sites including DecorMyEye and OpticsFast.

As far back as 2010, customers of DecorMyEye said they were shipped cheap counterfeits in place of the designer eyeglasses they believed they had purchased. Borker eventually was caught and it landed him four years in jail.

But this story sent a lot of people running for the hills. Don’t let this one bad apple or other tales ruin the savings you could be enjoying. In fact, if you stick to the list of trusted retailers I have below, you’ll be fine.

“How much do I actually save?”

If you’re going to buy your glasses online, you’ll pay one-fourth to one-sixth the usual price with the online sellers versus the traditional retailers. ZenniOptical.com prices start at around $7 for lenses and frames and $5 for shipping. That’s just about the cheapest price out there.

However, what you save in material costs buying direct from China, you lose in customer service apparently. Some Zenni customers have complained the lack of customer support from the online retailer.

In addition to Zenni, there are several other sellers of complete prescription eyeglasses for under $20. (If you wear bifocals or progressives, you can run that bill up to $40.) EyeBuyDirect.com and GlassesShop.com are both good cheap options as well.

What You Need Before Buying Your Glasses Online

You still need a prescription if you’re shopping online, typically your RX should be no more than one year old. The eye exam fee could end up being the bulk of your glasses cost, so it pays to shop around.

First, check your health insurance policy to see if eye exams are covered. Even if you don’t have insurance coverage, you should be able to get an eye exam for around $100. (Note: if you’re buying contacts as well as glasses, your exam will cost a little more.)

Here are few retailers that have reasonably priced eye exams:

  • Costco Optical
  • LensCrafters
  • Pearle Vision
  • Target Optical
  • Visionworks
  • Walmart Vision Centers

Also, your doctor is legally required to give you a copy of your prescription after your exam. One measurement you must have on your script is your pupillary distance (PD), make sure it’s there and if it’s not ask your doctor to add it.

The FTC’s Eyeglass and Contact Lens Rules lays out certain rights and obligations eye doctors have to their customers. Regarding giving out PDs, the rules say the following:

“Many doctors don’t charge for the pupillary distance measurement. If your doctor charges for it, some online sellers will refund the cost.”

If you don’t want to risk paying out of pocket for your PD and not getting reimbursed in the end, check out Goggles4u’s DIY guide to calculating your pupillary distance.

Know Your Frame Measurements

Choosing the right frames involves more than just picking a style you like — you need to find frames that fit your face. The three measurements to know are: lens width, bridge width (the width across your nose), and temple arm length (the length of the arms).

If you own a pair of glasses that fit, start by checking their size. Measurements are usually written inside the frame, listed left to right (lens width, bridge width, temple arm length). You’ll find them printed inside the temple arms or the nose bridge.

Online retailer Warby Parker will actually mail you frames to try on before you buy. And wherever you buy, check their return policy so you know what your options are if your frames don’t fit.

Most sites don’t offer full refunds on returned eyewear with prescription lenses. For example, FramesDirect.com deducts 50% of the lens price from the refund amount for returns within 30 days of purchase. ZenniOptical.com offers a 50% refund or a 100% store credit on all eyewear returned within 30 days of the delivery date. Eyeglasses.com provides a 50% refund on returned lenses.

The Best Places to Buy Cheap Glasses

According to Consumer Reports, these are the top 10 places — both physical and online — to buy eyeglasses:

  1. Costco Optical
  2. Any independent eyeglass shop
  3. Warby Parker
  4. A private doctor’s office
  5. ZenniOptical.com
  6. Kaiser Permanente
  7. Opticare Eye Health & Vision Centers
  8. Eyebuydirect.com
  9. Sam’s Club Optical
  10. Walmart Vision Center

39dollarglasses.com is another great option online that came in 12th.

Where Should You Avoid?

Consumer Reports says the three worst places to shop include SVS Vision, America’s Best Contacts & Eyeglasses and GlassesUSA.com.

If you still have cold feet after reading this then here’s one final tip…

Consumer review expert, Clark Howard, who wears progressive lenses says:

“I recommend a safe harbor until you’re comfortable. I want you to pay too much for your first pair buying them the traditional way to satisfy your fears. Then buy a second pair with a cheap online shop. Compare the two to see if the cheaper pair will work for you moving forward.”

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post What to “Look” for Before You Make This Purchase appeared first on Daily Reckoning.

Your 30 Day Financial Challenge

This post Your 30 Day Financial Challenge appeared first on Daily Reckoning.

A recent study by the U.S. Bank found that only 41% of Americans use a budget even though it’s one of the most effective ways to keep track of your finances.

Building a budget, automating bills, consolidating debt, negotiating lower premiums…all these financial must-dos are easy on paper but for whatever reason prove challenging in practice.

Why do you avoid doing what you know is best for your money?

I roll my eyes whenever I hear that old proverb, “A journey of a thousand miles begins with one single step.” But I have to admit, it’s true. If you’re feeling stuck financially, like you don’t know where to start even though you know what you should be doing, let me help.

Set aside five to 30 minutes each day over the next 30 days and follow my financial checklist. Don’t worry about trying to be perfect, this is an exercise in action. Here’s the full 30-day challenge:

Day 1: Make A List Of All Your Income and Expenses.

Use an app like Mint or software like Excel to help you. Your goal is to have a clear picture of where your money goes each month.

Bucket your income and expenses into different categories like Savings (retirement, emergency fund), Mortgage/Rent, Household Expenses (food, utilities, heating oil, etc.), Auto (car payments, tolls, Uber), Debt Repayment (student loans), Entertainment. It doesn’t have to be perfect, you just need to capture everything.

Day 2: Continue Day 1.

You might need a second day to get all your income and expenses tracked. If you can go back as far as one year, that’s even better. You’ll see irregular expenses like property taxes and gifts you might not have budgeted for looking at only the last 3 months.

Day 3: Build a Spending Plan.

Based on the data you collected in days 1 and 2, build a plan for your money.

Are you happy with how your money is being spent currently? Are there areas where you’d like to spend less money? Choose one area in your budget you want to reduce spending.

Day 4: How are You Going to Save in That One Area?

If you decide you’re spending too much on eating out, think of ways you can save in this one area next month. You can try meal prepping an entire week’s worth of lunches on Sunday or use the envelope method for meals out.

Day 5: Reduce Your Fixed Expenses.

Rather than trying to save in areas that require willpower like skipping Starbucks, look at your fixed, recurring expenses and figure out where you can save without having to lower your quality of life.

For example, if your cell phone bill costs you $80 per month now, how much could you save by calling your provider and negotiating a lower bill? A 20-minute phone call might save you an extra $15/month or $180 per year. 

Areas to look for recurring savings:

  • Utilities – energy saving light bulbs, programmable thermostat, wash laundry in cold water, etc.
  • Transportation – carpool, take public transit, walk more, sell one of your cars.
  • Cell Phones – family plans or corporate discounts, bundle internet, cable and your cell phone.
  • Cable – cut the cord, replace expensive cable packages with cheaper streaming services.
  • Internet – do a speed check to make sure you’re getting what you pay for. If you’re not, contact your provider and ask for compensation.
  • Insurance – review your deductibles and yearly mileage. Some carriers base your premiums on how much you drive. If you’ve changed jobs or commuting patterns, you might be overpaying.
  • Refinance debt – refinancing your mortgage or consolidating student loans can lower your monthly costs.

Day 6: Manage Credit Card Debt.

If you have credit card debt, call and see if you can negotiate a lower APR. A lot of providers offer 0% APR promotions. If you qualify, make a plan to pay down your debt before the promo period ends.

Day 7: Call Your Cable and Internet Providers.

Don’t pay for what you don’t use. Negotiate a smaller cable package or consider cutting the cord and switching to cheaper streaming services.

Day 8: Pull Your Credit Report.

Go to Annualcreditreport.com to get your free credit report from each of the three credit reporting agencies (Experian, Transunion and Equifax).

If you find any discrepancies, report them immediately. Mistakes on your credit will cost you money by making lending more expensive.

Day 9: Shop for Better Car Insurance.

Take a safe driver course online. For a few hours of your time and $25, you can save a decent amount on your insurance.

Day 10: Automate Your Finances.

Look at your budget and figure out which recurring bills you can automate. Also look at your savings and determine whether you’re on track to fund your retirement, emergency fund, or next vacation. Set up auto transfers to make saving and paying bills easier.

Day 11: Declutter.

Pick a room or spend the weekend decluttering your whole house. Gather things to donate, trash, or sell.

Day 12: Continue Day 11.

Continue decluttering and find a few more things you can get rid of, donate, or sell.

Day 13: Post Items for Sale

Post the items you’d like to sell on Craigslist or Facebook Marketplace. As soon as you sell them, take three-quarters of the proceeds and place it in savings. Use the rest as discretionary income.

Day 14: Declutter Your Finances.

Do you still get paper bills? Can you sign up for e-bills? Schedule a time every month to get the .pdf files and save them if you want to keep the bills. Shred documents that are no longer needed.

Day 15: Organize Your Financial File.

Make a few folders (virtual or physical). One for tax receipts, one for documents you have to keep for future reference (like a cancelled check for a security deposit until you get the deposit back), and one for monthly rotating documents (receipts that you can get rid of after reconciling with the credit card statements, bills that you can get rid of after paying them off, etc.)

Day 16: Have a Financial Date with Your Partner.

Talk to your partner about your finances to make sure you’re both on the same page. Align your goals and spending plan with your partners so there’s no surprises.

Day 17: Build a Master Financial Document.

After your financial date, you should create a master financial document with your current net worth, monthly budget, and all your accounts with passwords.

Make sure you encrypt this document and keep a copy in a safe place. Start it today and keep working on it until it’s complete.

Day 18: Spend One More Day Working on Your Master File.

Self explanatory, but you shouldn’t make a  master file in a hurry. Be thorough and take an extra day to complete it.

Day 19: Take Inventory of Your House.

To ensure your homeowner/renter insurance is accurate, you need to know what you own and how much it will cost to replace. Spend the day taking an inventory of all your most prized possessions.

Day 20: Do a Bank Audit.

Are you paying for a checking account or credit card? If you are, it’s time to change banks. Shop around for a free checking account and no-fee credit card.

Day 21: Do an Interest Rate Audit.

Are you getting the best interest rate? You don’t need to go chasing the absolute lowest rate but do a quick audit once a year to make sure you’re not getting ripped off.

Day 22: Do an Investment Audit.

How much are you paying in expense ratio? Are there ways you can reduce this and improve your return?

Day 23: Do an Energy Audit.

Do you have energy vampires? Check with your utilities company to see if they will do a free audit or buy a “Kill-a-Watt” device and DIY.

Day 24: Kill Some of the Energy Vampires.

After you finish your energy audit, fix some of the problems yourself. Whatever else you can’t fix arrange for a professional to come and resolve the issues.

Day 25: Do a Subscription Audit.

Netflix, Hulu, Spotify, Apple Music…the list goes on. If you have a number of entertainment or online magazine subscriptions, consider cutting the ones you use less frequently.

Day 26: Find More Ways to Save.

Look at your company’s HR page, your credit card company’s benefits page, your insurance company’s discount page and any other subscription’s (like AAA) pages to see what discounts you are eligible to receive.

VISA, Master card, American Express and Discover all offer benefits to card holders that can save you money with discounted tickets, extended warranties, etc.

Day 27: Calculate Your Hourly Wage.

If you’re on salary, you might not think about how much you get paid per hour. Do the math and you’ll know how many hours each of your purchases are costing you. This is an empowering exercise.

Day 28: Buy a Friend Lunch.

Take someone you admire and want to learn from, out to lunch. Ask questions and listen. This is one of the best ways to invest in your career.

Day 29: Update Your Information.

Make sure your beneficiary information for all your accounts is updated.

Day 30: Update Your Will.

You only need to do this if there’s been changes to your assets or life situation since the last time your will was updated.

That’s it! If you make it through all 30 days, you’ll have accomplished more in one month with your money than you will all year.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post Your 30 Day Financial Challenge appeared first on Daily Reckoning.

Fighting Medical Bills and More…

This post Fighting Medical Bills and More… appeared first on Daily Reckoning.

Back in December, there was an issue where I told you about a surfing accident sent me to the hospital for a weekend. And I said my own experience demonstrated how important it is to fully understand the type of insurance you have before an unexpected event sends you to the ER. 

Despite a little lingering soreness, I’ve pretty much fully recovered from the four broken ribs and collapsed lung. I was back to surfing six weeks later and recently spent five days snowboarding in Lake Tahoe with my daughter going as hard as ever.

But now that the bills are rolling in, it’s obvious that a financial recovery would be the much bigger problem for anyone without an adequate understanding of insurance and medical billing or at least the willingness to learn about such things.

Just to prove the point: The latest summary of charges for my weekend hospital visit totaled $30,124!

That’s roughly equal to the median annual individual income in the United States right now.

Fortunately, my insurance plan has an annual maximum out-of-pocket deductible of $3,500 per individual. 

Factoring in other unrelated charges already made earlier in the year, that means my total cost for the stay ends up being a couple grand. In other words, more than 90% of the bill was covered. 

Although it’s a small (and somewhat perverse) consolation, that means I actually made money on my insurance premiums for 2018. Hooray!

Okay, now let’s talk about a couple nitty-gritty details.

Choose Your Health Service Facility Wisely

First, as I pointed out in our earlier discussion, going to a different hospital could have meant the vast majority of this tab would NOT have been covered.

You do not want to make a $20,000 or $30,000 mistake like that!

Second, going through some of the individual items and charges was very revealing.

Take blood panels … 

My caregivers wanted to draw my blood once or twice every single day and with the exception of admission and imminent discharge, I refused. 

This was for two reasons:

  • I hate needles and they had a lot of difficulty finding a vein the first time around.
  • The stated reasons for the blood panels were minor concerns. Things like assessing the possibility of infection, when other signs such as my temperature were completely normal.

Now if you happen to work in the medical field, I’m sure you’re cringing a bit. Very few practitioners like the patient who says no to things. 

At the same time, even one of the doctors agreed that administering so many blood tests was unnecessary. And I firmly believe that patients have the final say over their own bodies and treatment choices.

Now that I’ve seen the itemized list of charges, it turns out there was a third reason not to want daily blood tests… each one was several hundred dollars! 

This raises an important point: Some “standard” treatments and protocols are not only medically unnecessary, but the costs are never discussed, either.

Your caregiver comes in and says, “Hi. We need a urine sample” and you oblige. They don’t tell you how much it will run. (In my case, $96.)

They also rarely say exactly why they’re doing the test or procedure. We’ll talk more about how that relates to my urine sample in a second.

But How Much Does It Really Cost?

For now, let’s stick with the economics. 

Plenty of procedures and protocols are more about reducing a medical establishment’s liability than they are about patient outcomes. 

That’s bad enough.

What’s worse is that anyone who studies the issue will quickly discover some outrageous markups on routine items.

Many years ago, a taxi ran over my foot in New York City. 

I distinctly remember getting the itemized list for my brief treatment in the ER, which included gauze at $100 a roll and crutches billed out at $400. The same items at my local CVS would have been $50 total. 

There’s not much an individual can do about this particular aspect of our medical system, though it is possible to dispute the charges if you think they’re too high.

A great example?

The time a surgeon offered to pierce a 5-year-old’s ears while she was having a separate procedure, and ended up billing her parents $1,877!

The girl’s mother, an attorney, got some of the charges reduced … but only after lots of phone calls and a protracted fight.

And here’s another account of someone who fought various charges and ultimately got a 20% reduction even when nothing was technically wrong with the care received.

Speaking of which, you should also go line by line to make sure you’re being billed for the things you actually got!   

All of the procedures and costs are tallied up using various billing codes and errors are rampant. Just as anecdotal evidence, my mother once found several inaccuracies listed on an invoice … including a procedure that had nothing to do with the reason for her visit.

Do You Need Everything You’re Being Tested For?

Last but not least, I was also surprised to see my $96 urine sample labeled as a toxicology screen – i.e. a drug test.

Why would that be needed?

I was completely lucid when I was admitted. I was exhibiting signs of physical trauma completely consistent with the circumstances as described. And I told my caregivers that I wasn’t on any medications nor was I a smoker or an illicit drug user.  

It turns out nearly any ER admission results in a drug test no matter what the patient says. 

They don’t tell you they’re doing it. 

They don’t have to ask for your permission. 

And as one doctor pointed out in Time, there are a lot of thorns to consider even beyond the financial aspects:

“There are some real tradeoffs to testing emergency-department patients for illicit drugs. As practitioners we need to pay attention to the downsides of these tests so we don’t overuse them.

“First there are ethical issues of autonomy and confidentiality. The principle of autonomy states that patients should be able to decide whether or not to undergo testing or treatment for anything. When you check in to a hospital, you sign a form giving consent for routine testing, including blood and urine tests for lots of things. This makes sense — it means that as doctors, we don’t have to check with you for every run-of-the-mill test we order. But the question here is whether or not testing for drugs and alcohol without your explicit consent should be considered routine.

“Confidentiality is, of course, the other major ethical problem with ordering illicit-drug tests on our patients. While the Health Insurance Portability and Accountability Act legally protects all medical information from public disclosure, just ordering the test increases the risk that a breach of confidentiality could expose this sensitive information.

“False-positive tests are another concern. Urine drug tests use immunoassays to screen for multiple illicit drugs. While they tend to be quite accurate, cross-reactions with other medications have been demonstrated — for example, over-the-counter decongestants have been shown to light up the amphetamine test incorrectly. Also, these tests may identify previous drug use but fail to tell us that the patient was using drugs recently (the marijuana test can be positive over a month after use, for instance). This can be confusing to the diagnosticians who are trying to figure out what is causing today’s symptoms.

“Last, there are issues of cognitive biases, mental prejudices on the part of doctors that can interfere with our ability to make the best decisions for our patients. Fundamental attribution error is one such bias, in which a health care provider inadvertently — and wrongly — blames a patient for her illness. Take the case of the patient with belly pain, who tests positive for cocaine: she becomes the “drug user in Room 2.”

The Bottom Line

Any time you’re receiving medical treatment, it pays to get as much information as possible before any treatment or procedure is performed …

It pays even more to scrutinize the statements you receive in the wake of a visit …

And you should never hesitate to question a billing department when you think a treatment was overpriced, mislabeled, or unnecessary.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post Fighting Medical Bills and More… appeared first on Daily Reckoning.

3 Secrets to Slashing College Costs

This post 3 Secrets to Slashing College Costs appeared first on Daily Reckoning.

A recent survey by the College Board revealed the budget for an in-state public college last year averaged $25,290.

And a moderate budget at a private school last year averaged $50,900.

Suppose you have three kids bound for college a decade from now. At the rate which college tuition costs are rising and tuition aid formulas changing, you’re looking at spending, over the course of 4 years, close to $900,000!

If you can’t figure out how to slash the costs of your child’s education, you’re going to get crushed. And good luck asking your boss for a $1 million bonus.

Lucky for you, I’ve been doing some research on this and found three ways I believe you can significantly lower the costs of getting your child a post-secondary education. Here’s what I found:

Section 568 Loophole

A college will use one of three different aid formulas to determine how much of a price break you deserve. The Section 568 formula, used by a small but impressive group of schools, including Dartmouth, Duke and MIT, has an interesting loophole that involves the value of your home.

For schools that follow Section 568, the home equity that goes into calculating your net worth is capped at 120% of your income. Here’s why this matters:

Take a family with an income of $150,000 per year and a daughter applying to two schools on the Section 568 list. They have a mortgage of $500,000 left to pay. If this family inherits a decent chunk of money, maybe from a relative passing, they have a few options. They can save and invest the money, spend it, or pay down their mortgage.

If the family decides to leave the money in their bank account, their daughter won’t qualify for any aid. But, if the mortgage is paid off, this girl could receive close to $20,000 of aid per year! So if you have extra cash, consider paying down your mortgage faster if your kid is applying to one of the school’s on the Section 568 list.

State School Advantage

Another way to save on tuition costs is take advantage of state universities. I don’t recommend you up and move your family to save on college but if you’re already considering a new job or potential job transfer to a different state, take the state university into consideration.

Some states offer huge cost advantages to residents. For example, the University of Texas at Austin slashes approximately $24,000 off the cost of the tuition bill per year for Texas residents. If you have two kids attending college at the same time, there’s potentially $192,000 in savings over the course of four years.

What if your kids want to stay close to home? There’s no guarantee your child will want to go to school close to home but some gentle persuasion may be in order. If you decide to make moves when your kids are in high school, make sure you know the state’s rules. There is usually a minimum residency of 12 months before classes start.

Part-time Student Hack

I saved the best for last. What should you do if you have a child who has their heart set on an expensive, four-year school (whether in-state, out-of-state or a private school)?

The answer is two part. First, have them register for only a few classes at their choice four-year school, qualifying them as a part-time student there. This will save you a ton in tuition cost. Second, supplement that by taking online classes from any school that offers the classes they need at the four-year school that will be accepted.

The benefits are as follows: your child still gets to live on campus and have the college experience they were hoping for but at a fraction of the cost since they’ll be taking courses from two schools.

Here’s why this plan works. Most schools have one full-time rate that covers anything over a certain number of credit hours. Take the University of Minnesota (UM) for example. For 13 or more credits (what’s considered full-time) a non-resident cost is $14,368 per semester.

One way to cut costs would be to take as many credits as possible, say 18, because the price is the same. But rather than overload your child with courses to max out on tuition, a better approach would be to take two three-credit courses at UM.

This would qualify your child as a part-time student and now be charged per credit. For the class of 2022, the per-credit cost is $1,105. Your UM bill for a part-timer taking six credits per semester would be $6,630.

If you supplement those courses by taking three three-credit courses online from a community college, for example the College of DuPage offers online courses to residents for $500 per course, you’d be looking at $1,500 for nine credit hours. Add the $1,500 to the $6,630 and you get $8,130, or nearly half the cost of full-time tuition!

Now imagine doing that for the first couple years of college while taking basic courses at your local community college. The savings add up fast! This hack applies to almost any four-year school. Keep in mind however that most colleges mandate the last 30-60 credit hours be taken at their school in order to receive the degree.

If you’re worried courses won’t transfer to the four-year school, you can easily check ahead of time before registering. A lot of schools have websites that help you check this, or you can speak with an adviser. Another great resource is Transferology, a website you can search every university that has a class that will be allowed at the college your child attends to meet the course requirement.

There’s no question the cost of going to college is out of control. But if you can learn to navigate the systems in place, you can slash the bill significantly.

To a richer life,

Nilus Mattive

Nilus Mattive
Editor, Rich Life Roadmap

The post 3 Secrets to Slashing College Costs appeared first on Daily Reckoning.