credit: Freedigitalphotos.net
Even before I started my own blog, I was a blog reading addict (mostly personal finance blogs). I’ve learned so many great things and gotten so many ideas from reading blogs, which include ideas that the main stream media often don’t talk about. I was tired of reading the recycled articles about making a budget and contributing to your 401K up to the employer match. I didn’t want to read any more stories about how early retirement was almost impossible (and by early they meant 50’s) and that even retiring at 65 might be a pipe dream. Here are some of the amazing things that I’ve learned thus far:
Retire in your 30’s
I always thought that, like most people, you get a job, work for 40 some odd years and retire in your 60s. I thought I was doing an awesome job saving for retirement when I opened an IRA account and increased my 401K contribution over the amount that my employer matched. Since I was working in government where I had a pension, I started thinking that retirement at 55 would be possible and thought that was incredibly awesome. Now when I stumbled upon the Early Retirement Extreme blog where the blogger, Jacob, said that he retired after working 5 years and was not yet 30, my mind was blown. He was a little extreme with his frugality, but then through Jacob’s blog, I found Mr. Money Mustache and his story really made me think that early retirement was possible. He went into detail about how he and his wife retired early, and argued that early retirement didn’t mean a life of deprivation, explaining often that he lives a very fulfilling life. I’m not going to be able to retire in my 30’s, but it’s possible I get there in my 40’s.
Simple, Stress-free Investing with Superior Results
I have talked about index investing many times on my blog. I believe in it and I am glad that I found this strategy. It wasn’t always this way though. Like many others, I used to chase returns by trying to a hit run by investing in the next hot stock and by investing in mutual funds which had the best returns. Now I realize that it is difficult if not impossible to consistently beat the market, so I just stick with low-cost index funds. Warren Buffet has encouraged most investors to just invest in low-cost index funds and I’m going to take his advice. This investment approach has also reduced my stress. The market drops a few hundred points! There’s a recession coming! Britain is exiting the EU! I’m investing for the long haul and I don’t really care about the stock market fluctuations. I continue to invest and stay the course. I’m not exactly sure when I first learned about index investing but it was likely on the Bogleheads’ forum.
Don’t Pay Taxes
You know how the saying goes that “there are only two guarantees in life: Death and Taxes.” Well, what if you could pay very little or no taxes? Wait wait wait, I’m not saying you should be like Wesley Snipes and get convicted of tax evasion. There are legitimate ways for regular working Joes to shelter our money from taxes. When I read the blog post title $150,000 Income, $150 Income Tax and Never Pay Taxes Again, I was very interested. We often hear about maximizing our returns when investing, but most times we ignored tax savings. Taxes are boring and complicated. Nobody really wants to deal with them. Heck, most people I know have no idea about their own taxes! They send their tax documents to the accountant who files the taxes for them. The tax policy in the US targets people with earned income so if you reduce your taxable income by “making your take home pay as small as possible,” you can avoid paying a good amount of taxes. Justin who blogs at Root of Good and wrote the post about paying only $150 in income tax with a $150,000 income, suggests that “you do everything you can to make your take home pay as small as possible” by maxing out tax advantaged plans like Retirement plan contributions (401k, 457 or 403b plans), flexible spending accounts, health savings accounts, and others. I’m pretty sure that after I read this post, I immediately logged onto my 457 plan online and maxed out my contributions.
The post about never paying taxes again was found on the Go Curry Cracker blog and it gave four simple rules to eliminate taxes:
◾Choose leisure over labor
◾Live well for less
◾Leverage ROTH IRA Conversions
◾Harvest Capital Losses AND Capital Gains
I’m especially a fan of choosing leisure over labor to eliminate taxes. That’s a win win! This advice is geared more towards those seeking or near early retirement, which is what I often dream about.
Out-of-State Real Estate Investing
I always wanted to invest in real estate but it didn’t seem possible because real estate was so expensive in the area where I lived. When I read that the blogger FI Fighter, who also lived in a high-cost-of-living-area, invested in real estate in states where the prices made more sense and where the properties would cash flow, I was very intrigued. I was somewhat skeptical at first but after some due diligence and research, I jumped in and also purchased a rental property out-of-state.
Travel for Free
I used to focus on earning cash back on my credit cards. When I read bloggers write about earning travel points on credit cards and going to exotic locations for nearly free with points, I didn’t really pay much attention because I always figured it was just too good to be true. There was a catch, right? However, after I read more and more stories of people were doing it, I was of course, interested to see if I could get in on it too. After learning some of the “tricks of the trade” with travel hacking, I’ve been able to score some free flights and have stayed at hotels (some pretty luxurious ones) for pretty much free. If you are someone who overspends with a credit card, travel hacking is not a good idea. If you are disciplined with your spending and are an organized person, you can definitely take advantage of travel hacking. I think I first started reading about travel hacking on the Flyertalk forums, but the information can get pretty technical and it might be intimidating to newbies. I think from that forum, I found the Million Mile Secrets blog which is a great resource for those interested in pursuing this. If you want to learn more about this area, there is even a free online course about the topic on Travel Miles 101. If you want even more hand holding, you can contact Holly from Club Thrifty with your ideal itinerary and she will help you create a “credit card rewards-fueled plan that can make your travel dreams come true”
You Can Really Make Money Online!
I always thought that there was an opportunity to make money online but I didn’t know how, plus I am not the least bit technically inclined. Reading articles where bloggers reveal how much money they earn online really opened my eyes to the opportunities out there. Check out the income reports on Club Thrifty and Making Sense of Cents and tell me you don’t want to learn more about this possibility. I definitely am and will need to learn more about how to earn some money online! The best thing about making money online is that you can be often work from anywhere and your schedule is a lot more flexible. Also, if you do it right, a lot of the income can be passive.
Drastically Reduce the Cost of Your Cellphone Service
I was in a family plan with AT&T and had an employer discount. I thought that was the best that I could do. There was no other way to reduce this expense unless I went with some unknown network which was probably unreliable. Then I read Is Your Cellphone Plan Ripping You Off? on the Saving the Crumbs blog and I knew that I could saved a lot of money by switching. Being that Cricket Wireless uses AT&T’s network, I figured there was no downside to the switch. With Cricket Wireless’ family plan, you can have 5 smartphones with unlimited talk and text and 2.5 gigs of data (after which your data speeds are reduced) for $100. That is less than half of what you would pay if you had a similar plan on AT&T. So why wouldn’t I switch? I’ve also heard great things about other plans like Republic Wireless and Ting which are a lot more affordable that the traditional plans, but I haven’t tried them. If you’re interested, you can check out the review on Republic Wireless here, and the review on Ting here.
Consider an Adjustable Rate Mortgage
When I was purchasing a co-op, I went to the bank and the loan consultant just assumed that I was looking for a 30 year fixed mortgage. I didn’t know any better and after the housing crash in 2007, there was such a stigma with adjustable rate mortgages that I just assumed that a fixed mortgage was superior. I truly regret not doing more research about this because I would have saved a lot of money if I didn’t go with conventional advice. When I read Financial Samurai’s post, 30-Year Fixed Mortgage Loan or an Adjustable Rate Mortgage (ARM)?, I knew I made a costly mistake. Here is an excerpt of what he had to say:
“First of all, the average duration one lives in and owns a home is 7 years. If that’s the case, what on earth are you doing borrowing a 30-year fixed rate mortgage for? A 23 year + overestimation of ownership is a serious miscalculation based on the statistics at hand. With a 5/1 ARM, your underestimation is only 2 years, but you already have baked that in”
We bought a co-op which is a junior 4 (small dining alcove converted into a small bedroom). Being that our family was growing, it was very likely that we’d outgrow the apartment in 5 to 7 years. I did run the “rent vs buy” calculator and given other factors, I think it made sense to buy a co-op even given this timeline. But it made no sense to get a 30-year fixed mortgage. If I had gotten a 5/1 ARM, I’d reduce my interest rate by 1% saving over a thousand dollars a year. *Face Palm*
Do you see anything here you might implement in your life? Have you read anything tips or ideas on other blogs that was really mind-blowing? If so, please share in the comments!
You nailed it. Anyone that comes along to this post is in for some interesting reading, particularly if they take the time to follow the links to the posts you mentioned. Each of them opened my eyes as well. It’s refreshing to read about how people are doing things differently in life. Turns out the conventional wisdom isn’t all that helpful!
The only thing I’d add to this is my mind was blown when learning about tax loss harvesting. I can sell a Vanguard index fund at a loss and replace it with something nearly identical. I get to write off the $3,000 loss against my marginal tax rate and I only have to pay long term capital gains taxes on it sometime in the future. Truly incredible!
Biglaw Investor recently posted…Should I Borrow Money in Law School to Fund a Roth IRA?
Thanks! Yes, it’s exciting when you read something and a light bulb goes on in your head. Tax loss harvesting is a good tip too. I think one of those robo-advisors specialize in doing that so it makes it even easier.
The one thing we’ll do after the debt is gone is minimize our taxable income by investing more for retirement, etc. Great stuff here , Andrew. There really is lots to learn by reading pf blogs!
Thanks Laurie! I’ve learned so much the last few years reading them.
This post was a great idea!
There are so many things I’ve learned reading Personal Finance blogs, this is a great idea to summarize some of these points in 1 post for the new readers. I’m not yet up to speed on these tax reduction techniques, but this is definitely something I need to understand.
Other things I’ve learned:
– Investing in rental properties can be a serious retirement plan (see nononsenselandlord)
– 1M$ is not as crazy as I once thought it was (see 1500days)
– Shareholder letters don’t have to be boring and Warren Buffett’s are amazing reads
Nick – TheMoneyMine recently posted…The #1 reason we should all prepare for retirement now
Yea, I have learned so much since I started reading personal finance blogs and interacting with other bloggers. It’s amazing the amount and quality of information that is out there. And much of this information is not written in the mainstream media.
Nononsenselandlord is a great resource if you want to get into rentals. I’d prefer to let a property manager deal with the tenants…well I have to because I’m out of state, but I think I prefer it to be more passive. If I had more time, I’d definitely like to be more hands on at some point.
I’m also a big fan of MR1500 and in general the blogs about those pursuing or already achieve financial independence.
All really great stuff! I think the most interesting thing for me is the tax savings. I talked to my manager about this and Go Curry Cracker is one of the only blogs she reads. As my wife and I work towards eliminating student loans and have more money to invest, we’d love to optimize tax advantages.
DC @ Young Adult Money recently posted…10 of My Business and Website Failures
Haha, it’s great that your manager reads GCC too! I think a lot of people aren’t interested in taxes but they’re so important and can save you so much money. Saving money is interesting to me!
Andrew, this is a great list of things that people should keep in mind. We’ve been thinking a lot about retiring early versus just finding an enjoyable career. For example, if I take a job as a professor, then get tenured, I don’t know if I’ll want to retire. Who knows at this point.
Jacob recently posted…The 11 Best Free Survey Sites to Make Extra Money in 2016
Oh right, that’s what you’re planning to do right? I guess if you enjoy your job it’s great to continue working but who knows! It’s always good to have options.
Thanks for these tricks and strategies. I am planning to learn more of this travel hack where I can visit places and use hotels for free by just using credit card points, though I have used it for free clothing. Let’s try using them for travel.
Kelly recently posted…4 Reasons Why You May Want to Rent Instead of Buy a Piece of Property
Yes, I wish I had learned more when I had the opportunity to travel! It’s tougher now with the kids…but still doable.
I’m definitely going to check out the articles on paying less taxes.
Real estate investors often pay very low taxes, simply because of depreciation and other expenses you can write off.
And Financial Independence is completely doable by 30!
Eric Bowlin recently posted…What to Do When Your Spouse Won’t Let You Invest in Real Estate
Yes, I would love to read in more detail your journey to financial independence! I love reading that stuff!
It really is crazy to think about how much our financial lives have changed due to the blogs we read. We’re trying for very early financial independence thanks to MMM, travel hacking thanks to a host of good travel blogs like Richmond Savers, investing in passive index funds thanks to JL Collins…
Done by Forty recently posted…What Happens When Humans Need Not Apply?
All blogs I follow and enjoy reading!
Good stuff! So much free information online that can help people save money and change lifestyles.
Are you able to refinance perhaps?
There’s one more thing you might find interesting. And that’s the whole $53,000 in pre-tax contribution PER ACCOUNT a hybrid freelancer/day jobber can contribute. So in other words, if you make enough as a freelancer and an employee, you could contribute $53K to your own Solo 401k plan, and have your employer contribute $53K to your SEP IRA employer plan!
Those contributions way over the normal $18K max 401k contribution really start adding up over time if you can get there!
Sam
Financial Samurai recently posted…How To Develop Emotional Intelligence: The Key To An Easier Life
I looked into refinancing but it wouldn’t make sense with closing costs. Plus, now with another kid I think we might move in the next few years. Thanks for the other tip, I’d have to start looking at becoming a freelancer on the side!
Good content once again, and a long but short story style post works. We all like to learn new things, and the content will not stop as people are creative. Good luck.
EL @ moneywatch101 recently posted…Don’t Keep Coins in a Piggy Bank for Long
Thanks!
Jacob is the guy we need to be like! I’m really interested in how he did for short 5 years! Thanks for sharing his blog.
James recently posted…Who spends money on mobile games?
By being EXTREMELY frugal! Haha.
I love this! I’m with you, reading blogs can be the best way of finding out new information that you wouldn’t necessarily come across or take up otherwise. There’s just something appealing about something that is recommended by a blogger.
I’ve learnt so much!
Francesca – From Pennies to Pounds recently posted…Budget Summer Outfit Ideas – 10 for £10 or under
Yes, there is something appealing especially when bloggers speak about their personal experiences and journey.
I thought I’d poke my head in on PF friends from yesteryear, and glad to see you are doing well. I miss PF blogs and hope to return to them sooner than later, especially people like you! Hope all is well on the other side of the coast. 🙂
Hey Anna, how have you been?! How’s the little one? Glad to see you back on PF blogs =)
I am glad that my friend told me about making money online or side hustling. Now, I can still money even though it’s weekend and it has helped me paying my debt.
Melinda recently posted…Who spends money on mobile games?
That’s great! What specific side hustles do you do?
How has your experience been with Cricket Wireless? I am considering switching our 4 family lines from Verizon to Cricket to save a ton of dough. I am also in the NYC area and am curious about the reliability (any issues with texting, data, dropped calls…etc). On another note, I am also looking to begin REI in the very near future and have been researching out of state investing and turnkey providers, so I really appreciate your insight on those topics.
I had AT&T before Cricket Wireless and they use the same network so I haven’t had any issues with reliability. There was that one day when the network was down for all Cricket customers and possibly some AT&T customers but other than that, everything is about the same…except the price tag. As for REI, definitely go to the BiggerPockets website and forum. It is such a great resource and the members on the forum are very helpful and knowledgeable.
Awesome, thank for the quick response. I’ve been all over the BP website for the past 2 years and have read everything I can get my hands on regarding REI and have finally decided on a strategy that if done right, will help me achieve my goals. Just need to save a little more for my first purchase (most likely within the next 3-4 months) and jump in.
Great! Good luck with that. It’s addictive and I’m trying to save some more to buy property #2.