Archive for the ‘Expenses’ category

Lifestyle Creep Checkup

November 8th, 2011

Well, I decided to give myself a Lifestyle Creep checkup and report back my findings!

Now a lot of you are more familiar with the phrase: Lifestyle Inflation, but I prefer the more precise phrase: “Lifestyle Creep”.  The two concepts are slight different and to me the more accurate representation of my experience is Lifestyle Creep.  If you are interested in the differences between the two terms, check out my article called “The Difference Between Lifestyle Creep and Lifestyle Inflation“.

Before I go into my lifestyle creep checkup, let me discuss what has enabled lifestyle creep to come into my life in the first place.

At the beginning of 2010, I finally became totally debt-free!  By totally debt-free, I mean no credit card debt, no car loans, no home mortgages or any other type of debt!  Eliminating all of my debt increased my income stream by so much at I wrote an article about it called: Paying Off Your Mortgage is Like Working at a Second Job!  This increased discretionary income stream is the source that has been fueling my slow lifestyle creep advancement.  Now onto the checkup!

 My Lifestyle Creep Checkup

  1. Increase in more expensive vacations, versus in the past occasionally skipping vacations for certain years. (I’m okay with this, and  I totally accept and want this!)
  2. Increased consumption at gourmet coffee shops (This lifestyle creep element has to be stopped or reduced!)
  3. Lack of concern about sudden expenses.  My wife got a speeding ticket recently and we just below it off.  In the past, we should try to account for the expense (not to mention the increase in our car insurance payments). (complacency is enemy of those trying to become wealthy, this is not acceptable!)
  4. Kids are entered into sports without cost considerations (I’m half and half on this.  If the program offers value to my kids, then “lifestyle creep” be damned, if not then I need to cut it out!)
  5. Dinning out, multiple times during the weekend.  Sometimes, we go out to eat up to three times in one weekend.  (This is horrible!  Need to sharpen the Axe)
  6. Both my wife and I go out and spend money with friends on movies, lunch, golf and special trips. (I’m half and half on this too, some lifestyle increase is good since we derive a lot of value out of these experiences)
  7. I didn’t carpool with a friend from work when gas prices went over $3!  See this post: Carpooling to Save Money and Reduce Gas Prices!  I found that I enjoy my personal time too much to share it anymore.  Plus, when I drive to work, I think of blogging ideas. (This is horrible, but I accept it anyway!)

Overall, for this past year, I would give myself a “B+” on my Lifestyle Creep Checkup, and here’s why:

  1. I’ve been able to pay my credit card bill in full each month.
  2. I increased my contribution to my 401(k) to near the max that is allowable.  I didn’t max it out totally because of the unpredictability of bonuses and other extra monetary rewards.
  3. I’m participating on my employer’s ESPP!  Read this article: Getting Over 15% Return By Saving Money In An ESPP  for a way to make better money than the typical stock returns, with little to no risk (It’s been all up for me!).  I consider this one of the more intelligent moves I’ve made recently!!!
  4. I’ve been able to make a little money by blogging.  This is a win-win scenario for me because I get money for doing something that I really enjoy!!!

Lifestyle Creep Checkup Conclusion

Yes, I have some lifestyle creep in my life, but I’m still saving over 25% of my income and investing it.  I’m also living a more balanced life and really enjoying my vacations without worrying about how I’m going to be able to afford them!

I will have to cut out some fat in my lifestyle if I want to remain debt-free, but I don’t think it will be that difficult to accomplish.

Hope you enjoyed my lifestyle creep checkup.  How are you going, are you experiencing any such phenomena?

MR

 

 

15 comments »

Posted in Expenses

Tags:

The Joneses Are Moving To A Larger House

June 14th, 2010

The great neighbor that lived across the street is moving. Basically, they are moving to a richer neighborhood (he’s an attorney and his wife is a nurse).

They bring in more income than we do… probably at least double the amount…

So just for some background information, their house is probably worth about $220,000 to $250,000 which in our city is a pretty decent house.  They are moving to a house that is in the range of $400,000 to $500,000.

I think it’s a bad move, here’s why:

  • They are only moving about 1 mile from where they live now.
  • The Elementary School their kids will go to will be a worse one that they are currently at (more crowded, and a bit rougher).
  • Based on who much they put into the house across the street, I’d say they are losing about $10,000 to $20,000 in enhancements and upgrades.
  • The economy isn’t that great, anything is still possible.
  • They need to start to build their non-retirement financial assets.  I know they have a lot of credit card debt.
  • They would have had their original house paid off in another 5 years.
  • Their real estate taxes will increase by double (so it will be $6,000 a year).
  • They’ll gut and refinish the new house like they did with the old one.  I’m not even going to guess how much that will cost.
  • They oldest kid is 14 and I don’t believe they have started saying for college yet for her.

So basically they are going to pay more that what it appears for this new house.  At least they did get to take advantage of the fed tax credits for moving!

What do you think of such a move?   To me it seems like a pretty large expense!

-MR

21 comments »

Posted in Expenses, Family

Tags:

Expenses That Are Like Neverending Lifetime Debt

April 13th, 2010

Currently, my Debt has been contained, but the expenses still march on…

Being debt free is great, but now I have to get ready for the 2nd great battle, and that’s the battle against necessary lifetime expenses (food, clothing, utilities, gasoline, taxes, etc).

In this post, I’m just going to talk about a subset of my expenses that I consider are debt-like in nature. 

The Expenses below have debt-like properties:

  • Taxes (Real Estate, Property, etc):  My biggest Debt-like tax expense is Real Estate Tax!  Unlike debt, this is an expense that will rise with the appreciation of your house, and any community levies that are passed.  Now I know, some of you will say, I can avoid this by Renting, but renting is even more expensive!  There isn’t any way to avoid this, so the best you can do is plan around it!  Like an oyster, you must build your wealth so that you can coat a smooth layer around this irritation! 
  • Utilities (Gas, Electric, Sewer, Water, Trash Collection):  These are also debt-like, but less so than Taxes.  The prices of utilites can do down sometimes, but mostly they go up.  Over years, the trend has been an upward slope!  You can control the cost of these expenses by conservation or going green.  Going Green (solar, wind, etc) may be an options in the future, but currently it’s too expensive.
  • Misc: Certain insurance costs, Driver’s licenses, and other little costs that the goverment requires that you pay.

 

Some lesser debt-like expenses can be reduced to a minimal cost:

  • Clothing: the cost associated with this lifetime expense can be minimized by buy cloths at garage sales, thrift shops, goodwill, etc…
  • Food:  this can be mimized by growing your own food, and possible a small bit of farming…
  • Gasoline prices: similar to utilities, the price of gas can go up and down, but over years, has an upward slope.  You can control the cost of gas by carpooling, driving less, implementing telecommunting at work, and using public transportation.  Walking is an option, but if the distance it too long, then the time factor may be too expensive (life is short).

Initially my plans were to build up investments that I would call “Dividend Funds” and have them pegged to help pay for certain debts and other expenses.  However with the threat of increasing taxes on the dividend yields of such financial instruments, I’m starting to re-think this approach.

Readers: Can you think of any addtional expenses that are debt like that I missed? 

-MR

17 comments »

Posted in Expenses

Tags:

pfblogs.org logo

Disclaimer: This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. It is highly recommended that you seek advice from a professional for serious financial matters. This site and its author may be compensated for expressing personal opinions regarding featured products and services.