Teaching

Buying versus Renting

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I have a tenant who, in the same day, told me that she couldn’t pay rent on time and asked whether she could buy the house. She said she paid $60,000 to me and that could have gone towards owning a house. While I understand the lump sum of what you paid being a pain point, owning a house isn’t that simple. I thought I’d break down a comparison of what she would have done to own this house versus her renting it over the last several years.

RENT HISTORY

Based on the proximity to Main St and the comps in the area, we went into the purchase expecting about $1,000 per month in rent. At the 1% Rule (where you set monthly rent at 1% of your purchase price), we should have been at $1,020. Knowing that it was October/November by the time we would get it rented (there aren’t as many people looking for a new rental in the Fall, after school has started and holiday activities are ramping up) we chose to list it at $975 and keep it below that 4 digit threshold. It sat for 3.5 weeks with hardly any activity, and we dropped it to $875. We found a tenant in under 2 weeks then, but we weren’t thrilled amount our cash flow on it.

The tenant’s lease started on November 1, 2019. Her rent was $875. My property manager incorrectly established a one-year term lease instead of an 18-month lease like she was supposed to, so we had to do a 6-month extension after the first year. Then in March 2021, we tried to increase the rent to $900, and she complained that due to the pandemic, she couldn’t afford that. We let it go and she renewed a year lease at $875.

Come February 2022, we were significantly under market value for rent and she hadn’t been a friendly tenant, so we were content pushing a raise to $950. If she didn’t want to pay that, she was free to leave and we would take the vacancy hit to fix it up and get it re-rented. She complained about the increase, and our property manager told her to take a few days to look around to see if she could find somewhere to rent that was at a price she would feel more comfortable with. She came back and said she couldn’t find anything and accepted the increase to $950.

Not including a few late fees she has owed over the last nearly-five-years, she’s paid us $52,850. While in total that appears to be a significant number, that number does not mean that you’d have $52k in equity in a home had you paid towards a mortgage.

OUR PURCHASE INFORMATION

We paid $102,000 for the house in 2019. We asked for several options for the loan structure. We asked about putting 20% versus 25% down, and whether the rate for a 15 year, 20 year, or 30 year loan would have the best rate. Going through those details is something I’ve done in the past, so for this purpose I’ll just note that we chose to put 25% down because then we didn’t need to “buy down” the rate. The rate for each loan length was 4.55%. With no incentive to do a shorter loan term (and therefore increase our monthly payment), we chose the 30 year term. I do want to note that our interest rate is higher than the average for 2019 (3.9%) because it was an investment property and not a loan for a primary residence.

Based on the 25% down and the closing costs, we had to come to the table with $26,589.12.

Our mortgage was $538.46, which includes escrow. We paid off this loan fairly soon after we closed on it, so we don’t have a monthly mortgage payment. However, I do need to plan for our current mortgage and insurance payments each year, which is currently over $2,000.

FACTORS TO CONSIDER

To keep this more consistent in the message, note that the loan discussed will be based on the purchase price of $102,000.

First, you need to have favorable credit to qualify for the mortgage. In an example, the lowest credit score I could plug in was 620. However, in much of what I’ve read, anything below 680 is questionable on qualification. Our requirement to rent a property is to have a credit score of 600. Perhaps there are lenders that will process a mortgage if your credit score is below 620, but you’re going to pay a premium via the interest rate.

With a credit score of 780, say you’ll have a rate of 6%. But then with a score of 680, you’re looking at 6.5%. At 6%, your principal and interest payment (doesn’t include the escrow required) would be $599.19. At 6.5%, it goes to $631.69. That’s only $32.50 per month extra; over 30 years, that’s an extra $11,700 paid to the bank. I have some tenants where an extra $32 per month is a big deal.

Without at least 20% down on a loan, you’ll likely have to pay private mortgage insurance (PMI). This amount could add a monthly premium to your mortgage payment anywhere from 0.2% to 6%. I did a quick calculator with the example of $102,000 purchase price, $3,060 down (typically the lowest available without any special loan structures is 3%), and a credit score of 620 (lowest it allowed). The PMI was calculated as $187 each month.

I mentioned that our final closing costs were over $26k. If I remove our down payment, that leaves $1,089 in closing costs. I will note though, that our contract had $2,000 in seller subsidy (a credit). Without that purchase agreement structure, that means your closing costs are actually $3,089. This means that you need to come to the table with $6,149. Buying a house is not like buying a car where you can roll all the costs into the loan, and I feel like people don’t realize this.

Your debt to income ratio also plays a factor in whether you can qualify and what your interest rate would be. So even with a decent credit score, you need to show a low debt-to-income ratio, meaning you can’t have your credit cards maxed out. The lender wants to see that you don’t have high monthly costs that would prevent you from paying your mortgage.

That brings me to the flexibility of paying rent. She paid $475 worth of August rent (due August 1st, with a grace period to August 5th before a late fee is owed) on August 20th. If you pay your mortgage late, there’s a late fee and it gets reported to the credit bureaus. Your late payment of rent doesn’t get reported to anyone. She also has the extra advantage that I’m willing to work with her on late payments. An apartment complex type owner is going to immediately file for eviction on the 6th without full rent payment, regardless of your story.

SUMMARY

While a mortgage payment of $538.46 looks favorable against a rent payment of $950, it’s not that simple. I was able to qualify for the mortgage, qualify for a favorable interest rate, and put significant money down.

If I add a premium to the rate we were able to get, assuming my tenant’s credit score is similar to what it was when she rented our house, and then add the PMI that would be applied by not having 20% down, then the mortgage payment (including escrow) would have been $903.02. PMI stays on the mortgage until you reach 78% loan to value ratio (unless you pay for an appraisal and can prove 80% earlier than that). That threshold in this example is $79,560. That principal balance would be achieved in over 11 years, which means you’ve paid $25,058 for essentially nothing.

Then on top of paying these premiums for the mortgage, she would need to pay for the maintenance of the property herself, which is included in my rent factors. I’ve paid over $3,000 for repairs and maintenance on the house over the last 5 years (which is fairly low). However, that includes a deck replacement that we did ourselves and probably would have cost $4,000 instead of the $400 we paid in materials.

So the next time you think that you could be paying half of your rent with a loan, know that you’re not looking at the whole story. There are many factors that go into a mortgage, especially the initial ability to qualify for such loan.

5% Rent Cap

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The President issued a statement calling on Congress to cap rent increases at 5%, specifically for corporate landlords. The statement appears to define corporate landlords as those owning over 50 units in their portfolio. This was not an executive action that is implemented. And while my numbers are different than the numbers of a “corporate landlord,” I do think it’s worth hearing a landlord’s side. I feel that there’s a lot of spite against landlords without a lot of knowledge about their actual financials.

I admit that there is a possibility that some of these companies with large complexes could be raking in on the fees or “utilities” that are in the unit, without actually providing a properly maintained building, but that’s not the case for everyone that’s labeled as a landlord. No one seems to step back and see that this is a business model for landlords, and while everything else around us is increasing in costs, rent needs to as well.

No one predicted such a significant rise in product costs or housing costs in such a short period of time, but here we are. And landlords aren’t in the business to graciously eat the costs of homeownership for renters.

LANDLORD COST INCREASES

The Presidential statement released refers to a press release that starts with, “Today’s U.S. Labor Department Consumer Price Index (CPI) report revealed costs remained largely unchanged in May, with overall inflation cooling faster than economists expected as the Fed considers finally reducing interest rates below a 23-year high.” Is there a comparison to costs that landlords had to take on because the costs of everything increased faster than expected back in 2020-2022? Increases have been seen on small things like a maintenance call for a technician, but also big things like property taxes and insurance.

That same article goes on to state, “Since 2019, the cost of rent has risen 31.4%, with wages only increasing 23%, as tenants on average need to earn nearly $80,000 to not spend 30% or more of their income on rent.” In 2019, on one of my properties, the taxable assessment was $95,000, which equated to about $1,200 per year in taxes. In 2024, the taxable assessment was $242,000, which equates to about $3,000 per year in taxes. That’s a 61% increase in just my taxes over that same period of time where they’re complaining that the cost of rent increased by 31.4%. If rent had been set based on the 1% rule in 2019, rent would have been $950 per month. Had I increased 5% each year from 2019, it would be $1,212 in 2024. If I set rent based on the 1% rule now, it would be $2,420. However, the rent on the property is $1,750. So while it’s more than 5% each year since 2019 (the baseline the government is using), it’s set at an amount where I capture my expenses for owning the house, while also turning a small profit.

It’s taboo for a landlord to turn a profit, but that’s why we’re here. It’s an income stream that we’re establishing for profit. I don’t get to pay myself an hourly rate for managing the property. So this “profit” can actually be looked at like a salary. Every time I need to show the property to a prospective tenant, the lease signing, the walk through, every call or text you make, every trade that I need to schedule and coordinate with the tenant on, any fixes or improvements that I do myself. All of these minutes in a day add up, and I’m not directly paid for any of them.

On the particular house that I’m using for the example, we are assuming $300 per month in profit, which comes to $3,600 per year. Would you work as a manager of a company (e.g., hiring trades to fix things, performing maintenance, making sure all bills are paid timely, general management of having liabilities), for only $3,600 per year?

I wrote a post last Fall about the changes in my rental fixed costs from a year prior. I plan on doing the same this fall when more tax information comes due. The house I’m referring to has been at $1,750 for the past two years. However, between 2022 and 2023, my taxes and insurance have increased by $255 per year. That’s a cost that I’ve “eaten” from my “profits.” I could have said that equates to $22 per month increase, and I could have projected a similar increase for the year coming. I could change their monthly rent to be $1,790-$1,800 to keep my profits on a similar path. However, I didn’t, because they’re good tenants that haven’t had many maintenance calls.

However, if I don’t increase every year, then I could find myself in a sudden deficit like I did during the pandemic because costs increased faster than projected. A 5% cap could actually incentivize annual increases because I wouldn’t want to be caught behind and not able to catch up down the road.

LEASE TERMS

The Federal Housing Finance Agency announced protections for renters in multifamily properties that are financed with loans backed by Fannie Mae and Freddie Mac. The protections include: (a) requiring 30 day notice before rent increases; (b) requiring 30 day notice on lease expirations; and (c) providing a 5 day grace period before imposing late fees on rentals. I know for a fact that every single lease I’ve executed personally already has all of these requirements in it, at a minimum. In many cases, there’s a clause for 60 day notice of a potential rate increase, with negotiations being completed before 30 days from lease expiration.

Some states already have this codified. Other jurisdictions have landlord/tenant agreements that give the tenants rights (and awareness of rights) that can be lobbied against if the landlord is noncompliant.

There’s a clause that I’ve seen that requires expired leases to auto-renew on a month-to-month basis instead of for another year. I would argue that a requirement to renew a lease month-to-month instead of annually actually hurts a tenant. A landlord then only needs to give 30 days notice of a rent increase, and they could technically increase it month after month.

SUMMARY

If the ‘cap’ were to apply to me, then I’d be more inclined to increase rent every year. As a general rule, I increase rent for long term renters by $50 every two years. When we turnover a property, we will evaluate market rent in the area and set the monthly rent at what we see (which could be more than $50). In some cases, the evaluation ends up being too high, and we set the rent at something we think more people can afford. For example, there were comparable houses renting at $2,200 near a house we had listed. We’d rather get the property rented than shoot for top dollar, so we listed it at $1,600. While lower than “market value” probably called for, it was $400 higher than what we had it previously rented at, which covered cost increases that weren’t previously covered.

In the post that I previously linked, I highlight that our standard for increases barely offsets our increase in expenses. While we manage each house individually on setting the rates (asking ourselves: do we think the tenant can absorb the increase, do we have to increase to cover actual costs now), our monthly income among all houses was increased by $475. If you add up the cost increases for taxes, insurance, and property management (increased rent means increased fees because fees are based on the rent price), our costs went up $415 (and that’s before any service calls). On a whole, we’ve offset the ‘fixed cost’ increases. We’re taking ‘losses’ on houses where our routine for increases is slower. Therefore, having 13 properties affords us the ability to be more lenient with tenants and to keep good tenants in the house instead of forcing them out with hgher rent increases.

I support having protections in place for tenants. I’m sure there are landlords out there that aren’t interested in playing ‘by the book’ and just being decent human beings like I intend to. However, landlords are people too, and they’re running a business. Creating boundaries without fully understanding both sides of the situation and focusing on data points that only support your theory is unfair. I’ve joined the Landlord/Tenant Advisory Committee in my city. I hope to bring more awareness to the landlord side of things and bridge the gap between landlords and tenants when it comes to responsibilities.

Thermostats and Finances

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There has been a lot of talk about thermostat temperatures recently because of how hot it has been where I live. There are Department of Energy images circulating that say keep your home at 78 when you’re home, 82 when sleeping, and 85 when away from home. Personally, I need it colder at night than during the day, but that’s not the point. My goal here is to make you stop and think about your actions. This applies to several areas of your financial life, but this post specifically will be regarding your heating and cooling process.

THERMOSTAT SETTINGS

In our house in the summer, we keep the thermostat at 75 or 76 during the day on the 1st floor. It usually starts at 76 and then if someone feels hot, they bump it down to 75. Upstairs, it sits at 77 for the day, is put at 76 for when the kids go to bed, and then 74 when we go to bed. When we leave the house, the thermostats are at 78; if we leave for extended periods of time, it’s set in the 80s. In the winter, the heat is set at 65 during our waking hours and 64 or 63 at night.

As a quick aside, our third son was born early and was having trouble breathing and regulating his temperature those first few weeks. We were told to keep the house at 70 or greater for him. We struggled! We made it to 69, but everyone was uncomfortable and hot. I mentioned this to the doctor and he said it was fine to be at 68 if that’s what everyone felt more comfortable at.

While we know these numbers now, we spent a lot of years working on different settings. We didn’t just assume that these were the numbers we wanted to be at. There were winter months where we set it at 63, but my fingers were hurting because they were so cold while I typed on my keyboard, working from home. I was at a friend’s house recently; they had it set at 70, and I was cold.

That brings me to another point. What’s the thermostat temperature where you’re comfortable in the summer while wearing shorts and a tshirt? If you’re wearing a sweatshirt and have the temperature set at 70, is that worth the extra cost to run the air conditioning at that temperature?

TIPS TO SAVE MONEY

This image was shared by a local meteorologist, but a citation wasn’t given, and it differs slightly from the numbers that the Department of Energy published. According to this, we’re saving 19% in the winter by keeping our heat at 65, but then we’re spending 32% more in the summer based on the recommended setting.

While you may have your expected temperature setting, you may want to consider is how hot (or cold) it is outside. If it’s going to be 100 degrees, maybe set the thermostat slightly higher on those days. It’ll feel comfortable at a higher temperature because the unit is going to be running more, therefore pumping more air into the room than on an 80 degree day.

In the summer, another option is to keep the blinds closed. If you keep the sun from peering into the house, especially during the heat of the day, it’ll help keep the temperature lower so the unit won’t want to kick on as often.

My local electricity company provided suggestions to keep your bill lower. Their article said to grill, use a slow cooker, and make sandwiches instead of using the oven and stove, which create more heat for the air conditioner to have to counteract. You can also use fans in rooms where you’re sitting so that you feel cooler while the thermostat is kept a degree or two higher. Make sure your filters are changed regularly so that your unit is working efficiently.

I implore you to increase your cooling temperature by one and see how that feels. Live with that for a week and see if going one more degree helps too. It could be that the cost to run your heating/cooling is worth the level of comfort you feel, but it could be that you find a setting that is still comfortable and it’s worth the savings you reap.

Social Security Benefits

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Social security was signed into law by President Roosevelt in 1935. One of the intents of the program was to provide income for retired workers aged 65 or older. The purpose of the Social Security Act was to help destitute aging individuals who were not receiving regular income. The program calculations have changed a bit over the years, but the purpose has remained the same: provide a minimum income to aging individuals, not to provide a source meant as your sole income stream.

Today, most of the United States workers pay into social security through a 6.2% payroll withholding; such withholding ceases once you make $160,200 or more (in 2024). An individual’s year of eligibility is based on their birth year, rather than being exactly 65 years old like it was originally, and is called the normal retirement age. Additionally, there are penalties for filing early and bonuses for filing later than your normal retirement age. The year you file for social security has implications on your income, which I’ll cover later.

CALCULATING SOCIAL SECURITY RETIREMENT INCOME

Social security benefits are computed based on an individual’s highest 35 years of indexed income. The income is indexed, or adjusted, to account for inflation over the years. If you made $10,000 in 1985, that equates to making about $25,000 in 2022. I mention that it’s in year 2022 and not today because indexing applies to all income older than the last two years, while the most recent years are taken at face value. Indexing ensures that your future benefits account for inflation to make them fair and equitable in the year you need that income, and makes all of the annual salaries of your working years comparable.

Once the indexed total is known for all working years (up to the highest 35 years worth), the totals are added together and divided by the total number of months worth of earnings. The average monthly earnings amount is then used to calculate the primary insurance amounts (PIA). The PIA is the amount paid out monthly if an individual waits until their normal retirement age, which is a table published by the Social Security Administration (SSA) and is based on birth year.

According to the SSA website, an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2024, or who dies in 2024 before becoming eligible for benefits, his/her PIA will be the sum of: (a) 90 percent of the first $1,174 of his/her average indexed monthly earnings, (b) 32 percent of his/her average indexed monthly earnings over $1,174 and through $7,078, and (c) 15 percent of his/her average indexed monthly earnings over $7,078. The percentages are based in law, but the dollar amounts, which are called ‘bend points,’ are updated annually based on the national average wage index. These bend points ensure the program weights benefits to lower income earners, and phases out benefits as an individual’s income increases.

Here’s an example that shows how the bend points are used to calculate the PIA, which is the monthly benefit amount that would be paid out to someone who retires at their normal retirement age and is eligible to receive 100% of their PIA. The monthly indexed earnings over the life of their 35 year career was $10,000. The bend points are applied to each bracket of income up to their max of $10,000, and then the bend points are added together. The total is rounded to the nearest dime though.

If you draw before the normal retirement age, but no earlier than 62, the PIA is reduced by as much as 30%. If you draw after your normal retirement age, the PIA is increased by 8% per year, until you reach 70. In the above example, the earner who made $10,000 a month average over the course of their career will receive ~$3,383 a month if they file for social security benefits at their normal retirement age (in 2024 numbers). If they chose to draw at 62, they’d receive 30% less of their PIA, equating to approximately $2,368 per month. However, if they chose to draw later than their normal retirement age, they would receive more than their PIA (with the amount depending on their normal retirement year).

As you can see, social security is not intended to replace your pre-retirement income. It is meant as a safety net to ensure some level of financial security. If you’d like to live a more lavish retirement, you need to plan ahead with additional sources of income/savings to draw from (e.g., retirement plans like a 401k, Individual Retirement Account (IRA) contributions).

WHEN TO DRAW

We recently heard a conversation where someone told another person that they should definitely claim as soon as possible. However, if you’re not in a situation where you absolutely need that income per month, it’s best to wait. Once you draw, you lock in that dollar amount, save for cost of living adjustments as authorized. Cost of living adjustments for inflation, or COLAs, are based on the Consumer Price Index and announced annually in October.

The year you draw is based on your outlook on your life expectancy, your income need based on lifestyle, and your other income sources. This isn’t a decision you need to make at 35, but you should be watching and planning this over the course of your life. If you’re in good health and active at 62, and have saved enough to live off other funds or are still working, it likely wouldn’t be in your best interest to claim social security benefits.

If you’re born in 1960 or later, your normal retirement age is 67. At 67, you get 100% of your PIA. If you file at 62, which is the earliest you can file, you get 70% of your PIA. If you wait to file until after your normal retirement age, then you get 8% each year until 70. On the graph above, I used a PIA of $3,500 to determine the values for the example. You can see that if you were to file at 62, your cumulative income line over the rest of your life time is a flatter line. You’re receiving a smaller benefit, so it’s adding up slowly. Where the lines intersect is how you’ll determine your break-even draw year. For instance, if you think you’ll live until at least 77, then it’s not worth doing an early draw at 62 because a draw at normal retirement age will provide you more income over the course of your life. If you think you’ll live past 81, then deferring your social security filing until 70 yields the most lucrative scenario.

RETIREMENT AND WORKING

There are stipulations associated with claiming benefits and still working, which is another factor to consider when drawing social security. If you’re 62 and still working, then it may not be in your best interest to collect social security. While you can still work while claiming social security, the SSA may reduce your benefits. The SSA reviews income earned against benefits paid out, and may adjust if there was employment income in the previous year (i.e., income based on pensions or other retirement benefits does not constitute current employment income).

If you are under normal retirement age for the entire year, the SSA deducts $1 from your benefit payments for every $2 you earn above the annual limit, which is $22,320 in 2024. In the year you reach normal retirement age, the SSA deducts $1 in benefits for every $3 you earn above a different limit, which is $59,520 in 2024. It’s likely you don’t “need” that money because you’re still working, your benefit isn’t increasing like it would if you deferred, and you’re actually receiving less money in benefits than based on the normal formula.

SUMMARY

There is no hard and fast rule on when to draw these benefits. The point is to be educated on your options. We don’t recommend you rely on someone else’s opinion on the matter or how it worked for them, as each person’s variables are different. Generally, if you’re in good health and still producing income, drawing on the social security benefits earlier than normal retirement age isn’t going to be your best financial move.

As is the case with most personal finance topics, having diversified income sources in retirement, regardless of what age that is, will set you up to make decisions absent emotion and desperation, and for the betterment of your entire financial picture. Utilize your 401k and all available match, your IRA, your taxable savings, and perhaps your pension, so that Social Security is just one more tool in your financial picture, rather than the only one.

Mentality, Consistency, Follow Through

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When I was little, we had friends come to our house a lot. When a certain crew came, they raided the candy drawer like they hadn’t eaten in a week. It was quite a binge. It’s because there was no candy in their house. They were fed 3 small meals each day, and that was it. They had the mentality that they needed to get everything they could in a small period of time. Because they hadn’t been taught self-regulation by having regular access to things, they didn’t understand moderation.

To me, I had access to the candy drawer in my house whenever I wanted. Therefore, it wasn’t exciting to me. It was there if I wanted something here and there, but it wasn’t something I felt the need to covet. I do the same with my kids. They have full access to the pantry. They know the things that are “good” for you, and they know they can take that without asking. They do ask if they can have any of the treats in there, and unless it’s close to a meal time, I try to give more “yes” responses than denials (and my denials always come with a reason).

I use this story regularly in my life it seems. It seems focused on a healthy relationship with food, but it’s really an overall concept of understanding the mentality it takes to make informed and beneficial decisions all day, everyday.

DELAYED GRATIFICATION

We did a stent with a multilevel marketing company. They preached “delayed gratification.” It was meant to say that you shouldn’t spend now because you’re going to produce a significant amount of income in the future, and you’ll be able to spend greatly at that point. Unfortunately, Mr. ODA and I are too cynical to watch that unfold. We took note of every “extra” our “upline” spent that wasn’t hitting that mark.

They who would go on a big trip with the statement, “well it’s ok because it’s for my birthday” or “it’s ok because it’s the last big trip that I’m going to take with my mom.” There was always another trip. Or the big, fancy, rent out a space, decorate to the nines, buy a new outfit, birthday party that happened almost annually. There were excuses to justify these actions that were clearly against their “delayed gratification” preaching, but they thought it was ok because they were “debt free.” They didn’t buy a house, continuing to throw money to rent year after year so that they wouldn’t have a mortgage.

There was a guise of having a “big picture” mentality, but the execution of the financials didn’t add up to us. If you were really in delayed gratification mode, the $3,000 you spent on a trip could have been saved towards a 20% down payment on a house at 2.5% interest rate. That’s what Mr. ODA and I did when we had to pay for a wedding and buy a house in the same year. We set a goal to spend no more than $5 per person, per day on food. We didn’t eat at restaurants. We didn’t go on huge trips (although we did do some weekend trips to visit family). Because of those years of ‘pain’ we went through, we bought a house with no mortgage insurance, and that house turned into 4 houses when we sold it.

I digressed. The point here was that creating a mentality of “delayed gratification” is setting yourself up for failure. If you created a habit of proper spending and a mentality of being able to discern whether the cost of something is worth it to you and your goals in real time, there wouldn’t be these “slip ups” of wanting to take that big trip or wanting to fill a void by throwing a lavish party.

In February, I started a diet. I was working out for a year at that point (after having our 3rd baby), and the number on the scale was exactly the same. I felt better, but I wanted that number to go down. I started reading up on diets, and this concept I found clicked with me. If you commit to a diet that is really restrictive, you’re going to fail. If you can’t have any carbs, then you end up having a binge day to make up for that desire. The concept of depriving yourself of something is more thought-consuming than if you had taught yourself moderation.

This diet concept was to alter your eating each day so that it keeps your metabolism on its toes. One day, eat a lot of protein. The next day, eat your carbs. Go back and forth. I was consistent on this for 3 months (see, best laid plans fail – between end of school things and travel, I haven’t put the effort in), and I lost 17 pounds with little effort. I haven’t been paying attention to this eating pattern, and I’ve been stagnant again. The whole point was that if you deprive yourself of something you want, then it’s going to consume you and make you unhappy. But if you eat in a thoughtful manner, then you’re happier and have an easier time reaching a goal and sticking with it.

RIPPLES

The decisions you make today affect tomorrow. The habit formed by thinking you had a hard day and deserve a “treat,” or that “it’s vacation so we should each have a $10 ice cream at the amusement park,” have ripple effects. I have another post about how people make fun of those who say don’t spend $5 on coffee everyday if you want a better life. Most people see it as a literal $5 per day (granted, it’s more like $7 or $8 at this point), do the math, and then say sarcastically “wow I’m a millionaire.” No, it’s the mentality. It’s the concept of teaching yourself that you don’t need to purchase an expensive coffee everyday, or you don’t need to buy lunch everyday at work, or you don’t need to overspend on treats once per week.

Someone once made fun of us because we like to go exploring new towns and find hikes, while his family goes to Disney at least once per year. I’d venture to say that our trips, where we spend time with our family and learn about new places and things, are more stimulating. I don’t hate Disney (Mr. ODA does though 😉 ), but I don’t see it as something to go to every year with no other experiences. But our trips that end up costing about $1,000 allow us to go do more things. We can do more activities when home, we can go on more trips, we can put money into savings accounts for our kids.

This summer, we have plans to be in 7 states outside of our home state. My kids are extremely happy with just the concept of staying in a hotel or “vacation house.” Add in swimming in a pool somewhere, and they’re ecstatic. I don’t have a desire to teach them that vacation is when you get to eat everything you see and buy whatever trinket you want. If you intentionally spend throughout the year, you end up with things that are more valuable to you than if you buy several trinkets just because you’re on vacation (really – when was the last time your kid played with that light up spinny stick from Disney on Ice). I want to teach them the value of their time, their money, and their family. I want to try my hardest to set them up for success because they understand the value of things in the big picture, and not just the instant gratification that lasts for a couple of days because they go that little toy we walked by.

Tax Returns

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Typically, I write a post around this time of year on how we handled submitting our taxes. This year, I’m going to focus on the return itself, and the concept that a large return is somehow “gaming” the system.

OUR TAX FILING

First, I’ll remind you of our process. I spend all year getting ready to do our taxes. This isn’t a last minute activity where I’m trying to find all the income and expenses and recreate data. I know more than one small business owner that constantly files for an extension because they’re not ready. Make it a routine all year to be organized. This way, once the year is over, you’re just verifying you have everything recorded, instead of compiling all paperwork and documentation for the first time. It’s less stress and you’re doing less work (because it’s still work to file the extension).

Most people have just their W2 income, maybe a little other income, and a standard deduction. However, if you have any more than that, you should make it a whole-year process. I have a spreadsheet that I keep for each rental property. I copy the template over each year for a new workbook, keeping the basics (rent income, routine utility costs, taxes, insurance, etc.) and deleting the extra maintenance costs that went into the houses (plumbing calls, HVAC repairs, etc.). As expenses occur through the year, I input them into the appropriate tab in the spreadsheet. At the end of the year, I verify I have all my receipts/invoices recorded.

Then Mr. ODA sits at his computer while I read off each house’s totals from my spreadsheets. This year, I think we hit a record in that it only took about 90 minutes to do our taxes! That’s probably the quickest we’ve done it since we’ve had all these houses. Actually, let me back track for one second there. I’ve spent all year preparing for tax season by inputting information as it happens. Then I spend about 2-3 hours reviewing all the data to ensure I haven’t erroneously recorded data, haven’t missed data, or haven’t omitted recording an expense or income. But the actual time that it took to go from spreadsheet into software and press file was 90 minutes.

“THE GOVERNMENT IS SAVING FOR ME”

A financial friend asked for “financial wins” recently on Instagram. Someone responded that they received a $5,000 tax return. He then said that he had several people comment that this isn’t a win, but he came to this person’s defense that some people need the government to do their savings for them. He said that, for some people, if they had an $100 each week of the year, they would have spent it frivolously.

I actually think that’s an excellent thought process. I see where he’s coming from there. Instead of someone thinking “let me set aside $100 this week to put towards debt,” it just becomes part of the pot of money that goes out with each pay check. That’s also easy to see as not worth putting towards a separate financial goal because it feels like not enough.

My frustration with the thought process of wanting a large return is that people think they’ve gamed the system and done something special to obtain (or earn) that amount, rather than realizing it was “their money” all along. You can project your tax burden for the year; it’s not a secret formula. Paycheck withholdings throughout the year simply allow you to work with your employer to gradually meet that tax burden as you earn your salary.

We project our tax burden each year. Sometimes Mr. ODA doesn’t listen to me on what our net for the rentals is going to be, and then we owe a lot come April, but that’s our own fault for not projecting with the right variables. For most people, the projection is a much simpler formula.

AIM FOR A $0 TAX RETURN

If you are someone who is going to put that $5,000 towards something productive, rather than frivolously spending it just as you would have all year, then that’s fine. However, I encourage a look at your opportunity costs.

Did you receive your tax return and go buy a 75″ tv? Was that a necessity? Did the money that went towards that tv have a better financial purpose?

Did you spend the whole year living paycheck to paycheck and worrying about the next bill to come in? Did you pay bills late because you needed funds from a future paycheck to cover the balance?

Did you spend the year carrying credit card debt, paying 26% interest on the balance, and then wait for your tax return to pay towards your balance? If you did, then maybe realize that the $5,000 you got in a lump sum could have saved you in interest costs had you just put $400 extra per month towards your credit card balance.

If you pay $200 per month (assuming a 26% interest rate):

If you pay $600 per month (that extra $100 per week that went into your taxes paid instead of into your pocket all year, causing a $5000 return):

You’ve paid off the balance in less than a year, and saved $1704 worth of interest payments. If you had paid $200 per month for a year and then used your tax return to pay off the balance, you’d have paid about $1,100 of interest, and then would be putting over $3800 of your tax return to pay it off. You also have the benefit of not having a bill hanging over your head at some point within that year, instead of worrying about meeting the minimum payments and continuing to accrue interest.

SUMMARY

So that’s my angst with the “financial win” of the tax return. Something as large as $5000 is an entirely different ball game than $500. Looking to get some money back and using the taxes as a ‘forced’ savings is an option. Perhaps you use that to take the only vacation in your year. But that should still be a reasonable vacation. Spend $1000 or $1500. You don’t need a $5000 vacation when struggling to pay bills or having debt that’s accruing interest.

So while I agree that the forced savings could be an excuse for a large refund, once someone receives a large refund, there should be an evaluation of their financial standing and an education on how that could be turned into a true, productive financial goal.

LLC Filing with FinCEN

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I was chatting with a financially savvy friend of mine, and she asked about filing our Limited Liability Corporation (LLC). I had no idea what she was talking about. Mr. ODA had no idea what she was talking about. I sent a text to 3 of my investor Realtor buddies (in two different states), and none of them heard about it. So I started digging.

Sure enough, if you have an LLC, you’re required to file with FinCen this year.

So here’s my attempt to let a few more people know of this legal requirement that carries fines, yet no one decided an email or mailing to LLC owners (which are filed with the State governments and are required to have physical mailing addresses) would be worth their time and cost of a stamp.

THE CORPORATE TRANSPARENCY ACT

On October 23, 2019, Congress passed this Act. The purpose being “to ensure that persons who form corporations or limited liability companies in the United States disclose the beneficial owners of those corporations or limited liability companies.” Essentially, they’re trying to ‘crack down’ on companies using LLCs as a shell game to move or hide money, or pay into criminal behavior.

It states, “Criminals have exploited State formation procedures to conceal their identities when forming corporations or limited liability companies in the United States.” In 2006, an international body determined that the United States fails to comply with beneficial owner information reporting, and gave a July 2008 deadline to fix it. The United States Federal level had urged State laws to comply, but didn’t follow up, and was cited again for failure in 2016. Since the States didn’t make progress, Congress issued this ruling.

The Act states that nearly 2 million LLCs are formed each year, with few States requiring beneficial owner information. A beneficial owner is generally someone who exercises control over the company, owns 25% or more, or receives substantial economic benefits; there are exceptions listed in the law.

While this was passed in late 2019, they then needed to establish a way to securely collect and retain the information reported. FinCEN established a Beneficial Ownership Information (BOI) website, in which you’re required to enter the pertinent information. It opened January 1, 2024.

Because this is the age where there are scams around every corner, note that this is a ‘.gov’ website, and their logo is below (i.e., don’t enter your personal information into a third party website).

REPORTING COMPANY

A reporting company is those that qualify based on the law’s detail. There are either domestic (registered here, doing business here) or foreign (registered in another country, doing business in the United States) reporting companies.

There are 23 ways a company may be exempt from reporting. The general gist of the exemptions are based on whether you’re already reporting to the government in another form (e.g., banks and accounting firms). “These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.” Don’t assume you’re exempt; be sure to check the list on the official website.

BOI REPORTING

The reporting is straightforward. You will need a legal identification card image uploaded for each person entered in the system.

From the main page, I selected the icon that said prepare a BOI Report. I chose to prepare and submit, so it’s a form within the website. There’s another option that appears to allow you to fill it out in PDF form and submit the form. I preferred the prompts along the way.

Below is a snapshot of the information that’s needed in the initial filing.

When we set up our LLC, our drivers licenses were copied, so this request isn’t for anything more than we’ve already provided to our State. For us, establishing an LLC was solely a way for Mr. ODA and I to create an ownership stake in two properties that we purchased with a partner. Though there are 3 of us listed in the LLC, Mr. ODA and I are 50% partners together, and this other guy is a 50% partner. I pay him out at 50% each month after I collect rent.

It’s very simple; I’m sure there are LLCs with employees and more paperwork. However, I didn’t need a social security number for the beneficial owner(s) or any dollar amounts paid. We did establish a EIN for the LLC several years ago, so I submitted that EIN for the reporting company. Otherwise, I would have submitted my social security number as the company’s identifier.

There are more details associated with the reporting; for instance, you can update your report through their website. However, I’ll leave it to you to dig deeper on all those instances, as I’m just trying to build awareness.

DEADLINES

As with all new systems, there’s a phased approach to the requirements.

If you were already registered before this year, then you have until January 1, 2025 to file the initial BOI report. If you create an LLC during 2024, then you have 90 calendar days from the registration effective date to report. For all LLCs created on or after January 1, 2025, you have only 30 calendar days to report.

“Cheap” Flights

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I recently went on a trip. We booked one of those “cheap” airlines, where you pay a la carte. Our round trip flight was about $50. In the process, I was amazed at the number of people who were frustrated by the rules, as if you don’t have ample opportunity to learn the rules in the process. So I wanted to go through a booking, to show you that there are plenty of warnings, and that it may or may not be cheapest to go this route.

I’m going to pretend to book a flight. From Cincinnati to Orlando, round trip, I found a flight for $87.96. The next page asks for my personal information. They then offer me a few options.

The price highlighted is for one way, and in smaller font, it indicates the round trip price. This could be a bit more straight forward, since my selection is for a round trip flight, so one way worth of baggage isn’t the expectation. I decide to ‘continue and customize.’ The next page is seat selection.

Every single seat has a price associated with it. Again, this could be more straight forward. Nowhere on the page does it clearly indicate that you don’t have to pick a seat. I click “continue.” There is a link below continue that says “what if I don’t pick,” but I didn’t check that. The next page causes me to pause and lets me know I should rethink my options.

I select no thanks. The next page provides my carry on and checked bag costs. I can select that I want to carry on and board first, just carry on, or have no carry on. I select no carry on and no checked bag. As I scroll down, it lets me know that I can have a personal item for free, and it lets me know the size restriction for this personal item. It tells me multiple times on this page that bags will be more expensive at the airport.

I click continue, without selecting any baggage, and it halts me again.

I then get asked a few questions about the check in process and any other add-ons. I decline everything, and I’m sent to the payment page. At the end of the page, I have to agree to several things, including baggage requirements, before booking.

The entire point here is that this airline has warned the consumer several times, through multiple pages and “clicks” that there are fees outside of the ticket price. So even if you didn’t know that the reason you found such cheap flights was because their pricing is a la carte, they’ve told you multiple times through the booking process. Similarly, you know going in, on any airline, that a bag over 40 or 50 lbs is going to be considered overweight.

It was frustrating to watch so many people get mad that they checked your bag size as you boarded the plane. You signed up for that. You could have checked the size. I read the wrong section when I packed my bag, so I had verified it as a carry-on size, which I didn’t pay for. I was able to move things around in my bag for it to be able to fit. If it didn’t fit, I knew that mistake was on me, and I’d pay the fee. The fee in the airport was $99. Yes, it seems astronomical to pay that fee for something that you can walk on with if you’re flying Delta or American, but it’s the rules for this airline, and I know that going in. I could have adjusted things for the flight home, so my total for this roundtrip would have been $150, still cheaper than roundtrips on other airlines.

For the pretend flight I went through above, if I had selected The Perks bundle, my total would have been $279. I’d get a carry on, checked bag, and the ability to select my seat at that price. Had I selected just a carryon each direction, my total would have been about $225. For the same dates, I could fly more inconvenient schedules (e.g., midnight arrival) for $209 through American.

When comparing the prices, you need to see what the best options are for what you need. If you can’t get by with just a personal item, then you need to factor that into the flight cost when comparing to other airlines. If you can’t handle the psyche of having your bag checked for size when you board the plane, then stick with the traditional airlines.

Be an informed traveler. Know the fees associated with your airline. Know the restrictions for each item. Plan in advance instead of having to move things around at the airport where you’re going to feel the stress.

Funds Management in Excel

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At the beginning of every year, I set up two spreadsheets in Excel. One is for our personal money management, and one is for each property’s expenses in the year (that will eventually be put into Schedule E in our taxes). I regularly mention using Excel to track your income and bills, so here’s a quick snapshot of what I do.

These are all dummy numbers, but otherwise, this is my spreadsheet set up (with several lines eliminated to reduce your visual clutter). The top purple section is rental income per house, the green section is rental property expenses, the blue section is our home’s bills, the gray section is what affect’s Mr. ODA’s account instead of our main checking account (Mr. ODA has his original account from before our marriage (I have access to view it) because of benefits associated with the linked credit card, and it was never worth closing it or adding my name to it). The white is what’s left over. The blue section is not necessary to be a different color and is left over from another way I tracked bills, but I’ve left it to differentiate home bills versus credits and investments.

The final line of “Other*” captures items that only occur once or twice a year, but have a significant impact on the checking account or is a deadline I want to be aware of. I keep the preschool registration fees on there so that it’s on my radar that registration comes due at about this time. In future months, I have taxes that are due for houses we have not escrowed, which is about $1500 worth in June and about $4000 worth in October.

The columns are organized by Mr. ODA’s pay check date. His pay check appears in the account every other Saturday, so that’s the date at the top. Then I’ve put all the income or expenses that align between that pay check’s date and the next pay check’s date in that column. This helps me project whether I’ll need a transfer from savings to cover the checking account balance. This particular section of the spreadsheet doesn’t show account balances, but you get the gist of the organization.

Each year, this is tweaked a little. I eliminate lines that are no longer necessary (for instance, our HOA is now paid annually, so I don’t need a line taking up space for a once-per-year bill). I add lines that become necessary (cable used to be paid by credit card, but now there’s a fee for that; since it affects our checking account monthly, it gets a line). It would probably be better to separate out my “investments” line into the specific transactions that happen each month, but I didn’t want more lines on my spreadsheet.

When rent is received or a bill is paid, I change the font color to gray. This indicates that it’s done and helps eliminate visual clutter for me. I can focus on the black font, which indicates to me it’s still due.

As I get closer to each pay check column, I update the projections. For example, a credit card may have had more than average expenses on it. This could happen because one credit card has a quarterly bonus for gas purchases. So while it’s typically $100 for a statement, it may be more like $200 because of the gas purchases on it. I update the projected payment because I need to monitor the checking account balance too. I also keep last year’s utility bill amounts in each column. I use this to track whether this year’s payment is comparable to last year’s at this time, so I know whether to look further into a bill because it’s significantly different than last year’s (for example, if last year’s June gas bill was $30, and this year’s June gas bill is $60, I want to check to see why it doubled, whether that means a leak or error in billing).

Every person’s tracking is going to look different. You may just have rent and utility bills to pay, and you can manage it via email notifications. You may want a more active approach to the tracking and use a spreadsheet in some fashion. This is just a start for you to have a visual in how a spreadsheet may be helpful in your money management, and may even help eliminate late fees or billing errors because you’re more actively managing your money.

New Year Financial Organization

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Two weeks ago, I shared how I organize my home and manage my time. I have my own home’s finances, thirteen rental properties, three kids with two in school, investments, and whatever other ad hoc bills show up to manage. I don’t have the ability to think in a quiet and distraction-free environment after 7:30 am. That post was all about the little steps I take at the beginning and end of my day that help set me up for success. This week is what I’ve done to organize our finances to ensure bills are paid on time, while managing it against what income I’m expecting. This also has tidbits on organizing yourself so you don’t end up with missed bills.

One problem that I run into is business hours. I seem to be working with a lot more companies that won’t let me make payments online and require a phone call. It’s so frustrating. So after a morning of my chores and managing the 3 kids, I need to put on my big girl pants and muster the energy to make my phone calls while the baby naps (and the two big kids are likely placed in front of the tv… except they like to tell me about the show they’re watching while they watch). Then there are ones that are even worse because they require me to leave a message for someone to call me back, even though my ability to have a coherent conversation is really only within these 2 hours of the day. For example, I ended up scheduling my son’s surgery while finishing up check out at Home Depot and walking out the door with two children in tow.

FINANCIAL ORGANIZATION

Every year, I need to set up two spreadsheets. One keeps track of our income and bills, and the other keeps track of property-specific income and expenses. While an investment property tracking mechanism isn’t something that everyone needs, a way to manage your bills is. My financial tracking spreadsheet has been used in the same exact form since 2012, when Mr. ODA and I got married.

Before I get into the spreadsheet tracking mechanism, you can do something as simple as a calendar appointment. At this time, the preschool director sends an email with a new link every month to pay tuition. Last year, it was the same link all year with no reminder email. Since this was something I wasn’t used to, I made a calendar appointment on the first of every month that said “Tuition Due.” I check my calendar every few days at the very least, so I didn’t need it to notify me; but you can set it up to send a push notification or an email if you need one of those forms to help with the reminder.

Mr. ODA gets paid biweekly. The paycheck shows up in our account on a Saturday, so my tracking is by that date. For example, his paycheck showed up on the 6th this month. I also expected to have most of rent paid on the 5th (falls on a Friday, tenants have a grace period until the 5th without a late fee, and it’s just after the holidays). I have each house listed with their respective rent due. As rent comes in, I turn the font color to gray from black, which is my indication that it’s been received. If I’m not expecting rent until later in the month, then I move it out to that two-week period column.

For expenses, I list anything that will come due between the 6th and the 20th. This includes all mortgage payments, utility bills, credit card payments, and investments planned. Again, as they’re paid, I turn their font from black to gray.

This process is necessary for me because of the number of bills I have to manage. The spreadsheet is an indicator to me that a bill is coming due, so if I haven’t noticed an email or mailing with the bill amount by a certain date, I go search for it. I don’t want to miss a payment. Sometimes, a system is updated and your email is missed, or there’s a glitch, and then there’s no email sent as the trigger for me to pay it. I like having the spreadsheet as a “safety net” for our bills.

MAIL ORGANIZATION

Nearly all of my bills are sent electronically to my email, but I sometimes receive paper mail. It could be a medical bill, a rental’s utility bill, tax bills, etc. I open all my mail the day it’s received.
– I separate out the junk mail and put it immediately in the recycling bin. A pile of envelopes building up over the week just creates distractions. You see a big pile that needs attention, and it’s a daunting task. If you eliminate the things that don’t actually need your attention immediately, it leaves a smaller pile for you to see.
– I lay papers that don’t need action, but I want to keep on file, in a pile at the bottom of my stairs. Many of these could probably be eliminated because I have access online. But sometimes it’s easier to have a paper version available. For example, my EOBs are mostly available online. Sometimes they don’t load on the website, and sometimes I need to take notes on issues I’m working on with them (which is far more often than I’d care to admit for a service I’m paying for).
– I lay the papers that need action on my “to do” pile, which is in the kitchen. When I worked in an office and didn’t have kids, managing these bills was a lot easier. Now I’ve set up a routine where I check the pile every Friday. The pile is visually available; it’s not in a basket or a drawer. There have been a few times where time flew, and before I knew it, I hadn’t checked the pile in 3 weeks (newborn life!). The scare that I remembered to pay a bill right on the due date, and by sheer coincidence checked my pile that day, made me establish a more consistent expectation of myself to look at the pile every Friday.

EMAIL ORGANIZATION

When I was working, this was a hot topic. I stayed on a top of my email. I verified that someone else didn’t respond to an email before I responded. I didn’t attend a meeting and state that I hadn’t seen an email pertinent to the topic discussed. I didn’t have leadership coming to ask me for a response to something that they didn’t receive timely.

I hit low hanging fruit first and reduced the clutter. This is the same concept as getting rid of the junk mail you get. I skimmed “all employee” emails to see if it was pertinent to me. I either read it right away (because these are just reading emails and won’t require an action) or I deleted it right away. I see people often just leave it sitting in their inbox unread. It’s a distraction. You’re constantly looking at something that needs to be dealt with, and it’s taking brain power away from the things that you really need to focus on.

Then I looked at emails from my direct leadership team. These items could be not pertinent to me, could require immediate action, or could be part of a larger situation that needs attention. After that, I focused on emails from my counterparts at the State. They’re my “customer,” and typically these emails are issues that need addressed timely.

Essentially, I’m skimming all emails and mentally filing them into how quickly they need attention or how much effort they’re going to take. If I can answer an email without any further research or effort than just typing the response, then I do that. I then immediately file the email because it’s “done.” I get it out of my inbox so that I can continue to focus on what needs addressed. At the end of this, I should only have a few emails left for action, and I get to work.

I manage my email the same way now, for my personal needs. Store coupons and such get deleted right away. A coupon is rarely good for more than a month, so I use my trash as the filing system there (which gets automatically deleted every 30 days). If I go to Kohl’s, then I just do a search in my trash folder for the latest Kohl’s emails to see if I have a coupon. I keep all emails that require action in my inbox. Right now, I have a Walmart order confirmation (so I’m tracking to make sure it arrives), a medical bill, a reminder from the Y to pick up a shirt, and the kids’ tuition email. When I’m done writing this, I’m going to go pay the two bills and immediately file them into their respective folder. When my Walmart order arrives today, I’ll delete that email. I’ll be going to the Y in the next couple of days, and once I pick up my shirt, I’ll delete that email.

BILL PAYMENTS

A lot of people would prefer to set up an auto payment for their bills. This is fine too, but that means you need to be keeping a balance in your checking account to cover all bills. I prefer to pay the bills based on what’s projected to be in my checking account, which is variable throughout the month. Some months, the pay checks align that mortgage payments to be paid on the 5th, sometimes it’s the 10th. You can only transfer out of a savings account 6 times per month, so I’m always managing that aspect as well.

The problem with auto payment is that you’re probably using that to “set it and forget it.” That’s not a great approach with bills. It’s a good approach if you’re sending $500 a month into your Roth IRA account, but not great if it’s your utility bill. If you’re usually seeing an electric bill for $75, then suddenly get a bill for $150, are you looking to see why that occurred? I did. Last year, I had a bill for $210 show up suddenly. I checked the meter against what they said the estimated meter reading was. They told me that the difference didn’t amount to enough to warrant an immediate credit. I thought that was unfair; I can afford to float that, but I don’t think everyone could suddenly absorb such an increase. I didn’t pay 2.5 months worth of electric because the actual readings were so much lower for the next couple of months.

REDUCE SUBSCRIPTIONS

Do you know what you’re subscribed to? Pay attention to all your charges over the next 5 weeks. Carefully consider what’s coming through. I’ve heard people say they didn’t realize they were paying two FabFitFun boxes. I’ve heard people say they’re paying for a Stitch Fix subscription that they haven’t used in 3 years. There are companies and apps out there that are trying to sell you a product to review this on your behalf. Is it really worth paying a fee to see what fees you’re going to save money from? No. Just put the effort into reviewing your statements now. Set a reminder in your email to check your week’s worth of charges at the end of each week. Pay attention.

What that company won’t do is help you decide if a subscription is worth it. Are you paying for 5 streaming services? Are you currently watching shows on all 5 platforms? Probably not. Go through phases. If you’re only watching one show on a platform, then you probably only need that subscription for a month or two of the year. We were subscribed to Peacock, but the only thing we used that for was The Office, which we put on as background noise; we cancelled that.

Have you been paying attention that a subscription has increased its cost? Is it still worth that price to you? These are things that you should be routinely asking yourself.

SUMMARY

The same goal applies in your daily routine as it does here: reduce the clutter so you can pay attention to what’s important. Reduce the number of subscriptions that you have coming in, reduce the number of papers you need to go through by immediately throwing junk mail away, set up an organized bill system so you stay on top of it instead of opening your mail once every two months.