The Power of Laser-Focus

It’s 2012 and I started a blog.

It is regularly updated, my finances are scrutinized, and for 9 months there are bonus payments of around $2,000 being hurled at a crumbling mountain of debt while I am actively searching for ways to do more damage.

 

Fast forward to April 2014 and the goal is to be complete next month. I make a chart.

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Every small square vertically is $1,000. Every three squares horizontally is a month.

 

What happened?

My focus and primary purpose altered. Not into another singular defining purpose, but into many half-thought out, ambiguous avenues that over 14 months led me right back to where I started from. My sole goal of crushing 90k into submission generated a successful side-gig. I foolishly allowed myself to think that my money was more secure in a checking account that was being rapidly turned over into growing piles of phones and cash because it’s rate of growth was far greater than the interest rate at which my debt was growing. I figured that more money would create even more money, with the hazy end-goal was to accumulate a $70k stash and just pay off the loans in a lump sum. And for a while, this worked GREAT. At one point early on, I had working capital of around $9k.

But unfortunately the feigned security of this method was no match with the finality of committing a few thousand to a loan. Money that would have been instantly and forever paid back and no longer adding interest to the balance was put at risk. My aim to create large piles of cash turned into the push to find a multi-plex in my new city to owner occupy… which actually was a pretty awesome idea. After the reality of rental property price tags in my area and the lack of any 3 or 4 unit properties in town, I had a small sum of cash with no purpose. Dollars with no name. So I figured I would grow my business. I got greedy and got scammed. I tried new things (small clothing ecommerce store, web-design outsourcing, Akron, Ohio Snow-plow outsourcing, resume designing) but didn’t fully commit to any of them. I made some money, but lost more than I made. After all is said and done, the total money and assets of my “business” are now roughly equal to that which my brother loaned me last summer to get things back off the ground.

 So yes, I am effectively back to square one.

But square one is better than the aimless alternative that I have been drifting in. My purpose is renewed, and only needs to be applied to my current circumstances. It is not a coincidence that within 3 months of my last “progress report” in November of 2012 all debt reduction was stricken to the minimum. This trend will be reversed with some soon-to-be-written posts of in-depth analysis of current budget and spending that will give me a direction from which to go from here, and a revised, more realistic timeline than May 2014.

 

$2500 in tax-refunds and April music gigs are going to get this party started again.

The Final Lap

After several months of life getting in the way of my mission, I am posting to say that I am back and am hitting the ground running.

Do I have lots of catching up to do? Yes.

In fact, I can’t remember the last time I looked at my loan accounts or updated a spreadsheet. Yes, I just had a month between jobs where I did not receive a salary. Yes, the rent and utilities in our new city are $350+ more a month. Yes, I have less free time in the afternoons/evenings with my new job. But, you know what, it doesn’t matter. April 2014 is the goal, and I’m going to bust everything I have to bust to get us there.

The phones are no more. They are a time sink, a headache, and I found that I had really maxed out what limited monetary benefit they were bringing. I was lucky to bring in an extra $1,000 a month, and that was if nothing went wrong. Instead, I’ve turned to Flippa.

What do hoodies, snow plows, and the grammy-nominated rapper J. Cole all have in common?

The answer: NO MORE UNT DEBT

 

 

Stay tuned.

How a $6,000 Mistake Improved My Life

paris_tuileries_garden_facepalm_statue

Six weeks ago, my side hustle of buying and selling cell phones had accumulated tons of momentum. I had a revolving door of inventory and my snowball of liquid capital was growing larger and larger. However, the growth of my business was linearly related to the number of available hours at my disposal, and I had reached the point where I had no more hours to work. For growth to continue and become exponential, something had to change.

I had two goals for myself: 1) Find a way to reduce the number of hours committed to my side hustle, and 2) Increase the amount of money I made per hour. Several months ago, I had attempted to achieve these goals by purchasing used devices in bulk from an electronics company on the west coast. While the venture was profitable, it came with so many headaches that I chose not to continue my relationship with the company. Since then, my eyes and ears remained open and I eventually found an “opportunity” that I couldn’t pass up.

In hindsight, I can see everything that went wrong: The facts I could have checked more closely, the red flags that should not have been ignored, and the need for a second opinion. The wool was pulled over my eyes and I blindly followed that pied-piper’s song. The scam artist walked away with $6,000 and I was left standing in the dust, wondering what happened.

I found myself dumb-founded because I had never encountered a scammer of this caliber. He had provided multiple proofs of identification, a bank account linked to an incorporated business formed several years ago and nearly all of the provided facts checked out (I found some to be false after-the-fact). I was given a phone number and communicated many times via text and voice to a gentlemen who was down-to-Earth, relate-able, and polite. In other words, I was not participating in an unsolicited Nigerian lottery from my spam folder. Yet, as soon as he had his hands on my cash, his phone number was disconnected, his email became unresponsive, and the trail went cold.

There were two options before me: 1) Whine, complain, and give up the business or 2) Redouble my efforts and make it all back and more. I’d be lying if said there wasn’t a couple of weeks where I wallowed in choice number one saying “woe is me” to anyone who would listen. However, once I got over myself, I went back to reading financial literature and looking for ways to get back on my feet. One of the books I read during this time was The Millionaire Fast Lane by MJ DeMarco. While not the most well-written book, many of the concepts were pure gold and I discovered a successful community of entrepreneurs in the accompanying forums. Here were real people achieving my two business goals in a very real way. I knew that in order to grow my business, I had to think outside the box, and I soon discovered some new opportunities.

A couple of weeks ago, I was relating my scam story to a local cell-phone repair shop that I frequently do business with. They were shocked that this had happened to me, yet impressed that I was still on my feet after taking a $6,000 hit. Perceiving me to be a “high-roller” they approached me with an investment opportunity. There was a piece of repair equipment that they wanted to purchase that would increase productivity and profits, and if I financed it for them I would earn a 27% return on my investment in four months after six bi-monthly payments starting in 30 days. This is currently ongoing, and should everything go as planned, I will oblige their desire for me to invest in additional equipment in the near future.

This new branch of my business has a lot of potential. The risk is higher, but the man-hours are minimal and the returns are large. I have also brainstormed several ways to scale the resale portion of business that will result in greater profits per hour invested. All in all, I don’t think it will take much time to gain back my lost capital, and once I do, the increased profits are going to be slashing down our loans.

Without a doubt, this $6,000 mistake has reinvigorated my business, but from it I’ve also gained knowledge and experience that can only be learned the hard way. I’ve learned the importance of due-diligence when a lot is at stake, and that a person’s appearance is meaningless because only the facts matter. I’ve learned that all reward takes risk, and that the greater the potential reward, the greater the potential risk. In this case the reward probably was too good to be true, and I need to be wary of profits that seem unrealistic. Finally, I’ve learned that the road to success is wrought with potholes of failure, and that the difference between winners and losers is whether the failures cause one to quit or persevere. I’ve been set back, but my goal of being debt-free by April 2014 remains the same, and I am going to do whatever it takes to get there.

One Man’s Trash, Another Man’s Debt Snowball

Day 334 | $25,485 paid | $63,228 till freedom

Garbage

In addition to free and prompt household maintenance, cheap rent, and regular pool & fitness center access, an unexpected benefit of living in a large apartment complex is FREE GARBAGE!

Normally, a stinking heap of middle-class waste would be less than helpful to someone looking for ways to pay off a mountain of student loan debt. However, after death and taxes, the 3rd thing you can always count on is Americans being the rampant consumers that they are, and this means perfectly usable things find their way next to a dumpster where local scavengers, like me, reap the benefits.

This all started when I saw a pile of Physical Education textbooks stacked next to the dumpster. Having resold all of my textbooks in college on websites like Amazon and Half.com, I knew that these things usually retained some value, and I figured it wouldn’t hurt to see what I could make of them. After Amazon fees and shipping fees, I ended up profiting a quick $12. With such risk-free money to be made, I decided to keep my eyes open on all of my future trash errands.

Kayaking: Something every P.E. teacher should be an expert in.

Solo-Rowing: Something every P.E. teacher should be an expert in.

 

 

 

 

 

 

 

 

 

 

 

The next item of worth that I came across was a fully functional HP Officejet 4200 series all-in-one printer with the box and all of it’s cables. Coincidentally, this printer was newer and worked better than our current printer which had compatibility issues with the latest operating systems and had followed my wife since she started college. We kept the printer from the trash and sold our old one for $20 on Craigslist two hours later.

Why is it called a moon chair anyways?

Why is it called a moon chair anyways?

Other items I’ve sold in the last month include a mildew-scented red “moon chair” for $10, a scratched-up wooden end table with a missing drawer for $5, and a 7 foot pre-lit Christmas tree with one bent branch for $10.

Currently, we live far enough away from the metroplex that Craigslist can be pretty slow to bring forth any buyers that have even heard of our town. Because of this, my junk accumulation is outpacing the rate at which I can sell it. With no additional square footage available in our small one bedroom apartment, I had to get creative to come up with place to store items for my “garbitrage” venture. A solution was found in the dark, musty space under our building’s stairwell. Here now lies a veritable gold mine of discarded goods including a 65-inch wide wire dog pen, a rolling office chair with a broken arm, a well-used Coleman camping chair with one small rip, a working Toro brand electric weed whacker, a small igloo cooler, and a 6.5 foot white door with minor damage (yes, a DOOR). Time will tell what all of this ends up being worth, but I’m guessing a cool $75 stands to be made in the future.

...except a hidden stash of garbitrage loot!

…except a hidden stash of garbitrage loot!

Just your run of the mill staircase. Move along, nothing to see here.

Just your run of the mill staircase, nothing to see here…

This post would not be complete without acknowledging the original dumpster-diver in my life, my dad. 15 years after watching him sell giant stuffed animals, remote control helicopters, and junked picture frames on Ebay, I can now carry on “the family business”. I’m proud to say that he’s recently started a cool new venture of picking up lots of books and DVDs off of Freecycle or the free section of Craigslist, selling the moneymakers on Ebay and dumping the rest at Half-Priced Books for store credit (which he’ll then use at Half-Priced to buy bargain-bin books of value to sell on Ebay). So here’s to you, dad, and may you find other people’s refuse to be ever profitable.

Progress Report: Month 6

Day 215 | $17,519 paid | $71,194 till freedom

64 / 68 Total Days Biked to Work (94%) | 58 Consecutive Bicycle Commutes to Work

October was completely overwhelming. It consisted of many evenings and all four weekends dedicated to my job and I worked a total of 365 hours. Understandably, there was little free time for financial tracking, improving the efficiency of our expenses, or Craigslist-ing. However, when all was said and done, it was the least amount of money that we have ever spent in a 30-day period. We excelled in keeping under our projected limits in all categories except for the water bill and groceries. Unfortunately, the water bill is mailed two months after-the-fact, so it’s difficult to track its cause and effect relationship.

October Summary:

  • Starting Cash: $200
  • Starting Debt: $73,410
  • Income: $4,530
  • Expenses (Including regular loan payments): $3,314
  • Amount paid to debt: $1,771
  • Ending Debt: $71,194
  • Ending Cash: $200
  • Total Assets: $38,036
  • Total Liabilities: $71,194
  • Net Worth: -$33,158

Predicted amount of debt at the end of May 2014: $1,229

As the trend line grows longer, it becomes more encouraging to me as I can visibly see that progress has been made. Last April seems like a long time ago, and it really hasn’t felt like we’ve done much. In reality though, after 25% of our time has expired we’ve knocked out 24.6% of what we started with. The more we take down, the bigger the snowball gets. This month we knocked out the smallest of my unsubsidized 6.55% interest federal loans that originally carried a balance of $2,000. I’ve got two more unsubsidized disbursements at the same interest rate that total to about $11,000 left to go before moving on to my two “Special Direct Consolidation Loans”.

Assessment of Expenses and Revenue

Here’s a look at October’s spending. As you can see, WAY more green in this month’s expenses category than any other month. Click once to open, and once to zoom.

Analysis: Expenses

  • Fuel – $65 – This month was the first time we’ve reached the sub-$100 mark, and boy did we shatter it. Biking to work and to carry out errands and not having many large cross-town trips to make made this possible.
  • Eating Out – $13 – Another number I’m very proud of. Planning ahead with our meals has virtually eliminated the “necessary” eating out caused by an empty fridge.
  • Dog Supplies – $37 – We finally reached an equilibrium where vet expenses, pet deposits, and other start-up costs are out of the picture and all we had to do was buy food. Maybe the budgeted $75 is a little higher than it needs to be.
  • Miscellaneous – $59 – This is by far the lowest we’ve spent on miscellaneous purchases. We usually end up somewhere near the budgeted $200, but not this month. This figure may be somewhat under-reported, as a number of Wal-Mart / Grocery receipts were misplaced and there were likely some line items that would have been taken from Grocery and placed into Misc.
  • Groceries – $582 – This is a solid $110 higher than our budgeted $470. There were lots of little extra trips between big trips and those small items add up. This figure is also probably inflated some due to miscellaneous items creeping their way in there.
  • Electricity – $73 – One dollar under the budgeted $74, so we’re right on track here.
  • Water – $76 – Yet another high water bill. This is concerning, as our average at the last apartment was around $58 and we’ve changed no habits. It’s obvious that some extra efforts will need to be made in this area.
  • Auto Insurance – $313 – We only have $63 a month budgeted for our new premium, but I had to pay All-State $250 for the last prorated amount of what we owed them.
  • Out-Of-Budget – $22 – We drained the Running Supplies ING account, and had to dip into our checking account balance a little bit to get some things for my wife. The $40 a month we contribute to the account is really a “best estimate” of what we’ll need to set aside, so occasionally going beyond that isn’t necessarily a negative thing.
  • Student Loan Snowball – $1,771 – I wish that in a month with such low expenses, I could have had some monster online sales action to boost the income and make this snowball roll a little faster. What is encouraging though, is that even in a month with ZERO supplemental income, the snowball payment matches what we paid in April and May when I DID made $1,000 per month online.

All other categories are the same month-to-month and were right where we budgeted them.

Analysis: Revenue

Well, not much to analyze this time. No gifts, sales, windfalls, or deposits of any kind were received except for our salary at the beginning of the month. It makes for an interesting pie chart, let me tell ya.

November Outlook:

I’m writing this post three weeks into November, but the outlook looks good! I’ve been selling some things out of my closet. This includes some unopened wedding gifts and the like that I know I wouldn’t use for a while, as well as other random things. I’m really trying to make the most out of the resources I have available to me. Also, with the end of our football team’s playoff run, it means I have gotten my weekends back which means getting back into the online electronics biz. I expect that going into the Christmas season more people will be looking to sell their unused toys for cash to buy gifts for family and friends and that my business will receive some fresh wind in its sails. As always, I will end this post with the full 24-month outlook. We’re 6 months through, and still have another 18 to go!

My Real Hourly Wage

Day 214 | $17,519 paid | $71,194 till freedom

64 / 68 Total Days Biked to Work (94%) | 58 Consecutive Bicycle Commutes to Work

 

 

 

 

 

 

 

 

 

After hearing it mentioned countless times on various personal finance / early retirement blogs and message boards, I decided to finally read Your Money or Your Life by Vicki Robin & Joe Dominguez. I was already familiar with much of the book’s content and ideas, and had already had most of the life-changing realizations that the authors try to communicate prior to diving into it.

However, YMOYL is more than a book, it’s a 9-step program to financial independence. Rather than reading it once and putting it on the shelf, I’ve decided to take action and go through the program.

Step 1 is to make peace with the past by finding out how much money you’ve earned in your lifetime, and to then calculate your current net worth. I decided to fly through this step, as I know I haven’t made a whole lot of money (thus the intended shock effect would be significantly lessened on me) and I already know my current net worth is $ -33,158. I get it, I’ve made some unwise choices with money over the past 7 years, moving on.

Step 2 is to A) Establish the actual costs in time and money required to maintain your job, and compute your real hourly wage, and B) to keep track of every cent that comes into or goes out of your life.

I’ve been tracking our expenses ruthlessly for more than a year now and have accounted for every penny, but calculating my real hourly wage is something I’ve been scared to do. However, getting debt free and changing my life around is not going to happen when I’m living in denial, so here it goes, starting with October, the most work-intensive month of the year. All figures include 20 minutes worth of commuting a day.

 

 

 

 

 

 

 

 

 

 

 

 

 

And here are the stats for the least work-intensive month of the year, Februrary:

 

 

 

 

 

 

 

 

 

So over the course of a school year, my wage fluctuates somewhere between $11.87 and $19.83 an hour. Honestly, that’s not nearly as dismal of an amount as I expected to end up with. Instead, I think the most shocking part of this is seeing how much I actually work laid out on the table. After working multiple back-to-back 91 hour work weeks, and my lightest load all year being 55 hours, a “40-hour Grind” is starting to sound pretty luxurious.

There are a number of questions I have to ask myself in the face of this data. Do I love what I do enough to dedicate that much of my life to it? If my priority in life is to be a good husband and father, does the amount of time I spend at work reflect these values? If I had an opportunity to make the same amount of monthly income working a 40-hour a week day job at $25 an hour, would I do it? What If I made $35 an hour sitting behind a desk for 8 hours a day and increased my income by 23%? What if that increase in income allowed me to work YEARS less in the future? Is combining my paid day job with my passion really such a smart idea if it causes me to neglect my home and personal life?

I do know this: As much as I love certain aspects of my job, it is still a job, and it’s primary function is to earn me money. My ultimate goal is to be financially independent and retired by age 35 so that I can dedicate my life to working how I choose to, not how I’m obligated to. Is working my current job in line with this objective? That is a question I will have to ponder over the next weeks and months. In the immediate future, I will have to increase the efficiency and quality of my work so that I don’t continue to over-commit myself in an unhealthy way.

Month 6 Progress Report coming soon.

Reducing the Auto Insurance Bill

Day 171 | $15,732 paid | $72,981 till freedom

29 / 33 Total Days Biked to Work (88%) | 23 Consecutive Bicycle Commutes to Work

 

 

 

 

 

 

For reasons unknown, I have previously viewed the auto insurance bill as a fixed expense that was simply a fact of life. It was something my parents had set me up with in high school, and I have maintained the status quo on both my provider and level of coverage. Besides, it is common knowledge that males under the age of 25 are considered high-risk and are unable to obtain reasonable insurance premiums. When talks of possibly selling my car began, it opened my eyes to the amount that could be saved on every six-month payment.

Discounts

Part of the reason I felt like my insurance savings were already “maxed out” was because of all the discounts my Allstate agent listed on my policy. My premium was reduced thanks to the following: Driver Training, Anti-lock Brakes, Good Payer, Anti-Theft, Premier, Multiple Policy, Allstate Easy Pay Plan, Good Driver Rate, Married. I was also enrolled in a program that gave annual $100 reductions on your deductible for staying free of accidents. Finally, on the policy declaration itself, it listed an “Installment” Price and a “Pay in Full” Price. By creating my own monthly installments and funneling money into an online savings account every month, I thought I was being responsible when saving $100 by being able to choose the “pay in full” option. In reality, $100 was chump change when compared with the savings I would find elsewhere.

Reducing the Premium

The first step I tried in reducing my bill was to get some of these discounts that were only applied to the Scion xB on the Honda Civic as well. The only one I was able to get my agent to add on was “anti-theft” for a total premium reduction of $3.82 or a whopping 64 cents a month. This was hardly acceptable, and I then looked to my level of coverage to see where savings could be found. Earlier this year, my coverage was as follows:

Using the “Pay in Full” discount, the total premium came to $1,277.86

 

 

 

 

 

 

 

 

 

 

 

What I couldn’t believe was that the premium to cover collision damage to my own car, with a maximum replacement cost of $10,000 had a significantly higher premium than holding liability coverage for up to $100,000. When I really started to consider the costs of replacing a vehicle, I came to an important realization: We don’t need a car to get to work, store, doctor, vet, post office, parks, pharmacy, or any other essential destination. Here I was living within 1.5 miles of everything I need for a comfortable life, with $3,000 in immediately accessible cash and liquid assets, and I’m socking away nearly $1,500 a year for comprehensive/collision damage to our vehicles.

My first move was to remove comprehensive/collision on the Scion xB altogether, and raise the deductible on the Civic as high as my agent would let me. It became immediately clear that my agent did not have best interests in mind, because he reverted into sales mode and began telling me that making such changes were not worth the savings in premium. He said everything short of calling me ignorant, but he went ahead and removed full coverage on the Scion and we agreed to keep the deductible constant on the Honda Civic. This reduced my $1,300 premium to about $900

By this point, my outlook on what we truly needed had shifted and my thoughts naturally arrived at the idea that we no longer had to have two cars in our lives. The previous policy change was hardly  in my hands before my brother had agreed to buy the Scion from me. I called Allstate back and told them to remove all coverage on the Scion, and to also remove the “rental reimbursement” coverage from the civic. (If we can bike to work, why would we need a temporary rental car?). This reduced our coverage to $757… but I still wasn’t satisfied.

Although we could function without a car, it sure is nice to have one for inter-city travel. I knew we wouldn’t be able to quickly replace the Civic in the event of a total loss, but it would be reasonable to front a $2,000 deductible. I made the call, and my agent quoted me $499 if we chose to make this new change to the policy. Reaching the end of the line with Allstate, and having no more practical deductions to make, I had to find out what other companies would quote me for an identical level of coverage. When I was able to nail down a quote from Progressive for $316, I signed up within 24 hours and gave Allstate my cancellation notice.

Thus, within a one-month time period our annual auto insurance costs reduced from $2,600 to $600 and we have suddenly found ourselves with and extra $165 to spend EVERY MONTH. This is a significant addition to our monthly debt snowball and is going to help knock this debt out for good!