Does it still make sense to “cut the cord” in 2019?

You may be asking yourself… “Wait…2019? Why didn’t you cut the cord like every other millennial 10 years ago?”

Short answer – We did.

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Long answer, we cut the cord way back in 2011 in our first apartment, living off of just the digital equivalent of Ramen noodles – 25 mbps Internet, Netflix, and some over-the-air local channels. The internet package at the time was $60 per month plus a $5 per month rental fee on the modem and a Netflix subscription, which at the time was $7.99 a month. Life was good.

Grand total… we were looking at a little under $75 per month.

Fast forward to 2017 and there we were… signing up for a cable & internet bundle!

You..what?! What changed?

We moved to our first home! Yay! Home ownership!

The not so good news was we found out that our previous internet provider was just out of reach, we are talking a less than a mile outside of their coverage map. When asked if they would come our way we were told it would cost a “over a million dollars” to run lines to our area…

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So, we begrudgingly had to start shopping around comparing the whole 1 cable provider, 1 DSL provider, and 1 Satellite provider that had service in our area. Like comparing Apples to Apples right? Not quite. The DSL provider had a terrible reputation for quality and the Satellite provider required an ugly dish and a monthly data cap of 100 Gb! That may sound like a lot, but not so… as our average monthly data usage currently is over 400 Gb. So Satellite was out. Who was left?

Good ol’number 15 on America’s most disliked company list – who we will call the “cable company”.

The Hook…

They were offering a sweet deal on an internet/cable combo for $55 per month “for the first 12 months.” Too good to pass up.

…and before you know it we are waiting for the installation. It took about a week and when the first technician showed up it was what you’d expect, he said he didn’t have the right tools he “needed” and said he would “be right back.”

He never came back.

So my wife and I had a cynical laugh, called “the cable company” and had to arrange another on-site visit another 5 days later.

Line…

Fortunately the next install guy was awesome! Extremely friendly and helpful in the whole process of setting up our own modem and router, where to locate it in the house, and how to use a cable box we haven’t had to operate it 5 plus years.

Having super fast internet, to us, a whole 150 Mps was sweet and having one of those remotes that you can speak into was pretty neat. I have a soft spot for techy things.

Sinker!

After the technician left we soon realized that the $55 per month was not really $55 per month.

“High Definition” service was not included, there was an extra $10 monthly fee for that… in the year… 2017. As well as another $12 per month in taxes and other fees. Thankfully we supplied our own modem and router which saved us another $10 per month in fees.

The actual grand total came to a little under $80 per month, a 45% higher price tag that we originally planned.

Time Flies…

Overall we were happy with the service and the first 12 months flew by. Soon 2018 came around and the cable bill did it’s first jump to $99.50, up almost 30%. Alright, we were under contract… it is what it is, we were still happy with the service.

Fast forward to 2019, 2 year contract is over and the bill jumps again to $126 per month, another 25% plus increase.

At this point we just laughed and said okay this is over. We started looking back into cutting the cord.

Clever Gir..Cable Company

Cable companies have gotten smarter regarding the whole “cut the cord” movement in the last few years and are doing all in their power to limit that reduction in revenue by pricing their “internet only” packages to be only a “few” dollars less than a “bundled service”.

As an existing customer we had to jump through hoops to see what the “internet only” prices even were. Information is no longer available for existing customers on pricing online from the big cable company directly, only promo deals for new customers. We had to go to our local cable store to find out what the prices were for existing customers.

Just as I said earlier… we were told, “Oh, where do you live? Oh hmm… well if you just want internet its only going to be a few bucks cheaper than what your currently paying….”

How is that even possible?

Alright, so we had to look into lower tier internet packages to bring the cost down. The lowest tier service was pitiful for 2019, $35 for 15 mps download and 1 mps upload, not very useful for a household full of streaming internet connect devices.

The next tier up was for 60 mps download and 5 mps up for $75, doable and no additional fees. We turned in the cable box, remote, and we were on our way to internet only living again.

So many choices…

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So the internet streaming landscape has changed quite a bit since we first cut the cord in 2011.

There seems to be dozens of streaming choices to choose from! Not only are there more choices than ever, the costs to stream has changed as well.

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Wow… we are looking at big bucks to have access to many (not all) options currently available.

Wait it gets better… each service has their own “anchor” show(s) that no other platform can carry, creating an incentive to subscribe to their service.

Remember HBO and a little show called “Game of Thrones”?

Just look at what Disney and Netflix are doing. In the past, Netflix had access to the Marvel franchise including the movies and Marvel branded TV series, creating an incentive for consumers to subscribe and gain unlimited access to an incredible brand that appeals to all ages.

Well, not too long ago Disney decided they wanted a bigger portion of the streaming pie and plan to come out with their own streaming service while not renewing Netflix’s rights to Disney products. Ouch. Good for Disney, bad for consumers.

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So when you start adding up all the great shows you watch and all the different services you need to do it… things are starting to look a little pricey again.

But, unlike cable you ultimately have a more of a voice and choice on what you really want to pay for.

What we did…

For our household we wanted to improve the cable experience we previously had.

We had a few channels that are our favorites, such as the History, Discovery, Comedy Central,and HGTV channels.

The service that ultimately gave us that and a few other channels of interest was streaming app – Philo, for $20 per month we got 50 live channels and on-demand shows with unlimited recording in High Definition (No $10 HD Fee!). Some of these channels were “extras” that we would have to pay extra for in our old cable package.

To replace the role of our old cable box we picked up a 4K capable Roku Premiere Plus for a one time cost of $35 (Walmart deal at the time) for our living room and another Roku Express for $24 for our bedroom TV which did not have cable originally (to avoid another cable box fee).

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To bring our entertainment center all together we topped it off with a new Universal Remote for $10.

Savings – BIG and small

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When we added up the monthly cost of our new streaming setup we were looking at a new cost of around $95 per month, or a 30% reduction in our monthly expenses. The Roku boxes and remote would be paid off in savings by the first 2 months of service. Over the next 12 months we are looking at freeing up $360, or $720 over the next two years.

Not huge numbers, but we are proud that we were able to improve our services while paying less to the cable company. While ideally stabilize the shock and awe rate increases the cable company was throwing our way every year.

We’ve shared this with our family and friends who are in a similar bind and have convinced them to follow a similar path, some of them will have savings larger than our own, going from $280 per month to around $100 per month. A savings of over $2000 per year, a substantial sum to anyone.

Conclusion

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So does it make sense to cut the cord in 2019?

The answer… it depends. It depends on you and what you want.

You can reduce your costs substantially if you focus on what you really want to watch like we did. Imagine what you could do with another $300 – $2000 per year, or another way to put it – $9000 to $60,000 in savings over 30 years! You could pay off debt, invest… maybe save for something special!

Or, if you want to check all the boxes on the major streaming services your bill may be as high or higher than your old cable bill.

It is ultimately up to you…

Just know that if you want to make the change and cut the cord the upfront effort and initial roadblocks are totally worth it in the end.

So what are your thoughts? We would love to hear from you! Leave a comment below or send us an email via our Contact Page.

If you liked what you’ve read please be sure hit the “like” button and share! If you want to receive the latest articles please be sure to subscribe.

Give Your Income a Plan – The 35/45/20 Rule

So you want to start making real progress on getting out of debt or building wealth, right? But where do you start? I’ll tell you…it’s not buying stocks or consolidating your student loans and it’s especially not by buying another lottery ticket.

No. You need to start on the ground floor by looking at yourself and streamlining how your most important tool, your income, is working for you.

If you are like most people… you’re itching for payday. As soon as the check clears your feeling pretty good, maybe even a little too good. A big lump sum, $500, $1000, $2000 or more, in your bank account that immediately starts burning a hole in your pocket… just wanting to be spent on new cloths, gadgets, or experiences. Hey, you earned it right?

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But what happens when the weekend is over or it’s the end of the month and your bills are due? How big is that pile of cash now?

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The problem is physiological. That single shot of cash is giving you an artificial high of “wealth” by feeling that you have more money than you really do.

So how do you avoid this trap?

You have to give your paycheck a purpose by developing a plan.

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I am going to give you the thought process that my wife and I currently use that helped crush our debt and accelerated our net-worth growth rate by almost 100% year over year.

You may have heard of the 50/20/30 rule – 50% of your post-tax income goes to needs, 20% goes to savings/debt, 30% goes to wants – i.e. fun stuff.

Why would you want to be normal? If you really want to change your life you have be different. We flipped the ratios around and currently live by the 35/45/20 rule. (A mouthful, I know!)

The 35-45-20 Plan

35% is your needs, or living expenses – rent, utilities, food, etc.

45% goes to debt payments or savings and investing. This portion swings wildly from debt payments to savings & investing depending on where you are in your financial journey.

20% is your wants – night out with friends, new shoes, movie tickets, etc.

If you think it’s nuts to only live off of 35% of your income check out our Ultimate Guide on understanding your budget and trimming the fat. 

Build a system of Accountability

How we held ourselves accountable to the above ratio was by developing an automated system for our income.

Instead of having our paychecks dropping into one checking account we started thinking of multiple accounts. This was taking “making a budget” to the next level, instead of putting the onus on us to constantly juggle and really blurring the lines of where the money was going from a single account we instead set our paychecks to direct deposit into 5 separate accounts…

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Checking Account #1 Fixed Expenses
Checking Account #2 Debt Payments/Investing (eventually)
Checking Account #3 Allowance
Savings Account #1 1 Month Emergency Fund
Savings Account #2 5-12 Months Emergency Fund

Checking Account #1 – Fixed Expenses – 35%

What are your “fixed expenses”? Think of the items that have a recurring bill, such as your rent or mortgage, utilities (water & electric), cable/internet, cell phone, groceries, etc. Think of expenses that typically don’t fluctuate significantly month to month. Write these expenses down… and add them up. Now, since some of these expenses fluctuate slightly due to external factors, such as hot summers and cold winters (i.e. A/C, Heating) electricity usage, and food prices, add another 10% to the total to cover that flux.

For example, if your fixed expenses add up to $1000 per month add another 10% on there, so you’ll have $1100 per month going into this account. If you get paid bi-weekly you will need $550 per paycheck going into Checking Account #1.

Checking Account #2 – Debt Payments – 45% to 0%

Depending on your income level, the status of your current emergency fund, or debt level this account will change in meaning as you progress on your financial journey. Like what was stated before…if you are getting paid bi-weekly whatever your total debt payments are every month you’ll need at least half of it going into this account per paycheck.

Checking Account #3 – Allowance – 20% 

So now take that lump sum of money and send 20% of that to what we will call your “allowance” fund. The money that you can use to spend how you want, going out to dinner, buying that fancy coffee every once in a while, or that new gadget. This is where living within or below your means comes into play.

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When my wife and I started living within 20% for the “fun” expenses our mindset started to change, we started adding more weight and value to the items or experiences we were buying. We don’t feel as if we are restricting ourselves here, we just ended up focusing on things that actually held value to us. Ultimately, we came to the conclusion that we were wasting so much money with our old habits, adding up thousands of dollars per year!

Savings Account #1 – Easy Access – 1 Month Expenses Emergency Fund

As we talked about earlier, having an emergency fund helps you handle life’s unexpected moments by giving you the money you need when you need it to avoid taking on additional debt. This account should equate to about 1 months worth of living expenses and should be easy to access, within less than 24 hrs. This account will be available when an appliance breaks down, or unexpected doctors visit. This account should not be touched unless an “emergency” happens.

Savings Account #2 – (5 – 12 Month) Emergency Fund – Online High Yield Savings Account

So this account should equate anywhere from 5 to 12 months worth of living expenses and should be accessible within 3 days or less. So we should be thinking of online savings accounts here. Your money is in a safe spot that is just out of immediate reach to prevent you from making impulse decisions.

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Steps to using the 35/45/20 Rule – From Debt to Wealth

Alright, so lets go through an example of using the 35/45/20 Rule…

Step 1 – Build 1 Month Emergency Fund

If you are starting out without an emergency fund of at least a one month’s worth of expenses your first goal should be to create one. This may mean paying the minimums on your debt payments at first, with the remainder of the 45% going to building up that small emergency fund. Remember, you can’t focus on aggressively paying off your debt if your constantly reaching for your credit card to cover small expenses that popup outside the norm.Step 1

Step 2 – Eliminate Debt

When you’ve completed your small emergency fund can you now attack your debt with the full salvo of 45% of your income. Step 2How you go about this is up to you. What worked for us was “The Debt Snowball” method outlined by Dave Ramsey. Take all your debts ordered smallest to largest and contribute more than the minimum to the smallest debt until it is paid off. Then roll that money over and put it toward the next smallest debt, and so forth and so on until your debt is eliminated.

Step 3 – Build Up a 5 – 12 Month Emergency Fund

After successfully eliminating your non-mortgage debt your next goal is to strengthen the rest of your emergency fund. Start throwing that 45% into Savings Account #2 until you hit that 5 to 12 month equivalent number. It is up to you what that amount is… be it 5 months, 12 months, or any number in between. This account is your fall back for extreme emergencies, job loss, significant health issues, etc.

Step 3

Step 4 – Wealth Building & Investment

So now this is where the fun starts to happen… Your non-mortgage debt is gone, you have a strong emergency fund set aside… now what?

Don’t fall into the trap of seeing all this freed up income as giving you the right to start a shopping’s spree. Stay focused!

It’s time to start building real wealth.

Checking Account #2 changes it’s meaning now to “Investing”.

Step 4

How you define “Investing” is up to you.

You may start saving up for your first home or your first investment property.

You may start to dabble in index and mutual funds in a taxable investment account.

Or maybe a little bit of everything… that is ultimately up to you.

What matters is that when you start to leverage 45% of your post-tax income to “investing” and wealth generation you are now way outside of the normal. Stay there.

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Plan, Automate, Execute!

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If you made it this far.. congratulations! Hopefully you followed all that…

So in conclusion, by giving our income a plan and a purpose while also automating our paycheck we changed our mindset, and ultimately our path to financial success. The 35/45/20 rule may sound like a challenge but you have to break outside the norm if you want to achieve above average results. This process has amplified our net-worth growth by 100% year or year by eliminating our debt and supercharging our investing potential.

Let us know your thoughts on the 35/45/20 Rule or whats plans you’ve had success with! We would love to hear from you.

So what are your thoughts? We would love to hear from you! Leave a comment below or send us an email via our Contact Page.

If you liked what you’ve read please be sure hit the “like” button and share! If you want to receive the latest articles please be sure to subscribe.

 

5 Money Habits to Start in your 20’s

Your 20’s are an exciting time of your life, so much opportunity for development and growth. For a lot of us we hit some major milestones… starting our first “adulting” job or career, getting married, buying our first home or car, maybe even paying off those good ol’ student loans.

The time you have in your 20’s has the potential to set the tone of your financial health of the rest of your life, so it’s important to develop some essential habits…

1. Create a Budget

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You hear this one from everyone, make a budget!

Write down and understand where your money is coming and going. When you start to track your income and expenses it opens your eyes to all the potential money you could be saving and investing but were actually eating away by going out three or four times a week.

You can track your budget using a number of different tools and methods, you can do the home brewed approach by developing a simple spreadsheet or you can use a number of financial and budgeting applications for your smart phone. Whatever method you end up choosing the most important attribute is your dedication and consistence in tracking your in’s and out’s. Check out our guide at making a budget and slashing our expenses.

2. Automate Your Savings

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This one is easy, money you never see in your paycheck is harder to spend on impulse. Set up automatic deductions from your paycheck to deposit into an online high yield savings account or online brokerage account for investing.

There are plenty of options today that not only are easy to setup and use but help you in the long run of setting you up for financial success. It may be developing an emergency fund for a rainy day, or starting that passive income dividend stream you always wanted.

Start small, it can be a little as $5 to $10 a paycheck but your goal should be to gradually ramp up your deductions until it starts to feel uncomfortable. You will be amazed in as little as a year how much you have saved with this approach.

3. Have an Emergency Fund

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In your 20’s change can be rapid and sudden, your 15 year old car breaks down.. your furnace goes out, or you just received a pink slip. You can never be too careful by creating a emergency fund to cover those rainy days.

Strive to save up 6 to 12 months’ worth of living expenses to get you through the tough times. Since the majority of Americans don’t have the cash on hand to cover a $1000 expense, it should be a wake up call to have a stash of cash to help you when you need it. By maintaining an emergency fund it allows you to avoid the major pitfalls of using credit and loans to cover those unexpected expenses and racking up unnecessary interest payments.

An emergency fund is not a “I need the newest iPhone” fund, or the “shopping spree” fund, and it should not be considered an investment fund. Leave it alone and keep it in a liquid high yield savings or money market account, it may not sound as sexy as putting it all in the latest penny stock but you’ll be happy when you need it to cover that blown out tire.

4. Invest early and often – Retirement (401k, IRA, etc.) and Taxable Accounts

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In your 20’s you have one of the greatest assets that money can’t buy, and that is time.

Use that time and the magic of compounding by investing early. If you are fortunate enough to have an employer that provides access to a 401k, try to contribute 15% of your pretax income or if you can’t achieve that do your best to contribute the percentage needed to receive an employer match if available. Your starting salary and contributes may start out small initially but as time goes by you’ll see massive growth and the sooner you start the less effort will be required in your 30’s, 40’s, and 50’s to prepare for retirement.

“Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”

-Albert Einstein

With every raise you receive try increasing your retirement contribute by 1-2%. If you were living on your previous salary just fine, you won’t miss that 1 or 2% all that much.

For 2019, you are able to contribute up to $19,000 of your pre-tax income. I know, your thinking to yourself…$19,000?! Are you crazy? You all have the potential to achieve that and more… you just have to start!

Other retirement vehicles such as IRA’s offer other tax benefits depending on your income, and I recommend looking into them if you do not have access to or are maxing out your 401k.

Taxable investment accounts also can be considered when you have reached your goals for your emergency funds and retirement contributions. Remember not to chase the latest penny stock or virtual currency, start off small and steady by researching low-cost index and mutual funds that provide you diversity to hundreds or thousands of companies.

“It’s a mirage… the idea it has some huge intrinsic value is just a joke”

-Warren Buffet (on Bitcoin)

5. Live Like a College Student

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You were living like one not too long ago so why change it? Just because your making big bucks now doesn’t mean you should go out and blow it all on a new depreciating car or some fancy apartment. Get a roommate, nurse that old car for a few more years, buy a a refurbished smartphone with cash. If you really want to jump start yourself on your way to extraordinary financial wealth, live below your means!

Conclusion

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Remember, your 20’s can be the best years of your life or… they could be the years that set you up for success for the rest of your life, it is your choice. By making simple and steady habits with your finances now you’ll thanking yourself later.

So what are your thoughts? We would love to hear from you! Leave a comment below or send us an email via our Contact Page.

If you liked what you’ve read please be sure hit the “like” button and share! If you want to receive the latest articles please be sure to subscribe.