Monthly Archives: April 2015

Anything is Negotiable

This post was sparked by an event that took place the other day. I have an HSA (health savings account), and therefore I have to pay the full bill for any expenses I incur until I meet the deductible for the calendar year. Well I’m a fairly young and healthy guy (knock on wood) so usually when I get a bill from the doctor, I’m paying the full amount since I’m no where near my deductible.

As I discussed in Managing Your Float I tend to not rush to pay bills that have no consequences for paying late such as interest or late fees. This includes medical bills. I put paying these off for a couple of reasons. Mainly, I think the cost of health care is insane (in the United States at least) and I try to put off paying them while I can think of a way to reduce the bill.

Back in January I thought I had a sinus infection and went to the local walk-in clinic in Manhattan and they ended up billing me $215 for a 5 minute appointment! Well when I got the bill, I tucked it away and thought “this is outrageous, I’ll deal with it later.” Well I finally got around to the bill last week. I decided to negotiate how much they were charging me, because I’ve learned everything is negotiable. I called the number on the bill twice, but due to call volume my call was sent to voice mail. So then I shot them an email explaining how I didn’t think the $215 bill was the fair value of the care I received. I described how I felt I waited too long in the waiting room and how they didn’t answer the phone the two times I called them during normal business operating hours. I received a response within 24 hours which said they were working on my request, and within 48 hours I received the following email:

Thank you for contacting the billing department. I apologize for any inconvenience that this may have caused you. I have reviewed your account. Based on the information that was provided to me, I have reduced your balance down to $125.00. I hope that you find this reduction satisfactory. Should you need further assistance, please contact the billing department at XXX-XXX-XXXX. Our hours of operations are Monday-Friday from 9:00AM to 5:00PM.

SHABOOM! Factoring in the two calls I made at about two minutes each, plus the three minutes it took me to draft my email, I saved $90 for seven minutes of work. I’d trade my seven minutes for $90 any day of the week.

Anything is negotiable when it comes down to it, especially if you feel it was not worth what you are being charged for it. Below is a list of examples of things I’ve negotiated over the years successfully:

  • Medical bills – see above
  • Cell phone – Luckily my work now pays for my cell phone bill, but in the past I’ve called with success. I’ve just asked for current deals they are running and if they can help me lower my bill. Usually they oblige as they don’t want to lose you as a customer. Never hurts to threaten to move to another carrier as well.
  • Cable / Internet – I usually call my cable and internet provider every six months or so to see if they have any new deals. This usually lowers my bill a little bit, and then you’re never blindly rolled into a standard contract where the rates are outrageous once the promotional rate ends. Like with the cell phone bill, saying “I’m not really happy with the service I’ve been receiving and have contemplated switching to XYZ” never hurts.
  • Satellite radio – I used to have satellite radio in my car when I had one. The base price that XM would bill me was pretty high. But every six months or so I’d call and threaten to cancel and they’d cut my bill in half after a 10 minute or so phone call.
  • Used cars – When I purchased a used car after college, I mentioned that CarMax had a better deal when I was there earlier in the day. As soon as I said that the used car salesman said “we’ll never lose a sale to them, how’s $1,500 off sound?”
  • Salary / Sign-on bonus – These are always negotiable, especially if you convey that you are qualified and would be a great asset to the organization.
  • Gym membership – I offered to prepay for 12 months and got an additional 6 months free for doing this.
  • Flights – This one can be done after the fact, but if you get delayed or your flight gets canceled, and you email the airline explaining how their delays or cancellations messed up your trip, they might give you a credit towards your next flight. This is not a 100% effective as it depends a lot on the reason for the cancellation or delay. I recently just used a $75 credit from United that I got from doing this.
  • Items and services in foreign countries – I went to Mexico quite a few years back on vacation and we negotiated everything from cab rides to cigars. In the touristy area the local businessmen tried to take advantage of our ignorance and charge us $20 for a $5 cab ride, or $80 for a box of cigars that should retail for $20. We learned quick not to let them take advantage of us (I’m sure this happens to foreigners in other countries as well, including the United States).

What have you negotiated? Anything out of the ordinary?

Liebster Award

First off I’d like to thank Nick at The Money Mine and The Finance things in Life for nominating me for the Liebster Award. Nick is a Texan trying to find new sources of income and reach FI by age 40. The Finance things in Life is a dividend investing Swede trying to build up his portfolio to $1m by age 40. Make sure to check out their sites.

The Liebster Award is passed on from blog to blog to help the personal finance community network and discover new and upcoming blogs, while learning more about its bloggers in the process.

The rules are simple and as follows:

  1. You are to share 11 facts about yourself so readers can get to know you better;
  2. Mention has to be made to the person that nominated you;
  3. Answer the 5-11 questions that were asked by the person that nominated you;
  4. Nominate another couple bloggers to receive the Liebster Award and ask them 5-11 questions;
  5. Let your nominees know either by leaving a comment on their blog, sending them an email, calling them out on social media, etc.

First I need to share 11 facts about myself:

  1. I workout approximately four times a week. My workout revolves around the main powerlifting movements: squat, bench, and deadlift. I’ve been doing it consistently for over a year now and I’m hooked. When I’m not reading personal finance blogs in my spare time, I’m watching my favorite Youtube fitness channels.
  2. Because of #1, I eat a TON. Huge chicken parm heros, Chipotle burritos, and basically anything edible don’t stand a chance.
  3. I am a CPA.
  4. I have a thirst for knowledge. I spend more time than I’d like to admit researching anything and everything online. Probably why I considered becoming a professor.
  5. I have won the lottery. Don’t get too exited, it was a secondary prize and was only for $1,000. But hey, it still felt awesome!
  6. My favorite author right now is Michael Lewis. I’ve only read Liar’s Poker and Flash Boys so far. I can’t wait to finish his other books.
  7. My favorite podcast right now is Masters in Business with Barry Ritholtz. He has great interviews once a week with many financial experts, entrepreneurs, and writers.
  8. I am becoming a more avid traveler. I haven’t been too far from the US but have been to Canada, Mexico, England, Ireland, and various Caribbean islands.
  9. I do not own a car. Living in NYC makes this quite easy to accomplish.
  10. I’m fairly handy and know my way around various trades such as electrical, plumbing, carpentry, roofing, and chainsawing.
  11. I want to buy a run-down foreclosure at some point and fix it up myself, and either rent it out or live in it.

My answers to The Money Mine‘s questions:

  1. What’s the best/worst financial decision you’ve ever taken? Years ago I put too many of my investing eggs in one basket by investing in a company that ended up going bankrupt. I was investing using my heart, and will never forget that lesson.
  2. What is one thing you are really good at? Bowling – I only bowl about once a year now but can regularly break 200.
  3. If you could meet anyone dead or alive, who would that be and what would you talk about? Mark Cuban – I think his intelligence, hustle, and business savy are unmatched and I would pick his brain about everything from sports to entrepreneurship to investing.
  4. What is the achievement you are the most proud of? Graduating college in three years.
  5. What is your most important failure and what did you learn from it? See #1 above
  6. You win the lottery and your financial independence is guaranteed for the rest of your life: what do you do with this fortune? I already won the lottery (haha)! Unfortunately it did not give me financial independence. I would sock this money away in some Vanguard index funds and quit my corporate gig. I would be able to live off the dividends, and use what ever was extra to give away to causes I felt close to.
  7. What is your favorite post that you’ve ever written (with link)? Dream Job
  8. What are some of the topics you would like to write about in the near future? The possibility of stepping away from a stable career with a decent salary to pursue something more entrepreneurial and that I’m passionate about.

My answers to The Finance things in Life‘s questions:

  1. What’s the long term goal with your blog? To keep on keepin’ on. I want to continue to learn about careers, personal finance, life, and spreading what I learn to others.
  2. What is one thing you’re really good at? See #2 above
  3. What is one thing that you really dislike? Celery. I’ll eat just about anything but I cannot stand that vile weed!
  4. If there is a heaven and god himself greeted you at the pearly gates, what would you ask him? Can you really beat the market?
  5. What is the best prank you’ve done or experienced? I’m not much of a prankster.
  6. If money and time wasn’t an issue, where would you spend New Years Eve 2020? Hawaii. I’ve never been but it is definitely on the bucket list! I love the warm weather and ocean.
  7. If money wasn’t a problem, what would you spend your time doing? Helping people willing to listen and learn about personal finance. Spending time with my family. And doing what ever struck my fancy that day.
  8. What’s the best advice you’ve ever received? Buy and hold.

Now I have the pleasure of nominating TheHappyFrugaler and Our Next Life for the Liebster award. TheHappyFrugaler is a husband and wife who used to be a consumers in Vancouver, but are now a frugalers. Our Next Life is a couple from the western US who are planning to become financially independent by December 2017! I’ve enjoyed both of their content greatly so far.

I’ll be easy on you guys and only give you five questions to answer:

  1. What is your favorite book (finance related or not)?
  2. Favorite country you have traveled to?
  3. If money was not an object, but you still had to work a 9 to 5, what career would you choose?
  4. What is one expense that Mr. MM has probably cut out, but you will never be able to?
  5. Real estate or dividend producing stocks or index funds?

My Millionaire To-Do List!

J. Money over at Budgets are Sexy has a Millionaire Dollar Club that currently has 153 pledges. Well I plan on being number 154! The only requirements to be in the club are that I create a millionaire to-do list that is realistic and that I check back every so often on it to make sure I’m on track. I’ve broadly discussed my savings goals in other posts, but it will be nice to get them here as I continue my journey to the double comma club! Here are my goals that I plan on achieving every year:

1. Max out my pre-tax 401k – This one is a no-brainer in the personal finance community. My current biweekly payroll 401k contribution rate should get this done during the month of November this year.

2. Max out my Roth IRA – I’ve already maxed out my 2014 Roth IRA during 2015 (since you have until April 15th of the following year) and it only took me three months. So now I’m onto my 2015 Roth IRA which I plan to max out as well.

3. Max out my HSA – My current biweekly payroll HSA contribution should get me close. Luckily my employer also contributes $500 to my HSA (which counts towards the employee contribution limit).

4. Pay off my student loans – I have less than $9k left, and the interest rate is only at 3%. I’m going to concentrate on funding my retirement accounts first, and worry about these later.

5. Never finance a car again – I currently do not even own a car, as I live in NYC. So I count that as a win for me! But I do know I won’t live in the city forever, so there will come a point in time where I will need to purchase a car again. And it will be a used car with cold hard cash!

6. Save at least 75% of every raise and bonus – I make quite a bit more now than I did fresh out of college, but I have tried not to let my spending increase as well. I do not subscribe to lifestyle inflation, and that has helped me funnel most of my raises and bonuses into retirement savings and the pay down of debt.

7. Once all tax advantaged accounts are maxed out for the year, begin funneling all savings into my after-tax brokerage account – I hope I run into this problem A LOT. I have an internal debate brewing right now about whether I should go the dividend producing portfolio route such as Dividend Mantra or go the more conservative, commonly accepted method of just dumping this money into Vanguard Total Stock Market index fund (but this debate is for another time).

Well there is my short, very attainable to-do list to become a millionaire. I’ve run the numbers and I should be able to get there by 40 if I stay in the same industry and career trajectory. This is a conservative estimate and if I can reach it any earlier, then SHABOOM!

Are you part of the Millionaire Club? If so, what are some of your more important goals to get there?

How much house can you afford?

I was perusing the CNN Money website, and I came across a link for “How much house can you afford?” so obviously I clicked on it. It asked for three inputs: 1) annual income, 2) down payment, and 3) monthly debt. So of course I tossed in some quick numbers resembling my scenario and it popped out a house value of over $500k! Let me repeat that, 27 year old me can “afford” a home of over $500k! I almost spit out my water when I saw that number pop up. And remember, I’m an accountant so none of those three numbers were anything special.

Of course someone in our online personal finance community would never make a life changing decision like determining how much house they could afford by using some calculator online that only takes into consideration three inputs, but then it got me thinking. Who are the people that would use this calculator? Unfortunately, those are the people without any financial background or interest in personal finance. They don’t research how to open up an IRA, just contribute enough to their 401k to get the employer match, have a car payment, and pay the minimum on their student loans.

So I decided to run an experiment with this calculator to see how appropriate it is. Our lucky participant is Sally from New York (upstate, not the city). She is a 25 year old nurse earning $65,000 a year at a hospital in NY state. She has lived at home for a couple years and saved up a $20,000 down payment for a home. The only debt she has is some student loans from nursing school at $275 a month (she purchased her used car in cash), and she knows that credit cards are not meant for reckless spending so doesn’t carry any balances on them. Interest rates are at an all time low so her friends and family members have convinced her to purchase a home as it will be a great investment.

So as you can see, Sally’s scenario isn’t too bad. She definitely would have a leg up on most people utilizing this online calculator. So let’s input her information into the calculator and see how much home she can afford. Lucky Sally! She can afford a home valued at $302k!!!

number1

From there I went to the payroll processor ADP to utilize their online Salary Paycheck Calculator to see how much Sally would take home from her job to see if she could really afford this $302k house. Here are the assumptions I used:

Salary – $65,000 annually
State income tax jurisdiction – New York
Exemptions – 2 federal exemptions as Sally is single and has only one job
Deductions – Only deduction I used for Sally was a 10% pre-tax 401k contribution. Sally once read an article that said contributing just enough to receive the employer match was not enough and to aim for 10%.

Her monthly take home pay with those assumptions would be $3,557.

Now let’s look at her expenses. The CNN Money calculator came up with a monthly mortgage payment of $1,675. This payment calculator assumes a 30 year loan at 3.84%, annual property taxes of 1% of the home’s value, and annual home owners insurance of 0.4% of the home’s value. Since Sally only had a $20k down payment, she’s going to need to pay private mortgage insurance (PMI). Using goodmortgage.com I calculated a monthly PMI payment of $169. See below for her total guestimated budget (before you tear up the budget, I put it together off the top of my head just using experience and from what I have been told by homeowners over the years in the northeast).

number2As you can see, per the budget to the left, at the end of the month Sally only has a $63 surplus. You might have noticed I have not included health insurance since this can vary greatly from person to person. Also, $350 a month to heat and cool a home in the Northeast may be a little bit of a stretch depending on the age of the home. For instance I once rented a bedroom in a 3-bedroom house in New England and it easily cost over $400 a month for electric and heating (annualized) for the whole home.

The $100 a month budgeted for home maintenance isn’t going to get her very far if she needs a new roof or furnace, especially since she drained her emergency fund for the down payment. And she will definitely have to take out a car loan to purchase her next car unless she can earn more, pay down her mortgage enough to rid herself of the PMI, or cut down her budget.

So as you can see, the people these calculators are meant to help are exactly the wrong people who should be using them. With only $63 left over at the end of the month, Sally is really going to reconsider her “investment” especially since since she’s living paycheck to paycheck now and has to cut back on her more expensive hobbies.

Do you think the Sally can actually afford a $302k house? Is the CNN Money calculator dangerous for uneducated users?