Personal Car Downgrade? or Upgrade?

Hi All!

It has been awhile since the last post. We have both been trying to figure out some factors in our lives that we can improve on.

As part this process from the new year, I decided to take a serious dive into the search for a different car.

Some questions I had to ask myself:

  • How do I use my car?
  • What are must haves in a car for me?
  • Does the car I have make financial sense?

After asking myself some of those questions, I decided to venture into the search with Mr. Bzness for a “downgrade.” We started looking for a Honda Accord sedan, which would fit the need of my family and we still kept some options that I would like to have in a vehicle. (Fyi…I do consider myself a car enthusiast)

After a couple of weeks of searching, we started to check out the cars and decided on the specific vehicle we wanted. We did have a dilemma of should we trade in the car or sell it ourselves, after posting it on and craigslist we went with the trade in option due to the small difference in offers and the sales tax advantage you would get when trading in a vehicle. The tax advantage is essentially due to the price of the car you are buying is less due to the trade in and you only pay sales tax on that amount versus what you would have paid. We did decide to buy a 2-3 year old pre-owned car versus buying new, which definitely helped with the pricing of the vehicle.

After everything said and done, I had gotten rid of a 2011 BMW coupe for a 2016 Honda Accord sedan. So I asked myself, did I downgrade? After taking everything into account, I had more new features and the space I needed for the family.

Immediately after the purchase, I started to realize that this “downgrade” actually isn’t what I thought it would be.

I was pleasantly surprised to have my auto insurance policy decrease by ~$100, when I called to change the vehicle that needed to be insured (I did not change any coverage options). Then after my first week of driving to work, I only used a quarter tank of gas!!! I have been used to using 3/4 of a tank on the BMW and pumping premium gas versus now with less gas usage and pumping regular gas, I foresee more hard earned dollars staying in my pocket than in the pump!! 🙂

Another big factor that made me pull the trigger on the switch was that I was spending around 2-3 thousand dollars on maintenance for the BMW a year and it was getting to the point where we were expecting more repairs to be needed. The BMW had ~93k miles on it and the more I drove it, the more dollars I could hear I would need to keep it running.

So back to the original question…Downgrade? or Upgrade?
Let’s do some quick high overview math on this:

  • $100 less in auto insurance per 6 months = Savings of $200/year
  • 1/3 less consumption in gas w/average 10,000 miles driven a year for me, and pumping regular instead of premium gas (50 cents more per gallon). Let’s say average price regular gas is $2.00. = Savings of ~$647.50/year
    • BMW 18/27 mpg (City/Hwy) = ~555 gallons/year x$2.50 = $1,387.50
    • Honda 27/37 mpg (City/Hwy) = 370 gallons/year x$2.00 = $740
  • Maintenance – I won’t be able to break this savings down to an actual number but I think we can safely assume I will be at least be spending $1,000 less in repairs/maintenance cost a year and I truly believe that to be a conservative estimation = Savings of $1,000/year

So if only looking at the finances we are expecting a total yearly savings of $1,847.50!!!!!!!

Based on some quick math and my opinion, I think it was definitely and upgrade! Not to mention, the right financial move to make, especially since I only drove it to work and to drop off my kid to daycare. I no longer needed a vehicle that had more speed capabilities that family friendly options. The instant savings with auto insurance was definitely a nice surprise. Buying a newer vehicle used and going with Honda, I am hoping/expecting a reduction in maintenance needs/cost and the decrease in gas consumption should all add up to a decent amounting financial savings!!

There is a great podcast from ChooseFI, that breaks down the true cost of car ownership. To be honest, I was always to afraid of listening to it because of my choices in cars but I may give it a quick listen now 🙂 .

Just wanted to share what I think is definitely a WIN in my life recently! Hope this quick breakdown of a real scenario can help others visually see some of the pros and cons of different cars versus just keeping it in our head, this helps make it less abstract of a concept.

As always, please leave comments or email us if you guys have any questions or want to know a little bit more about the small wins we post!!! 🙂

Also, please feel free to share any of your small wins as well! We would love to hear about it and see what we can learn from it as well!

Companion Pass Redemption!

So great news! Hopefully…

As you know I was not successful in my first attempt in obtaining the coveted Southwest Companion Pass.

Based off of many factors, but the saga continues!!!

I received a text from my brother today, about a new promotion from Southwest that if you sign up for one of the Chase Southwest cards and spend $4,000, you will get 30,000 Rapid Reward points and the Southwest Companion Pass!!!!!!!!!!!!!!!

One key difference between this promotional offer and the traditional way to get the Southwest Companion Pass is that this Pass offer will end December 31, 2019 versus the traditional pass would have lasted until the following year December 31, 2019.

I did run into a little snafu…I already have a consumer/personal Southwest Credit Card. In this scenario, I just had my wife apply for the consumer card.

There are a couple of personal card that you can apply for that currently has this promotional offer. I’ve highlighted some key differences between the cards below.

I decided that the card that would work the best for my wife and I, in this situation was the Southwest Rapid Rewards Plus Credit Card. She applied and was approved!!! Bam!!!

I am hoping to be able to meet the requirement of this card and maximize the travel perks for this year! Wish me luck!

The dream never died! Another small win! #Neverstoptrying

Savings and Taxes!!!

As we approach the end of the 2018 year, I wanted to quickly go over some of the key concepts we’ve learned this year about savings and taxes. (I know this sounds boring, but I promise I will try to keep it concise and finish before you fall asleep)

One of the biggest concept I realized from all of the financial resources out there, was if you have the opportunity to take advantage of pre-tax savings/investments we should definitely try our best!

What does that even mean? Well for starters, most of us who work a “regular” job, that we get a W-2 at the end of the year, most likely have options from our employers to put our earnings into investments before taxes are taken out. Typically this is offered as a 401k or for government employees 403b. Basically, this means we have the opportunity to invest 10-30% more money and have that amount grow until we are ready to take it out, versus just paying that that 10-30% as taxes to the government that year.

Some background, I’ve always contributed to my 401k through my company ever since I’ve gotten a full time job. However, I’ve only been contributing the amount that the company will match (as a benefit of employment). My employer intially only matched up to 3% of my earnings if I was willing/able to contribute that much. For my situation that was am easy decision, why not take “free” money. So as a benefit of employment, most employers will give some kind of “match” with a “vesting” schedule. Vesting is basically how much of the “matched” contribution you can keep if you decide to the leave your current employer.

So I took a leap of faith this year after listening and researching into how to best take advantage of this pre-tax investment opportunity. Based on the 2018 tax bracket (provided below from the IRS website), I would personally would be taxed up to 24% on some of my income, which means a majority of my income and my wife’s income will be taxed at 22%. Let’s put this into some more relatable numbers, imagine that I earn $1,000 that will be taxed at 22%. That means I will pay in taxes $220 of that $1000 I earned. Once I understood that I was pretty frustrated…I thought to myself what can I do about this?!?!?!?

This is where utilizing the employer’s retirement investment option such as the 401k became very appealing to me. Long story short, I changed my contribution to my 401k from 3% of earned income to an amount that would allow me to get as close as I could to the current maximum 401k contribution limit of $18,500 (for 2018, it will be $19,000 in 2019). I am pleased to say that although I did not reach the limit, but I was able to contribute $17,806. I will definitely make it a goal of mine for 2019 to contribute the maximum amount of $19,000 into my 401k. To put this into perspective, if I had not elected to contribute $17,806 into this pre-tax savings account, I would have essentially paid ~$3,917 in federal taxes on those earnings.

That is definitely a simplistic overview of the situation but I believe it overall explains the main concept of how advantageous contributing to a 401k or any pre-tax investment account can be, when we simply look at how much we are saving that year in taxes. Beyond that we are getting to choose what to do with that money in the mean time until we get to pull that money out, of course there are more rules and regulations to how that money can be moved, used and taken out. (That is a whole book in itself) There are definitely a lot of options out there and some we haven’t even talked about in this post including 457, Traditional IRA, and Roth IRA accounts. If you want to learn a little more about that I did find a good overview in a table format to make it a little bit easier to understand. Savings account overview. <- we do not endorse the company that has put this material together but merely sharing because we found it to be very helpful, keep in mind that this information will change for the 2019 tax return.

So my take home message is, if you are financially able, consider placing your money in these beneficial pre-tax investment accounts and have the money you work so hard for, potentially earn you money!!! (Or you can just decide to pay thousands of dollars more in taxes)

Mr. Bzness, is in a completely different scenario, being that has a personal business venture. This means he doesn’t have the luxury of an employer having all of this 401k structure available to him. He is also convinced this is a great way to maximize his earnings as well (work smarter not harder, right?), so he is on his own journey to set up a solo 401k. Definitely be on the look out for this because once we get a little more traction on setting up a solo 401k, we will explain how the process was for him and give details on what we have learned about that journey.

Remember, “Work smarter not harder!”

Happy New Years to all!

Please let us know if you have any questions about anything in this post either in the comment section or through email.

Southwest Business Card

Happy Holidays All!

Updating everyone this week on the Southwest Companion Pass journey. (It has been a rocky one)

So it seems that some things have been changing and it getting a little bit more difficult to get these credit cards. Unfortunately, it seems that I was denied the Southwest Business credit card with the reasoning “Too many requests for credit or openers accounts with us.”

Based off of all the information out there we are suppose to be okay if we stayed within the rules of 5 in 24. Which is not opening 5 credit cards within the past 24 months. I have not done so, but it seems that not having my business Tax ID before applying the first time has hurt my chance of getting approved.

I am definitely disappointed it not being able to take advantage of this opportunity to obtain more bonus points that available to help reach the Southwest Companion Pass 🙁 .

I did get to reach out to some other individuals that I know have gotten this Southwest Companion Pass and it seems that they were able to obtain this pass when Chase was still allowing one individual to open multiple personal Southwest Credit Cards.

I did try to give Chase lending department a call explain the situation and after about 30 minutes, I was given further reasoning that my business was to “new” and had insufficient revenue to be approved. The representative definitely was not helpful at all and was very dodgy on most of my questions.

So moral of this story is credit cards are a good way to optimize rewards for money we are already spending but applying for them seem to be a science of its own. Banks definitely have an algorithm that is being used to approve or deny credit card applications and it seems I haven’t gotten the science of this down yet. However, I am learning and want to share my experience with everyone who is trying to explore these options as well.

My recommendations:

  • Do not apply for Business Credit Cards until you have applied for a EIN (Business Tax ID) with the IRS.
    • This seems to make the process much smoother and no request for proof of business should be needed.
    • Also, I wanted to let everyone know I have had a personal business before but just have never filed for a sole proprietorship.

With the bad news going into the holiday season, I am going to try to turn this around and look on the bright side. I will at least get the bonus points from the personal Southwest Credit Card and plan to use those points up for my expected travel and maybe try again later in the 2019 year. If that application doesn’t work again then I will probably just cancel the Chase Southwest personal credit card.

No small win this time! But definitely learning!

I hope someone can find this information to be helpful! If anyone has any other insight for myself please let me know 🙂

Southwest Companion Pass

It’s now mid December and the saga for the Southwest Companion Pass is well underway!!! Hoping for more small wins!

So, update on my progress so far:

  • I was approved for the Southwest Rapid Rewards Credit Card
  • I am close to the $1000 spend requirement for the card to receive the 40,000 bonus points
    • FYI…I had to stop the spending on it for 2 weeks to make sure the bonus points wouldn’t be awarded in the 2018 fiscal year. (Remember that the accumulation of the 110,000 points must be awarded in the same year, so in my case 2019)

One of the new challenge with obtaining the companion pass now is that, they’ve created a rule that won’t allow one person to have 2 personal Southwest credit cards. Which means, the only other option is to open the Southwest Premier Business Card. 

I tried to open the business card in early November of 2018, but was denied because I couldn’t show proof of owning a business (some of the accepted documentation was mentioned in the previous post). So, I had to go find proof, even if I already had a business. So it seemed that I needed to legitimize the things I was doing for my business in order to get approved for this card. The route I chose was to apply for a Sole Proprietorship with my county tax office, this costed me $20 and would probably help me in the long run anyways. I’ve posted the fee schedule for different applications just to help everyone visualize how inexpensive, legitimizing a home business can be.

I did not enjoy having my application denied last time so I wanted to make improve my chances even more than just having a sole proprietorship paperwork (I really hate getting denied). So, I went ahead and applied for a business tax ID [EIN] with the IRS, through the IRS website. This is actually an even easier process. If you apply for it online you will get your EIN number immediately. 

I think I’ve done all I can and let’s see how this goes. I went ahead and applied for the card again today and received a reply that they will need to review further. Worst case scenario I will at least get the bonus points from the personal card. -_- 

ChooseFI, is a great resource and one of their recent podcast essentially goes over all of this at a little higher level. If you haven’t listened to it, you should definitely check it out. 

104R | Travel Rewards | End of Year Planning

Let’s hope I can report soon that this will be another small win!!

Credit Card Hack 2.1

It is Friday!!! Time to recap on some of the small wins throughout the week!

So I have some exciting news about the referral program that we mentioned last week, after going over some details with a friend about how beneficial credit card rewards points can be, he signed up for one of the best credit cards currently out there to start off with the Chase Sapphire Preferred Credit Card (in my opinion). Then to my delight I received an email from chase confirming I will be receiving the referral points!!! 

To be a little bit more specific on the time frame, the person applied for the credit card  and was approved on Nov 20th and on Dec 6th, I received the confirmation email that I will see the bonus points on the next month’s statement. So, it seems that the approximate timeframe is about ~20 days and BAM someone gets paid at the very least $100 but potentially even more if used through affiliate programs (see previous post for info). 

Now, onto what we had mentioned at the end of the last post, the almighty Southwest Companion Pass…

What is the Southwest Companion Pass? 

Essentially, it is a “perk” that if you can accumulate 110,000 Rapid Rewards Points, in 1 (one) calendar year then you will be able to get a free ticket for a “companion” for every flight you book with Southwest Airlines. So for example, you buy an Southwest Airline ticket to Denver, you can also book a “companion” ticket for free on the same flight!!

So maybe not completely free…there are some fees that will need to be paid see above. 

There are a lot of mentions of this is a great way to travel for less and an awesome credit card airline hack…but how exactly can someone get this 110,000 qualifying points?!?!?!? Well, I am starting this small journey myself and will document the process I am taking. 

One of the key things that I am reading, is that the qualifying points that will be counted in the 110,000 points need to be earned in the same calendar year. Once the Companion Pass is earned you essentially have this pass for the rest of the year and until December of the following year. So if the pass is activated February 2019, you will have the pass active until December 2020. That means, if you time it correctly you have a Companion Pass for almost 2 years! 

This is where it can get a little tricky, (at least for me) I opened the Southwest Rapid Rewards® Plus Credit Card November 2018 and plan to charge $1,000 on this card to obtain the 40,000 points to be awarded in 2019.  Then I will apply for the Southwest Rapid Rewards® Premier Business Credit Card and charge $3,000 in the first 3 months to obtain the 60,000 point bonus. That should give me 100,000 points and I will only be 10,000 points away. I am hoping to get a referral bonus in early 2019 to get my last 10,000 points 🙂 . So if anyone is feeling giving and is going to try to get the companion pass as well please try to use the Southwest Credit Card link in the post to apply for the credit card. 

The business credit card requires a little more information/effort to get. You have to have proof of an actual business to apply for this. A couple of ways this can be done, if you have a Tax ID for the business, then that’s it! If not, then you could prove it by having your tax return show you declared a business. 

I am hoping to have this companion pass by March or April of 2019, wish me luck!!! 

If you have any questions or comments please let me know!

Credit Card Hack 2.0

**Another small win**

Previously we went over a scenario I had and how to actually use the reward points people discuss about. 

Today, I wanted to expand a little bit on a couple of more little “hacks” that we all can do to fully take advantage of the offers and points available to us. One thing I actually learned while trying to help others with credit card hacking is that we can all benefit from this, by using referral codes. If someone we know is going to start trying to benefit from credit card rewards why not get referral points?

Currently Chase has a wide variety of options. Some are shown below.

Depending on the time of the year and what promotion they may have going on, the referral points may differ. I was able to receive points from a referral pretty easily. 

  1. Choose the card you currently have and click on the “Invite friends now”
  2. Then it take you to a page to fill out:
    • Last Name
    • Zip Code
    • Last 4 digits on your card

3.  Then the site will provide you with a referral link that can’t be sent to anyone or you can decide to email it out to anyone you know. *Note – the email options takes awhile for the recipient to receive it. I personally don’t like that option. 

If you are finding this helpful so far and don’t have a current friend or family member to give them the referral bonus in opening a chase credit card. In this example, the Southwest Rapid Rewards® Plus Credit Card. If you don’t mind I would love to get a couple of referral bonuses on this Southwest credit card as I am trying to obtain the Southwest Companion Pass.  (Note: I will update/remove my referral link above when I have maxed out my bonus for the year.)

Then Bam!!! After someone uses your referral link and gets approved for the card you will be awarded the bonus points for that time period. I currently still need to follow up on 1 referral bonus that I have out, for the Chase Sapphire Preferred credit card to make sure I do get the points and how long it takes and will keep everyone updated! (Chase website does mention it may take up to 8 weeks)

So, I mentioned something previously in this post…that my goal in this next couple of months is to obtain a Southwest Companion Pass, I will go more in detail that benefit and how I plan to obtain this next week 🙂 

I hope you have found some use of this quick and easy hack! Another small win! 

Again please leave any feedback/comments for this post or anything else you would like to see more of. Thanks for reading! 

Mr. 9-5 & Mr. Bzness

The First Small Win

Where do we even start? How do we start? How do we get to this HUGE goal of financial independence?!?!?!?!? Can I commit to this goal? Do I need to just save and never spend any money? Do I save everything in these investment accounts (401ks, 403b, 457, IRAs..)?!?!

I am already overwhelmed…

Well, how about we take a step back? Let’s take things 1 step at a time. 

As we both started this journey, we realized that this is a daunting task for all of us. How can we follow a concept that we may feel is unreachable? That we can’t touch or feel? 

We learned there are many ways to “save” money for financial independence. One easy step is to change how we approach spending money, there is a system in place that allows us to get more out of each dollar $$$ we spend. 

The answer is credit cards…sounds counter intuitive, but let’s think about it. We have all heard about credit card rewards and points. It is all over the media and advertisements, but isn’t credit cards bad? Well if you are at a point in life where you are spending more money than you can pay off every month, then yes. If you are able to allocate your spending and route them through what the industry calls a “premier” credit card, and can pay the monthly statement balance in full and not pay the interest fees, then this concept/method is perfect for you! 

I felt in over my head on many concepts at this point but due to life’s obligations to attend family and friends’ milestones, I looked into how to better use my credit card rewards points. 

For the rest of the post I will go into the specifics on how I am maximizing the use of my Chase Ultimate Reward Points and I hope this will help anyone that already has Chase Ultimate Reward Points or is looking into getting a Chase Credit Card for this purpose. 

To start off, I have the Chase Freedom and Chase Sapphire Preferred credit card. These cards allow me to earn “Ultimate Rewards Points,” which I can claim as cash back (10,000 points = $100.00), redeem for travel (10,000 points = $125.00), or anything else at (10,000 points = $100.00). 

No that has been established, I needed to take a small road trip and after all of the advice that points can be used better than cash back, which I had been doing for the past 10 years…I decided to look into it. 

I decided to follow the advice that I should try to spend the points on things I am already planning on doing such as having to travel for the obligations mentioned earlier. So I started looking for places to stay for this road trip, options included Airbnb and hotels. From the advice, I started looking into transferring these points to a travel program. 

There are many Travel Partners, that we can transfer points to. 

I found a hotel meeting my requirements for the trip and it happened to by a Hyatt hotel and that is one of the travel partners. In order to transfer the points I had to create a “World of Hyatt” rewards member account, which is free, then looked for the place I wanted to stay and how many points it would require. After that I transferred that amount of points 5,000 points per night and booked the room. 

So let’s break this down a little more. When I searched how much the room would cost, it was $100 per night. I was then able to see that it would cost me 5,000 points per night. If you can recall earlier, the cash value for the 5,000 points would have been equivalent to $50. So I was able to book $100 room for basically $50 worth of free points. 

That really amazed me!!! I use to waste my points by redeeming them as cash…instead I could have been getting double value for all of my points if I was using them for travel that I was already planning on doing!

This was my first small win! I really hope to make many small wins, which will help me save more and spend money or points 😉 smarter.

Please feel free to leave us any feedback or questions on this! We would be happy to answer questions to help others trying spend points in this fashion!