How to Invest in Real Estate to Achieve FIRE

The goal of the FIRE movement is to obtain financial independence through smarter spending, saving and investing more money than is typically recommended. The eventual goal of FIRE practitioners is to retire early — hence the acronym FIRE, which stands for Financial Independence, Retire Early. According to FIRE enthusiasts, it’s “complete freedom to be the best, most powerful, energetic, happiest and most generous version of you that you can possibly be.”

People who practice FIRE tend to save or invest 50% to 75% of their income. They live frugally in the meantime and avoid taking on unnecessary debt or making large unnecessary purchases. The FIRE movement has especially influenced the saving habits of younger generations. Those between 18 and 37 years of age save nearly 16% more of their annual income for retirement when compared to older generations.

One popular investment for achieving FIRE is real estate. In most cases, it means buying rental properties, then collecting rent from tenants to boost one’s income. But being a successful real estate investor — with the goal of becoming financially independent and retiring early — requires education and planning. There’s much more to practicing FIRE, though, especially when it comes to real estate.

Everyone who practices FIRE does so in a different context. Some have children while others do not, and some have high-paying jobs while others make a middle-class income, but there are a few basics to FIRE that are necessary to retire early.

First, you must start planning for retirement as soon as you can, ideally the moment you reach adulthood. You must keep your regular expenses as low as possible by avoiding debt and you must look for ways to increase your income. If you do have high-interest debt such as a student loan debt, you should pay it off as quickly as possible to avoid suffering unnecessary losses from interest.

You must also make saving and investing your biggest priorities. The younger you are the more aggressive your portfolio can be, but you should also diversify. This means putting money away in tax-advantaged retirement accounts, but it also means making investments in other important areas — like real estate.

The pros and cons of investing in real estate

If you’re investing in rental real estate to achieve FIRE, you need to know how to leverage properties to improve your cash-on-cash investments each year. If you want to make money through rental income, it also means you need to know how to be a landlord. There are a ton of pros and cons for investing in real estate for FIRE, including:

The pros of investing in real estate

1. Quick way to fast FIRE

You have the potential to achieve FIRE faster by investing in real estate than if you invest in retirement accounts or other stock market products alone. You’ll need an initial down payment if you want to buy property, but you can finance the rest with other people’s money — money provided by real estate investors who have the cash on hand to make the investment but don’t have the time to manage it.

This will provide you with a steady return of rental income, which you can use to supplement your existing income and put more away for retirement. If you need to, you can use traditional mortgages to finance your property purchases, but you’ll need to calculate whether your monthly income will be worth the monthly payments you’ll need to take on that debt.

2. Less volatile than the stock market

When you retire and begin withdrawing from your retirement investments, you’ll still be beholden to market forces. If the market crashes as soon as you start to cash out, you could be the victim of “sequence of returns” risk, and because you’re no longer contributing to your retirement, you run the risk of your portfolio diminishing faster due to your withdrawals.

On the other hand, the income you receive from rental properties is ongoing. If you maintain them and keep the properties occupied, they’ll keep generating income for you well into your retirement. Investing in real estate is much less volatile than investing in the stock market.

3. Adjusted returns 

When you put money into an investment fund, you must adjust for inflation when predicting your returns, but rental prices rise alongside inflation and as the cost of business goes up. As a landlord, you can raise the rent after each leasing agreement is complete, usually once a year.

The cons of investing in real estate

1. They’re expensive

Even if you finance the bulk of your real estate investment with other people’s money, investing in real estate still comes with a high upfront cost. Buying property means shelling out thousands of dollars and then spending additional cash on closing fees, insurance, maintenance and repairs. If you don’t have the money on hand, it could take years to save it.

It’s also important to factor in that you may end up with vacant houses during some points in your real estate investing. Markets fluctuate and rentals can sit empty for months, or even years, if you aren’t careful about where you buy. It’s also crucial to think about what it will cost to invest in a property manager to take care of the day to day needs with your properties and handle things like broken appliances or damages done by renters.

If the real estate market crashes, it could be an even bigger hit to your finances, as you’ll have to keep paying on the home while it loses value or risk selling it at a loss. Real estate markets fluctuate constantly, and it can be a big risk if you aren’t careful.

It’s also important to consider diversification. If you invest a significant portion of your savings in real estate, that investment is tied to a small handful of physical assets or a single physical asset. Physical assets are susceptible to depreciation through forces other than the market. If you can’t keep tenants, you won’t earn rental income, either.

2. Lots of work 

Investing other people’s money in real estate requires you to take on the bulk of the work involved with managing the properties. If you’re investing in rental properties and collecting rent, that means acting as a landlord, and being a landlord is an entire profession in and of itself.

Landlords must ensure their properties are safe, clean and livable. You may also be responsible for taxes and utilities. If tenants don’t pay the rent, you’ll need to ensure they know they are overdue. In a worst case scenario, you may need to evict tenants who don’t or can’t pay, which costs time, money and also involves the legal system.

3. Very little liquidity

When you invest in the market, you can sell stocks when you need cash, but that isn’t possible with real estate, as selling a single property can take months, or even years in some cases. Real estate is a good long-term investment, but it’s not the best choice if you think you’re going to need that cash back in the near future.

How to invest in real estate

You don’t necessarily need to take the landlord route to invest in real estate. There are many ways to do it. Your first step should be to decide which type of real estate investment is best for you.

1. Decide what kind of real estate you want

Owning rental property 

If you’re confident you can act as a good landlord and keep tenants, this is perhaps the safest and most predictable way to earn income through real estate. You’ll know exactly how much you’ll make each month and you can factor that into your FIRE plan.

House flipping

If you’re particularly handy, or if you’ve partnered with someone who does home improvement work, you could also consider house flipping. This typically requires much more sweat equity, but the payout could be substantial if you know what you’re doing.

House flipping involves buying a property when its price is low, then selling it quickly to turn a profit. Investors often focus on foreclosed properties and short sales to do this, but house flipping does come with risks.

For one, a foreclosure may not be livable, which means you’ll have to invest more money into it if you want to turn a profit. Making these types of repairs and improvements is also a lot of work and you can run into trouble if you don’t have the time or experience to handle it.

Real estate investment trusts (REITs)

You could also consider putting money into a real estate investment trust (REIT). These are investment equities run by companies who own and operate real estate properties. These investments tend to produce high dividends but they also come with risks.

REITs are traded on the market, so they have market risk just like any other stock. They are directly affected by the real estate market as well. They tend to have good long-term returns, but they might underperform in the short term.

In most cases, diversifying your investments is key. This could mean investing in one type of real estate in addition to a traditional portfolio of stocks and bonds, or you could try all the above.

2. Choose a good property

Choosing which property to invest in is one of the biggest challenges of being a real estate investor, but there are a few things you can keep in mind that will help you avoid the most common mistakes.

Location, location, location

First, you should only invest in an area that is growing. While it may be tempting to buy up properties on the cheap in places that are struggling, keep in mind that you need people to live in your properties if you want to make any income. Growing areas will have more demand for housing, which means you may be able to charge higher rental prices as well.

You should also start with locations you either already know or have researched thoroughly. Work to understand an area’s vacancy rates and demographics before putting any money down. Investing in a brand new building filled with high-end condos might sound nice, but it won’t make you much money if the people living in the area can’t afford to live there.

Choosing a property within budget

Unless you have an electrician or plumbing license in your back pocket, try to avoid the worst “fixer-upper” properties. It might be a good investment if the walls just need a new paint job, but if the core of the property is compromised, you could lose thousands of dollars trying to make the location livable.

Finally, you should calculate your returns, including your cash-on-cash return rate, before putting any money down. You should be able to project well into the future to determine how your real estate investment fits with your budget and your FIRE objectives.

3. Prepare your finances

Most people have to get their finances in order if they intend to buy a house to live in. Investing in real estate is no different.

Have a good credit score

You’ll need a strong credit score if you intend to get a mortgage or rental property loan with a low interest rate, and you’ll need a low interest rate if you intend to profit off your property investment. By most standards, a score of 700 or more is considered “good.” In order to get the best rates, you should try to achieve an “excellent” credit score of 720 or more.

This can be challenging if you’re still young and you haven’t built up that much credit, as the length of your credit history affects your score. The length of your history is an average of the lengths of your debts, so don’t take out any new debts while you’re trying to improve your score.

Assemble your documents

You’ll also need certain documents to acquire a mortgage:

• Recent pay stubs (W-2s)
• Two years’ worth of tax returns
• Property tax documentation
• Proof of property insurance
• Existing mortgage statements
• Statements from your bank and from your investment and retirement accounts

You’ll also need documents associated with your purchase:

• A purchase agreement
• Proof of funds for the purchase
• Statement of current property taxes

Even if you intend to use other people’s money to finance your purchase, a good credit score and clear documentation will be important for convincing investors you’re a good bet.

Make sure you have savings

You’re going to need to front some cash for your real estate investments, whether that’s on the front end or when repairs and updates come up. Make sure you have an adequate amount stashed away to pay for any unexpected expenses and closing costs on your properties, as well as anything else that may arise, like gaps between tenants.

Finance your investment

There are a few ways to acquire the financing you need to invest in real estate.

Investor capital

One of the most attractive ways is to use investor capital, also known as other people’s money or (OPM). Of course, this isn’t always an option, and succeeding with it often comes down to having the right people in your network.

Traditional loan options

If you don’t have a ton of cash on hand, you can also use traditional loan options like mortgages to fund your real estate purchases. With an investment property, the lender may require more than the standard 20% down payment, however. Banks typically prefer to provide mortgages to people who intend to live in the homes they buy, not to investors.

You’ll also need to rely on your personal financial history to secure a mortgage.

Fix-and-flip or hard money loan

Another option is to get what’s often referred to as a “fix-and-flip loan” or a “hard money loan.” These loans typically have terms of just one year. The money you can get is based on the lender’s determination of how much the property will be worth after you fix it up.

The downside to this route is that these loans are not cheap and you only have a short time to pay them back. They come with high interest rates and the fees associated with obtaining one can eat away at your returns.

HELOC or cash-out refinance loan

You could tap into your own home as a source of equity through a home equity line of credit (HELOC) or cash-out refinance loan. These are risky loans for any borrower, though, as you’re putting up your own home as a source of collateral.

A HELOC will come with a variable interest rate, but you could capitalize on it if you only have to make payments on interest before you’re ready to pay it back. With a cash-out loan, you’d get a fixed interest rate, but it could extend the life of your existing mortgage.

From a FIRE perspective, taking on additional high-interest debt is almost always a risk to your goals. If you’re stuck with high monthly costs, you’ll have a hard time setting money aside for retirement. You’ll need to do the calculations beforehand to determine if these types of loans are worth it for you.

Common mistakes when investing in real estate

Real estate investment can be a great avenue for achieving your FIRE goals, but it involves risk, just like any other investment. It’s important to avoid some of the common traps real estate investors fall into, including:

1. Failing to get educated

You may be a guru when it comes to managing your personal finances, but managing real estate investments is a different animal altogether. Learn as much as you can before deciding to invest in real estate, especially if you want to make it a part of your FIRE strategy.

2. Failing to plan beforehand

A plan-as-you-go strategy never works in real estate investing. There are just too many variables to consider with a physical asset, and if you don’t calculate your expenses, returns and interest beforehand, you could find yourself with real estate assets that are costing you money rather than making you money.

It’s important to find a property that fits your plan, not force your plan to fit a property. You should also have contingencies in place in case something goes wrong. After all, while the rental market can affect the profitability of your real estate assets, so can hurricanes.

3. Paying too much for a property

“Buy low and sell high” is one cliché that almost always applies to real estate investments. Once you purchase a property, you’ve already sealed in how much profit you can make from it. Search for bargain properties that fit your plan, but focus on those properties that won’t require too much investment to get up and running as well.

4. Miscalculating maintenance costs

Investing in a physical asset like a property always involves costs for maintenance and upkeep, especially if you’re investing in a rental property. If you fail to fix the problems from general wear and tear while people are living in your property, they could turn into expensive problems down the road.

You’ll need to have enough cash flow to cover repairs and keep your property livable during an emergency, such as a natural disaster, a burst pipe or a long-term power outage.

Advice from one FIRE enthusiast to another

It can be tricky to figure out how to make the FIRE movement work for your specific needs, especially when it comes to real estate investing, as every market is different and requires a unique approach from investors. Still, even with the potential investing difficulties, the young investors who have found success with the FIRE method swear by it and have plenty of advice for young would-be FIRE enthusiasts.

“For young investors that are a part of the FIRE movement, my best piece of advice is to invest aggressively. The fastest and most profitable way to invest in real estate is to leverage the properties as much as you can,” Kevin Vandenboss, Broker at Vandenboss Commercial, said. “In most cases, you will get a higher return on your cash by spreading it out among several properties than it will by owning a single piece of real estate free and clear. The cash flow per property will be less, but the cash flow from four with a mortgage will be more than from one property without one. As you build equity in your investment properties you can either leverage the equity to buy more or use a 1031 exchange to trade up to a larger investment. It’s a game of monopoly. You have to stack up properties if you want to win.”

Caleb Liu, owner of HouseSimplySold.com, said you should “get educated in real estate first. You’re buying a house, not a share of Tesla stock. Mistakes hurt. Real estate, as great as it is, is generally not ‘retire early.’ There’s one exception: the young hustlers who put in eighty to one hundred hours looking everywhere to find great deals. Never buy based on quoted returns. Everything looks great on paper. But there are some shady people in real estate.”

Jared Hauf, a FIRE blogger for 30sum.com, said investors do their homework beforehand.

“Run your numbers multiple times and then run them some more. You can wipe out a lot of progress by purchasing the wrong property. If it doesn’t meet your exact goals, walk away,” Hauf said. “There are always more opportunities; picking the wrong one can sink your ship. To best achieve FIRE using real estate, the investor needs to have a firm understanding of what they’re trying to achieve. It’s easy to say we want to achieve making more money, but you must understand how, and have a plan in place to deal with all aspects of the business.”

Brian Davis, Director of Education at SparkRental, also has some very specific suggestions for FIRE real estate investors.

“My best advice for new real estate investors pursuing FIRE is to focus on just three fundamentals before anything else because there are so many micro-skills and moving parts involved in real estate investing…,” Davis said.

“First, focus on learning how to find good deals. As an investor said to me once, ‘There’s no deal tree that you can walk up to and pluck deals from; you need to learn how to go out and find them.’

“Second, learn how to accurately forecast rental cash flow. Financial independence requires income, so generally FIRE-oriented real estate investing means rental investing. Get very familiar with forecasting expenses, in particular, and get comfortable with running the numbers in a rental cash flow calculator. The last place you want to find yourself is buying a property that costs you money each year, rather than earning you money.

“Finally, learn how to screen tenants thoroughly. It sounds simple, and it is, yet so many new landlords gloss over this step. The quality of your returns directly correlates with the quality of your tenants, and bad tenants can cost you tens of thousands of dollars.”

The bottom line

FIRE is achievable even on a middling income if you make the right financial moves, according to practitioners and enthusiasts. If you intend to invest in real estate to achieve FIRE, you’ll need to avoid all of the most common pitfalls in the business and choose investments that will provide you with the best opportunity for steady income.

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USAA Renters Insurance Review 2020

In 1922, United Services Automobile Services (USAA) was born when 25 members of the U.S. Army formed a small organization to insure each other’s automobiles. What began as a well-orchestrated effort to help fellow Army members later became a booming organization serving all branches of military service.

To illustrate its rich history, USAA includes a timeline on its website to show current and future customers where it came from to get where it is now. USAA is now one of the only fully integrated financial services organizations in the United States and it has a net worth of over $31 billion. The company serves the insurance needs, including renters insurance, of over 12 million military service members. It goes without saying that it ranked in the top 10 of our review of the best renters insurance companies of 2020.

Find the Best Renter Insurance

Enter your ZIP code below and be sure to click at least 2-3 companies to find the very best rate.

Aside from USAA’s deep American roots, it’s also known for excellent customer service and has a reputation for providing sophisticated technology along with the flexible renters insurance options.

The specs

Price	Starting at $12 per month
Best for	Military members who are renting
Not for	Non-military or military homeowners
States served	50
Discounts	Renters and auto bundle discount Monitored security alarm discount
AM Best Rating	A++
Standout Features	Long-standing company reputation Excellent customer service Replacement cost coverage Affordable rates Innovative technology

The claim

USAA offers affordable renters insurance to the U.S. military and their families with more features than many other insurance companies. With one of their renters insurance policies, USAA promises your belongings will be taken care of in the event of damage, theft or destruction.

Is it true?

Our research shows that USAA’s claims are true. USAA offers renters insurance to active duty military, veterans and the families of both. Unlike many competitors, things like flood and earthquake coverage are standard parts of the USAA renters insurance policies.

Because it understands the mobile lives of active-duty military, USAA ensures that all your personal belongings will be covered, no matter where they are located. In addition to the excellent coverages, USAA ranked five out of five in overall satisfaction, policy offerings, price, billing process and policy information and interaction in J.D. Power’s 2019 Renters Insurance Study.

Our deep dive

• Replacement cost coverage: Many insurance companies offer actual cash value policies in addition to replacement cost policies. USAA differs in that it only offers replacement cost renters insurance policies. No matter how old your belongings are, the policy will cover you for what it costs to replace the item with a new one.
• Liability coverage: If someone or their property is damaged while on your property and you are liable, your USAA renters insurance policy promises liability coverage to cover those costs.
• Active-duty, veteran and family coverage: If you are active-duty military, a veteran or a family member of either, you are eligible for USAA insurance. However, if you do not fit into one of those categories, you will not be able to get insurance from USAA.
• Discounts: Though USAA’s discounts may seem limited, remember that they are highly competitive with its affordable rates. Consider bundling your renters and auto insurance and installing a monitored security system to save on a discounted premium.
• Quick turnaround: USAA has claims centers that are open 24/7, which means you will never be delayed in filing a claim.
• Mobile app: USAA offers a mobile app that gives 24/7 access to your insurance documents, claim filing and claim tracking. The app is now also accessible for those with visual impairment through voice-guided technology.
• Military uniform and equipment replacement: True to its roots, USAA offers special coverage for military uniforms and equipment as outlined below and on the website:
  • Repairs or replaces military uniforms and issued military equipment at full cost with no depreciation.
  • There is no deductible for covered losses sustained while on active or active reserve duty.
  • Includes coverage up to $10,000 for damage caused by war.

Cost rundown

While USAA’s renters insurance rates start at $12 per month, there are a variety of factors involved in determining what your rate will be. USAA underwriters will look at things like geographical location, the proximity of the rental unit to fire hydrants and first-responder stations, age of the property and potentially even your credit score.

Your premium cost may increase if you need to add any special endorsements. However, things like flood and earthquake coverage are built-in as a part of USAA’s standard renters insurance policy.

Cheaper (or free!) alternatives

Here are some ways to make USAA renters insurance even more affordable:

• Consider bundling your renters and auto insurance to save money on your annual premium.
• Install a monitored security system to save money on your annual premium.
• While it is important to have adequate coverage, don’t overdo your personal property coverage. Make an inventory of all personal property before seeking quotes.
• Monitor your credit score and make changes necessary to improve your score.

The competition

• Allstate: Allstate offers renters insurance coverage that is comparable to that of USAA, but with the added bonus of several discount options like a multi-policy discount, safe home discount, easy pay plan discount, 55 and retired discount and claim-free discounts. However, Allstate got below-average rankings nearly across the board in the J.D. Power’s 2019 Renters Insurance Study, which assessed customer satisfaction in a variety of categories.
• Erie Insurance: Erie Insurance, like some of its competitors, has been around for more than 90 years. Its local agents are known for providing personalized customer service. Erie’s renters insurance policy offerings are comparable to that of its competitors, and Erie received average to among-the-best ratings in all categories of the J.D. Power 2019 Renters Insurance Study.
• Nationwide: Nationwide Insurance is a nationally recognized name in the insurance industry, making it a competitor of USAA for renters insurance policies. It offers a variety of options on renters insurance policies, and things like theft extension for your belongings in any motor vehicle, trailer or watercraft. Nationwide also offers several discount options to lower your annual premium. However, on the J.D. Power survey, Nationwide scored below average across the board in all categories assessed.
• State Farm: On J.D. Power’s 2019 Renters Insurance Study, State Farm gets five out of five ratings in every category except claims. In that category, State Farm ranks two out of five, which represents below-average customer feedback on their claims process. While State Farm is inferiorly ranked in claims, we consider State Farm a competitor of USAA due to its long-standing history, reputation for good service and comparable renters policy options.

What others are saying

For the 2010-2018 time period, USAA received the highest scores in Satmetrix Net Promoter Benchmark Study. Between 2016 and 2019, USAA earned a ranking in the World’s Most Ethical Companies. These accomplishments are representative of USAA’s service excellence. Its No. 100 Fortune 500 rating in 2018 is indicative of superior financial strength.

In 2019, USAA was awarded the 2019 Gallup Great Workplace Award and FORTUNE’s Best Workplaces in Finance and Insurance Award. USAA also received a 100 percent rating on the Human Rights Campaign Foundation’s Corporate Equality Index. While these awards may not be directly related to USAA’s renters insurance policies, they are representative of the type of company USAA is and the morals it is founded on.

The bottom line

Renters insurance is a critical part of protecting your financial well-being. With a great reputation for customer service and flexible policy offerings, USAA is an excellent choice for renters insurance if you are a current or former military service member.

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Amica Renters Insurance Review 2020

Amica Mutual Insurance has been in business for more than a century. The company is known for its exceptional customer service and satisfaction, and Amica has received recognition and rewards in numerous categories for multiple branches of its operation.

Despite its reputation and recognitions, none of these acclaims are for Amica’s renter’s insurance branch. While some awards, such as the PBN Best Place to Work award of 2018, might apply to the whole company across the board, others such as their 2019 ranking as number 1 in “Highest in customer satisfaction with the property insurance claim experience” are particular to a division of the company.

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Although Amica does not display any awards for its renters insurance division, the company as a whole has an excellent reputation. This reputation is upheld when you take a look at Amica’s market share of complaints compared to their market share of the industry. Here, in the NAIC complaint ratio report, we can see that Amica receives roughly half the amount of complaints that would be average for its size within the insurance industry.

Still, this doesn’t mean they are right for your situation. A closer look at what is offered through Amica renters insurance is needed before any decision can be made.

The specs

Price	$4 a week*
Best for	People who prioritize customer service
Not for	People who want to interact with their agent in person
States served	All states except for Hawaii
Discounts	Loyalty Multi-line Claim-free Autopay E-discount
AM Best Rating	A+ (Superior)
Standout Features	Discounts Policy customizations Excellent customer satisfaction

*Lowest premium as listed by Amica.

The claim

Amica makes a few claims as to why it should be chosen over others for renters insurance. Here are the two most significant such claims, from a customer perspective:

• “Work with a team that’s nationally recognized for customer service.”
• “Get customized coverage to fit your specific needs.”

Is it true?

Amica was smart in choosing these claims, as both are critical elements of choosing renters insurance and both are easily verified. We’ve already seen how highly Amica ranks with customer satisfaction and customer service. Thanks to the J.D. Power report, we can determine that the first claim is valid, as Amica has received awards for being number one in the industry for customer satisfaction.

The second one is a little trickier because it might be considered correct as long as the company offers any customizations on renter policies. On the other hand, one can just as quickly find it false if Amica doesn’t have customization options that “fit” one’s needs. While Amica does have an array of policy customizations available, the only way to be sure that Amica renters insurance will meet your needs is to compare your needs to its policies and customization options.

Our deep dive

Standard renters insurance coverage

• Personal property coverage: This coverage helps with replacing damaged or stolen property, whether you are at home or away. Itextends to items such as electronics, furniture, credit cards and clothing.
• Personal liability coverage: This aids in costs related to either people or their property being injured or damaged while at your residence or by you, your family member or your pet.
• Loss of use coverage: This can temporarily assist with living costs for hotels and food if your residence becomes unlivable.

Additional renters insurance coverage options:

• Personal property replacement: This covers full replacement or repair of property, up to the limit of your coverage, without needing to take item depreciation into account.
• Scheduled personal property: This is an extension to cover more specific and expensive possessions such as fur or jewelry.
• Smart devices and computers: This adds coverage for phones, computers, tablets and laptops.
• Identity fraud: This provides reimbursement, up to your coverage limit, for unauthorized use of your identity. It helps with such expenses as unauthorized credit card usage.

Cost rundown

Numerous factors can influence the cost of your renters’ insurance policy. Below are some of the more common variables to be taken into account by companies such as Amica Mutual.

• Deductible: The higher the deductible you choose, the lower your premiums will be, but the more you will have to pay out of pocket before your policy kicks in.
• Add-on coverage options: Adding coverage options will extend your coverage and increase your premiums.
• Rental location: The building location can have a significant impact on cost. Things like local crime rates and proximity to fire stations are often considered to determine various risk levels for the insured property.
• Building and unit size: The larger the insured property, the more it costs to replace, and the more the insurance company charges for that risk.
• Credit rating: The higher your credit rating is, the more the company trusts in your future payments, and the less it will charge you on your premium.
• Building security: More secure buildings experience less damage and loss and are therefore less expensive for the insurance company to cover. As a result, you can experience lower premiums.

Cheaper (or free!) alternatives

While renters insurance isn’t mandated by law the way that homeowners’ insurance is, it can still save you a lot of money in the event of a disaster. If you do wish to take out a policy, Amica is one of the most affordable options available. Part of this is due to their discount programs, which are detailed below.

• Loyalty: This discount kicks in once you’ve held a policy with Amica for at least two years. It saves you money based on how long you’ve held a policy with them.
• Claim-free: This is a discount provided for customers who have gone without filing a claim on their policy in the last three years.
• E-discount: This discount is for customers who choose the paperless option and receive their policy information and bills electronically.
• Multi-line: If you also get car insurance through Amica, this discount can save you up to 7% on your renters insurance.
• AutoPay: This discount is for customers who pay their premiums using automatic payments.

The competition

There are numerous companies to choose from when looking for renters insurance. Each has its place, and more than one may be suitable for your needs. Below are five of the top competitors for Amica renters insurance, along with their J.D. Power scores. Although Amica has received awards for 17 years in a row on the J.D. Power report for their homeowners’ insurance, it isn’t represented for its renters insurance in the J.D. Powers reports.

For a more in-depth look at alternative companies for renters insurance, take a look at this guide to the best renters insurance companies of 2020. If you’re looking specifically for policies that include flood coverage, read this guide to the best flood insurance companies.

• Erie Insurance: Erie renters insurance is known for customer satisfaction. Erie’s J.D. Power ratings reflect this with a five out of five in both customer interaction and pricing. It received three out of five in the rest of the categories. With its reputation and rankings, Erie renters insurance is a safe choice.
• Farmers: Farmers renters insurance is known for extensive policy customization options but received average ratings (two out of five) in all categories on the J.D. Power report for renters insurance. Farmers can still be a viable option for those seeking extensive policy customization options.
• Nationwide: Nationwide renters insurance has a reputation for a robust selection of coverage add-on options. It is competitive within the rental insurance industry yet received two out of five in each of the categories on the J.D. Power’s report. Despite these ratings, Nationwide can be a good choice for those looking for specific coverage add-ons that the company provides.
• Travelers: Travelers renters insurance provides unique additional living expense coverage designed to suit the needs of those who travel a lot. It received average or below (two out of five) rankings in each of the J.D. Powers categories. Despite these rankings, Travelers can still be a solid choice for those who travel frequently.
• State Farm: State Farm is known, more than anything else, for its presence. It is one of the most widely available renters insurance companies in the U.S., and it received top marks for each category of the J.D. Power’s report except for claims satisfaction, where it received a two out of five. State Farm is ideal for those having a hard time finding insurance companies that offer coverage in their area.

What others are saying

Customer reviews reveal some of what makes Amica so well-liked by its customers. Quality service and product delivered for an affordable price and discounts that get better over time are features that frequently come up in reviews.

The bottom line

When it comes to renters insurance, there are plenty of options, but the best company for you is going to depend on your needs and your situation. Amica Mutual offers reliable renters insurance policies with good coverage, good extended coverage options and excellent customer service for a low price.

The post Amica Renters Insurance Review 2020 appeared first on The Simple Dollar.

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If You Can Afford $1,200 in Rent, Make These Money Moves

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If you’re paying more than $1,200 a month in rent by yourself, that means two things:

1. It stinks to pay that much rent, and 
2. You’ve clearly got some income. Not everyone can afford that kind of rent.

So you’re making money and living in a decent place. You’ve finally got a little cushion in your bank account. You’ve achieved a certain level of financial stability.

What should you do next? Well, we have seven suggestions for you:

1. Buy a Home — Without a Huge Down Payment

Dream of owning a home? For many of us, this feels like a faraway fantasy.

But before you settle into the idea of renting for the rest of your life, consider this alternative: Buy a home through Divvy Homes.

Divvy’s program combines the best of both renting and homeownership. You get to choose a home you love, and Divvy buys it on your behalf. As soon as the closing process is complete, you can move in.

You’ll make monthly payments until you’re ready to buy the home from Divvy (or move out). Your payments include a portion that goes to your future home savings. At any time during the three-year lease, you can buy the home from Divvy with the money you’ve saved each month.

Even though you don’t truly own the home — yet — you can still make your home yours. You can paint, replace carpet, decorate or landscape. Oh, and Divvy takes care of any major maintenance needs. Need a new roof? Air conditioning go out? Divvy’s got it covered.

It’s free to see if you qualify, and it doesn’t take more than about four minutes in most cases. No visits to the bank, no lengthy phone calls, no impact on your credit score.

2. Protect Everything in Your Apartment for $5

What if you lost everything? All your possessions — your clothes, your furniture, your laptop. Any jewelry you have. Even your microwave oven.

A kitchen fire could torch it all. A burglar could steal your valuables. And where would you be then?

You could be out of luck — unless you have renters insurance. And here’s the thing: It can be surprisingly cheap, especially if you get it through a company like Lemonade.

With Lemonade, you could get a policy for as little as $5 a month — less than half the average rate. 

Even better? No phone calls. No lengthy sign-up process. The whole process takes just 10 minutes. And $5-a-month renters insurance policy could be a lifesaver in the event of a fire or theft or vandalism.

If you think you don’t own enough stuff that’s worth insuring, just take a look around you. How else would you be able to replace your possessions if you lost them all? Check to see how much it would cost to insure it all. You might be surprised.

3. Leave Your Family up to $1 Million

Have you thought about how your family would pay the rent without your income after you’re gone? Chances are your checking account balance won’t last forever.

Now’s a good time to start planning for the future by securing a life insurance policy. 

You’re probably thinking: I don’t have the time or money for that. But your application shouldn’t take more than about five minutes — and you could leave your family up to $1 million in life insurance (for as little as $5/month) with a company called Bestow.

You can change or cancel your plan at any time. Plus, the security of knowing your family is taken care of is priceless.

If you’re under the age of 54 and want to get a fast life insurance quote without a medical exam, pushy sales calls or even getting up from the couch, get a free quote from Bestow.

4. Add up to 300 Points to Your Credit Score

You’re doing pretty good. You’ve got a decent place to live, you make your rent payments — you’re not overly concerned with your credit score. In fact, you might not think much about it at all.

But what happens when you want to buy a house? Or a car? Even a five-point difference in your credit score could make a huge difference. That’s why it’s important to keep tabs on your credit score, which you can do for free through Credit Sesame.

James Cooper, of Atlanta, used Credit Sesame to raise his credit score nearly 300 points in six months.* “They showed me the ins and outs — how to dot the I’s and cross the T’s,” he said.

If you want to make sure your credit score is in tip-top shape, Credit Sesame will help. Just sign up for an account — it takes 90 seconds — and Credit Sesame will outline exactly what you need to do to give your credit a boost

5. If You Can’t Lower Your Rent, Cut Your Credit Card Bill

If you’re like most of us, two of your biggest financial burdens are rent and credit card debt. High credit card bills make it that much harder to pay the rent every month.

One problem: Your credit card companies are getting rich by ripping you off with insane rates. However, a company called AmOne could lower your monthly payment.

Here’s how it works: AmOne will match you with a low-interest loan you can use to pay off every credit card balance you have. The benefit? You’re left with just one bill to pay every month, and because the interest rate is so much lower, you can get out of debt so much faster.

If you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could save you thousands of dollars. Totally worth it.

6. Download This App to Get Up to $500 in Free Stock

If you feel like you don’t have enough money to start investing, you’re not alone. But guess what? You really don’t need that much — and you can even get free stocks (worth up to $500!) if you know where to look.

Whether you’re got $5, $100 or $800 to spare, you can start investing with Robinhood.

Yeah, you’ve probably heard of Robinhood. Both investing beginners and pros love it because it doesn’t charge commission fees, and you can buy and sell stocks for free — no limits. Plus, it’s super easy to use.

What’s best? When you download the app and fund your account (it takes no more than a few minutes), Robinhood drops a share of free stock into your account. It’s random, though, so that stock could be worth anywhere from $5 to $500 — a nice boost to help you build your investments.

7. See if You Can Get Extra Cash From This Company 

Here’s the deal: If you’re not using Aspiration’s debit card, you’re missing out on extra money. And who doesn’t want free money? 

Yep. Aspiration gives you up to a 5% cash back¹ every time you swipe.

Need to buy groceries? Extra Cash.

Need to fill up the tank? Bam. Extra cash.

You were going to buy these things anyway — why not get extra money in the process and put it towards your retirement?

It takes just five minutes to sign up for a new debit card and see how much extra money you could earn with the Aspiration Spend and Save account.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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16 Frugal Changes I’ve Kept Over the Years

Over the many years I’ve written for The Simple Dollar, I have tried a ton of different frugality tactics, and I’ve written about a lot of them. Often, I’ll hear about or read about an idea, wonder if it actually works well and saves money, and then try it myself to find out. If there’s something interesting enough to make a full article about it, I’ll write about it — sometimes there is and sometimes there isn’t.

The thing is, I’ll often try tactics and then end up discarding them after a while because some problem or another pops up, something that I didn’t initially notice. I’ll just shrug my shoulders and go back to my old way of doing things.

However, quite a lot of the things I try stick around. I might adjust them a little over the years, but they prove themselves to be simply better ways of doing things. They save money without any additional effort or quality of life reduction, or in some cases, they actually save money and time or save money and produce better results or, once in a while, all three of them are true.

Here’s a list of sixteen of the frugal changes I’ve tried over the years that have really stuck with me because they simply work. As always when I share frugal ideas, not all of them will match up with your life. Rather, choose a few that seem like they might click well with how you live and try them out for yourself. As for me, every one of these things has worked incredibly well for me over the years and I stick with it to this day.

1. I buy almost everything I can in store brand form.

If you take a peek in my grocery cart, you’ll see a ton of store-brand items. Basically, if it’s not store brand, it’s either fresh produce, something from a very local producer so the money stays local, something on sale, or there’s not a comparable store brand version. If it’s not one of those four things, it’s basically a store brand.

I used to buy heavily into the store brand “stigma” until I actually made a conscious decision to try lots of different store brands and I found that, in the vast majority of cases, I couldn’t tell the difference. Even when I could tell the difference, it was either something that I didn’t care about or, in a few cases, the store brand was better.

I admit that I did hold out for a long time on trash bags, as the first couple of store brand trash bags I bought weren’t good. Readers encouraged me to give store brand trash bags another try and now that’s all we use.

2. I get almost all of my books from the library or Overdrive.

I get a ton of value out of our local library. I read tons of books from there and often check out movies and audiobooks as well, and I’ve gone to a bunch of different group meetings and lectures and special events there, too.

The library also offers a lot of books in e-book form via the Overdrive app, so I actually read a fair number of books on that app on my phone, too.

I do still buy some books, but my pace is perhaps 10% of what it used to be and many of those are discounted e-books. The ones I buy are ones that I feel confident that I’m going to re-read in the future, too, usually after borrowing the book first and reading it.

3. I cut my own hair with a simple, low maintenance hairstyle.

I use an Oster Fast Feed motor clipper with a 1/4″ guide comb on the sides, a 3/8″ on the top, and a run with the blending guide around the edge between the two to smooth it out. I do this about once a month.

This not only reduces the cost of a haircut down to a few cents (plus the prorated cost of the clippers, which has to be down in the $1 range at this point), but it saves time because I’m doing it at home when it’s convenient.

It’s a simple cut, but I’ve practiced enough that it looks pretty good. I have a standard short hair look that I like and that I stick with.

Another advantage is that, by keeping my hair short, I have minimal need for other hair care products. There’s really no need for much more than a drop of shampoo and conditioner for the short hair on my head, and no styling products are needed.

I occasionally get my hair cut by a professional, mostly when I feel like I really screwed up trimming the back (which I can’t see really well) and I want them to fix it to the best of their ability, but this happens less and less frequently as I become more practiced at cutting my own hair. It’s been quite a while since I’ve been inside of any kind of barbershop.

4. Sarah and I make almost all of our meals at home, rarely eating out or getting takeout.

Sarah and I used to eat out or grab takeout several nights a week. We rarely ate at home, in fact.

We nudged ourselves to start cooking more at home when we decided to take our financial life more seriously because it was obvious how much money we were spending on food. At first, we weren’t very good at it — it felt laborious to even make something like scrambled eggs and we often messed up the things we made.

The trick was sticking with the easier stuff and repeating it until it became easy to always get it right. We got really good at things like scrambled eggs, pasta with sauce, grilled sandwiches, and simple soups. After a fair number of tries, we could just nail all of that stuff with ease, and then we started varying those things a lot, and then we started trying new things.

Now? We use those simple meals as emergency fill-ins when our schedule is crazy, make a wide variety of meals on other days, eat a lot of our own leftovers, and very rarely eat out. Our kids view eating out at a restaurant as a rare and special treat… because it is, for us.

5. I keep our home temperature cooler in the winter than I used to, and warmer in the summer.

I used to want our home’s temperature perfectly climate controlled, no matter the season. If I felt a little cool in the winter, I raised the thermostat. If I felt a little warm in the summer, down went the thermostat.

Nowadays, I do things differently. If I feel a little cool in the winter, I go put on some socks or a big hoodie. If I feel a little warm in the summer, I go drink some cold water with some ice in it or go barefoot around the house.

I also do little things like adjusting our ceiling fans so they turn in the right direction for the season and then run them quite a bit, as they do a surprisingly efficient job of stabilizing home temperatures. I also try to block drafts as much as possible, preferably in a permanent fashion with weatherstripping and caulking around windows.

6. We don’t have a home cable or satellite service.

In late 2018, we canceled our home cable service and haven’t had one since. It was actually a surprisingly smooth transition for us, as it turned out that we found easy replacements for most of our viewing habits on streaming services.

Now, we merely subscribe to one or two streaming services at a time and rotate them when the content feels “tired,” circling back to them in a year when they have a bunch of fresh content. This strategy gives us more stuff to watch than ever before. Our monthly bill for video entertainment went from about $120 a month to about $15 a month.

The amazing thing? I can’t think of anything that anyone in our family strongly misses. We still get tons of programs we’re excited to watch, both together and individually.

7. I have a pretty strict laundry routine (and a few other routines).

One thing I learned over time is that if there’s something I do at least once a week, it’s probably worth my time and money to tease it apart, figure out the most efficient way (in terms of time and money) to do it, and stick with that optimized routine.

I have optimized routines for lots of things – doing the dishes, making a number of common meals, getting ready for the workday, my afternoon routine, my before-bed routine, cleaning certain areas of the house, and so on – but the one I wrote about in detail was my laundry routine.

By simply spending an hour or so really investigating my laundry routine and how to maximize the efficiency of what I’m doing and the efficiency of our washer and dryer, and then maybe a couple more hours deliberately practicing much more efficient ways of folding and hanging clothes, I shaved a notable amount of both time and money off of every single load of laundry that I did. I use less water, use less energy, and spend less time doing it than I used to.

Now, replicate that for every routine you have around your home. I’ve basically improved almost all of those routines by spending a few hours thinking about how to do it the best way possible and practicing it intentionally. In each case, I recouped that time surprisingly fast and, in most cases, I do it faster and cheaper now.

The key is to be willing to spend the time to really re-think and re-train some of those routines. If you can do it to several routines, you’ll have noticeably more free time and spend less money, too.

8. Every single bulb in our home is an LED bulb.

Why? In terms of the total cost of ownership, LED bulbs are a great bargain compared to incandescent lights. They last far longer and consume far less energy than pretty much any other household lighting option, which more than makes up for the higher initial cost.

We started migrating to LED bulbs early on for the energy savings but were dissatisfied with the light quality of the earliest LED bulbs. However, LED bulbs today have such variety and light quality that they replace normal bulbs quite well.

We’ve basically “standardized” all of the bulbs in our home to two types and were able to buy bulbs of that style in bulk during a sale a while back. This makes it easy to replace bulbs — if a bulb ever burns out or has some other issue (I think this has happened roughly once), we go to the closet, grab an identical one, and replace it.

We spend less money on our energy bill and less time on changing bulbs. They just work.

9. If I want something impulsive, I either pay for it with a small amount of pocket money or it goes on a “wishlist” for 30 days.

This is a habit that I had to work to build over time, but it’s one that has saved me a ton of money.

I came to realize that almost everything I bought on impulse was something that I ended up at least feeling indifferent about and often entirely regretting when I looked back at that purchase a month or so later. When I’d go through credit card bills and look at each purchase, it was always those impulsive ones that made me disappointed.

So, as a 30-day challenge, I simply gave myself a small amount of pocket money for the month to spend on impulse items, then everything else went on a wish list for at least 30 days before I made the purchase. This 30-day challenge became a 90-day challenge, then a permanent shift. Over time, I made a few little adjustments, bumping up the pocket money a little and setting a clear hobby budget for myself, but I’ve stuck to this overall practice ever since.

If I see something I want but don’t need, I just throw it on a wishlist somewhere. I’ll write it down in my pocket notebook, put it on my Amazon wishlist, or something like that. I date it, then wait. If I come back to it later and more than 30 days have passed, if I still want it, then I allow myself to buy it. If not, I delete it. The amazing part? 95% of the things I save are things that I really can’t see any good reason to buy when I come back to it. The other 5%? Those are completely fine.

10. I buy almost all household supplies and a lot of non-perishable foods in bulk.

Let me clarify what I mean by “in bulk.” What I mean is that almost all of the time, I’ll buy whichever item has the cheapest cost per unit, which is usually (but not always) the largest one. I’ll usually do mental math to quickly figure this out whenever we need something.

That being said, if I notice a big sale on an item we use frequently, I will buy a lot of it. I’ve joked before that I’m the reason that some sale items at my local grocery store have a “limit 10 per customer” sign on them because I will grab a lot of them if the discount is steep. For example, our local store had boxes of store brand spaghetti for $0.49 on sale not too long ago and I bought up to whatever their limit was one day, then reloaded on another day when I was near the store.

We have plenty of room in our house to store those items. We have a large pantry and a pretty large closet that’s mostly used for household supplies. We might as well use the space to keep costs low.

11. I do (almost) all of my grocery shopping at a discount grocer.

I spent some time figuring out which store reasonably near our home had the cheapest prices on the 25 or 30 items we buy the most often and two stores came out as the clear winners above the others — Fareway (a local discount chain) and Aldi. Aldi is just a bit cheaper than Fareway overall, but Fareway is substantially more convenient by location.

Because of that, Fareway became our default grocery store, chosen primarily for price. I became really familiar with their regular prices and can identify sales there quite easily.

Fareway’s selection isn’t endless, so I do supplement a bit with purchases at Hy-Vee (a more expensive local grocer), Target (more convenient than Wal-Mart), and Sam’s Club (more on that in a minute).

12. We keep a warehouse club membership mostly for the gas savings.

A while back, I did the math on the annual cost of fuel for our vehicles and I came to the conclusion that by buying all of our gas at a local warehouse club, we save more than enough over the course of a year to pay for our membership. The only warehouse club near us is Sam’s Club and the fuel costs are around $0.08 to $0.10 per gallon less than any station nearby. Thus, over the course of a year, if we fill up each car twice a month there, we save enough to pay for the membership. Since I also use it for things like mower fuel and snowblower fuel and we sometimes fuel up more than that, the membership actually saves us money before we even go into the store.

This opens up the warehouse club as an equal comparison tool for shopping since the membership is subsidized. We find that it’s worthwhile on a few bulk buys, while our discount grocer is better on others. It’s also a good comparison point for some larger purchases, too.

13. I buy late-model, used cars, keep up with the maintenance schedule, and drive them until problems consistently pop up.

With the exception of my wife’s commuting car, a hybrid bought when there were several tax incentives involved, all of our cars bought since our financial turnaround has been late-model used cars (one of them was even purchased off of Craigslist). Each car has followed the maintenance schedule pretty strictly and has been driven until the repairs start to mount.

When we buy a car, we tend to stick to brands with great reliability history (mostly Toyota and Honda thus far). We have a great local mechanic that we trust that does our maintenance for us and is very familiar with Hondas and Toyotas. He has established a great track record for us in terms of pointing out problems that are coming and actually encouraged us when it was time to move on from two of our cars as they both had several expensive necessary repairs looming.

So, here’s the key: buy late model used reliable cars, stick to the maintenance schedule, and use a trusted mechanic loyally for all of the work so that you can take them at their word when they start pointing out lots of upcoming repairs (which is the time to replace it).

This has been our pattern since our financial turnaround and it has kept our car costs quite low. We’ve had multiple vehicles go over 250,000 miles without skipping a beat.

14. I try repairing things myself before calling in a repairperson or getting rid of an item.

My tendency in the past was to simply call a repairperson if something wasn’t working right and if that didn’t make obvious sense, to just junk the item and move on to a new one. Now, in both cases, I give a serious shot to repairing it myself. I go to Youtube, watch some videos, read a few guides, and see what I can do.

As a result, I’ve replaced faucets, replaced toilets, fixed electrical issues, done minor car repairs, and fixed countless toys and electronic devices and mechanical devices. I’ve stitched up clothes, glued many things back together, tightened screws, and fixed hinges. In each one of those cases, I saved us the cost of replacing an item.

Here’s the kicker: the more things I actually do in this vein, the more confident I feel the next time. There are a lot of things that used to be intimidating that are now easy. There are a lot of things I would have never dreamed of tackling several years ago that I fix on my own, like a furnace issue just this winter and a washing machine issue in the fall.

Even a conservative counting of the savings over the years registers into the multiple thousands of dollars, and because of that experience, I feel ready to tackle all kinds of things.

15. I drink a lot of water and very little of anything else.

I used to be an absolute soda addict, quaffing Diet Cokes and other sodas all throughout the day. Over the last several years, I’ve cut that habit drastically.

Most days, I’ll drink maybe one or two cups of cold brew coffee in the morning, maybe one cup of tea in the afternoon, and all of my other beverages are water. Perhaps twice a week, I’ll have a craft beer. Perhaps once a week, I’ll have a soda.

The savings have been tremendous, as have the health benefits. I feel better than I did ten years ago and I attribute that, at least in part, to the beverage switch.

16. I use a meal-plan-to-grocery-list grocery shopping strategy every single week.

Back in the day, I’d go to the grocery store without any real plan in mind, hoping meal inspiration would strike as I browsed the aisles, grabbing all kinds of items as I went. It worked in terms of cobbling together meals, but I ended up with a lot of extra items and snacks and ended up spending a ton of extra money.

Nowadays, I use a pretty straightforward process almost every week for meals and groceries. I look at the grocery store flyer, come up with meals for the entire week based on what’s on sale at the store and write it all out on a whiteboard, figure out what we need to pull off those meals and make a grocery list accordingly. Then, I head off to the store and stick to that grocery list.

Focusing on the list means that my eyes aren’t roving the shelves any more other than to look for a specific item I have in mind. The impulse buys have dropped to practically zero. Furthermore, I find that my list almost always magically includes a bunch of items that just happen to be on sale, which is the result of making a meal plan after studying the grocery store flyer.

Afterward, I just follow the meal plan. If we’re having one-pot spaghetti and salad on Wednesday, I make one-pot spaghetti and salad on Wednesday. If we’re having “leftover buffet” on Thursday, I pull out all the leftovers on Thursday evening and let people make their plates.

Effective frugality is really about changes that incorporate easily into your life.

Over the years, I’ve read about thousands of frugality strategies and tried hundreds of them. Only some of those stuck around in my life as a truly permanent change. One might see that as a failure, but here’s the thing: the ones that stuck around were the ones that folded easily into my life. They made my life better because they incorporated easily into the other things that I valued in other aspects of my life. They folded nicely into my hobbies and interests and how I spent my time and the relationships I have.

Everyone’s life is different. The key is to keep learning about and thinking up new strategies for better living, trying out the ones that seem promising, and keeping the ones that live up to that promise of making things work just a little better. The ones that click for you will probably overlap a little with the ones that click for me, and some won’t overlap at all, and that’s okay. What matters is that you keep seeking a better life and a better way of doing things.

Good luck!

The post 16 Frugal Changes I’ve Kept Over the Years appeared first on The Simple Dollar.

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Big Changes, Small Changes, and Disruption

One of the more interesting differences of opinion amongst personal finance books and websites is whether or not it makes sense to focus on making a few big changes or a lot of small changes.

Let’s say you make 10 small changes to your life that each save you $1 a day. Over the course of a month, that’s $300 — $1 times 10 things times 30 days in a month.

On the other hand, let’s say you make 3 big changes to your life that each save you $100 a month. Over the course of a month, that’s also $300 — $100 times 3.

Obviously, both approaches are going to save money, but which one is the better approach?

Some will argue for the smaller number of big changes. You’re far better off making a few really high impact changes, goes that argument and this enables you to live your day to day life. The argument here is that it’s not the $5 coffee that’s damaging you, but the $100 cable bill.

Others will point to the small changes because of the repetition factor. They don’t see the individual $5 coffee as a problem, but the $5 coffee repeated five times a week and four weeks a month that turns into $100 a month. If you can eliminate that $5 coffee, great, but even turning it into a $2 expense saves you $60 a month.

What’s my take on this? I don’t think either side is strictly right. Rather, I think the best approach is what I call the “low hanging fruit” approach.

Basically, the best financial changes you can make in your life are the ones that cause the least disruption and negative impact on how you want to live. If you make changes that are disruptive to your way of life in a negative way, you’re going to find that there’s a high likelihood that you’ll resent those changes and there will be a backlash. At the very least, those changes likely won’t be sustainable.

The less continual effort you have to make to maintain a change, the more likely it is that it will stick. The more rules you have to follow, the less likely it is to stick. The more often you have to deny your natural impulses and instincts, the more likely you are to resent it and give up.

Successful financial change is not about who has the most willpower. It’s about who can find the changes in their life that they can easily adjust to and stick to.

I think this approach becomes clear when I point to some of my favorite financial strategies.

First of all, I always encourage people to automate as much of their savings as they can. Sign up for retirement and have retirement savings automatically deducted. Have your bank automatically transfer $50 a week into savings for you. Pay a lot of your bills automatically.

This serves a couple of purposes. One, it makes the act of actually saving money as easy and non-disruptive as possible. There’s no effort in doing the savings once the transfer is in place. Two, it makes other spending cuts easier because it just directly reduces the pool of money left for nonessential spending. You still have a pool of money left, but it’s just a bit smaller than before. You get to decide where that money goes, so you’ll unconsciously cut the things that matter the least to you.

Another example of this is buying store brand versions of your normal purchases. It’s a really easy switch to flip – you just buy the same stuff you always do but grab the store brand instead. If there’s an issue with one or two specific store brand items, you can always buy the name brand for that specific one. It’s also pretty transparent — once you’re home, everything is basically the same in terms of usage. The only change is that your grocery store bill is 10% or so lower than before.

What about something like dropping cable? If you have a large array of programs you watch faithfully that are really only available on cable, dropping the service will be a challenge. If you only watch a few shows and watch other shows on services like Netflix that you may keep, it’s less challenging. For me, during the last year or two that we had cable, I watched virtually nothing on it. I watched Game of Thrones and that was pretty much it. So, for me, canceling it was extremely low impact. For others in our house, the impact might have been a little higher – there were a few shows that others watched — but it wasn’t a big crisis. It was a low effort change.

What about the $5 daily latte? For some, that morning coffee is a really big part of their routine and removing it would be a big impact. For others… they could switch to getting coffee at work with little problem, or maybe they could make it at home. It’s going to be a big change for some and a minor change for others.

What if you’re unsure? That’s what a trial run is for. I find 30-day challenges perfect for this. Try going without cable for 30 days — don’t cancel the bill, just try to not watch anything on cable for that long. Try making coffee at home or drinking the stuff at work for 30 days.

Was the change really hard and unpleasant? Then that’s not something that you should drop — it’s a “big effort” change for you and likely to result in a lot of negative feelings and pushback. You might find, on the other hand, that the change was easy. In that case, go for it! More money in your pocket is going to have a bigger impact on your life.

Here’s the deal: human beings almost always operate on habits and the path of least resistance. If a change doesn’t disrupt your habits and routines and doesn’t add a lot of resistance to your life, then it’s a good change, particularly if it saves you money. It doesn’t really matter whether that change is big or small – if it’s a net financial positive without a whole lot of negative disruption in your life, it’s worth doing it.

So, for me, the answer to the question is to change one $100 a month thing like canceling cable, change a couple $20 a week things like switching to store brands, and change a few $5 a day things like my own personal morning coffee routine — all of the ones that don’t amount to a big life impact for me — and that adds up to my $300 a month in savings.

A financial change is a good one if it results in less spending without a lot of additional effort or negative consequences in my life. Of course, it’s great if there’s a big financial impact, but small ones are fine too as long as they’re not disruptive or cause a lot of additional effort.

Don’t look at financial changes through a lens of $1 or $100, look at them through a lens of actual impact on your life. If a change would cause you to have a lot of additional effort on your plate, or reduce the quality of life in a real tangible way, skip it, especially if the change doesn’t produce a huge financial incentive in return. However, if the life impact and required changes are pretty minimal in terms of effort and your life enjoyment, that’s a change to strongly consider.

Good luck!

The post Big Changes, Small Changes, and Disruption appeared first on The Simple Dollar.

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Asda slashes petrol prices again, but cuts should have come sooner says RAC

Asda slashes petrol prices again, but cuts should have come sooner says RAC

It is the second time Asda has cut prices in a week

Stephen Little Wed, 02/05/2020 - 11:10

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Asda has cut fuel prices for the second time in a week, knocking 2p a litre off petrol and 4p a litre off diesel.

Drivers filling up at any of Asda’s’s 322 petrol stations will benefit from the price cut, which has now seen the retailer bring fuel prices down by up to 7p per litre during the last week.

Drivers filling up at any Asda filling station will pay no more than 118.7p for unleaded and 120.7p on diesel.

Asda shaved 3p off a litre of petrol last week, sparking a price war among the supermarkets.

Morrison’s, Sainsbury’s and Tesco are expected to follow Asda’s lead once again.

Asda senior fuel buyer, Dave Tyre, says: "We’re pleased to be passing on these wholesale cost prices to customers for the second time in two weeks as the price of oil continues to fall.

“This is the second time in a week we’ve led a price cut, bringing the cost of fuel down by up to 7p per litre.

“We will continue to put the savings straight back into drivers' pockets without any vouchering requirements meaning all our customers, regardless of their budget, will benefit from a price cut at the pumps.”

Cuts should have come earlier

While the cuts are good news for motorists, the RAC says they should have come earlier.

The UK’s big four supermarkets increased petrol prices every day during January until the cuts were announced at the end of the month.

This was despite a fall in wholesale price of petrol in January, mainly due to the fall in demand in China because of the coronavirus outbreak.

The RAC says this should have led to a price reduction at the pumps in January, but instead retailers put their prices up for the second consecutive month.

A litre of unleaded rose 0.92p to 127.60p in January, according to RAC data.

Diesel is now 132.04p, up from 131.08p at the start of the month.

However, at the supermarkets, unleaded rose 1.51p on average to 123.69p, while diesel was up 1.30p to 128.14p.

RAC fuel spokesman Simon Williams says: “Based on steadily falling wholesale prices January should have been a good month for drivers at the pumps, but instead they ended up paying well over the odds.

“Retailers were very quick to protect themselves from a slight jump in the price of oil caused by the tensions between Iran and the US at the start of January by putting up forecourt prices, but when the cost of a barrel dropped back, for some reason, retail prices carried on going up.

“Our biggest retailers – the supermarkets – blatantly resisted passing on the savings they were making to drivers until the RAC publicly called on them to do so.

“This was clearly good news, but it’s hard to congratulate retailers on doing something they should have done at least a week before. Even since the cut pump prices are still out of kilter with what’s been happening on the wholesale market. As things stand now – despite the cuts – petrol is still 5p too expensive and diesel over 7p too dear.

 “We strongly urge retailers of all sizes to play fair with drivers and cut their forecourt prices. Going forwards we call on them to charge prices that more closely mirror drops in the cost they buy fuel in at in the same way they do when prices go up.”

 Regional fuel prices

Those living in Northern Ireland saw the largest monthly price increase of unleaded in the UK of 0.92p, taking a litre to 125.62p. The smallest increase was in London, with prices rising by 0.52p to £128.26p. Prices fell in the North West by 0.14p to 126.78p.

Regional average unleaded pump prices

Area	02/01/2020	30/01/2020	Change
UK average	126.68p	127.60p	0.92
Northern Ireland	123.83	125.62	1.79
North East	124.52	126.25	1.73
Wales	125.29	126.87	1.58
Yorkshire And The Humber	125.57	126.71	1.14
Scotland	125.76	126.88	1.12
East	126.82	127.87	1.05
South West	126.35	127.38	1.03
East Midlands	126.40	127.40	1.00
West Midlands	126.81	127.52	0.71
South East	127.73	128.40	0.67
London	127.74	128.26	0.52
North West	126.92	126.78	-0.14

Source: RAC 2020

Wales saw the biggest increase in the cost of diesel with a litre going up to 130.07p after a 1.56p rise. The South East had the most expensive diesel at 132.08p and Northern Ireland the cheapest at 128.02p. The North West had the smallest monthly increase at 0.70p litre.

Regional average diesel pump prices

Diesel	02/01/2020	30/01/2020	Change
UK average	131.08	132.04	0.96
Wales	130.07	131.63	1.56
Scotland	130.46	131.87	1.41
Northern Ireland	128.02	129.27	1.25
North East	129.42	130.62	1.20
South West	130.90	132.08	1.18
Yorkshire And The Humber	130.04	131.15	1.11
East	131.56	132.49	0.93
East Midlands	130.97	131.88	0.91
South East	132.08	132.96	0.88
West Midlands	130.83	131.70	0.87
London	131.52	132.27	0.75
North West	130.52	131.22	0.70

Source: RAC 2020

How to cut down on your fuel costs

Here are some handy tips to help you reduce your fuel costs.

Shop around

To save wasting fuel hunting down the cheapest forecourts you can enter your postcode at on PetrolPrices.com or Confused.com.

Make sure your journey to the garage does not cancel out the savings made though.

It is also best to avoid filling up at a motorway service station as these tend to be more expensive.

Regular maintenance

Making your car more fuel-efficient can also help you cut down on your petrol bills.

Regular maintenance and servicing can significantly help improve fuel efficiency.

A poorly-tuned engine can reduce fuel economy by 10% or more, so it is a good idea to get your car regular serviced.

Under-inflated tyres can increase fuel consumption, so make sure they are pumped up properly.

Excess weight can also hurt fuel economy, so remove anything that is not essential, such as roof racks.

Supermarket loyalty schemes

Supermarkets such as Morrison’s, Sainsbury’s and Tesco all have loyalty schemes that transfer the benefits from your daily shopping to the petrol pumps.

If you have a Sainsbury’s nectar card you can use it to fill up at Sainsbury’s and BP forecourts. For every litre of fuel you buy you will get one nectar point – worth half a penny. While it might not sound like much it could save you around £5 for every 10,000 miles on average.

With a Tesco Clubcard you will get one point for every £2 you spend at a Tesco petrol station. For every 150 points you will get £1.50 in vouchers, which you can then use in-store.

With the Morrison’s More scheme you earn five points per litre when you buy fuel. You can also earn five points for every £1 you spend in store and online.

Once you get to £5,000 points you will get a five pound voucher.

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