Hey everyone – we are heading into summer and heading into where individuals usually spend time vacationing, experiencing more “free time” and thus are usually spending a little more than usual. Which provides a good segway into talking about fixed/typical monthly expenditures that I pay for and that most of us do pay for on a monthly basis. I am here to talk about Transportation costs & Rent/Mortgage. I am going to break it down for us to show much in investments we will need to have in order to cover these large monthly expenses in our lives and also to find ways to reduce this, as that will lead us to where we all want to be – Financially free. I will leave other expenses out of this discussion, for now… that is.
As part of you to get to know me a little better – during my time in between graduate school and starting as a certified public accountant, I was also house hunting and low and behold – purchased my house in September of 2011. With that, however, comes: Mortgage – principal & interesting, property tax, house insurance, utilities: Water, Gas, Electricity, Internet & for me – Netflix. I don’t use cable simply because I don’t want to spend the money on something that will keep me glued to a television screen for that many hours – I’d much rather go to a bar and spend $3 one time on a beer, be with people and watch the game than spend $65 a month to watch a handful of sports games or a TV show that will come out on Netflix a month later. Just how I feel about it, that’s all. Here is the breakdown of where my expenses stem from owning a house:
- $447 Mortgage Payment (P&I)
- $300 Property Tax
- $41 Property Insurance
- $8.50 Netflix
- $25.50 (currently) Internet
- $25 (average) Electricity (this is with a roommate, which I’ll have an article on that at a later date, that’ll be a fun story)
- $68 (average) Gas (similar comment above)
- $17 (average) Water (similar comment above)
- $10 (average) Sewage – newer bill
- GRAND TOTAL: $942/month for me to sleep at night.
$942 per month I am spending to live in my house. I know there is an “equity”/net worth portion to that, which only benefits me when/if I would sell the house. Annually that is $11,304. For me to pay that on an annual basis, when you divide that by a closely/accurate portfolio yield of 3.50% = $322,971 of stocks to pay my monthly expense to live in my house. I am currently at $92K roughly at this date of writing aka I am a LONG ways away from hitting that. However, with that – where can I trim the “fat” here? I could refinance possibly, but my rate is rock bottom low and I’m now almost 3 years into payments that there isn’t much of a “beneficial” impact to do that. Property tax – I actually may re-assess my property value to see if I can lower that. Even if I can decrease that $50/month or $600/year – that is $17K less of investments I would need. Anyone have luck with that? Any beneficial sources? Property insurance is very low/cheap, however, it did increase from prior year. I could shop that around, but I think the maximum savings I could see from there could be $70 annually, which is about $2K worth of investments. I feel like I am running pretty lean – gas will be cheaper as there was an individual living in my house that would constantly crank the heat even after I demanded for him to stop. Do any of you see where I can slim these payments down?
The next fixed expense that I have is.. sadly.. my automobile. I know a few readers and frugal living individuals will be frustrated. In fact, I am even mad at myself, I would love to live in an area and possibly work in a profession where I didn’t need a vehicle. I am a traveling auditor and at one point in my career – I didn’t have a client within 2.5 hours of where I lived, talk about life on the road. I was driving my 1997 beautiful Toyota Celica from October 2005 until July 2013. Life was great = no car payment, my auto insurance was $30/month, just awesome. I put 214K miles on that puppy, but I knew it was on it’s last leg, it’s last bolt or last ____ insert car part title here. I shopped around for vehicles and purchased a 2010 Honda Accord EX-L for about $16.5K, when all of the valuations displayed between $19-20.5K; my interest rate is 2.19%, so fairly low/cheap for a used vehicle and was the best financing deal at the time – I actually asked for that rate stating that I could get that at my bank – which is when I showed the dealership the bank on my phone with that rate, and they attempted to have me receive a 3.99% rate with an almost perfect credit score, really? Remember everyone – it doesn’t hurt to ask and to pressure them for a better rate. However, with that being said I now had a car loan and also an increase in auto insurance. My payments are $284/month for the car and it comes out to roughly $95 per month for auto insurance for a grand total of $379/month in my auto bill. That is an insanely $4,548 per year to drive a car (not including routine maintenance and oh wait – GAS). To pay this I would need $129,943 invested at a dividend rate of 3.5%.
All of the fixed monthly expenditures above, would lead me to have, at a minimum, $452,914 invested to simply pay for these fixed expenditures that I currently have. Obviously I hope to drive my car well past the remaining 56 months left and the auto insurance will decrease with age/value of the vehicle, but if I wanted to retire tomorrow, I would need $452,914 to drive and to sleep. That is to not even eat or to do anything “extra” like gifts for family members or even gas to drive the car. That is purely to have a car sit in the drive that I’m paying my mortgage on. Isn’t there something wrong with that? Writing this article actually is getting me riled up and is pushing me to do something about it. What should I do readers? Should I get rid of my car like Dividend Mantra had performed? Should I sell my car and get a lower/less valuable vehicle? Should I re-finance (currently at a 4.375% rate)? Shop around for property and auto insurance? Property tax valuation/re-appraisals? I know there are a lot of questions, and I’m open to hear what YOU have to suggest, as I feel we are all in this together. Two things that I will look further into: Property re-evaluation to lower my bill and Insurance.
The Goal & Mindset
The primary goal here is to show how much you need to invest into dividend paying stocks to cover expenses that may not be necessary or truly beneficial to you. This could lead you to see that maybe that isn’t your lifestyle and you do want to live in a place where you don’t need a vehicle – such as move to DC/NYC/Chicago/Florida/Boston or just to get rid of your car in general and have people visit you. Maybe this will motivate you to change your living situation, maybe you are paying too much for rent in an area that doesn’t offer you happiness. All I know is the less monthly expenses that you do have, the less amount of investments you need to have to be #Financially #Free with the shackles off. Thank you all for reading, excited to hear your voice!