Acorns: Small Investments in Your Future

Acorns: Small Investments in Your Future

Last year in December (of 2015) I enrolled in a little-known application called Acorns. This company would look into your transaction history; all of your credit card and other purchases, and then round up to the nearest dollar from the purchase and take the difference. They’d these small amounts of money up, anywhere from 1 cent to a dollar, and once you had $5 available, would invest these micro-investments into a series of mutual funds.

 

I didn’t expect much out of this since we’re talking literally pennies per purchase. But I was wrong. Site after site emphasizes the importance of investing whatever you have to work with. So while I invest already in a number of different ways, I decided to give this a try. From $5 onward my balance slowly started to grow. Eventually I started to see returns outside of my investments as dividends were given and funds sold. I don’t ever expect this to become a nest egg for me, but I do use it for an emergency fund. I slowly invest as I make additional purchases, and it acts basically as a savings account earning around 3% for me. If I had an unexpected expense like maybe one of my cats got sick, I’d just withdrawal from the account and be on my way.

Normally you can get $5 when you sign up but they seem to be running a special where you will get $10 free for signing up. Check it out here.

 

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2016 Financial Year in Review

As I normally do at the beginning of each year is to reflect on how things went in the previous year. Topics are a general reflection, financial, and fitness. This is the first of these posts.

Dining

In general I spent 6.90% less this year on dining than I did last year. However, I am spending too much of my dining budget (and exceeding my planned budget for dining) the majority of months. The top three categories: dinner, lunch, and alcohol, I have a lot of influence over. Instead of ordering out or dining out for dinner, cook food. Instead of going out for lunch every day at work, bring a lunch a few days a week. As for alcohol some of this will drop as dinner dining out goes down, but also spend less time drinking, reserve it to not drinking during the week, or perhaps go on discount days like Goose Island does.

2016 dining breakdown by category

My analysis has shown that even though I eat out more often the overall cost of the meals are less. I believe I have identified the reason because at my last company we would grab drinks during lunch or after work pretty often. I don’t do that now. This would account for a large amount of the nearly 7% decrease in overall spend.

Groceries

Ideally I wouldn’t spend as much on groceries as I do dining but also that groceries last longer and make more meals. This is true for 2016, but I’m spending more, 17.5% more, on groceries this year than last. Additionally, as seen in the graph, the “Other” category is the largest group, which means that I need to determine additional categories to track against.

2016 groceries by type

Meats are by far the most expensive, so reduction in meats will result in less cost as well as healthier eating. Generally though I need to plan out my meals better to make grocery shopping more efficient. It’s also important to note that just because I don’t spend a lot of my overall grocery spend on fruits and vegetables doesn’t mean I don’t buy them often. These are normally much cheaper than meats and therefore don’t contribute to a lot of my overall spend. I have entire grocery visits of just vegetables and fruits.

Additionally, the $35 a week experiment that I did a few years back seemed to work pretty well. So if I up that to say $50 a week so that I can get leftovers enough to also bring lunches, this should influence both budgets in a positive way.

Travel

Did I travel more in 2016? Well, I don’t think so, but I did spend more on travel overall, nearly 53% more to be exact. Where did the increases come from? I did take a few trips this year but didn’t rent a car or have large expenses with them. I had a nearly 38% increase in airfare costs this year. This could be caused by not having the points budget at the time of travel to not have to pay for tickets. Airfare is also increasing in cost.

I started spending on tolls this year whereas I didn’t at all last year. This is caused by having a job that requires me to travel to suburban areas of Chicago now and there are tolls on the roads. With this change, I also recorded a 171% increase in gas spending this year. Again, this is due to having to drive to the suburbs for work.

Financial Health

Spending doesn’t really give a good picture of overall financial health as this category does. I’ve broken this down into four categories: saving contributions, investment contributions, retirement account worth, and overall net worth.

This year I recorded a 58% increase in my savings contributions. This means money I put into saving accounts increased by 58% in 2016 over 2015. It’s a pretty large amount and this year I’ll probably reduce that some to allow more to go into investments instead, where I can potentially get a higher return.

As for overall investments (which are contributions made to investment accounts – not retirement or 401(k) or the like) I increased overall contributions to these accounts nearly 47%. This doesn’t reflect a 47% increase in net worth, per se, just that I contributed 47% more to them. I didn’t calculate overall net worth change for these accounts.

Retirement account contributions (things like IRA contributions and 401(k)) also rose in 2016 by 26%. Again, this does not reflect overall increase in value, just contributions. I didn’t calculate value change, but I do know it’s higher, not as high as 26% but I did have a very good year and is in the double digits.

Lastly, and probably the most telling metric, is net worth. Take all your account balances and assets, subtract the debts and liabilities, and you get a value. That’s your net worth. This year was a good year for debts and liabilities for me as I finished paying off all of my student loans in December of 2015, five years ahead of schedule. Therefore this is my first year completely debt free. Overall my net worth increased nearly 5.5% in 2016. While I’m quite proud of that number I hope to increase it with smart investing and savings and reducing overall spending.

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2013 Year In Review: Dining by Meal Type

Each year I focus on one area of spending in order to hyper-analyze it at the end of one year.  In 2013 I decided to focus on my spending habits as they relate to dining.  I define dining as eating out at a restaurant or going somewhere to get food that I did not make in order to eat a meal.  Dining does not include going to the grocery store (those are defined as grocery) and also does not include eating not at an establishment (i.e. eating at a friends’ apartment.)  By breaking out my spending by meal type I can then identify, if I am over budget for dining, where I might need to cut back to meet my spending goal for the month.  It should be noted that I don’t have a line item budget for each of these categories.  All spending comes out of my “Dining” line item and I don’t establish budgets for each meal type.

Dining By Meal Type: 2013As you can see from the above graph, 50% of the spending in this category over the past year has been spend on lunch.  That’s not surprising as I normally eat out for lunch around four to five times per week while I am at work.  Breakfast is more of a rarity during the week and I normally make myself some sort of breakfast during the weekends.  The same goes for dinner, as I normally make myself dinner during the week.  At most I probably average going out to eat for dinner about two to four times per month.

The alcohol category is an interesting one because it encompasses every one of these other categories as it’s own.  Any time I have a beer with lunch or dinner that amount of my check does not go toward the lunch or dinner category, it goes to the alcohol category.  It might also seem a little excessive to have my second largest spending category of dining being alcohol.  While you know the percentages you don’t know the scale, so if I was only dealing with $100 then while it looks like a lot really I would have only spend about $20 in the past year on alcohol.  But also consider this: the beer or mixed drinks that I drink are premium, therefore they cost more than the average $5 beer for a macrobrew.  Yes, that’s right, I’m one of those people who enjoys a delicious microbrew, and if possible, a regional microbrew, the more hyperlocal the better.

The last note I’ll make about this graph is “Other” which represents something I just can’t categorize into a meal type.  For example, let’s say I go to a movie at 10:30pm and when it let’s out at midnight, I stop at a taco stand or at the gelato shop for a snack.  It’s technically not any defined category, and as you can see, I don’t do that often enough to create a category for snacks.

I liked this activity and it doesn’t take much effort for me to define my meals like this so I will continue to do this breakdown.  Ideally, now that I have this information, the next step is to reduce my spending at lunch in order to spend less in general.  What’s next?  For 2014 I’ve decided to track my spending by food group for groceries.  I’ve broken these into the following categories: Fruits, Vegetables, Meats, Breads and Grains, Dairy and Cheeses, and other. Expect that report in early 2015.

 

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Overdue Update

I somewhat expected to have long spans where I didn’t write in this but months seems a bit long.  Winter has been rather lacking from what I expect from a typical winter but I’m not sure if I’m happy or upset about it.  On the one hand I don’t have to walk to the train in the snow and weather and it hasn’t been cold to the extreme (note: it has been cold) but on the other hand it isn’t very much like winter these days.  It’s the first part of February and I think Chicago has received only a few measurable snow falls this season.  I do look forward to the snow each winter and I think the worse the winter is the more apt I am to be excited for spring and summer.  I’m looking forward to playing outside this spring and summer but I have to ask myself if I am looking forward to it as much as if we had a bunch of snow this winter.  As mild as it has been I can’t imagine more winter weather this year.  It’s been in the 50s the past week or so which is highly unusual.

Anyway this update is short to say that I am still around and I’ll hopefully get back into the writing mood from time to time.  I am also going to start reading my next book, Jim Cramer’s Real Money: Sane Investing in an Insane World.

Jim Cramer - Real MoneyWhy am I reading this?  I’ve read this book before but I want to get a refresher in his books because my 401k starts at work soon so I want to be prepared to make the appropriate decisions.  The stock market is fascinating to me.  I’ve played around with it a little bit and I’ve had some success in it.  I just don’t devote enough time or money to make it really worth my while.

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Maximizing Your Budget

I, like many others, live on a budget.  I’ve been pretty successful in saving money while living on a budget so I thought it might help others if I shared a few of the ways I’ve been able to cut back on costs without cutting everything out in order to do so.  I’ll try to not talk about things that are specific to me since that wouldn’t be very helpful at all.

Dining
The past few months I haven’t been following my plan to take my lunch to work and consequently I’ve also not saved as much because I went out to eat for lunch every day.  My original plan was to bring my lunch three to four times a week always eating out on Friday with the rest of the team.  On average, in downtown Chicago, I spend on average about $8 per lunch when I go out to eat and I spend more like $10 per lunch if I happen to order a drink other than water.  By taking a lunch from home I save around $8-10 per day I bring my lunch.  That might seem like a small amount that isn’t even worth the effort but think about it this way:  each week I save $24-32 (on average) and carrying this same average throughout the year that could be a savings of up to $2,000 every year!

Likewise many also go out to dinner every night.  Dinner can be very expensive to the tune of $20 per meal!  Throughout the week I make my dinner at home and try to go out to eat for dinner a few times a week, typically on the weekends with friends, to save money.  Cooking at home can have lots of benefits beyond just the money you will be saving like being healthier not to mention the leftover options.  I try to make meals at home for dinner that provide leftovers for lunch and dinner the next few days, or those options that provide leftovers that I can freeze to eat at a later date.  Bringing the same lunch every day can be boring and you’d be amazed how quickly you grow tired of eating a cold sandwich every day.  For example, if I make a casserole for dinner one night I can save the rest to eat the next few days.  Most meals can easily be brought to work or frozen.

Grocery Store
But with all of the cooking at home doesn’t that mean that you won’t really be saving anything because you’ll be spending more at the grocery store?  Not really, although it could.  There are plenty of ways to bargain shop at the store to save money.  I try to buy non-perishable items in bulk (or at least in greater quantities) whenever possible.  I try to wait to buy things like oatmeal and peanut butter and pasta until they go on sale.  Normally once a month or so these items will go on a buy-one get-one sale and that is when I stock up.  Canned goods often times will go on a 10 for $10 deal and that’s a great time to stock up on canned goods.  Canned goods last for years so provided you have storage for them why wouldn’t you buy them when you can?

There are many items which are perishable that I also buy whenever they go on sale and try to buy in greater quantities because they are usually cheaper like butter and meat.  Butter and meat can be frozen for long periods of time and if you can find them on sale or if you buy family packages or packages set to expire in a few days you can really save.  I found a great website a few weeks ago that details all of the items that are safe to freeze for long periods of time as well as tips on how to maximize the length of time these food items can be frozen.  I can’t claim I buy all of these items and freeze everything but I do what I can.

Another great way to save at the store is to buy items that can be used for multiple purposes.  Canned soup can be good for this because you can eat the soup or you can make other items with the soup.  But if you really want to save money on multi-use items then try to buy whole chickens or turkeys.  With a roasting chicken, for example, you can easily have a nice dinner and several days of leftovers.  With those leftovers you can make other items to change up the meals you eat day after day.  Think of Thanksgiving.  You make a turkey and have all these leftovers.  With those leftovers you can make sandwiches and casseroles not to mention just a meal of leftovers.  With one purchase you could easily make five or more meals.

I’ve also been experimenting with store brand items to see if they are as good as name brand.  I admit that I try to stick to brands if I find one that I like but typically you are paying more because of the brand.  Some items just aren’t the same and you have to buy store brand.  Some items, though, taste the same so why not buy store brand for a fraction of the price?  Here is a very short list of store brand items that I’ve found to be the same as name brand:

  • Butter
  • Milk
  • Canned vegetables
  • Frozen vegetables
  • Kitchen trash bags
  • Paper towels
  • Shredded cheese
  • Bread
  • Olive oil
  • Jarred garlic
  • Dish soap
  • Hand soap

Of course that isn’t an all-inclusive list but those are things I buy on a regular basis that are store brand that are the same taste and quality as brand name.  Typically these are much cheaper and if the store you are shopping at has a card savings/rewards program they will often give you even more of a discount for buying these store brand items.

This leads me to the store card.  Many stores have a frequent shopper card that gives discounts.  If these are free to join you would be throwing away money not to join these programs.  Couple these card programs with manufacturer coupons and you can have quite a deal on your hands.  I have, on occasion, been paid by the store because of the coupons and store card usage.  It’s great to be able to get an item for free at the store!

Utilities
Sometimes there isn’t much you can do with utilities to save money but I have done what I can.  During the summer months I love having the windows open when I can.  Depending on where you live this might not be an option for very long when the summer months really start heating up.  I make sure to decrease the air conditioner before I leave for work to save on electricity.  One way that I have greatly impacted the cost for my electricity is with my computer.  I am one of those people that would leave their computer on all the time.  When I wasn’t using it the screen saver would come on or I’d turn off the monitor but this was such a waste!  What about when I am at work or asleep?  The computer really doesn’t need to be on during those times but I also wanted to be able to use the computer when I wanted to use it.  The answer: hibernate mode.  In the past I haven’t been a fan of this because it seemed to mess up my computer but I quickly learned that it takes some time to configure it properly in order for hibernate mode to work the way it should so when I go to use it the computer turns on and is ready to use within seconds.  This way instead the computer using 600+ kWh of power, it uses around 1 kWh, a significant improvement.  I have seen my electric bill reduced by 40-50% because of this.

In the winter months I make sure to keep the gas bill low by not overheating the house.  I know that I can be comfortable at 66-68 degrees.  When I sleep I have blankets and cooking dinner for myself always produces lots of heat from the stove and oven which will also warm the place so I don’t need to use lots of gas.  I’m lucky in that I have great windows that are double glass to help keep out the cold winter breeze.

Those are a few of the ways I have been saving money on a budget.  I’m sure as I discover more of these ways I’ll post again about this sort of thing.  Hopefully this helps others.

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