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A Penny Saved is 1.57 Pennies Earned

January 23rd, 2018 at 02:53 pm



There is a long standing understanding that a penny saved is a penny earned.  I submit that the statement is false.  Here's why:

When you save a penny by substituting out cheaper alternatives, using coupons, or other means, you become one penny richer.

When you earn a penny, it must enter a pool of tax piranhas before you can take a fraction of it home.

Let's start at the Federal Income Tax



When looking up my effective tax rate of 2% on my federal tax return, I really don't feel that bad about taxes.  To make me even happier, it has been going down every year since we were at 7% in 2013 (before we had 3 tax credits, I mean children).

Since we are talking about the marginal level, we will ignore the effective tax and look only at the tax on that last penny earned.  For most Americans, this is a 15% tax ($18,550-$75,300 taxable income for 2016).

Social Security & Medicare Tax
Also taxed at the federal level and collected by the IRA are the Social Security Tax (6.2%) and the Medicare Tax (1.45%).  This is a flat tax with no brackets or caps until $118,000.  These taxes are in addition to the federal income tax and neither one is deductible from the other.  The vast majority of Americans pay the sum total of a 7.65%  tax towards these funds.

State Income Taxes



Each state has its own income tax and tax brackets ranging from 0-13.3%.  I'm going to use California as an example.  The average Californian household income was about $64,500 in 2015 (source), If they don't have a $4,522 worth of deductions, that puts them in a 6% tax bracket ($59,978-$83,258).

Running Total: 28.65% tax

Unfortunately, that's not the end of the story...

Invisible Taxes
Yup, we have those too.  It turns out businesses must also pay additional Social Security and Medicare taxes when they pay you.  Your employer sends off both portions before you see any money.  Although one is "paid by company", the company sends both portions out of your wage by simply paying you less.  This adds another 7.65% tax, bringing you up to a running total of a 36.3% tax.

Corporations also pay an "income" tax.  Economists debate as to how much of that tax is actually transferred to the workers and how much is "paid" by the share holders, but 20% of the 15%-35% tax is a pretty good estimate (source).  Because I have no clue how to estimate how much earnings per employee is a good estimate, I'm going to leave off this tax in my numbers. Just know that your income is taxed even higher.

A Penny saved is 1.57 Pennies earned



With a tax of 36.3%, you would have to work the equivalent of a 1.57 cent wage to take home 1 penny.

$0.0157 * (1-0.363) = $0.01

There you have it, while earning extra money is really nice, much of it disappears long before you see it.  Dollar for dollar, saving is a more powerful tool.

Limits
Obviously, there are limits to this thinking.  There is only so much money you can save and infinite money you can earn.  It is also true that there is infinite money you can want to spend.  You can have a million dollar salary and still be broke.

It is also important to note that saving money isn't really saving money if it leads to a more costly alternative.  Ignoring the oil changes and being forced to buy a new engine, is obviously a bad idea.

Where to focus your efforts, depends on where you are on your financial journey.

-Milly





Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast.  Anything I recommend should be personally analyzed and discussed with your financial adviser.

Ultimate Anti-Take Out Plan

January 22nd, 2018 at 09:19 pm



It's been a long day at work and an hour past your usual dinner time.  As you approach your home, you drive past your favorite Thai restaurant.  You had better have a equally tempting anti-take out plan.

You are pregnant and feel rotten.  The more you think about food, the more disgusting it sounds.  At the same time, you know if you don't eat something soon, you'll just be sicker and your family will be grumpier.  You had better have a simple anti-take out plan.

You just got back from an extended vacation.  Anything perishable in your fridge has perished.  You haven't done any meal planning and don't have time to hit the store anyways.  You had better have a robust anti-take out plan.

The window between helping someone move and your child's performance is closing rapidly.  You are going to have about 20 min total to cook, eat, and change clothes.  You had better have a lightning-fast anti-take out plan.



Want a 5% Raise? Get an Anti-Take Out Plan
According to the Bureau of Labor Statistics, the average American household spends $3,008 on food away from home.  Zagat determined, that 4.5 of meals are eaten out weekly.  That's 43% of their entire food budget on about a fifth of their meals!

Surprisingly, lowest 20% of income earners, the middle 20% of income earners, and the highest 20% of income earners all spend 5.1-5.4% of their total income on eating out.  With this plan, I've reduced my eating out to less than 1% of my annual spending and even less of my annual income!  In other words, rich or poor, we can all give ourselves about a 5% raise with a solid anti-take out plan.

What type of raise do you get annually?  1-2% to keep up with inflation?  3-8% in a developing career?  Imagine if you could tack on an extra 5% this year! Since that is a tax-free raise (see my post: A penny Saved is 1.57 pennies Earned!), it is probably actually closer to 7-8%.  That is the power of an anti-take out plan.

The Anti-Take Out Plan
Option #1: Lightning Fast Meals
My favorite is meals that I can make in a flash.  If you can have a fresh, tasty, home cooked, inexpensive meal in less time than driving to a restaurant, it makes it easy to follow through.  Make sure your anti-take out plan only uses ingredients that you pretty much always have on hand.  I can make a tortilla soup in 15 minutes (instructions below), but I don't usually have 4 tomatoes available to blend (canned tomatoes?).

The key is to have lots of ingredients ready to use in the freezer.  Pre-cooked meats and diced veggies are a life saver!  Every time I cook chicken breasts on our smoker, I throw in twice as many as we need, dice it, and freeze it in Ziplocks.  Make sure to lay them flat so they are easy to break off into smaller portions or thaw quickly.  Whenever I get a bag of onions, bell peppers or broccoli are on sale, or I pull beets out of the garden, I dice them all up and do the same thing.  I even do this after cooking a pot of beans to avoid the price of canned.

If you aren't going to do any of these, at least buy frozen cooked meatballs, diced grilled chicken, and frozen veggies.  It isn't quite as cheap, but it sure beats eating out!

Here are some of my lightning fast meals, make a list of your own and post it on your fridge.

Lightning Blender Tortilla Soup (adapted from Danica's Daily):

Stick the following ingredients in a blender: 4 tomatoes, 1 large carrot broken in half, 1/2 onion, 1/2 bell pepper, 1 clove garlic or 1 tsp minced garlic, 1 Tbsp Taco Seasoning, 2 chicken bouillon cubes, and up to 2 cups water depending on what blends nicely in your blender.  Sometimes I also add a handful of tortilla chips to make the broth thicker.

Blend until smooth

Pour into sauce pan with remaining water, add any other ingredients you want: a drained can of corn, a drained/rinsed can of black or pinto beans, and fully cooked diced or shredded chicken (if you happen to have it on hand).

Cook until it doesn't taste oniony (boil 5 min?)

Serve topped with tortilla chips, cheese, and sour cream (cilantro, avocados, and/or olives if you are feeling fancy and have the time to chop it while it cooks)

Spaghetti with meatballs


Boil water and prepare noodles according to package

Meanwhile, thaw pre-cooked frozen meatballs in microwave

Lightly grill the meatballs in a sauce pan or on a George Forman

Add a can of spaghetti sauce to the meatballs and cook till warm

If you have time while the rest cooks, butter up some bread, sprinkle with garlic salt, and broil for a couple minutes (check often!) for garlic toast.

Grilled Veggie Quesadillas


Grill all sorts of veggies, beans, and leftovers together with some garlic salt (favorites: onions, tomatoes, corn, spinach, beans)

Layer with cheese on a tortilla and top with another tortilla or fold in half

Grill in pan or on griddle, flipping once (unless you are using your $4 thrift store quesadilla maker woot!)

BBQ Ranch Chicken Quesadillas
This was our fall back meal in college, but it always felt like we were getting a special treat.

Thaw frozen cooked diced chicken

Put cheese and chicken on tortilla and smother in ranch and BBQ sauce, top with another tortilla or fold in half

Grill in pan or on griddle, flipping once

Chicken 'n Ranch Grilled Sandwiches (From Life in the Loft House
This is a brand new discovery I got from my "Monthly Meals" Pinterest Group Board.  I LOVE IT! Here's the recipe

Mexican Tuna Wraps (From Kim's Cravings)
The flavors sound weird, but it turns out SO GOOD!  I usually have my super easy homemade yogurt on hand, but if you don't have plain yogurt, you can just use all mayo.  Make sure to drain things very well it always goes a little runny the second day (still good, just pour it off... or drink it).  The only thing I change is I omit the olives and avocados (for time and cost) and use a little less tuna (a 7 oz can).  Here's the recipe

Microwave Baked Potatoes


Scrub a few potatoes

Stab them several times with a fork (to prevent explosions)

Double wrap them in tied grocery sacks

Nuke them in the microwave for a few minutes per potato (we do about 15 min for 4 potatoes)

Top with baked potato toppings (butter, cheese, sour cream, chives, peas, salt, pepper), or BBQ sauce and ranch, or warmed up chili and cheese.

Stir Fry Ramen
Break ramen noodles apart and boil for like 5 minutes

Drain most of the water

Add seasoning packet, 2 eggs, 1 Tbsp butter, any veggies you have on hand, any meats you have on hand, and optional seasonings (soy sauce, crushed red pepper, crushed peanuts, etc)

Stir Fry until desired consistency

Cheater Omelets


Fun fact: I was an omelet chef my freshman year in college.  I learned how to make a lot of omelets in a little amount of time.  I also learned how to flip spatulas, spin pans, and made stick figures out of omelet slices (the many adventures of Greg the Egg), but back to making omelets.

Put a little oil in the pan and get it medium hot

Throw in some onions, bell peppers, or whatever (zucchini tastes good too, get creative) and saute

Whisk 2 eggs together (or even use a blender because the more homogenized the easier it is)

Pour into pan with veggies

Work the edges of the egg with a high temperature spatula, tilting the pan to get the uncooked egg underneath the cooked layer.

Get the whole omelet loose so when you shake the pan, the omelet slides freely

Flip the omelet upside down to finish cooking the top side

Top with cheese

Optional: serve with salsa and sour cream or baked beans

Note: If you are making lots of omelets, it might be worth it to go the normal route and have a separate pan for sauted veggies.  In that case you would flip the omelet, top with veggies and cheese, and fold in half like a taco.  But then again, if you are making more than two of them, it isn't really a lightning meal.

Huevos Rancheros
Fry an egg
Place on lightly toasted corn tortilla
Top with cheese, refried beans, Mexican style rice, or whatever else you have and salsa


#2: Frozen Meals
Ever have leftovers?  Lots of the freezer meals you see online require planning ahead, setting something in a slow cooker at least 4 hours before consumption, and waiting.  That's great if you know you're going to be low on time (scheduled events with a small dinner window).  Most of the time, though, you'll need your anti-take out strategy last minute.  You need something that can heat up in a microwave and still taste great.

Whenever you finish a meal and there is enough leftovers for tomorrow's lunch and then some, think to yourself if you've ever seen something like it as a frozen entree (think Lean Cuisine and TV dinners).  Meats, cooked veggies, beans, cheese, breads, pastas, rice and broths all freeze very well.  Fresh veggies and milk based soups/sauces don't.



Whenever you make a classic freezer item, go ahead and make some extra and portion it out for your next anti-take out strike.  Whenever I make pizza, I make an extra pan, cut it into gallon-sized Ziplock squares and stack them in the freezer.  It can be thawed in the opened bag in the microwave, then popped onto a pan under the broiler to avoid the soggy microwave finish (or just use one method).

Option #3: Commercially Ready Dinners
These are generally more expensive than prepping your own meals, but they sure beat eating out!  Don't feel guilty if you have a bunch of commercial ready-made food in your freezer as long as you don't use it for normal dinners.  You are saving money and it probably isn't any worse than the fast food alternative.

Some frozen foods we like are: chicken nuggets, green chili steak burritos, orange chicken, pot pies, corn dogs, and steamer bags of veggies.



Some boxed/bagged foods we like are: Bear Creek Country Kitchen soup mixes, stuffing, instant potatoes, ramen noodles, and pancake mix.

Just because you are eating out of a box doesn't mean you have to feel like it.  You can make your own dip concoctions for your chicken nuggets or corn dogs while they cook.  Put shredded lettuce and salsa on top of your microwaved burrito.  Dress up a can of tomato soup with some grilled cheese for dipping.  Add a side of canned veggies or quick rice.  Top your main dish with cilantro, basil, cheese, sour cream or anything else you want.

Here's one complete meal that you can make as fast as you can boil a few pots of water:
Pot 1: Instant Mashed Potato Flakes (follow directions on box)

Pot 2: Stuffing Mix (follow directions on box, I throw in a hand full or two of Craisins for extra flavor)

Pot 3: Gravy= Put as much measured water as you want gravy in a pot.  Add 1.5 tsp chicken bouillon (this brand is preferred for both flavor and cost) for each cup water.  Bring to a boil.  Separately mix 1 Tbsp cold water and 1 Tbsp corn starch for each cup gravy.  Whisk corn starch slurry into boiling broth.  Cook until thickened.

Microwave (optional): Throw some frozen veggies in a bowl, add a little water, cover with a plate, and nuke it until heated through.


Option #4: Snacks
One final strategy is to buy yourself some time with filling snacks.

When we are out of town at the doctor's I would much rather bring some Trail Mix granola bars to keep my kids happy for an extra hour and warm up some leftover lunch when I get home.  I keep quite a few in my van's center console and at only $0.25/bar (Costco), it saves me quite a bit on fast food.

Find what snacks are convenient for your family and keep good in a hot car.



At home, if we get back late and need something to hold us over, smoothies are our go to "half-meal".  We keep Kirkland Signature 3-berry blend as well as Wawona festival blend in our freezer at all times.  Throw in some homemade yogurt if you have it, any near-date fruit you have, some fruit juice if able, and oats if you want it to be more filling.  Don't tell my husband, but I always throw in a carrot with the tropical smoothies or beets with the berries (color match).  Blend till smooth.  Once you've downed a full glass of real food like that, you can get away with something pretty small, simple, and late for dinner.

Which Anti-Take Out Plan is for You?
Probably all of them.  You need to have several options available to make the system robust.  You need fresh food when you feel like it, prepared food when you are out of ingredients, and sometimes you just need food NOW.  If you only have microwavable burritos in your arsenal you will get tired and hit that Thai restaurant.  Get stocked up on several strategies.

Just reading this blog post isn't going to change anything long-term.  You need to make a plan and get organized.  Spend the next few minutes with a piece of paper or at least a bulleted list on your mobile device.  List every lightning meal that you usually have the ingredients for.  List all of the commercially prepared meals you usually have on hand.  Put the paper on the fridge and add to it every time you remember another one or come up with a new concoction that is worth repeating. (Then pin this to help your friends too!)



Above all else, please don't be caught saying "I can't afford the down payment on a house", "I can't max out my IRA", or "I am one of the 69% of Americans who have less than $1,000 in an emergency fund"... "because I'm too lazy for an anti-take out plan."

-Milly




Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast.  Anything I recommend should be personally analyzed and discussed with your financial adviser.