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Financial Freedom

What it’s like living in a Fast Food Nation

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“A generation ago, three-quarters of the money used to buy food in the United States was spent to prepare meals at home. Today about half of the money used to buy food is spent at restaurants–mainly at fast food restaurants.” – Eric Schlosser

If you focus on the bottom-line of your household budget, you will notice three expenditures that are usually the highest – housing, transportation, food – and it is getting more expensive every year.

One of the biggest things I have learned from reading about personal finance is that your expenses can make or break your budget. If you can keep the costs of food, shelter, and cars low, then you have a shot at financial independence. It’s yours for the taking. All you have to do is spend less.

I learned about zero sum budgets from my readings. The person who really sparked my interest to act and create a zero sum budget was actually finance writer Phil Town.

However, the person who inspired me to save like nobody’s business was finance blogger Grant Sabatier.

Thanks to Grant, I started increasing my savings rate every year.

In reading about finance, many books and blogs teach you that focusing on the top three biggest expenses and keeping those costs low are very important.

In fact, there are bloggers that have become millionaires by not purchasing too much home or not buying a home at all. They put that money into investments instead.

Same rules apply with cars.

That is what I did with my transportation cost. I cut it to the bare minimum. And paid off my car. Once I got that sucker paid off, I put that money to work. I invested every penny in the stock market. I turned a $450 car payment into$100,000!

See my post on my 401k. How I went from $5k to a six-figure 401(k) in 6 years 

One of the last big ticket items in the budget is food.

Growing up my mom always cooked sensible dinners. However,as I became a teenager, I started to become a junk-food junkie. I gained weight and had horrible skin. And spent tons of money on fast food.

Well, as an adult, I grew out of that. I started eating more at home or at least making healthier choices. That meant more salads, raw veggies, fruits, and less meat. Eating leafy greens. And drinking plenty of water.

As long as you’re green, you’re growing. As soon as you’re ripe, you start to rot. – Ray Kroc, founder of franchising of McDonald’s

After a while and as a result, I saved a ton of money, lost weight, and my skin cleared up.

So, let’s talk about food that is fast.

WHAT IS FAST FOOD NATION?

Fast food is popular because it’s convenient, it’s cheap, and it tastes good. But the real cost of eating fast food never appears on the menu. – Eric Schlosser

Fast Food Nation is a book written by Eric Schlosser in 2001. He discusses the fast food industry in an in depth and thorough, well-written book. This book had a profound effect on me. It is probably one of the most scholarly pieces of literature to ever have that type of influence on me.

Let’s talk about food being fast.

WHY EAT SO FAST?

I can understand why a single parent, working two jobs, would find it easier to stop at McDonald’s with the kids rather than cook something from scratch at home. – Eric Schlosser

Today, fast food is part of the American lifestyle. It started after World War II. Frozen food technology emerged at that time around the 1940’s and 1950’s. It was cheaper to buy frozen than fresh. For instance,French fries then became mainstays of restaurants.

However, I did some of my own research. Found that fried foods, especially French fries, are loaded with saturated fat; a type of fat containing a high proportion of fatty acid molecules without double bonds,considered to be less healthy in the diet than unsaturated fat. All that sugar and salt, like shopping and credit card spending cause it’s all about that plastic, is addictive.

See my post on how I curbed my own shopping addiction.

 How Millennial Money inspired me to start saving $13,333.06 a year. 

Want to know more about credit cards and plastic? Read Credit Card Nation and Maxed Out

I also noticed that everywhere I went there was soda, French fries, cheeseburgers, and pizza on the menu. Why is this being marketed so hard at consumers? I am being pumped for my dollars to buy fried foods. Therefore,I figured it must be some sort of control mechanism and I decided to cut out or radically reduce all of these items from my diet. I like to have control overall facets of my life and that includes what I spend my money on and what I eat.

I also learned to slow down when I eat. According to dietician and nutritionist Cara Stewart, it takes the brain 20 minutes to know you are full, as she stated, “your brain and stomach register feelings of fullness after about 20 minutes.” You should also chew your food well to limit problems with digestion.

Want to know more about French fries?

Read up on the man referenced by Eric Schlosser named J. R. Simplot. He built a multi-billion-dollar potato business and provided those potatoes to none other than McDonald’s.  He was said to be worth an estimated $3.6 billion.

FOOD OF YESTERYEAR AND TODAY

“Twenty years ago,teenage boys in the United States drank twice as much milk as soda; now they drink twice as much soda as milk.” – Eric Schlosser

My mother said my grandmother would cook food from scratch. Sweet.

You see, my mother grew up on a farm. Her father grew fresh fruit. They could literally go out to their backyard and get fresh food.

Today, most families shop at the supermarket.

Lots of families also dine out. Especially, after households started having two-parents work. And for quick meals, they eat out.

You want to know more about this two-parent income trap?Then check out my post and Elizabeth Warren’s book The two-income trap.

I did some more research. Found out that the top drink in the 1950’s was milk. Today, it’s soda. Coincidence? I’ll leave you with this to chew on, there is no such thing as coincidence. It’s just about being in the right place at the right time.

The two most important requirements for major success are: first, being in the right place at the right time, and second, doing something about it. – Ray Kroc

Who is Ray Kroc?

It’s easy to have principles when you’re rich. The important thing is to have principles when you’re poor. – Ray Kroc

Ray Kroc is the founder of the McDonald’s franchise business. He became a millionaire in his 60’s. Ray was estimated to be worth$500 million to $1 billion dollars.

He was a stickler for cleanliness. It was said he would get on his hands and knees to clean floors and corners with a toothbrush. He believed in running a clean business. Ray also believed in thriftiness and fiscal responsibility. And set high standards.

The quality of a leader is reflected in the standards they set for themselves. – Ray Kroc

He never went to college. Ray didn’t think MBA’s or college was the only or most important ingredient in success as he preferred those with grit, determination, and persistence.

While formal schooling is an important advantage, it is not a guarantee of success nor is its absence a fatal handicap.  – Ray Kroc

 He joined the military during World War I. While there, he met a young man named Walt Disney.Later in life, the two would work together.

“The life’s work of Walt Disney and Ray Kroc had come full-circle, uniting in perfect synergy.McDonald’s began to sell its hamburgers and french fries at Disney’s themeparks. The ethos of McDonaldland and of Disneyland, never far apart, have finally become one. Now you can buy a Happy Meal at the Happiest Place on Earth.” – Eric Schlosser

Want to know more about Ray Kroc? Check out the book Grinding It Out: The Making of McDonald’s by Ray Kroc or check out the movie The Founder

DOWN ON THE FARM

“The United States now has more prison inmates than full-time farmers.” – Eric Schlosser

I tell people all the time we are not on the farm anymore. People are not making anything in America anymore. No one is churning their own butter or making their own clothes.

Farms, like the one on Smallville starring Tom Welling, are a thing of the past.

You now have to work another way for your meal.

What has happened to the strapping young men? Where have some of the people gone?

Because these days,the system would rather incarcerate a boy than redeem him. – Supernatural S09S07Bad Boys.

would rather incarcerate a boy than redeem him.

What happened to farmers?

Jimmy Dean may still be down on the farm, but many others have lost the family farm due to hard economic times.

The price of milk,eggs, and bread can only go so high. Many people now go to Amish markets,organic stores, or specialty markets like Whole Foods and Trader Joes.

That organic carton of milk can cost $8 or $6 for eggs. The farm was cheaper. You just had to own and work the land, which includes taking care of the animals.

HOW MUCH ARE WE SPENDING ON FAST FOOD

“In 1970, Americans spent about $6 billion on fast food; in 2000, they spent more than $110 billion. Americans now spend more money on fast food than on higher education, personal computers, computer software, or new cars. They spend more on fast food than on movies, books, magazines,newspapers, videos, and recorded music—combined.” – Eric Schlosser

If you check your bank statements, you will see a large portion of your money is spent on food. The majority of that is usually on meat.

Many financial advisors will tell people they should only spend around $50 per week per person.

For a family of four, that is $200 per week.

The only way to make that number work is by cooking more at home.  

HOW YOU CAN SAVE

It’s possible to go to the market, buy good ingredients, and make yourself a healthy meal for less than it costs to buy a value meal at McDonald’s. – Eric Schlosser

It’s a four letter word that rhymes with nook. Cook.

You need to save every dime you can, since pensions are on the chopping block of just about every company from here to Alaska. The money you save cooking at home can be put into your retirement accounts or funneled into a savings account for capital for your business.

WHY YOU SHOULD SAVE

Studies have found that preparing your own food is usually healthier and less expensive than buying fast food. But most people just don’t have the time. – Eric Schlosser

I aimed at the public’s heart, and by accident I hit it in the stomach. –  Eric Schlosser

One particularly poignant moment in the book was when Mr. Schlosser interviews a high school administrator. She said that in 30 years as an educator she noticed how things had changed in schools and that people were poorer now than ever.

It shook me to my core.

At that moment, I made a decision. I. MUST. SAVE.

Sure, you can work on earning more, but you can spend everything you have down to the last dollar without a financial plan and discipline. Yes, work on earning more, but also save.

See out my post on frugality and Benjamin Franklin

I feel that saving is an important part of household or business finance. A business 101, if you will.

Saving can be just as exciting as spending.

Watching that bank balance go up never gets old.

Don’t forget this:
Things you get tired of quick
-$25,000 new car smell

Things you never get tired of
-$25,000 in the bank https://t.co/ydrGQVs078— Miriam Joy (@mjp2520) November 17, 2018

I truly believe you should save to help your family and your community and the world around you. In addition, you should save to fund your dreams. I also like to save to have financial independence.

I will expand upon that last statement and I’ll tell you exactly what I mean.

Greenbacks Magnet is on set up to save more money each year. It could be 1% or 2% more, but more none the less. We have set a savings goal and are on track to save $14,555.06 in 2019. In 2018, we set up and will hit our target savings of $13,333.06. That money can go toward the business, helping others, and doing good work.

I am truly passionate about what I do. And being thrifty help sme continue to do that which I love; write.

If I could put my feelings of how much I enjoy writing into words,it would be like this. In the illustrious words and slogan of McDonald’s, “I’m lovin’ it.”

Bankruptcy, Retirement, Saving

From Pulitzer Prize winner to Penniless

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‘All happy families are alike; each unhappy family is unhappy in its own way.’ – Leo Tolstoy from Anna Karenina 1877

The rich are all alike, to revise Tolstoy’s famous words, but the poor are poor in their own particular ways. – William McPherson

William McPherson, was a Pulitzer prize winning novelist and an editor at The Washington Post.

Although, he tried in earnest, he did not become a man of means.

A career in writing does not often come with riches. Writing tends to be a labor of love.

The career you choose can determine your outcome. It could mean the difference between fulfilling your destiny or starving.

No one wants to be a starving artist. I am not a romantic when it comes to money.

That is why I occasionally write these Cautionary Financial Tales such as these:

From debt-free to owing $1 million in mortgage debt

Meet an orthodontist with $1 million in student loan debt

Why the Rents shouldn’t pay your rent

Before Mr. McPherson died, he wrote an article called Falling, that was published in 2014, regarding his descent into poverty. It was published in The Hedgehog Review.

He went from book critic, novelist, and an editor at The Washington Post to destitute. That is a far fall from grace indeed. Here is his story.

HOW TO GO FROM PULITZER PRIZE WINNER TO PENNILESS

William Alexander McPherson was born on March 16, 1933. His father worked as a plant manager and his mother was a homemaker.

He attended public schools and eventually went on to college. Between the period of 1951 to 1966, he attempted to get a college degree. He attended several universities during this time. Alas, the coveted sheepskin (college diploma), remained ever elusive as he did not earn a degree.

He married in 1958, but it ended in divorce.

By 1969, he started working at The Post.

As an editor, he was in charge of Book World for The Post and under his leadership, he turned that into one of the leading literary publication in the United States, which is no small feat. That is a tremendous undertaking, job, and responsibility. However, here in the real world versus in college, he thrived.

WINNING THE PULITZER

In 1977, he was awarded the Pulitzer Prize for distinguished criticism and the judged noted his large breath of literary and historic knowledge.

A Pulitzer Prize is a coveted award in literature. It first began in 1917. This prize is given out for achievements in magazine, newspaper, literature, journalism, and music composition.

The Pulitzer is named after Joseph Pulitzer, a famed newspaper publisher, that made his fortune in publishing. The award is administered by Columbia University in New York City. Either a gold medal or cash prize of $15,000 (increased from $10,000 in 2017) and certificate is awarded to the winners.

He wrote two published works. One in 1984 and the other, a sequel to the first novel, in 1987. A third was in the works, but was never completed.

At the age of 53, he decided to leave his job, and head to Romania, after the fall of the Berlin Wall. He stayed there for seven years. Mr. McPherson opted for early retirement at the ripe old age of fifty-three. He would not be eligible to receive his pension for 12 years; at which time he would be sixty-five. This is where things began to spiral downward.

Why not retire at 65, when you can receive your money? That just makes more sense. In my opinion, unless you have between $2.5 to $5 million in assets it will be tough for most folks to retire or even justify retiring early before you have access to 401(k)’s, IRA’s, Social Security and pensions.

THE FALL FROM MIDDLE TO LOWER CLASS

Don’t follow any advice, no matter how good, until you feel as deeply in your spirit as you think in your mind that the counsel is wise. – Joan Rivers

After choosing early retirement, having no real plan and giving little thought for his future income, he set out for an adventure overseas.

Although, he is a writer by profession, with age and the decline in his health, he is unable to sustain this way of earning a living. It is far different to be a man of twenty-two, eking out a living by writing than it is at seventy-two. He can long longer grind out the words as he could when he was a young man. He states this is one reason that he is poor.

Inflation would also erode the purchasing power of his money. From 1986 to 2014, inflation has gone up 109.7 percent. Meaning things have doubled in price.

His pension becomes worth half of what it once was and it not adjusted for inflation.

He receives Social Security, but having not worked formally for the last few decades means that this amount would not be very high.

Medical insurance has skyrocketed. It is a much higher cost to insure anyone, let alone a man in his golden years. It now costs him more monthly than he used to pay in a year.

He did not pay attention to his investments and bought stocks on margin.

In addition, he allowed advisors to manage his money and give him advice against his own gut instincts.

Eventually, his investments and brokerage accounts were empty.

FINANCIAL MISHAPS AND MISSTEPS

These are the things that caused Mr. McPherson to lose his financial shirt:

  • No clear vision of a career
  • No path to wealth creation ever established
  • He did not complete his degree; after numerous attempts which is time and money wasted
  • His only income consists of a Social Security check and a miserable pension
  • He retired early without a financial plan
  • Gave no thought to the future or inflation
  • High cost of medical care never even considered
  • Higher cost of housing not considered either (as news flash, things become more expensive not cheaper)
  • Did not plan for health issues
  • Divorced without having a financial net
  • He invested on margin
  • He spent his investment capital
  • Took bad advice from advisors that told him not to buy shares in AOL and Apple
  • Having fun was more important than getting his financial house in order (See my post on Aesop’s The Ants & The Grasshopper)
  • He did not spend modestly
  • Due to this he has to depend on the kindness of family and friends
  • He couldn’t pay for $10,000 of dental work
  • Did not have the money to attend a funeral
  • He subsists on a HUD subsidy for housing and medical benefits
  • Things got so bad, at one point, he only had a quarter to his name in his pocket and no bank account

POVERTY IN OLD AGE

He states by all standards of living that he is poor. Living in poverty is awful and humiliating he writes. Being poor is exhausting and time consuming. Waiting for buses and in lines at assistance offices takes all day.

His income is above $11,670 annually, putting him above the poverty line, as he receives more than that in Social Security. Even though, he has not ever had to apply for food stamps, welfare, or Medicaid he still has had to ask for government assistance.

He feels his younger self was delusional and naïve.

Although, he does not live in a homeless shelter, but living in subsidized housing isn’t exactly palace living. Many living there are poor as well.

The ailments that come with age are hard. Without good medical insurance, medical bills can be catastrophic to say the least. Medical debt has caused some to declare bankruptcy.

According to Elizabeth Warren, Americans are filing bankruptcy in record numbers. The main causes are job loss, illness, and medical bills. Women with children are also most vulnerable to file for bankruptcy.

The things he did that harmed his financial future were unable to be undone.

I share this story because the author had the fortitude to do so. I urge you to not just eliminate, but crush all of your debt and save at least 20 percent of your income because one day you may need it.

Budgeting, Financial Freedom, Saving

Dom Perignon taste on a Budweiser budget

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“A budget is telling your money where to go instead of wondering where it went.” ― Dave Ramsey

Most people out there have probably heard of the saying “champagne taste on a beer budget,” and that is exactly the kind of behavior I have been seeing more and more of lately.

It is not that I have a problem with nice things.

Quite the opposite.

In fact, I like to buy high quality and first-class items. This can include anything from airline tickets to a nice vacation. However, you have to be able to afford it.

You must therefore follow this advice: “Act your wage.” ― Dave Ramsey

Therefore, if you can only afford Bud Light instead of Rosé, then go for the beer.

If you are familiar with the Suze Orman show, she had a segment called “Can you afford it?”

Basically, people would call in and ask if they could afford to buy whatever item was the hot new thing that year.

Suze Orman would require certain criteria like a six plus month emergency fund, a job, income, and a realistic way to pay for the item either outright or over a reasonable period of time.

It was very engaging. By far, the most popular part of the show.

Let’s see if this post can bring back some of those feelings tonight.

If you can’t afford champagne, then it is perfectly acceptable to buy sparkling wine.  Just make sure when you pay for it, that you use cash and not plastic or it will not matter how much you think you are saving, if you are paying interest on it. Then beer can turn into the price of champagne.

Interest over time makes any purchase more expensive.

For example, buying a pair of jeans that cost $50 on plastic at a 25% interest rate could turn into a $500 pair if you pay the minimum payment over 5 years. That wasn’t on the price tag!

It seems that if you pay cash you are protected against this type of price inflation. Especially, if you get a 0% deal (teaser rate) and then do not pay it off and are charged interest retroactively from the date of purchase.

So, be very wary when it comes to credit cards. They will give one to anybody with a pulse.

In Elizabeth Warren’s books, The Two-Income Trap and All Your Worth, she discusses how even with two-income earners Americans are still struggling with debt, filing for bankruptcy in record numbers, and still unable to afford housing and higher education for their families.

Credit, in large quantities, is trapping people in an eternal debtor’s prison.

In the book Maxed Out, author James Scurlock talks about how having access to easy credit at young ages (college kids) is ruining people’s financial future before it even begins.

Starting out in a hole due to student loans and credit card debt means playing a constant game of catch up and struggling to get by.

Curtailing spending and only buying what you need and can afford are the only ways to stop this phenomenon of being maxed out.

Therefore, we budget.

However, “A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” – William Feather.

Below I will provide some fictitious examples of how it all goes down similar to the show.

So, let’s go back to the infamous Suze Orman question of “Can you afford it?”

What do you want to buy?

So, let’s say I get some tweets from followers asking if they should make a purchase. Let’s go.

Thank you for tweeting Greenbacks Magnet (GBM for short). What do you want to buy?

FOLLOWER: I would like to purchase a brand new Lexus RC 300 priced at $43,305. My birthday is coming up and I have never had a new car only used. Growing up, my parents said buy new. Why inherit someone else’s problems? I have always wanted one.

GBM: Ok. Show me the money.

FOLLOWER: I have $15,000 in savings, no credit card debt, $10,000 in student loans, no mortgage, no auto or personal loans and $55,000 in my retirement accounts. My after-tax income is $4,150 monthly. My expenses are $3,300 per month.

GBM Email reply: It’s great that your expenses are lower than your income by $850 so that you are able to save, but you could knock out the student loans and then have no debt. You have a 4 month emergency fund. I prefer to see 9 months ($29,700) as that is how long it takes the average person to find a new job (including me). Check out out my post How to build an emergency fund.

A car at that price of $43,305 will cost $676 per month at a 3.9% interest rate over six years. That will bring your monthly expenses up to $3,976 and decrease your net saving from a respectable $850 to $174. That is too close to the financial edge.

I want you to start putting more money toward retirement such as $200 more per month or whatever gets you to 20%. A car is not going to feed or house you it will only get you from Point A to B. You should also consider setting aside enough for a 20% down payment on a home as I know you are not going to want to rent forever.

Setting aside 4% of the purchase price of a home for 5 years will net you the 20% down payment. If you can beef up the 401k by $200 per month, pay off the $10,000 in student loans, start setting aside 4% for a home down payment, and get a 9 month emergency fund then you can get your car, but not before.  Until then, keep taking Lyft.

Next follower. Thank you for tweeting Greenbacks Magnet (GBM for short). What do you want to buy?

FOLLOWER: I would like to buy a Sony PlayStation 4 at $300. I am 20 years old and currently a college student, but I am working part-time. I have a game system, but the PS4 has more of the games I want to play and is cheaper than a new Xbox One X.

GBM: Ok. Show me the money.

FOLLOWER: I have $1,200 in savings, no student loans as I go to college online which is cheaper than traditional and stay at home, no credit cards, no 401(k) and a car note of $150 per month. My after-tax income is $600 monthly and my expenses are $350 per month.

GBM tweet: It’s awesome that your expenses are lower than your income by $250 so that you are able to save, always a plus, but I would like to see you open a Roth IRA. You are so young that this money could compound for like 40 years! Your future self will thank you.

GBM 2nd tweet: You can contribute $50 per month just to start in a Roth IRA. I do prefer to see a 9 month rainy day savings ($3,150). Since you have so few expenses, and live at home with virtually no debt other than a car note you could simply take the money from savings. Have fun!

Next follower. Thank you for tweeting Greenbacks Magnet (GBM for short). What do you want to buy?

FOLLOWER: My name is Lucy and I am 13 years old. I would like to buy an Apple watch for $219. I like it because it’s so cool and fun. A lot of my friends have it and I want one of my own.

GBM: Ok. Show me the money.

FOLLOWER: I have no debt. I have savings of $5oo from birthday money and saving my allowance. I get an allowance of $80 a month. I have no expenses.

GBM: Well, it is nice to see you saving. You could just take the money from savings as you have no expenses. I just want you to continue the habit of saving. You can afford it.

Less stress with a budget

You can see from the examples above that saving makes all the difference.

The more control you have over your money; the more control you have over your life.

Hope you enjoyed this walk down memory lane with me.

Now remember this: People first, then money, then things – Suze Orman

My motto is this: Always remember that cash is the best option. Cash is king. – Miriam Joy, author of financial freedom blog Greenbacks Magnet