The post [Ep. 220] The Life-Changing Reason You Need Emergency Savings with Sharon Epperson appeared first on Jessica Moorhouse.
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Hi, everyone! It’s been about a month since I updated you all on our savings and property progress, so I figured I’d take a few minutes to share the pictures I took when we stopped by the house this past weekend.
But first, I want to give you guys a quick savings update! You may recall that on September 1 of last year, we started a new goal of saving enough cash to cover all costs associated with the purchase, renovations and emergency fund of our very first investment property. We chose $100,000 as our amount to aim for simply because we knew that it would more than cover all of these costs, and we set a timeline of two years. We decided to live on $2400 per month while saving the rest of our net income for this purpose, and we ended up pulling the trigger in July when we bought the small single family house that I lovingly call our LBC (Little Blue Cottage – though I was later told I was colorblind because the house is actually gray).
We are still saving away while we cash-flow the renovations of the property, and we still aim to live on $2,400 per month while saving the rest. We haven’t always stuck to that amount (we are human, after all), but we have consistently saved an average of 62% of our take-home earnings toward real estate investing since the start of this goal.
Here’s how we’ve done each month so far:
|Month||Amount Earned||Amount Saved||Net Savings Rate|
I can’t believe we’ve put 15 full months in the books now! We’ve brought home $105,502.99 since September, 1, 2018, and after keeping an average of $993.74 per week over the last 66 weeks, we have saved $65,586.72 of that amount toward this goal.
And of those savings contributions, $25,652.69 is the amount that is currently sitting in our online savings account that is dedicated to real estate investing. The rest of our savings have been spent along the way on the acquisition costs (inspections/purchase price/closing costs), property taxes, insurance, contractor fees, flooring, lights, etc.
We’re on track to have saved over $52K toward this goal in 2019 alone by the end of the year. Ron and I have decided that we’re happy with saving $50K per year for real estate investing, and thanks to a few raises we’ve received this year, we’ve been able to put direct deposits in place from both of our incomes to ensure we reach this goal without ever having to think about it. As always, 100% of my take-home pay (currently $942.49 per week) is direct deposited to savings, and $40 from each of Ron’s biweekly paychecks is now direct deposited to this same account, which puts us at $50,039.08 per year.
Because of this new automation, we plan to take our foot off the REI gas just a little and increase our traditional pretax retirement contributions. We recently raised my husband’s contributions from 5% to 7% and are in the process of getting them raised to 11%. My contributions remain steady at 4%, which is enough to get my employer’s match, and we will start raising them once my net income allows us to save $50K per year from it alone. It’s at $48,999.08 now, so we don’t have too long to go!
Alright, enough of that – let’s move on to the pictures! I’m glad to say that things are moving a little faster now than when I gave you guys an update last month. Not as fast as we would like, but we’re now seeing changes every week that we visit, and that’s enough to keep me from feeling discouraged. I’ve accepted that it’s just going to take longer than I originally thought, and that’s okay!
Below are our “Befores” and most up-to-date “Still Befores.” The pictures on the left were taken August 3, 2019, and the pictures on the right were taken December 7, 2019. To see the pictures I posted last month, tap or click here.
That’s it for now! To see all of the original pictures of the property, as well as all the numbers, check out this detailed post that I wrote in August to announce our purchase.
Check back soon for more updates!
Can’t fit all your investments into your ISA and SIPP tax shelters? Then you’re going to have to make some choices. Happily, the pecking order for maximum tax efficiency is clear cut.
In order of most important-to-shelter to least:
- Offshore funds without reporting fund status
- Bond funds
- Individual bonds
- Income producing equities
- Foreign equities (arguable)
To see why this sequence is likely to suit your circumstances, let’s just quickly tee up the relevant tax rates:
|2019/20||Income tax||Dividend tax||Capital Gains Tax|
|Basic rate taxpayer||20%||7.5%||1o%|
|Higher rate taxpayer||40%||32.5%||20%|
|Additional rate taxpayer||45%||38.1%||20%|
(Note: The above capital gains tax rates are for investments like shares. Capital gains on residential property other than your own home is taxed at 18% and 28% instead of 10% and 20%.)
At a glance we can see that income tax is the nastiest while capital gains tax (CGT) is generally the most benign due to the high personal allowance (you can use your spouse’s too) and the ability to offset gains against losses.
Before we get into the guts of it, I’ve got to dish up some caveat pie:
- This article is written for the 2019/20 tax year.
- Information on the CGT rate for 2020/21 is currently unavailable.
- Interest is taxed at your usual income tax rate. Basic rate payers have a £1,000 personal savings allowance, reduced to £500 for higher rate payers and nil pounds beyond that.
- If your interest or dividend income or capital gains pushes you into a higher tax band then you will pay a higher rate of tax on the protruding part.
- I’m restricting this article to mainstream investments – no kinky stuff.
- If you’d like a quick refresher on the tax deflecting powers of ISAs and SIPPs, well, just click on those links.
- And if you’re not sure which is best for saving then try our take on the old ISA vs SIPP debate.
Offshore funds that do not have reporting fund status are taxed on capital gains at income tax rates. As you can see in the table above that’s a hefty tax smackdown. Worse still, your capital gains allowance and offsetting losses are knocked out of your hands by HMRC like the school bully taking your lollipop.
If your offshore fund or exchange-traded product (ETP) doesn’t trumpet its reporting status on its factsheet then it probably falls foul and should be stashed in your ISA or SIPP.
It’s worth double-checking HMRC’s list of reporting funds. Many offshore funds / ETPs available to UK investors don’t qualify.
It is possible for a reporting fund to lose its special status. You could put all offshore investments in tax shelters if you like to head off unlikely but plausible worst case scenarios.
Bond funds / ETFs are next into the tax bunker because interest payments are taxed at income tax rates rather than as dividends. Any vehicle that has over 60% of its assets in fixed income or cash at any point in its accounting year falls into this category.
Real Estate Investment Trusts (REITs)
REITs pay some of their distributions as Property Income Distributions (PIDs). PIDs are taxed at income tax rates not as dividends. Get ‘em under cover.
Individual bonds are liable for income tax on interest just like bond funds. The only reason that bonds are slightly further down the list is because individual gilts and qualifying corporate bonds do not pay capital gains tax.
Income producing equities
The dividend tax situation has got a lot worse for UK investors in recent years, so high-yielding shares and funds should duck under your tax testudo next.
By all means prioritise protection for your growth shares if you think CGT is the bigger problem. But bear in mind you can defuse capital gains every year, and you can usually defer a sale.
It isn’t necessarily a priority to get overseas funds and equities sheltered, but there’s a tax-saving wrinkle here that only works with SIPPs.
The issue is withholding tax which is levied by foreign tax services on dividends and interest you repatriate from abroad.
Some withholding tax will be refunded as long as you fill in the right forms. For example a 30% tax chomp on distributions from US equities becomes a mere 15%.
Foreign investments in SIPPs can have all withholding tax refunded but only if your broker is on the ball. You’d need to check. ISAs don’t share this feature.
If you hold foreign equities outside of a tax shelter then you can use whatever withholding tax you have paid to reduce your UK dividend bill.
So in the case of US equities, a basic rate taxpayer could use the 15% they’ve paid in the US to reduce their 7.5% HMRC liability to zero.
In other words, only higher rate / additional rate taxpayers should consider sheltering US equities in ISAs. Everyone can benefit from the SIPP trick, though.
It only remains to say that this is generalised guidance and tax is a byzantine affair. Please check your personal circumstances.
Tax efficiency is important but whatever happens don’t let the tax tail wag your investment dog.
Take it steady,
Although you may be unfamiliar with the name Azure Standard, it had its start in the early 1970s in a little town called Dufur, Oregon.
Years ago, founder and CEO David Stelzer and his family decided to stop using pesticides and herbicides on their farm’s commercial crops, garden, and orchard.
For several planting seasons, the soil, which had become dependent on chemicals, only produced meager harvests. However, after removing pesticides and focusing on producing nongmo food, the soil became more healthy and fertile.
The Stelzer family became healthier as a result of eating organic products and started selling nongmo food to other families. Thus, the Azure Market began to take shape.
Over the years, the demand for their organic products became so high, the family needed to find other ways to deliver the additional produce that was requested – items they didn’t grow on their own farm. So, in 1987, Azure Standard was formed.
What Types Of Food Does Azure Standard Sell?
The main goal of Azure Standard is to make affordable, healthy, natural food available to everyone. To support that goal, Azure farms produce the majority of the health food they sell.
The farms grow grains, beans, fresh produce, fruits, berries as well as garden seeds and plant starts for gardens.
In addition to produce, they also raise cattle, chickens, and lambs.
Organic Food: Is It Really Worth It?
Organic foods are vegetables, fruits, fish, meat, and dairy that are grown naturally, without chemicals, and are not processed or refined. Although people know that organic is “better for you”, many often say that nongmo food is so much more expensive than “regular food,” that it just isn’t worth it.
However, the USDA indicates that organic food only costs between 10 and 30 percent more than conventional food. There are so many advantages to organic food, that additional cost pales in comparison.
The Advantages Of Eating Organic Health Food
First, whole foods are healthier to eat because it has not come into contact with any pesticides and herbicides that can be harmful. Organic food is also preservative-free.
This makes organic food safer to eat, since the use of chemicals and pesticides have been related to leukemia, Parkinson’s disease, immune disorders, cancer, and other diseases. In the long term, you may save money by not having to deal with the aftereffects of contaminated food.
Second, organic food tastes better than non-organic food. Many non-organic foods contain additives which change the taste and sometimes have an impact on the nutritional value. Organic foods don’t have additives so they taste more natural.
Third, organic foods contain higher levels of antioxidants than non-organic food. In recent years, we have learned that antioxidants are molecules that fight compounds in the body that can be harmful if their levels are too high. So, eating foods that are high in antioxidants reduces the risk of conditions like heart disease, stroke, and cancer.
Fourth, organic farms protect the environment. Rather than chemical fertilizers, the farmers fertilize using manure and nitrogen-full plants. Not using chemical fertilizers helps keep the water supply clean, as no chemicals leach into nearby bodies of water.
Finally, when you purchase local products, you support local farmers. “Buying local” helps keep farms in business and creates jobs, which supports your community’s economy.
Azure Standard Products
Azure Standard has grown significantly from its first deliveries of organic grain in the 1980s. Today, they sell wellness products (like herbs, nutritional supplements, and essential oils), health and beauty items, personal care products, clothing, laundry supplies, garden products, pet food, paper products, kitchen supplies, and more.
Their biggest category of products, by far, is natural food. Azure Standard also sells frozen food (like frozen vegetables, frozen dinner entrees, and ice cream), meat of all kinds, and refrigerated foods (like cheese, eggs, butter, and milk) – all healthy, natural, and organic.
In addition, they also have a great selection of gluten free items that we order to combat my wife’s Celiac Disease.
Bulk foods (like flour, pasta, cereal, nuts, sweeteners, and more) are also in Azure Standard’s repertoire, as are conventional groceries (canned foods, beverages, snacks, and boxed meals). They have also added special diet foods to the mix for people who prefer gluten-free and non-GMO products.
How Much Does Azure Standard Cost?
There is no fee to join the Azure Standard service. There is a $50 minimum cost on each individual order and the total order of a drop site, which will be discussed below, must be $550.
When you visit the Azure Standard website to place an order, be sure to check out the Sales area and the Clearance area under the Shop tab at the top of the page. In those areas, you can find products that are 50 to 75 percent lower than the same organic products in your local grocery store.
Azure Standard Uses “Drops” To Get You Your Orders
Azure Standard is located in Dufur, Oregon, but you do not have to live there to be able to take advantage of their service. You can have their food delivered to you!
To get started, first create an account on the Azure Standard website. Then, you need to join a delivery drop near you.
So, What’s The Catch?
To be able to fill the many orders that they receive, Azure Standard uses a co-op in order to buy in bulk. A co-op is a food distribution source that typically offers healthy, nutritious, organic foods, along with foods that support a special diet (like paleo or gluten-free).
Co-ops are owned by their members; members pay a flat rate for membership, along with dues. The co-op members make all of the decisions, including what foods and products they would like to sell.
How Co-Ops Can Save You Money
In general, members of food co-ops are committed to community development, social awareness, and obtaining organic, high-quality foods and products to sell.
Positives Of A Co-Op
For example, in most co-ops, you do not have to be a member to shop there. Members usually have benefits that are not available to non-members, but anyone can shop there.
Consistent access to healthy, organic produce is the main advantage of shopping with a co-op. Members usually work with local suppliers, so the produce is fresh and crisp.
Because local farms and agricultural businesses are the suppliers, costs are much lower than the same products in budget supermarkets that have products shipped from all over the world.
Negatives Of A Co-Op
Although co-ops have advantages, there are also some challenges. There is not usually the same variety of products that you would find in a typical grocery store. Additionally, a few household products – like laundry detergent and cleaning products – are not available in bulk.
Depending on the location of the co-op and its suppliers, there may be challenges in obtaining high-quality, fresh produce at certain times of the year.
For instance, it may be difficult to find fresh tomatoes or seasonal tropical fruit in January. You may need to go to your regular supermarket for produce that has traveled from warmer areas.
Finally, the local co-op may be less convenient than a regular supermarket in terms of hours. Many mega-supermarkets stay open 24 hours a day and co-ops tend to have a more limited schedule.
Delivery drops are locations where the Azure Standard trucks regularly deliver orders. Azure Standard delivers to more than 3,000 drop locations across the United States, so there is likely one near you. Check out their website and search for the nearest drop site here.
Azure Standard has drops and truck routes in most areas of the United States. In fact, Azure Standard delivers to Alaska, Hawaii, the Caribbean, and the South Pacific through different barge lines!
Unfortunately, the one area that does not have a drop site is the Northeastern U.S.
If you do not have a drop near you, no worries! Azure Standard offers home delivery for an additional shipping and handling fee. Another option would be to become a drop coordinator yourself.
Drop coordinators are responsible for choosing a drop location on an established route, ensuring that each individual customer order meets the minimum order of $50 and the total order for the drop is at least $550.
Drop coordinators are responsible for communicating with their members when the delivery day and time will be.
Rumor Control: Is Azure Standard Going Out Of Business?
A rumor circulated some time ago that Azure Standard would be going out of business. In Oregon, individual landowners – even those that own thousands of acres as Azure Farms does – are required to control the spread of harmful or unpleasant weeds on their property.
The county government found that they were in violation of this ordinance and gave the farm 30 days to submit a plan for destroying and controlling the weeds.
Azure Farms refused to use herbicides, as they are a certified organic farm, and they refused to submit a management plan. Eventually, they did submit a weed control plan and began to work with the county government to resolve the issue.
So, Azure Standard is alive and well.
Azure Standard Challenges: Customer Service
Azure Standard has experienced some challenges, but they are no different from the challenges experienced by one’s local food co-op. One challenge is the inconsistent availability of products. Since orders can be placed 30-60 days ahead of shipping, some products could go out of stock before someone’s order is filled and shipped.
Another challenge – and a welcome one for most businesses – is that Azure Standard has experienced significant growth. Due to this, they have had difficulty keeping up with on-the-spot customer service. However, many members report that they have had good experiences with the follow-up by customer service representatives in response to an email or phone call.
Why Azure Standard May Be Perfect For Your Family
With the busy lives that we all have, Azure Standard may be the perfect service to help you obtain high-quality organic food for your family. For some people, particularly those who live in rural areas, it is very difficult to find healthy food nearby.
Azure Standard eliminates that problem with its convenient drop sites.
Azure also ensures that everything they sell meets their high product standards with clean ingredients. Providing nutrient-dense foods that are grown in healthy soil at affordable prices to anyone who wants it is the main goal of Azure Standard.
They also are proud to support small, local farmers and suppliers who need an outlet for their healthy products.
Get Started With Azure Standard
If you’re interested in trying out Azure Standard, you only need to order $50 worth of items on your first order. I encourage you to give it a try – buying organic produce doesn’t need cost an arm and a leg every month and Azure Standard is there to meet your needs.
What if I told you that last year my kid who doesn’t love reading (I’ve only got one of those) said one of his favorite Christmas gifts that year was a book?! I want to show you exactly what we did to turn a book into a most amazing gift.
We’ve done the same thing for each of our older kids (who can read) for the past couple of years and each one has been a hit. I’m going to share with you specific ideas for kids of varying ages and interests, so feel free to use these exact ideas for people on your giving list!
We don’t buy a lot of “new” books around here. Most of our kids are voracious readers and would quickly read us out of house and home if it weren’t for the library and the thrift store. BUT in this case we do buy a new book because I’m looking for a specific book in most cases (though if you find the right book used, then by all means get it!).
Pick the perfect book
The first thing you’ll need to do is pick an awesome book. The kind of books we’re looking for are books that teach something exciting that your kids want to learn. Let me give you some examples and then I’ll share with you the key to making this gift awesome.
My son who doesn’t love reading is currently 10 and is a maker at heart. He loves engineering, building, inventing, and projects.
Some of the books I looked at for him were:
The one I decided on was Rubberband Engineer, but I’ll probably get the other two in the future!
In a minute we’ll look at lots of other ideas for kids with other interests.
Address the problem
Now if you’re a kid like my son and you thumb through a book full of really cool projects with great instructions and pictures on Christmas morning, what are you going to want to do?
You’re going to immediately want to get started on those projects! But while the supplies are fairly simple and inexpensive, you don’t have the things you need to make the project you want to start with. So you flip to another page, eager to try that project, too. But same problem– you don’t have the supplies you need.
After this happens a few times you give up and shelf the book. You ask your mom to pick up the supplies next time she’s at the store, but she’s busy and doesn’t remember. Your cool book isn’t nearly as cool anymore.
Make it a magical gift
The key to making this gift awesome is that you include supplies needed WITH the book! Of course you don’t have to include everything you need for every project, but having a good arsenal of supplies to start out with– so that you can do some of the projects– makes a huge difference.
So when we gave our son Rubberband Engineer. We also gave him:
- packs of paint stirrers (also available at Home Depot)
- big bag of rubber bands
- mouse traps
- rubber tubing (found at Walmart where pet fish are sold)
We wrap the supplies right with the book so that the kids immediately know that they have what they need to get started with their projects.
Here are some examples of some of great books and the supplies that go with them:
- hair brush
- hair elastics
- bobby pins
The possibilities are endless! Just think about the interests of your child, find a book gear toward kids that teaches that topic in a fun way, and include some of the necessary supplies along with the book! If you’re kids are like mine, they’ll dive right in and get started while there’s still wrapping paper all over the floor!
What type of fun “how to” books would your kids love?
I’ll see you back here tomorrow for day 11 of Frugal Festivities: 25 days of Christmas Cheer on a Budget. AND don’t forget to sign up for January’s Frugal Fresh Start Challenge! See you tomorrow!
The post Making “How to” Books into Magical Gifts– Frugal Festivities Day #10 appeared first on Six Figures Under.