Building a platform to FI (part 2)

Last week I covered how we built the foundation for a platform to get to the FI train – we stopped borrowing from our future selves by ensuring money inflow (income) > money outflow (spending).

Once we got our finances in the black, we then moved to the next step: how to make that difference between inflow and outflow as big as possible.

There are two ways to do it, by minimizing outflow and maximizing inflow. Today, I’ll cover how we minimized the outflow

Needs or Greeds?

Things that were luxuries years ago, cars, mobile phones, even some utilities, are simply necessities today in order to do one’s job, let alone be a part of society. Where we are, in Granada, Spain, we can get by easily without a car, but we have to have internet and cell phone service.

Still, just because we need these things in our lives doesn’t mean we should not look for the best deal for each. You may need bread, but would you pay $10 a loaf?

1. From point A to point B (Cars)

For most, the biggest expense after a mortgage is a car. It is important to evaluate, however, what you want the car for, transportation, ego boost, or to impress others, and decide how much you are willing to spend for each aspect (when was the last time you actually thought about the vanity plate you have, which can cost up to $200 per year just to impress someone in another car you don’t know and whom you may never see again).

Remember, you are not borrowing from a bank so much as your future self.

Dallas, our former city, is built for driving; life without a car would be extremely difficult. We regarded a car as a necessity, but only so far as it got us from point A to point B. 

For our family car, we bought a Scion XB with 131K mileage on it, paying cash. There were plenty of times when we lamented not having a big SUV, like when we could not close the car trunk because we had to haul 4 sets of Taekwondo gear to our family martial arts gym, or when one of our sons became a pole vaulter, and we had to strap a 10-foot pole to the side of the my car to get it to competition! But those times were fewer than when we didn’t need the size, and we saved a lot of money on gas.

And while we didn’t have as impressive a car as others, somehow we got to the same events, and once away from the parking lot, who cared?

2. Stay in touch (Cellular phone)

The next costly necessity is having a mobile phone.  There are two major expenses when it comes to mobile phones:

  • the phone itself.
  • the cellular phone plan.

     2.1 An unlocked phone is the key to lock-in savings.  

There is no other tool that generates as much buzz and excitement about a new version of it as a phone.  

Again, though, what do you want the phone to do, and what are you willing to pay for? For us, we didn’t want to pay more for an expensive phone with “must have” features we never knew we were missing out on and then finding ways to use them once in a while.

Our family is now on three continents, so while we feel we need to have good phones to keep in touch with the boys, having the latest iPhone or latest Android phone is not necessary (using WhatsApp or Line, who can tell?).

I set a budget of no more than $400 for a phone and always bought used, UNLOCKED iPhones on Amazon and eBay. As of September, 2018, Jim and I still use iPhone 5s we bought a few years ago.  

We may not get the latest doo-dads with an unlocked, older model phone, but we got:

  • to spend less, of course.
  • to change mobile cellular services plans as often as we liked with no contract (see next section.)
  • to have flexibility at a much cheaper cost for international travel. Since we have a GSM unlocked phone, we can easily buy a SIM card at the airport, giving us a phone to use while outside the US at a much lower price. Believe it or not, other countries (Thailand, Spain and the UK) have much more advanced and competitive cellular phone plans than in the US. We paid a much lower rate buying a local SIM card.

And remember, it’s not about no-fun; it’s about virtual fun now versus actual fun later. We have never been able to superimpose bunny ears and noses on pics, but we have savings to buy rounds of drinks with tapas, or travel to the ski resorts of Spain, or…

     2.2 Know thyself   

As Clint Eastwood once said throughout a movie, “A man’s got to know his limitations.”

I know people who spend a few hundred dollars monthly for family cellular plans because they are more familiar with big companies like AT&T, Verizon, or T-Mobile, and they want “unlimited” everything – minutes/text/data!

We don’t pay for unlimited usage. We treat the cellular phone like any other utility, such as water, gas, or electricity.

Would you pay 2 to 3 times your actual usage per month for “unlimited” use of electricity, or would you stick with paying the city just for what you consume?  Would you leave the water flowing and then just fill a glass but leave the tap on?

Unlimited usage can cost a lot in the long term, so it is important to know yourself and what you truly need. How many minutes do you actually use for phone calls a month? How many texts do you send and how much data do you need a month? Defaulting to “the most” may seem the easy guess, but that’s like throwing a $100 down for a fast food meal because you know it will cover whatever was the actual cost.

For Jim and me, our cellular plan before we moved to Spain was $15 per person! Yes, $30 for both, and that’s for us to talk/text with our sons and friends on several continents. Our plans included 1,000 minutes (we never used even half of it), 1,000 texts (that 34 texts a day), and 1 GB of data (plenty for us because we always made sure to try to connect to wifi first).  

Our plan was flexible enough so we could always go up to the next plan or buy extra minutes/texts/data for the months that saw heavier usage than normal (for example, $10 for 1 extra GB of data).

     2.3 The secret ingredient – MVNO

The most important key to saving on cell phones is to know about mobile virtual network operators – MVNOs.  

An MVNO is a wireless communication service provider that does not own the wireless network infrastructure over which it provides service to its customers. The big networks (AT&T, Verizon, T-Mobile, Sprint) own their own towers, but the smaller ones (MVNOs) buy service from these big guys in bulk, re-selling to us at a much cheaper price.

If you want to learn more about MVNOs, there are a lot of sites describing what they are:

I have switched our cellular phone service between MVNOs quite often (including Mint SIM, Consumer Cellular, Red Pocket, Ting, TPO, and PureTalkUSA), so often that Jim is never sure what cellular company we are using. He only knows that we have extra money to do the things we find out about, ironically, on the phone.

One company, however, I would not recommend is FreedomPop, even if they offer the “lowest cost” plan. I feel they bait and switch, as all services have a la carte pricing. For example, they charge $5 extra if you need to talk to a live customer service rep!  

To summarize how to choose a MVNO:

  1. Pick the network with the most coverage in your desired area, such as that of T-mobile or AT&T.  
  2. Find the MVNO companies that operate on your preferred network.  
  3. Knowing your usage, search the internet for comparisons of plans that will fit that usage.
  4. Read the company’s review before signing up. I normally search on Google, but I also like Digital Trend and Whistleout.
  5. Sign up and activate the plan on the company site. Some companies, like Consumer Cellular and many others, give you a 30-day free trial, so take advantage of it. Remember, you can always change because these companies have no contract.  

3. Utilities

Utilities can add up, especially if, like we did, you live in an older home (ours was built in the early 1970’s). As mentioned in the previous post, the house we bought came with a pool and we decided to have it filled in, saving $150 – $200 a month in electricity and water.

Less dramatically, I also shopped for the best electricity rate a month before our then-current contract expired. I used Compare Power, where I could enter either my actual 12-month usage or average usage to compare the rates based on my input.  There are other sites as well, such as Power to Choose.

Coming up:

In our next post, I will cover the other side of the equation: maximizing money inflow, and how to take advantage of little “life hacks” that not only save money, but keep the fun in family activities even while saving (lest you think our children never got to go to amusement parks, movies, or on trips). People give up on diets if they can’t have some tasty foods along the way; the same is true for a spending diet (if you’re smart about it)!

We would really love to hear back from you. Do you find the information here useful? Too much or too little detail? What questions do you have? We’d also like to hear your tips for maximizing the inflow/outflow difference!

Part 1

Part 3

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