Discount Tactics, 529 –> Roth Transfers & Leaky Bucket Feelings 🪣

January 17, 2023

Happy Tuesday, friends!

A quick fable to start the day…

Two buckets lived in a village. They carried water every day from the river to the people.

One bucket was old, warn, and cracked. As it walked it leaked water everywhere and lost half it’s load by the time it reached the village. The leaky bucket felt terrible for not fulfilling it’s sole purpose.

However the younger, newer bucket (without cracks) told the older bucket to look behind at the trail they walked each day… The water dripping from the older bucket had watered a beautiful path of flowers.

💐🌷🌹🌺🥀🌸🌼🌻

Just sharing this for any of you out there who feel like an old leaky bucket sometimes (I do! 🙋‍♂️)… Precisely the things that make you feel broken are the exact same things which make you so powerful in life.

Flaws can be amazing advantages. And you’re probably making a bigger impact on this world than you realize. Keep doing what you’re doing. 😊

OK, onto this week’s money stuff 👇👇👇


TO DO

Review your subscriptions 🧾

Most folks tend to massively underestimate their subscription spending. By how much? Studies show that they’re typically off by $133 per month!!! 🤯

This week:  Review all the stuff you’re subscribed to, analyze whether you truly need it, and get rid of any subs that aren’t providing enough value.

(There’s rarely a downside to canceling services. If you realize you’ve made a huge mistake you can always just sign back up again, later.)


SAVING

Asking for a Discount 🥺

I know a guy who walks into every store and asks, “excuse me, where is the “free section”?”… 

And after the worker gives him a strange look he says, “Just kidding… I’m on a budget so I need to keep my spending down. Any chance you have some specials or sales discounts available right now?”

Most of the time, store clerks help him out! They point out sale items, give advice on where things could be bought cheaper, or even hint on future promotions. Nice people want to help nice people.

Asking for a discount is an art, not a science. Every situation is different, but here are a few tips that can help:

  1. Always be genuine, and NICE! People generally want to help you if you’re nice. Flash your winning smile or offer the salesperson a compliment. It not only eases any awkwardness, but it also helps you connect on a human level, which is a crucial first step.
  2. Do some research first. It helps if you can recite 1-2 reasons why you should get a discount. If you’re looking to save on a product or service, you should know what other providers are charging or offering better. Coming prepared with evidence increases your chance of success!
  3. Know who and when to ask. Some avenues are better than others. For example, AT&T has a handle called @ATTHelp. It’s so much easier to DM a Twitter account to ask about getting a better rate than it is to waste your afternoon on the phone. Twitter customer service is truly is one of the best kept secrets on the discount front.
  4. Hearing “no” is not personal! In fact, many employees wish they could help you more, but their hands are tied. You might be talking to the wrong person/department. If so, ask if someone else can help in your pursuit of savings. Even if the answer is no, you’ll rarely regret trying.
  5. Be willing to walk away. Don’t feel compelled to buy the product or service if you weren’t able to score the savings you’d hoped for. Part of being an intelligent bargain hunter means a willingness to shrug your shoulders and mosey on down the road. You’ll have other money-saving opportunities in the future!

Related stuff:


TOGETHER WITH YNAB

Budgets gotta be flexible…

A good budget needs to ebb and flow with life’s circumstances. It’s rare when every single dollar is spent exactly how you planned it at the beginning of each month.

That’s one of the reasons we like and recommend YNAB. Their software lets you shift money from category to category, as needed, without stressing out about “blowing your budget”.

YNAB is free for students!! Or, just $9 a month after a 34-day free trial. Check them out if you need help budgeting this year!


SECURE ACT 2.0

529 —> Roth IRA Transfers

We’ve always been hesitant to recommend 529 savings plans. One reason is that many folks end up “overfunding” these accounts and then have to pay penalties/taxes to withdraw the money later in life.

But, thanks to the passage of the Secure Act 2.0, 529 plans just got WAY more interesting. They now allow you to transfer some of those funds into a Roth IRA account for your beneficiary!

What changed?
If you fund a 529 education account for your kid(s), but they don’t end up using all of the money inside for educational expenses, you now have the option to transfer money to *the beneficiary’s* Roth IRA account starting in 2024.

Rules and limitations:

  • The Roth IRA must be in the name of the beneficiary listed for the 529.
  • The 529 must have been open for at least 15 years.
  • Any contributions (and earnings) to the 529 in the last 5 years cannot be transferred.
  • There’s a lifetime maximum of $35,000 you can transfer to an individual***
  • IRA contribution limits still apply (eg $6,500 annual max)

Hypothetical example:
You have a baby this year (woohoo – congrats!!)… You open a 529 savings plan and name them as the beneficiary because you want to help your baby go to college one day. You set up a transfer of $100 per month into this 529 account.

18 years later (in the distant year of 2041) your grown-up baby is now an adult! They become an AI/e-commerce genius and land a paid internship with Amazon (congrats again!). Not only that, but Amazon has opted to fully fund your kid’s bachelor’s degree as part of their career choice program!…

The 529 plan now has $30,000 in it. But since your kid has no more education expenses, you make a plan to transfer that money into their Roth IRA. You begin transferring ~$6500 per year (or whatever the annual IRA contribution limit is at the time) into your kid’s Roth IRA until the 529 account is empty. You’ll incur no fees and no penalties. All that money will continue to grow tax-free on their behalf, forever!!

***It’s unclear right now whether you can change the 529 beneficiary multiple times and transfer $35k to multiple different kids (or whether you need to wait another 15 years after a beneficiary change). This will be clarified by Congress or the IRS in writing eventually.

All in all, this is a pretty cool change that we’re happy to see. 529 funds now have the much-needed flexibility that parents have been hoping for. Hopefully, anyone out there with unused 529 funds can take advantage of this new perk!


ICYMI

Latest happenings…

“Rage Applying” 👩‍💻
One of TikTok’s latest trends… It’s when you’re feeling under-appreciated and overworked at your current job, so you get really mad and “rage apply” to like 15-20 new jobs all at once. We’re not huge fans of using anger as motivation, but hey, if it gets you a pay raise and a better work environment, we can’t argue with that!

Expensive Eggs 🍳
The average price for a dozen eggs jumped to $7.37 in California last week! This is due to the nasty avian flu that wiped out some 50 million egg layers 😪 in the US. Apparently, it’ll be 7-8 months before production can ramp up safely again, so expect higher egg prices for a while.

Golden Ratio Budget 💵
Via MorningStar, this budgeting trick helps you balance your life by dividing your spending into “past, present, and future” buckets. A really interesting approach because it encourages enjoying your money today, while also making sure long-term goals are met.

Non-compete 🙅
The FTC has proposed a rule that would ban non-compete clauses for employees (and cancel any current ones that are in effect). It could take a year to see this come to fruition, but if it goes into effect the ~30 million people under non-compete contracts would be free to switch jobs, get pay raises, and explore career options more freely. 🎉

Life Expectancy 🌴
A new NiceRx study ranked all the US states based on life expectancy. Surprise surprise, Hawaii came in first again, followed by WA, MN, and CA. (No matter what state you live in, health = wealth, people! Take care of your body & mind!)


HOW *YOU* MONEY

Ren, 24y/o from Seattle, WA 🌳

Occupation: Nanny
Salary: About ~$33k

Paycheck deductions: ~$450/m
Rent: -$650/m
Debt Payments: -$250/m (student loans)
Other expenses: -$350/m

Leftover savings each month: ~$1,050!

How are you investing your excess savings each month? 
I try to put at least two hundred dollars into my savings account each week. I’ve actually started adding more because I am saving for a trip to Europe in the coming years for a friend’s wedding.

Biggest “craft beer equivalent” splurge:
Fancy coffee, and I find myself getting flowers for my tables every week for the aesthetic of it all. I also found myself spending a lot on books, but I’ve solved that problem with a kindle unlimited subscription.

Best savings hack/advice:
Not carrying cash, it feels like fake money and I am more prone to spending it. I learned this while waitressing and was given mostly cash because of tips, and I found myself spending frivolously. Putting it into my bank account and watching the math happen before my eyes just makes me feel more conscious of how I spend my money.

Recent money win, and how did you celebrate?
I was refunded for a festival and I didn’t celebrate, but I am using that money to purchase a plane ticket to visit my family for my sister’s college graduation.

Anything else you want to share?
I am a casual listener of the podcast. Learning how to better manage my money has become extremely important to me since moving out on my own two years ago, and I appreciate the advice and knowledge you have imparted on your listeners. I have a degree in English Literature and I’m attempting to begin my freelancing career so making the jump from working in childcare to writing full time has been a challenge but one that I am confident is the right choice for me.

**If you’re up for being featured in a future newsletter, we’d love to hear from you –> fill out the How You Money form here (we only post with your permission!!)**


Cheers to a great week ahead, enjoying your beautiful existence! 🤗

Best friends out 🍻

*****

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