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Archives for May 2016

What I Love About Reading

By Frugaling 11 Comments

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Books

When I was younger, you couldn’t pay me to read a book. My parents read to me as a child, but in middle and high school, I was a Sparknotes reader; preferably, about 15-30 minutes before exams.

Homer’s Odyssey sat mostly unread. I was supposed to have spent the summer before my freshman year of high school analyzing the prose and coming up with something intelligent to say. Instead, I read the first 75 pages and called it good.

Reading wasn’t something I naturally enjoyed doing. It felt boring and stuffy. While I enjoyed the cover artwork, the text never enticed me to stay until the end. Ironically, I loved purchasing new — open it up, bend the spine, smell the glue and paper, and see those perfect 90-degree corners — books. But again, they sat mostly unfinished.

Something clicked in college. Suddenly, I enjoyed turning the pages of a good book of fiction. I wanted to read more. And for the last eight to nine years, I’ve become further engrossed and in love with the act of reading.

Now 27, I want to read even more. A lot more. And I’m not talking about finding a good book to read before bed or in between classes or to start my day. I’m talking about reading for entire days — hours upon hours!

I want to get swept away in a non-fiction subject or in fictional characters, plots, and narratives. I want to be amazed by others’ writing and ideas; most of all, I want to learn and hone my own writing abilities through reading. I learn through talented authors. They’re my role models.

The act has become this thing I lust after. Inside, I say to the world, “Get out of my way, leave me alone, stop talking to me. I need to read!” I read like there’s no tomorrow, because I’m not sure if there is. I read because there’s something I need to learn and would be remiss not to know it. More and more pages turned, pulled, flipped. Hours pass uninterrupted; frankly, I prefer it that way.

As I reflect on my habit, I realize what I love most about it. The classic book is a deep dive into a subject — whether fiction or not. Inside this world — and unlike the Internet — nothing pops up. Nothing pokes or aggravates. Nothing makes suggestions. There aren’t click-bait or artificial headlines. I don’t break from the reading to click and subscribe. I don’t scroll down to get back to the content. Ralph Nader says the only time to escape advertisements might be sleep, but books still provide an oasis.

Frugality is much easier with a good book. In fact, reading might be the lowest cost of entertainment on Earth. Consuming television and movies is cheaper than ever, but remains more expensive than going and getting a book.

For instance, a movie might have a 90-minute runtime and cost $10 to buy. That’s roughly a dollar for every 10 minutes. Meanwhile the purchase price of a book might be comparable — say $10 — but the runtime is magnificent. Pick up a lengthy tome like Stephen King’s 11/22/63 at 849 pages, and you’ll be reading for a 20-30 hours. It’s pennies to read every hour — enjoyment at a fraction of the price. And this doesn’t even account for public libraries!

Living simply and frugally is easier with a good book. These hours spent avoiding material consumption for knowledge, empathy, and understanding. And best of all, it won’t leave your wallet reeling.

So, what will you read this summer?

Filed Under: Save Money Tagged With: Books, cost, Entertainment, Film, media, Movies, Read, Reading, Television

How Much Money Can You Make Driving For Uber?

By Frugaling 5 Comments

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How Much Money Can You Make Driving For Uber? Now that Uber is here, I can't help but think: Between taxes, fees, depreciation, and other driving costs, can you actually make any money driving for Uber?
A couple weeks ago, Iowa City entered the 21st century. The City Council, after much hemming and hawing, decided to approve Uber within city limits. In this booming college town known for some of the hardest partiers in the country, ridesharing services have been sorely missed. College students have needed to pay for expensive cabs, take circuitous buses, or stumble home. We’ve really missed the Uber option.

I’ve been waiting for this moment for years. I’ve been fantasizing about it. I would roll up in my Bentley, glide the window down, and chuck a half-smoked cigarette onto the curb. I’d peer over my Secret Service-style aviators and say, “Someone order an Uber?” Then, the fantasy would evanesce — including the Bentley, the smoking, and the aviators.

Now that Uber is here, I can’t help but think: Between taxes, fees, depreciation, and other driving costs, can you actually make any money driving for Uber?

In many ways, Uber is the perfect side income. It subsidizes the ownership and use of a car, pays for hours otherwise uncovered by other opportunities to make money, and is a fun, social method to make money.

Despite the many positives, Uber isn’t some sort of utopia. Passengers smoke cigarettes, vape, leave trash, and can be altogether rude — and that was just my first four rides. People can miss your phone calls, texts, and app notifications of your arrival, too — or cancel the request after a couple minutes of driving towards them.

This morning I had an extra 40 minutes and decided to “go online.” Within the Uber Partner app, I waited about 45 seconds and was called to pick up someone. That was quick, I thought. About 25 minutes later, after the Uber mafia had taken their cut (25% of every fare), I walked away with $9.17.

The couple I picked up were out-of-towners whose car had broken down in the city. They needed a lift to a dealership for auto repair. Being there to help them seemed important — a win-win for us both.

Searching for the real Uber income statistics

Plenty of news articles have noted Uber drivers’ incomes and attempted to get a net income, but it’s challenging to see how they do their math. I figured I’d do some math right here, and see what I found for both of our sakes.

Let’s estimate $1,000 for 2016 earnings. I haven’t made that much — yet — but intend to keep driving when fares surge due to increased demand. Maybe I’ll get there?

IRS Logo
Ah! The IRS!!!

At Uber, you’re considered an independent contractor. You are your own business in many ways. Many of the company’s risks and costs are displaced onto their drivers. You have to pay for medical and car insurance, and if you get in an accident, it’s on you.

Thus, the $1000 earned is called self-employment income. The IRS considers self-employment income for a couple special taxes: Social Security and Medicare. When Uber pays you — or other drivers — it doesn’t take out any money for income taxes. Thus, you have to give some of the money back to the government. Importantly, these taxes are only owed on earnings over $400.

Calculate your self-employment taxes

Currently, the self-employment tax rate is 15.3%. But like anything the IRS publishes, it’s complicated. Only 92.35% of income is considered taxable. Why? Again, call up the IRS — I’ve got no clue. Here’s what the math looks so far with the taxable income consideration and self-employment tax:

$1,000 total Uber earnings
x.9235 taxable income conversion
_____
$923.5 total taxable income
x.1530 self-employment tax
_____
$141.30 total taxes owed

In review, by calculating this initial taxation, I’m left with $1,000 minus $141.30. After all these calculations I’d be left with $858.70. Here’s where people tend to stop and say, “Hey, I think driving for Uber is worth it!”

Calculate your tax deductions

But wait a moment, okay? These initial calculation fail to account for business expenses and tax deductions. Tax deductions are usually expenses incurred in the process of making additional income. Over the last few weeks, I’ve calculated a few deductions because of the business.

Here are some quick examples of things I’ll be watching out for:

  • Tax deductible portion of self-employment taxes (50% of taxed self-employment income)
  • Mileage deduction ($0.54 per mile driven for business)
  • Parking (e.g., $5 thus far)

Meticulous drivers out there should try to keep track of all mileage driven for Uber. Pay close attention to every mile, as the IRS provides a $0.54 standard tax deduction per mile. What I’ve noticed is about a 40% per dollar to mile calculation on average. In Iowa City, which might differ compared to your local city, I’m out in the boonies for a long drive and then back into the city area for short trips. For the sake of this estimate, I’ll say $1,000 in income equates to 400 miles driven.

Here are my tax deductions:

400 miles driven
x.54 per mile deduction
_____
$216 tax deduction for standard mileage driven
+$70.65 deduction for self-employment tax (50% of taxes)
_____
$286.65 total tax deductions

Importantly, tax deductions are not money put directly in your pocket. They essentially are a method of reducing your tax burden on annual income. For instance, if I made $25,000 in combined income in 2016 — some of it receiving income taxes and others from self-employment — that would put me in the 15% tax bracket. With $286.65 in deductions, the IRS says I made only made $24,713.35 in adjusted gross income.

Now, here’s why I hate calculating taxes by hand…

Without deductions:
$25,000 combined annual income
x.15 tax bracket
_____
$3,750 in taxes

With deductions:
$25,000 combined annual income
-$286.65 total tax deductions
x.15 tax bracket
_____
$3,707 in taxes

Hold on, let me take a breather — this is a lot of math. Phew! Subtract $3,707 from $3,750, and you get $43 from the tax deductions. $43 that the federal government is essentially giving back to you because you drove for Uber.

Calculate your driving costs

You might’ve thought we were done. You might’ve thought, “Okay, now we can add and subtract — bada bing bada boom!”

You’d be wrong.

Before we can calculate a realistic number earned, we need to account for depreciation, registration, maintenance, and other fees associated with operating and owning a car. Driving all those miles, while accounted for in the IRS mileage deduction, still hits your wallet. Simply put, you still incur costs to driving that vehicle all around town.

AAA to the rescue!The best driving statistics come from AAA. Every year they publish their driving cost statistics, while accounting for gasoline, insurance, and other variable rates from year to year.

Based on a small sedan (that’s what I drive), driven about 15,000 miles per year, equates to 43.9 cents per mile in costs. Driving for school, work, or even Uber on the side costs the same amount: 43.9 cents per mile.

Here’s an estimate of driving costs:

$1000 income
x.40 rough estimate of dollars to miles
_____
400 miles driven
x.439 cents per mile
_____
$175.60 total driving cost based on AAA statistics

The final, Uber calculation and results

Starting from $1,000 in earnings, I lost some to self-employment taxes (-$141.30). I was fortunately able to reclaim some money through tax deductions ($43). But before I could make the final judgment, I calculated the driving costs (-$175.60).

In total, after all is said and done, $1,000 becomes $683.10 in take-home pay. And by “take-home,” I mean no one can touch it at this point. That’s after everything is paid off.

Throughout this article, I’ve made a number of calculations. With more time and statistics, I’d be able to report more accurate estimates. For now, the statistic equals 70% of what you see is what you get.

Every fare, surge, and ride time. Every cool conversation. and every drunk college student — you’ll make about 70 cents on every dollar earned.

I forgot one remaining variable: time. When you’re staring at 70 cents per dollar, you might wonder if Uber driving is worth your time. While an important question, this is what I fall back on: the money and market for ridesharing didn’t exist prior to Uber’s arrival. There were fewer ways to monetize free/down time. Now, every few moment or time off can be an opportunity to earn.

If you’re interested in becoming an Uber Partner, use my referral to gain an extra $100 to start. And if you’re an Uber passenger or want to be one, use this referral link to gain a fe ride!

There are many caveats and exceptions, it’s hard to clarify them all in this article. If you’ve driven for Uber, or have experience as a passenger, or are thinking about driving, let me know in the comments below! I’d love to include any additional insight you have into this article, as well.

Filed Under: Make Money Tagged With: AAA, car, college students, drive, driving, income taxes, Lyft, Miles, ridesharing, Self-Employment, tax deduction, taxes, Uber

4 Lessons From 3 Years Of Frugaling

By Frugaling 12 Comments

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Typewriter
Photo: Dustin Lee/Unsplash

Three years ago I sat at my then-girlfriend’s kitchen counter, which looked out at the Pacific Ocean. The panoramic window looked on beautiful condos and homes nestled along the California coast. The weather was perfect, and there wasn’t a cloud in the sky.

Amidst this perfection, my heart sank with the weight of tens of thousands of dollars in debt. It was something that could stand in the way of relationships, compromise my job prospects, credit scores, savings, investments, retirements, and giving to others. I wanted to excise the morass of debt, but didn’t know how.

I started writing Frugaling as an aspirant — a mere amateur in the financial planning world. What could I know about saving money, making money, and changing my prospects? While I didn’t have all the answers, I had hope.

I could never have predicted what happened next.

By cataloguing my story, sharing my triumphs and travails, and being open the entire way, I benefited financially and emotionally. The former included about $40,000 in revenue. Something that would allow me to pay off almost all my debt. The latter permitted me to regain my breath — to relax once more. I was able to let go of most financial uncertainty stress.

Three years of Frugaling flew by faster than I could have ever expected. It’s hard to fathom where I was then and now. Much has changed. Here’s what I’ve learned:

The rules don’t apply evenly across populations

We don’t all start from $0, the same educational prospects, families, or social networks. We aren’t all born the same race. We aren’t each afforded a $1 million loan from our fathers.

Finance, while personal, goes beyond “personal finance.” After writing for years, it’s clear both in comments, criticisms, and critical thinking that society has great power in affording people the opportunity to succeed.

Whenever we talk about financial management, we need to consider multiple stories — not just our own.

People care deeply about food concerns

Some of the most popular articles have been about food. And I don’t think it’s an accident. When people look at their budgets, one of the highest lines is for food.

Food is often an area where people look to cut back on. Maybe you eat out too much. Maybe you eat too much. Maybe you spend too much on coffees.

More importantly, any little change in your food spending instantly affects your total spend for a month. Reduce the regular visit to your favorite restaurant, make a meal at home, and you can immediately see the benefit to your wallet.

Simple living, minimalism, and frugality are deeply intertwined

If we imagined a venn diagram, these three concepts would greatly overlap.

Those who enjoy canning, meal planning, and living simply are usually following the frugal life, too. Minimalism directly affects budgets, too. Reducing the urge to fill closets, cabinets, and stuff the remaining areas can help you save money every month.

I’m inspired from each of these concepts. I read — mostly checking out books at the library. I cook (or attempt to) at home. And I constantly look for ways to reduce extra stuff and refuse impulse buys.

Debt can suffocate its victims

Swimming in debt made me struggle for air, space, and time. How long would I have to live this way? How long would I be able to negotiate this rat race? I felt choked by the burden.

Many live like this — even middle-income earners. One way or another they find themselves in great debt and/or living paycheck to paycheck — always on the precipice of a missed house payment, medical bill, or job loss. Every day is a struggle.

Debt has a sneaky way of controlling lives and forcing people to work more, save less, and reduce time spent with loved ones. Debt can impact marriages, relationships, and family members. And oftentimes, it’s inescapable until the final dollar is paid off.

These lessons have taken years to understand and conceptualize — to convey them today. I’m honored and humbled you’ve taken the time to follow along, read, subscribe, tweet, and share.

Cheers to another three years!

Your frugal friend,

Sam

Filed Under: Save Money Tagged With: anniversary, debt, frugaling, frugality, Minimalism, planning, saving money, Simple Living

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