On Insurance and Emergency Funds (and a bad day)

Even in the midst of serious debt repayment, having adequate insurance and an emergency fund is essential.  We were grateful  we had these in place when we had a really bad day.

I thought I was the one with the bad news.  My husband called me on while I was at the auto shop getting the screechy noise on the van checked out.  He asked me about my morning and listened patiently as I explained that the van repairs would cost us close to $500.

I asked about his morning and he said his hearing at court went well.  Then, cool as a cucumber, he told me that when he went out to his car afterward, he found the passenger window of his car broken and everything of value stolen.

The most painful was his briefcase which had his laptop, the files he was working on, and his notary seal and book.  They also took all the other electronics in his car and other random things like his spare deodorant and toothbrush (although they left his toothpaste).

Now for the good news and the point of this post:

Even in the midst of serious debt repayment, having adequate insurance and an emergency fund is essential.

Car Insurance

California minimum coverage requirements for auto insurance are so low as to be almost laughable, if this was not such a serious subject.  In California you must carry insurance to cover

  • $15,000 for injury/death to one person.
  • $30,000 for injury/death to more than one person.
  • $5,000 for damage to property.

Our auto insurance policy limits are substantially higher and also include collision and comprehensive coverage, with a $250 deductible.  Comprehensive coverage includes any damage to our cars or car-related property caused by anything other than a collision with another vehicle (e.g. collision with a deer, hail damage, or theft.)  After our $250 deductible, the comprehensive coverage will pay for the cost of replacing the window and all the car-related items like the GPS and power inverter.

Renters Insurance

If you have a home mortgage, you’ll be required to have home owner’s insurance. That decision is made for you by the lender.  For those who rent instead of own, renters insurance is always available, but often overlooked.  Renters insurance is generally very inexpensive, but can easily cover all your personal property, whether located in the home you rent, in storage, in your car, or anywhere else.  This insurance not only covers loss of your personal property (possessions), but damage to the rental property.

To give you an idea about how affordable renters insurance is, our policy costs us $175 per year, and was substantially less when we lived outside of California.  I would never have thought about renters insurance (I never had it when I was single), but my savvy and responsible husband has made sure that we have always had it.  In our case, after a $250 deductible, our renters insurance policy will cover, the laptop, briefcase, bluetooth headset, notary seal and book, and other stolen property.

Emergency Fund

If we were living paycheck-to-paycheck, it would be hard to come up with $500 in insurance deductibles, pay $500 in car repairs (remember how I thought I was the one having the bad day), and purchase replacements for all the stolen items (we will have to wait for reimbursements from our insurance).

In my opinion, trying to tackle debt without an emergency fund is a recipe for failure. Without savings for unexpected expenses, the slightest out-of-budget emergency will send you right back to borrowing.  Between living on last month’s income and having our emergency fund, we have money to cover the insurance deductibles, car repairs, and replacement purchases.

While it ended up being an expensive day, it wasn’t nearly as expensive and painful as it could have been.  We all sat down to dinner together, safe and well, and just a little bit poorer for the events of the day.   I’m just thankful that all we lost was stuff and money.

It’s Your Turn

  • Do you have an emergency fund and insurance?
  • How has your emergency fund or insurance saved your tail?
  • Have you ever had stuff stolen from your car?

How to Make a Profit Selling Used Stuff

Three keys to making a profit selling used stuff. Also, how to get started making money by buying used and selling for more.

When my husband finished law school, we put our house on the market and thankfully sold it quickly.  We sold most of our furniture and large items to cut down on moving costs and storage costs.  The best part was that we turned a profit on every piece of furniture, every household item and every toy that we sold.  Essentially, we not only furnished a portion of our house for free, but made money in the process!

First I want to share with you some of my secrets to success for coming out ahead when buying used.  Then, I’ll share several tips to help you get started buying used to resell.  I would love to hear your ideas and success stories in the comments!

3 Keys to Making a Profit Selling Used Stuff:

  • Buy almost everything used.

Just like a car loses value as soon as you drive it off the lot, most household items also lose value when they are no longer new, though many household items hold their value better than cars.  Let someone else take the loss associated with buying new.  You will save (and earn!) so much by being willing to buy used instead of new.

We all have our own personal preferences about things we won’t buy used and that’s fine.  As an example, I’m a little squeamish about used mattresses.  Other than those preferences, most of your other home furnishings can be purchased used.  You may have to wait a little longer to find exactly what you’re looking for, but it will be worth it.  Some of the best interior designers I know follow this rule and maintain a unique and classy look and feel to their homes.

  • Don’t base your resale price on the price you paid.

Many people think that when you resell items that you have used you should sell them for less than you bought them.  That is generally true when you’re talking about things that you bought new and then want to resell after you’ve used them.  That rule of thumb does not carry over to items you bought used, then want to resell.  Your price should be based on the market value of the item, not what you paid (whether it was a lot or a little).

  • The profit comes at the purchase, not the sale.

I love hunting for a good bargain, especially at yard sales, estate sales, and thrift stores.  When I’m looking for something specific, I scour Craigslist and local buy-sell-trade groups on Facebook in addition to looking at thrift stores and yard sales, until I find the best deal.

My rule for buying used is to only buy things that I know I can resell for a profit.  That means I have to know that what I’m buying is a great price and know the potential mark-up either now or in the future.

How do I get started?

Are you ready to start buying used with the intent to eventually (or immediately) resell?  Here are some tips for beginners:

  • Pick a couple of niches to start.

You can’t be an expert in every area to start.  Start with things you are interested in and already know about — tools, electronics, furniture, kids stuff, etc.  Gradually build your expertise as the need arises or interest piques.

My expertise grew as our needs and wants grew.  I started with furniture and specific household items.  Then naturally added in kids studd. When we started cloth diapering, I became an expert in cloth diapers.  Did you know there is a resale market for cloth diapers?

  • Know price ranges for your niches.

Learn what prices are a steal and will sell fast.  This is when you want to buy.  Learn what a fair price is that will sell to an interested buyer.  This is the price range you will sell your item at.  It may take a week or two to sell, but that’s okay.

When we needed a table, I learned about the market for tables.  In fact, I found several great tables that were priced really low and bought them all!  For a while we had several kitchen tables in our garage.  I was fine with that because I knew that I could easily resell each one for more than I bought it for.  We picked the one we liked best and sold the others for a profit, more than paying for the one we kept,  because I had learned what price the market would sustain when it came to used dining tables.

  • Know brands.

In many niches, knowing brands is essential.  What gives the item value is the reputation of the brand.  If people are hesitant to buy used, having a name brand often assures them that they are purchasing quality and not getting scammed.

When we were shopping for a jogging strollers, I learned all about them and learned that the name brand strollers held their value better.  I waited until I found a name brand jogging stroller for a good price on Craigslist.  Two years later, when I needed to upgrade to a double jogger, I sold the single jogger for twice what I paid for it.

  • Inspect items carefully.

Inspect potential purchases well before buying so that when you are ready to resell you know that the items are in great condition.  Any decent seller gives a full disclosure about the items they sell.  There’s nothing more disappointing that realizing that your “great find” is somehow terribly flawed and not really worth anything.

 

We had so much success selling our used items, that I started buying things that I didn’t need myself, but that I knew I could sell for a profit.  There are people who have entire businesses based on that concept (think ebay sellers).

What about you?

  •  Have you sold used things for profit?  What tips do you have? If not, why not?
  • Do you look specifically for items to resell when you are shopping at thrift stores or garage sales?
  • What was your best find?

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How to Make Plum Sauce and What to Do with it

I never knew how versatile plum puree was until I had several trees-worth of plums on my hands.  Now that we have discovered plum sauce, we can't live without it!

Last fall, some friends invited us to pick all the plums from their plum trees.  Their house had just sold and they were moving, so they just wanted to the trees cleaned off.  They didn’t want the new owners to have to deal with fruit falling off the trees making a mess right when they moved in.

We were happy to help them out, but I had no idea what we were going to do with all those plums.  Of course many were eaten whole.  They make a great snack (though they can be messy for 2-year-olds) and go great in sack lunches.

With the rest of the plums, we decided to make plum sauce and can it in quart canning jars.  Freezing works great too, if you have freezer space to spare.

Making Plum Sauce

You can call it plum sauce or plum puree, but no matter what you call it, the process to make it is pretty simple.  I didn’t take pictures of every step since back when I made plum sauce, Six Figures Under was only a figment of my imagination.  Thankfully I did take a few pictures!

Wash plums and remove pits by cutting plums in half and popping out the pit.  If the plums are ripe and juicy, the result might look like a crime scene.

I never knew how versatile plum puree was until I had several trees-worth of plums on my hands.  Now that we have discovered plum sauce, we can't live without it!

Blend plum halves (skin and all) in your blender or food processor until you get a puree of an even consistency.  This was back before we killed our secondhand blender by making green smoothies.  We’ve since upgraded to the best blender in the world.

I never knew how versatile plum puree was until I had several trees-worth of plums on my hands.  Now that we have discovered plum sauce, we can't live without it!

Bring the plum puree to a boil in a pot on your stove top.  If you’re going to can it, you’ll want it to be hot when you put it into hot jars.  If you are just freezing your plum puree, you can skip this step.

I never knew how versatile plum puree was until I had several trees-worth of plums on my hands.  Now that we have discovered plum sauce, we can't live without it!

Canning Plum Sauce

You can freeze your plum puree, have it fresh, or preserve it in canning jars.  This is going to look pretty much the same as canning homemade applesauce, including the processing times, so if you are interested in canning your plum sauce, check out my applesauce tutorial where the process is broken into simple steps with lots of pictures.

What to do with plum sauce

When we first made plum sauce I wasn’t quite sure what we would do with it.  I had a few ideas, but the possibilities really opened up!  Here are some of our favorites.

Pancake Topping

We eat lots of homemade pancakes around here.  My husband isn’t a fan of sugary syrups, so we always have fruit on our pancakes.  We’ll open a jar of applesauce, pear sauce, or plum sauce, or maybe even all three!

Oatmeal Add-in

We save money by enjoying hot cereal more often than cold cereal.  Adding a spoonful of plum sauce not only adds flavor, but it helps to cool down the hot oatmeal.

Substitute for Oil

You probably know that applesauce can be substituted for oil in baking recipes, but did you know that plum sauce does the trick too?  Plum puree can be substituted for oil (1:1 ratio).  Plum sauce does have a dark purple color, so it won’t exactly “hide,” but it works great in chocolate recipes (like brownies) or in pumpkin bread.  It adds a zing of fruit flavor and some extra nutrition too!

Smoothie Ingredient

We’re found that green smoothies are one of the easiest ways to get our kids to eat veggies.  Adding in some plum sauce adds color, flavor, and nutrition.  It acts as a thickener too, just like homemade yogurt.

 

Now that we’ve incorporated plum sauce into our regular kitchen routine and love it, we will definitely miss it when we run out!  Our friends with the plum trees moved away, so we lost our source of free plums.  Thankfully we’re set for a while!


Blendtec Blenders

Should You Pay Off Student Loans FAST or Just Pay the Minimum?

Should you pay off student loans fast or invest? Here are some pros and cons of paying off student loans quickly or sticking with the minimum payment.  Of course it's personal.  What's your preference?

Most people would agree that credit card debt should be paid quickly,  since the minimum payment won’t get you anywhere fast (except maybe more debt).  Exceptions may be made for balance transfers with zero interest offers for careful users.  Credit card debit is a considered one of the riskier kinds of debt.

What about student loans which typically have a much lower interest rate and needs-based deferment plans?  Is there any reason you shouldn’t pay them down quickly?  Some people choose to pay just the minimum even when they could pay more.

Let’s look at the alternatives to paying off student loans quickly and talk about what your preference is and why.  For each alternative, I’ll explain why we are still planning to pay off our student loans as quickly as we can!

 

Alternatives to paying off student loans fast

*and why they don’t work for us

1. Hope for forgiveness

With the many repayment plans offered for federal loans, there are loan forgiveness possibilities that come into play after anywhere from 10 to 30 years of regular payments.  Some people avoid paying more than the minimum on their loans in hopes of having their loans forgiven.

*We actually WANT to pay our debt.  We don’t want to stick around long enough to see how the loan forgiveness programs pan out.  The risks of the public service loan forgiveness program apply at least in part to the other repayment programs that offer forgiveness.  We want to be responsible for our student loan debt.  After all, we did borrow the money and give our word that we would repay it.

2. Pay the minimum and invest the rest.

Between suggestions from readers and multiple articles and comments I’ve read lately, I’ve learned that some people prefer to pay just the minimum on student loans and invest any extra in the stock market.  If you are paying 6.8% interest on student loan money but can earn 8-10% in the market, you could come out ahead.  Here’s a look at that perspective.

*While the numbers might entice some to invest extra income while making minimum payments on student loans, I am not interested in going this route. Part of the reason is that it’s additional risk I’m not willing to take.  Historically, the stock market has performed well enough over the long term to support this theory.  Over a period of just a few years, though, you could as easily lose 10% as gain 10%, leaving you short when it comes time to use that money you’ve invested.  For most people, returns on investment are also subject to taxes,  eating up part of that higher interest rate.  We want to have our debt over and done with in a couple years and not have to wait for the stock market to perform favorably to pay off our student loans.

Even though this method has potential to earn money we could put toward student loans, I prefer the safer, surer method.

3. Slow and steady will eventually finish the race.

There are hundred of other priorities that could be put above paying down student loans, so many people are comfortable coasting along paying the minimum payment on their student loans.  Maybe you would prefer to put money toward other financial goals. Perhaps you are barely scraping by paying the minimum.  Maybe your student loan debt has an especially low interest rate.  Perhaps you have other debt that has a higher interest rate.  The scenarios are nearly as numerous as the borrowers.  Personal finance is personal and that’s fine!

*For us our top financial priority is getting out of debt.  We are waiting to buy a house (or even rent one) until our debt is paid off.  Thanks to our living arrangement, our expenses will never be as low as they are right now.  For us, NOW is the best time to crack down and destroy our student loans.  We aren’t actively saving for retirement right now, but we also aren’t touching the retirement we have already put away.  Focusing on a single goal allows us to make progress faster and increases our motivation.

In addition, the faster we pay off our debt, the less we’ll pay in interest. Even our little ones understand the urgency that having to pay interest gives us.  Comparing the total amount we would pay in interest depending on how quickly we paid off the loan, like we did when we first set our goal, is really eye-opening!

 

Of course this all assumes that you are in a position to make a choice between just paying the minimum or working to pay off student loans fast.  If you haven’t started your debt repayment journey or you don’t know where to start to tackle your debt, then check out How to Get Started Paying Off Debt.

How about you?

  • Are you trying to pay off student loans fast or are you happy with making the minimum payments?
  • What are the major factors that have influenced your decision?
  • Do you (or would you consider) paying the minimum and investing the extra in hopes of coming out ahead?

LInked to Thrifty Thursday at LWSL,  One Project at a Time