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Eliminate debt, accelerate savings, increase retirement funding, and reorient your real estate position for positive cash flow. These Budget 101 Hacks are designed for anyone wanting to plan for an early retirement.
At Hacking the Road, we are dedicated to finding ways to help people live a Better Life ... on the Road! We are full-time travelers and experience seekers, and we want to share our journey with you. We believe that travel opens hearts and minds, and makes the world a better place. Join us as we explore each new destination.
Budget 101 Hacks
Please Consult your Financial Advisor for all financial decisions hypothesized in this plan. We are NOT qualified Financial Advisors. The plans developed simply represent an approximation of the plans we developed for our own full-time travel needs. Hacking the Road does not warrant or guarantee success.
Hacking the Road has developed a robust framework of Budget 101 Hacks designed to help anyone planning for a life of early retirement.
Our Budget 101 Hacks will show you how to eliminate debt, accelerate savings, increase retirement funding, and reorient your real estate position for positive cash flow.
Interested?
Having the freedom to eventually control your own destiny takes a considerable amount of research and planning. We strongly encourage you start developing your early retirement plan as soon as possible.
These Budget 101 Hacks will provide a solid foundational framework for your strategic plan.
Make sure that you are also thinking about what you'll do with your newfound freedoms. It's one thing retiring early, but what do you want to do with that freedom? Plan now, enjoy later!
Early retirement without a plan for the future can be a wasted opportunity. The possibilities are almost endless!
At Hacking the Road, we focus on developing strategies and plans for future early-retirees interested in a life of longterm travel. This is just one of the many options for early retirees.
Your future may, instead, focus on volunteerism or spending more time with family. Any which way, plan for an future that will make you happy for the rest of your life.
For those of you interested in digging a little deeper into the longterm travel option, Hacking the Road has developed three easy-to-use plans that might just fit your current situation:
Let's get back to our Budget 101 Hacks!
The following section will outline the Budget 101 Hacks and provide resources for your due diligence. Some of the Hacks will not necessarily apply in your situation.
Your job is to review the Hacks and find ways to integrate those most appropriate into your early retirement plan.
This framework will help you to aggressively go after your goals over the next 5 years.
Each Hack shows the potential savings over a five-year period. Let's get to the real savings!
#1. Pay Down Non-Mortgage Interest
Start paying down your interest debt--highest first. Credit cards, installment debt, and retail credit are all examples of high interest obligations. Set your target date for full-time travel and plan to pay off all high interest debt by that date. The average American pays $280,000 in interest over a lifetime. Average non-mortgage debt in the U.S is about $27,000. Average credit card rates are 19%, student loans are 4%.
Total Savings up to $10,000 over 5 Years
#2. Downsize Home Size
Downsize your home, reduce your mortgage payment. The median price of a new U.S. home is approximately $284,000 with a monthly mortgage payment of $1,750 (including PMI). The average home size is about 2,500 sq ft. Interest paid over 30 years would be about $200,000 (4% rate). Reducing home size to 1800 sq ft, will reduce the monthly payment by approximately $450 per month.
Total Savings up to $27,000 over 5 Years
#3. Convert to a 15-Year Mortgage
Convert your 30-year mortgage to a 15-Year obligation. Let's assume you downsize as suggested above, but take out a 15-year mortgage instead of a 30-year mortgage. The monthly mortgage payment would increase by about $100, but acceleration will save approximately $130,000 in interest over the life of the loan. Keep in mind, a 15-year mortgage has a lower interest rate.
Total Gain in Equity up to $30,000 over 5 Years
#4. Cut the TV-Viewing Cord
Change how you view television and save $$. Cord cutting gets easier and easier. Alternatives to most programming are available through an increasing number of streaming vendors. The average American family pays about $75 for cable or satellite TV. An impressive package of streaming subscriptions including Netflix, Amazon Prime, Paramount+ (CBS), Disney+, and ESPN + would cost approximately $45 per month.
Total Savings up to $1,800 over 5 years
#5. Don't Overpay for Internet
Save on home internet costs. We all need access to a reliable internet connection, but it doesn't need to cost a fortune. The average American pays $60 - $80 per month. The key to saving here is to actively manage your account. Shop around for promotions and check your bill for extra charges. Most of us are overpaying for speeds we don't need. 100Mbps is just fine for most. Save at least $10 per month by owning your own router-modem.
Total Potential Savings up to $1,200 over 5 Years
#6. Get Your Cell Phone Bill Under Control
Cell phone bills are out of control, but they can be controlled. The average American family pays about $115 per month for cell phone plans. The following strategies can be used to reduce this liability: Try to keep your smart phone for at least 3 years; shop around for promotions; get rid of extra charges on your account; get senior and military discounts; check out Mint Mobile, Google Fi, Reach Mobile, and/or Pure Talk for savings of about $50/month.
Total Potential Savings up to $3,000 over 5 Years
#7. Don't Trade in That Car
Buy a reliable second-hand car, maintain it, and keep it! Most people make the mistake of trading in their vehicle too soon. The average American keeps their car for 6 years, owes $4,600 at trade in, and always has a car payment. That liability is a huge contributor to consumer debt. The average monthly car payment is about $450. Keeping your car for 15 years can really add up to significant savings--and investing those savings will compound the benefit. Buy (cash) high-demand Toyota, Honda, Nissan, or Subaru.
Total Savings up to $27,000 over 5 years
#8. Technology Can Cost Less
Buy quality technology, buy refurbished, and keep your gadgets longer. Check Consumer Reports and buy reliable technology. Buying refurbished can save about 30% compared to new. Take a look at Back Market, Amazon, and Walmart for deals. Keeping your smart phones and computers for an extra year can further reduce your average annual tech cost by another 30%. Most couples have at least 2 cell phones, 2 laptops, and 1 tablet. That's big savings!
Total Potential Savings up to $1,500 over 5 Years
#9. Savings Should Work 24/7
If your savings aren't working, you're not saving. The average American has approximately $5,500 in cash, checking, and money market funds. Very few realize much of a return on this money. We have used Worthy Bonds to park these funds at a very generous 5% (recently increased to 5.5%) annualized return. Best of all, the Worthy App is easy to use and provides daily interest updates. Another benefit is that your funds can be available more or less within a week when needed.
Total Potential Savings up to $1,500 over 5 Years
#10. Long Term Passive Investment Strategies Work
Buy a passive S&P Index Fund (SPY) to take advantage of impressive longterm growth averages! The S&P has averaged 7%+ appreciation annually since the 1920s. The key to this strategy is a time horizon of at least 10 years.
Gains and losses tend to come in big spurts and collapses. Over time, the upward trend line has held. The S&P is up an average of over 8% per year since December 1999. Over 20 years, the average equity investor underperforms the S&P by about 4.5%. For our Net Gain calculation, let's assume the average 50-year old has $135,000 invested.
Total Net Gain up to $30,000 over 5 years
#11. Long Term Active Dividend Growth Investment
For the more adventurous longterm investor, a dividend growth strategy may be more attractive. What if you could get both portfolio appreciation and a steady stream of income?
The DivGro 2.0 website shows how they have actively managed such a portfolio over the last 9+ years. This active strategy has yielded an annual return of over 26% through 2021! All income is reinvested.
DivGro 2.0 has outperformed annualized S&P returns by a whopping 17% over the same period. The 5-year net gain below is compared to the performance of the average investor with an average $135,000 portfolio at age 50. 'Subscription required.
Total Net Gain $100,000+ over 5 Years
#12. Shop Home and Car Insurance
Conduct an audit on your home and car insurance, actively shop for savings, bundle to save more. Stay on top of your home & auto insurance costs. Annually shop around for the best rates. Bundling home and auto insurance with the same insurer tends to yield the best result. The average American saves 17% with this strategy. Pay upfront for the year to save another 5%.
Total Potential Savings up to $3,500 over 5 Years
#13. Skip the Starbucks and Dunkin' Donuts Fix
Kick the coffee & snack quick fix at Starbucks and Dunkin' Donuts, it's costing you a fortune! The average American conservatively spends about $4 each week day at Starbucks and/or Dunkin' Donuts. Enough said, you know you do! With a little planning, you can easily satisfy you habit by brewing at home and purchasing K-Cups for the office. Besides, you can always count on free gift cards when you really have to go--birthday, holiday gifts.
Total Potential Savings up to $5,000 over 5 years
#14. Avoid the Soda Habit at Restaurants
Drink your soda at home, not at the restaurant. A nice cold glass of water with a refreshing slice of lemon more than replaces the unhealthy sugary soda drinks offered by most restaurants. The average American couple eats out at least once each week. The average restaurant soda costs about $2.50 per order. That can be as much as 16% of the total restaurant order.
Total Potential Savings up to $1,500 over 5 Years
#15. Outsmart the Alcohol Trap at Restaurants
Stay away from ordering alcohol at restaurants and reward yourself later. Alcohol sales represent a huge mark-up opportunity for restaurants. The average restaurant alcohol order can easily be 25-30% of the total bill. The average couple could conservatively spend $15 per outing once a week.
Total Potential Savings up to $4,000 over 5 Years
#16. Fewer Restaurant Visits, More Home Cooking
Learn to make pizza or cook that steak at home, it's fun! The average home-cooked meal costs approximately $4 to prepare. The average restaurant meal conservatively costs about $14 without tax and tip. Besides, home-cooked meals are substantially healthier, with less salt, fat, and sugars--a win-win. The average couple has a restaurant sit-down meal at least once per week. Eating out once each month adds up to big savings! Don't forget Groupon and Restaurant.com!
Total Potential Savings up to $7,000 over 5 years
#17. Take Full Advantage of Employer 401-K Matching
Max out your 401-K contributions when employers match contributions. Many employers offer a 401-K matching contribution for every dollar you contribute up to a certain percentage (3% of salary is common). The median annual salary in the U.S. is about $70,000. At this rate, employees stand to gain an extra $2,100 per year in tax-deferred savings. Compounded over a career, this represents a sizable contribution to your nest egg.
Total Extra Potential Savings up to $10,000 over 5 Years
#18. Don't Overpay for Storage
Audit your storage needs every year. We've all been there. Maybe we'll need this, maybe we'll need that. Better keep it! Next thing, we're paying for storage.
Key: Never pay for a storage unit bigger than you need, and honestly evaluate whether you really need one at all.
You can buy new stuff with the money you save. Step one, make some tough decisions--sell, donate, trash, keep. Sell things you don't need, donate the things you don't sell, trash the junk, keep your essentials. Downsizing from a 10 ft x10 ft to a 10 ft x 5ft locker saves easily $40 a month. Pay upfront for 12 months and save another 8%.
Total Potential Savings up to $2,400+ over 5 Years
#19. Sell That Extra Car
If you don't regularly use that extra car, you don't need it! An extra car is a money pit. You are obligated to maintain it, pay for insurance, and pay for registration. Why not turn it into cash. Besides, it takes up a lot of room. The average American family own 3+ cars. Consider car-pooling, the occasional Uber or Lyft, or cycling to cut down on your car needs.
Total Potential Savings up to $8,000 over 5 years
#20. Turn Furnishings, Clothing, Appliances into Cash
Cash is king! Sell or consign your used clothing, furniture, and home appliances. Yard sales and consignment stores are common these days. We've all collected and hoarded things for years. It's time to liquidate and get that money working for you. There's a real movement out there that really values retro.
Take your best items over to a reputable consignment store or sell through Poshmark or ThreadUp--you'll get top dollar that way. Get to know your local yard sale schedule and plan to have 2 sales a year to clean up your clutter. Donate the leftovers. You'll be surprised how much you make.
Total Potential Earnings up to $4,000 over 5 Years
#21. Get That Dreaded Side Hustle Going
Side hustles abound, pick one that suits your schedule and talents. There are so many convenient side hustles today. COVID has single-handedly main-streamed remote working as a viable option for millions around the world. The options are boundless.
ETSY is there for the artists and artisans, Ebay and Amazon provide robust marketplaces for all kinds of merchandising, and then there are all the free-lance sites like Upwork and Fiverr for remote project-based work. You could try your hand at Airbnb or Vrbo. How about Tutoring online? Get certified to teach English as a Second Language online.
Total Potential Earnings over 5 Years Depends on the Hustle
#22. Become a Grocery Shopping Guru
Become an expert grocery shopper by studying flyers, clipping coupons, shopping multiple stores. There are big savings here if you are willing to put in the upfront time.
Once a week, mail boxes are flooded with grocery flyers and coupons. The Sunday paper is a good source for major coupons. Online coupons can be found at SmartSource.com. Develop a list of your regular staples.
Plot your weekly shop with your flyers and coupons in mind. We maximize our savings by shopping at Aldi (similar to Lidl), Walmart, and Sam's Club (similar to Costco). The USDA's Moderate Cost Plan estimates monthly grocery costs at $625 per couple. A skilled shopper can save almost 30% off that total.
Total Potential Savings up to $10,000 over 5 years
#23. Reject the Landline Offer
Reject cable or satellite packages offering to bundle their services with a landline. If you have a landline, ask to have it removed from your bill. Landlines are still in favor with those concerned about cell phone reliability during a crisis (weather especially). You will need to decide whether this $25-$35 per month expense is worth the extra peace of mind.
Total Potential Earnings up to $1,800 over 5 Years
#24. Don't Spend Tax Refunds
Have the IRS direct deposit your refund and save the full amount. The average American receives a tax refund of approximately $2,800 each year. Unfortunately, this check is mostly seen as a windfall and quickly spent. $2,800 invested (5%) each year over a 40-year career results in a sizable nest egg of about $350,000.
Total Potential Earnings up to $15,500 over 5 Years
#25. Don't Spend Annual Raises
Stay disciplined, stick to your inflation-adjusted budget, and save at least half of your annual raise. The average American receives a 3-5% annual raise when the economy is in good shape. This is not found-money or a windfall. This is an opportunity to shrink your timeline to independence. Auto-deposit half your raise into a savings account (Worthy Bonds)--or use it to pay debt.
Total Potential Savings up to $10,000 over 5 years
#26. A Second Home Should Pay its Way
Rethink your 2nd home financial model and stop the bleed! If you're reading this, you're most likely building a financial strategy for financial independence. Most 2nd or vacation homes can bleed hard-earned cash. Buying a destination property that can be managed for positive cashflow can turn this around.
Destination condos in Myrtle Beach (SC) and Branson (MO) can be bought for less than $140,000 and fit the bill.
The average 2nd home costs approximately $210,000 (2021). In many cases, one could use the equity from the sale of an existing 2nd home to purchase one of these condos for cash. Your mortgage savings can now be applied to debt reduction. Keep in mind, this home can become your permanent residence once you sell your primary home.
Total Potential Earnings up to $60,000 over 5 Years
#27. Consider a Warren Buffet Mindset
Warren Buffet's success is no accident. Warren buys undervalued assets, holds them for the longterm, and liquidates when his goals are met. There is no reason this strategy can't be implemented in your portfolio.
The longterm extremes of market cycles in the Oil & Energy Industry represent opportunities for investors with patience and long horizons.
The play, here, is to buy 5%+ dividend paying midstream Oil & Energy stocks when the per-barrel cost of oil falls below $40, and then sell when oil hits $70.
This opportunity has surfaced 3 times since 2001--Oct 2001-Sept 2004; Jan 2016-January 2018; and March 2020-Jun 2021.
Assume an investment of $50,000 with 3 opportunities over the last 20 years. While you wait for the big pay-off, the dividends will keep you flush--take a look at KMI, EPD, TRP, ET, and ENB. Before 2000, the cycles were longer, but the emergence of China and India have changed the market dynamic.
Potential Average Earnings up to $45,500 over 5 Years (20-Year Average)
#28. Consider Thrift Outlets for Clothing & Apparel
Goodwill, ThredUp, Poshmark, and other resale merchants should be a part of your wardrobe. Sustainable resale is cool now! According to ThredUp, 33 million people bought thrift resale for the first time in 2020--and 76% expect to continue this new habit.
On average, Thrifters are buying 7 thrift pieces that they would normally purchase new. A significant number of people spend more than a $1,000 per year in this category. Thrifts offer discounts of over 50% across the board.
Total Potential Savings up to $2,500 over 5 years
#29. Stretch your Entertainment Dollar to the Max
Entertainment is critical to our sanity, but it doesn't need to cost a lot. The average American adult spends about $3,000 on entertainment annually. Try to cut that in half!
If you must go to the movies, attend a matinee, go Monday through Thursday, or find a low budget theater. Better yet, stream recent movies at home and make an evening of it for the family!
Start following the local high school sports teams. If you must go out for drinks, choose Happy Hour and limit yourself to once per month. Organize a monthly potluck dinner that rotates among your friends. Find free concerts. If you love the casino slots, find machines that have lower denominations and be disciplined with a set budget. It all adds up!
Total Potential Savings up to $7,500 over 5 Years
#30. Change the Way You Vacation
Be strategic in the way you vacation. The average American couple spends about $3,000 on vacations each year.
Most of us live within a day's drive of amazing destinations. Reduce the number of vacations where airfare and a rental car are required. Some of that savings can be used to do more and stay at nicer places.
Check out Airbnb, Vrbo, Booking.com, Expedia, and Hotel Tonight for the best deals. Book lodging that has a kitchen or free breakfast. Sometimes booking 15-20 miles away is much cheaper.
Consider home swapping via Home Exchange or Love Home Swap to save on accommodation and transport.
Use smart search engines for cheaper flights. Agoda and Skiplagged are consistently good. Try Kayak and Google Flights for multi-city flights. Always check Southwest, Ryan Air, Volaris, and Easy Jet. They are not included in most searches! Make sure you earn and use your frequent flyer miles.
Total Potential Savings up to $7,500 over 5 Years
#31. Take Control of Your Healthcare Costs
Beyond major medical necessities, most healthcare expenditures are discretionary. In other words they are controllable. Many doctor's visits can be completed via Telehealth at $30 - $40 per visit--cheaper than the co-pay with your insurance.
Make sure your medical professional writes a prescription allowing the generic version of the medication. The average brand drug costs about $96 vs $28 a month for the generic version. A 3-month supply can also reduce the monthly average cost. Shop for the best prescription prices and check out GoodRx.
Always stay in-network for all medical procedures to avoid unexpected bills.
Take a good multi-vitamin and exercise! Consider Urgent Care instead of the Emergency Room for minor concerns--reduced out-of-pocket, and less time.
Re-evaluate your Dental and Vision plans. Are they really saving you money? Research the actual out-of-pocket prices of dental and vision care with what you are currently paying in annual insurance payments.
The vision care industry has been disrupted recently, making vision care much cheaper. Increasingly, people are buying their lenses and frames online through Warby Parker, GlassesUSA, and EyeBuyDirect. Eye exams are about $75 at Walmart and JC Penney.
Total Potential Savings on Insurance up to $2,500 over 5 years
#32. Take the Senior Discount!
Assuming you are older than 50, you're eligible for special treatment. Many discount programs start earlier than most people think. Don't be embarrassed to take the discount, you earned it!
Step one, go to theseniorlist.com to see the full array of major discounts currently available. Most restaurants offer a 10% discount for age 60+. Denny's stands out offering a 15% discount to AARP members. Uno Pizzeria offers a 25% discount on Wednesdays.
Retail savings are also available. Walgreens offers 20% off once per month. Ross, Goodwill, Bealls, DressBarn, and TJ Max all offer at least 10% on certain days of the week. The AARP Prescription Discount Card is a must.
Budget and Alamo car rental offer 10-25% discounts. Hyatt has the most aggressive discount in the hotel sector. Most hotels discount 10%, but shop around.
A Lifetime National Parks Pass is only $80--a must if you travel. Cell phone plans discount 10-15%, but shop around (Google Fi, Mint Mobile and other discount carriers).
Total Potential Savings up to $3,000 over 5 Years
#33. Tame the Electricity Beast!
Identify all of your electricity hogs and develop strategies to deal with them. The average American home pays about $100-$130 per month for electricity. By making a few changes, you can save 20% on your bill over time.
Turn off the lights when you are not in the room. Replace your air filters every 3 months. Cook using a countertop appliance. Add a couple ceiling fans. Change out burned out lights with energy-efficient alternatives. Reduce all major air leaks around the house. Buy a programmable smart thermostat--reduce energy consumption when you are not at home. Run the dishwasher and washer-dryer when you have full loads. Set your water heater to no more than 140 degrees Fahrenheit. Dress warmer in the winter.
Total Potential Savings up to $1,500 over 5 Years
#34. Hire a Good Accountant for Your Taxes
Assuming you own a home and actively invest in the market, it pays to have an accountant file your taxes. The tax code is constantly changing and it's easy to make a significant mistake.
A recent survey of over 2,000 tax payers showed that self-filers, on average, received an $1,800 refund vs accountant-filings who received on average $2,600. Paying $300-350 for accounting services still leaves almost a 30% increase in your refund. You also have the peace of mind knowing the accountant will help defend you in an audit.
Total Potential Savings up to $2,500 over 5 years
#35. Choose Your Bank Wisely
The wrong bank can be costly to your bottom line! Choose a bank with a national network and a strong affiliated global network. Banks are notorious for their fees--ATM, overdraft, monthly account, transfer, and currency exchange. The average American pays about $330 in fees per year.
Find a bank that has the biggest reach, requires the lowest balance, and is sparing in charging extra fees.
Capital One 360 and Schwab Bank rank very high on our checklist--both online banks There are no monthly fees or minimum deposit requirements.They have strong networks and reimburse for global bank ATMs. Private ATMs will still have fees.
For savings, it may still be preferable to use Worthy Bonds at 5% interest--hard to beat.
Total Potential Savings up to $1,600 over 5 Years
#36. Actively Manage Subscriptions and Memberships
An audit of your subscriptions and memberships is a must for a disciplined budget. Take control with the Truebill app.
Step One, review monthly credit card statements and identify all subscriptions and memberships.
Step Two, cancel all subscriptions and memberships you don't need!
Step Three, actively manage the remaining subscriptions.
Where possible, share streaming media subscriptions, e.g., Netflix. Use trial periods to your advantage. Rotate your streaming media subscriptions when your favorite shows start new seasons, e.g., Netflix, Showtime, and HBO (Max).
Be careful of software subscriptions! Buy instead of subscribe, e.g., Adobe and Microsoft products.
Indoor fitness memberships can really add up over 5 years! Consider running or join an outdoor community club.
Total Potential Savings up to $3,000 over 5 Years
#37. If You Have Hair, Save Money on Maintenance
Hair styling and grooming don't have to cost a fortune. For most men, short hair is easy--buy a pair of decent hair clippers and enjoy years of saving!
For those requiring styling, network with friends to find a reasonably priced skilled hairstylist.
Adopt a style that is easy to manage, cut you own bangs, touch up your own roots, don't buy salon product, and skip the wash & style. After a few months, this will all come naturally.
Total Potential Savings up to $2,000 over 5 years
#38. Move to an Area With a Lower Cost of Living
Check out NerdWallet's Cost of Living Calculator. Many companies offer internal transfer opportunities to cheaper areas of the country. Be sure to account for the possibility of an accompanying pay cut.
Your biggest savings will come in mortgage, rent, and taxes (property, sales, personal income) payments. A number of states don't have taxes on personal income. Sales tax rates across the U.S. can range from 0% to just over 10%. Effective real estate tax rates in the U.S. range from 0.28% to almost 2.5%.
Median home values in Nashville, Memphis, and San Antonio range from $100,000 to $165,00 (2021).
COVID has opened the door to all kinds of remote opportunities. The gig-economy has endless opportunities!
Where you live can make a huge difference in freeing up savings! The savings below compare San Antonio to the U.S. average.
Total Potential Savings up to $80,000 over 5 Years
#39. Make Some Tough Decisions on Pets
We all love them, but pets can be costly and very limiting when it comes to travel. If you are considering a long term Better Life on the Road, planning must come earlier rather than later. Traveling with pets will limit your options in accommodations, travel mode, and budget management.
This is very personal, of course. The simplest solution is to start a transition plan for a life without pets. Some long term travelers get their pet fix by house sitting homes with pets.
The U.S. average annual cost to take care of a dog or cat is approximately $600 - $1,000. This includes food, pet insurance, medical expenses, and grooming.
Your transition plan should aim to be pet-free by the time you hit the road.
Total Potential Savings up to $1,500 over 5 Years
#40. Take Advantage of PMI Savings
Be aware of private mortgage insurance and avoid it if possible! PMI makes it possible for you to buy a home with a down payment lower than 20%.
On an average home value of $250,00, a down payment of 10% will add an additional $100 of PMI each month. Typically, PMI can be removed by request once your home equity rises above the 20% threshold (22% to be safe). Rapid appreciation and/or increased principal payments are key to reaching the threshold faster. In many cases, PMI can be avoided.
Warning: Some banks won't remove PMI for a set period at the beginning of a mortgage.
Total Potential Savings up to $6,000 over 5 years
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