Frugal Living 

Remember to Pinch Pounds Too

A while back I discussed how you could save some cash by cutting just one cup of coffee a week and by brownbagging it just one day a week. That’s when, in chatting with Paid Twice, she joking said “yeah… all these years of home brew coffee and packing lunches – explains why we’re broke. :)” She said it tongue in cheek but it’s a legitimate concern. So many people budget to a penny, diligently track their expenses, yet find themselves behind the eight ball and I suspect it has to do with expenses on the other side of the spectrum – the big ticket items. (I suspect this because that’s what happened to me!)

With respect to frugality, I see the world in two different categories. The first category is for those big ticket items where savings can be significant. Big ticket items are marked by lower frequency but high savings potential, such as a car. The second category are those smaller day to day expenses where there is a much higher frequency of expenses but lower potential for savings. Many times we focus on the small items because we deal with them every day but get panicky or pressured when we start talking major expenses, but those big expenses are the ones where the big savings are too.

Unfortunately, big ticket items aren’t things you can change overnight and they also tend to be more stressful. I recognize that. The two big ticket items most individuals have to pay for are housing, either renting or buying, and a mode of transportation, usually a car. The two are generally marked with higher levels of stress (what’s more stressful, buying a house or making your own detergent? duh!) in part because of the higher dollar values but also because of time constraints. With housing, you’re usually under the gun because you have to move by a certain date according to your lease or some other agreement. With a car, you’re usually under the gun because you need a car ASAP and the whole car sales business is a pressure cooker anyway.

So, how do you counter it? Remove the pressure and reduce those expenses as best as possible.

Remove the Pressure

Sales Pressure: With either a car or a house, there will always be a measure of sales pressure on the part of the agent or the salesperson. It’ll be far worse with a car dealership salesperson because they know they might not get you the next time in so they want you to buy now. Combat this by doing one thing… never sign anything the first time you walk into a place. If you meant to go test drive a bunch of cars, don’t buy that day. Always sleep on a decision and always get a second and third opinion from people you believe are both trustworthy and knowledgeable. You can save yourself from making plenty of bad decisions if you sleep on it and ask for second-party opinions.

Housing: You know when your lease will expire, so start your housing search as early as possible. If you’re buying, start it several months in advance of your move. If you’re going to rent again from another place, start a couple months in advance of your move. Chances are, if you’re renting, even if you can’t find another place to live, you can always go month-to-month on your lease and pay a small premium. Paying an extra hundred dollars a month for one month is far better than rushing into another lease or even a 30 year mortgage!

Car: What’s the worst thing that can happen if you don’t buy a car and your car is kaput? At best, you’re inconveniencing yourself and perhaps friends and family that agree to drive you around. At worst, you rent a car at about thirty or forty bucks a day until you settle on a car. What’s worse, overpaying a few thousand on a car or shelling out for a rental? There is no pressure to buy a car as soon as possible.

Reduce the Costs

The topic of how to reduce the costs of housing and a car, at the tactical level, is way too complex to go into in a few paragraphs here. If you want to know the best tactics for negotiating down the price of a car or a home/rental, you can find plenty of information online . I will however say a few words about how I view homes and cars from a philosophical level and I’m interested in hearing your opinion as well.

Housing: When I rented, I saw my apartment as a temporary location for, at most, a few years. Since it was temporary and I wasn’t building a long term solution, I tried to spend as little as possible on my housing. My end game was to buy a house, not rent a swank apartment, so I never painted or put up pictures. The point was to pay as little as possible so that I could put as much as possible towards a down-payment. To this end, I spent two years renting, always had the same roommate, and we tried to keep costs down as low as possible – I never paid more than $600 a month for rent. I’ve know people who have spent $1200 to $1500 on single bedroom or studio apartments because they wanted someplace nice. That’s $600 to $900 a month that person can’t put towards something else (which is perfectly alright, we all have our own tastes). However, if you are looking to save money, you have to make a lot of detergent to recover $600-$900 a month.

Car: My car gets me from A-to-B and I want it to be affordable, reliable, and fuel efficient. I know some people like to buy cars because it projects a certain image, they want to be able to drive their co-workers or bosses around in a nice ride, but luckily I never worked in industries where that mattered or could affect my future job growth.

Total Cost Considerations: This post is getting a little long winded but I wanted to throw in one last point about total cost. When you sign up for a house or a car, you’re signing up for years and years. A lease is often for twelve months minimum. When you make these purchases, remember to consider the monthly costs as well as the initial costs.

 Frugal Living 

Save Earth & Cents with Reusable Shopping Bags

This Is Not A Plastic BagFrugality has met environmentalism at my local Giant supermarket as those 99 cent reusable shopping bags can now net you a five cent discount at the checkout register. It’s estimated that Americans consume a hundred billion plastic shopping bags each year and we recycle about none of them. Those hundred billion end up in the woods, in the water, and in the throats of small furry animals, so do your part and start using reusable shopping bags because it can actually save you some money too.

At 99 cents each and a nickel discount each time you use them, it’s a mere twenty visits before each bag pays for itself. After the twenty visits, you start turning a small profit on the bags and can save yourself some money while saving the environment. And if you don’t want to spend the dollar on a reusable bag and you don’t have any totes, you can always turn a tanktop into a shopping bag (or use some other feat of ingenuity). 🙂

These stores offer some sort of discount for using a reusable shopping bag:

  • Giant Foods,
  • Whole Foods,
  • Trader Joes,
  • Krogers,
  • Super Fresh

If you know of a store that offers a discount for using a reusable bag, please leave it in the comments below and I’ll add them to the list.

(Photo by bsing)

 Personal Finance 

PFBlogger Spotlight: David of My Two Dollars

Before my wedding in February, I had sent out a bunch of interview requests and questions to some personal finance bloggers I didn’t know too well and then prompted forget I had done so (I blame it on the hustle and bustle of the wedding!). David, of My Two Dollars, was one of them and thankfully he asked about it the other day or this would forever have been lost in my GMail archives!

David’s background is certainly quite eclectic and he single handedly brings a pretty diverse perspective on a lot of things. I don’t want to give too much of it away but the guy has a degree in Criminology and Sociology and has never used either in a job (oh and don’t move across the country for a girl, unless you know her really well :)).

Oh, and it’s his birthday today, so send him your well wishes!

jim: Hi David, could you tell us a little about yourself?
David: I was born in Boston, MA and moved to California 13 years ago when I finished college. Although I don’t work in the field that my major was in, I spent my first 12 years in California working in the movie and television industry, and just last year left the corporate job to strike out on my own building websites, writing, and doing video editing.
jim: Do you have any crazy or funny stories from your twelve years in the movie and television industry?
David: One that stands out in my mind was when I was working at Paramount Pictures, and I went to use the restroom in my building. As I am at the urinal, who walks up to the one next to me but Tom Cruise. You get very used to seeing celebrities every day at work, but never would I have expected to run into Tom Cruise in the bathroom. Very surreal – and before anyone asks, no, I didn’t look.
jim: What motivated you to begin blogging and how long have you been doing it?
David: I started blogging in 2006, strangely enough, because I was bored at my job and needed something to do. I figured it would be a nice hobby to pass some time in the office, and it was then that I started my first site about the environment, The Good Human. That site is still doing really well now, and in November of 2006 I started My Two Dollars.
jim: Can you tell us a little about your other site, The Good Human?
David: I started The Good Human at first just to diary my thoughts and motivations for becoming a “better human.” There are so many ways that we can all contribute to our existence here on Earth, and I found over time that one of mine was talking about environmentalism and sustainability issues with people. I wanted The Good Human to be a place where people could learn about these types of things without being made to feel guilty or like they were not doing enough.
jim: How did you come up with the name for your blog?
David: I wanted something catchy, and it was called about 5 or 6 different names before this one stuck. My Two Dollars came from watching a rerun of Better Off Dead, that movie with John Cusack where that kid chased after him for his two dollars.
jim: What do you think makes your perspective unique?
David: I think I have a unique perspective because I did not start off life after college as a financially responsible person. I spent like I was made of money, I used my credit cards to impress people (girlfriends, mainly), and lived the high life on around $35K a year. But a few years ago something clicked that I was getting older and was digging myself further into debt that I was not going to be able to get out of. So I stopped spending, learned about finances, starting saving, paid off my credit card debt and came up with priorities that to me saved me from financial ruin.
jim: What’s something no one else in the blogging world knows about you?
David: I have a degree in Criminology and Sociology that I have never used for any job. Also, I moved to California following a girlfriend. And guys, don’t ever do that, seriously, unless you have been together for a very long time.
jim: What are your favorite personal finance books?
David: Lately I have been enjoying The Automatic Millionaire, Your Money Or Your Life, The 4 Hour Workweek, and The World Is Flat.
jim: Which of your posts do you think all your readers should read?
David: I think a few that best represent what kind of writing I do would be Making The Financial Sacrifice To Get What You Want, Why You Should Stop Paying For Storage And Just Get Organized, Sometimes The Simple Things Can Save The Most Money, and The Start Digging Out Of Credit Card Debt Challenge.
jim: What financial “mistake” that you’ve done has bothered you the most?
David: Spending money like it was growing in my backyard. By the time I was 29 years old, I had racked up over $30,000 in CC debt…and had absolutely nothing to show for it.
jim: How about your best decision?
David: To stop leasing cars and to start buying them. I used to lease expensive cars until I realized I was paying over $500 a month to rent a car that I could not even sell at the end of the lease!
jim: What is your favorite personal finance blog and why?
David: That’s a tough one – before I had a personal finance site, I started off reading Five Cent Nickel, Get Rich Slowly and of course, your site – and since I still read all three I would have to say they must still be favorites of mine. There has been such an explosion of PF blogs in the past year, and so many of them disappear after a short time. It’s nice to see the familiar faces are still around, as I hope to be in a few years as well!
jim: What do you hope to accomplish this year?
David: My wife and I would really like to have children, so we will be starting to try this year. And now that I have gotten a clean bill of health from the doctor after a cancer scare, we will be moving forward with our dream of moving to New Mexico, buying some land, and building a house.
jim: I didn’t know about your cancer scare, I’m glad things worked out.
Did it change your perspective on anything (life, money, etc) that you
think would be helpful for others?
David: Going through 6 months of the possibility of having cancer was quite frightening – it opened my eyes even wider to what is really important in life. My wife, my lifestyle, what I do in my spare time and how I expend my energy is way more important to me now than amassing huge amounts of wealth or the finest cars or anything like that. I was on that road before, but after thinking you are going to die relatively soon, the important things come to the front and you realize how useless and unimportant “stuff” and wealth is. Now we just want enough to be happy and to be able to do the things we love – we have no need for getting rich. Thankfully, the symptoms I was having are related to something else that I can live with for a very long time, so we were quite relieved.
jim: That’s great… I’m curious also about New Mexico, why there?
David: We decided to move to New Mexico because we spent a while there last year…and have not stopped talking about it since. We absolutely fell in love with the area; the clean air, the lower cost of living, the wonderful people and the views that go on forever. My wife and I are avid hikers and campers, and this area suits our lifestyle much better than Los Angeles.
jim: And, lastly, if your blog ended today, how would you like people to remember it?
David: As a blog that gave sound advice on lifestyle choices and an encouraging voice to those who are looking for said advice. I am by no means a financial planner, but I have my head on straight and hope I have offered valuable information that will be around for a while. And if only one person got something out of it, I can be happy with what I did.

I invite you to check out both My Two Dollars and The Good Human, both are excellent blogs and I’m not just saying that (just look how interesting his life has been, how could his blogs not be fun to read???).

 Investing, Personal Finance 

Money: Only 7 Investments You’ll Need

Money Magazine recently released the only 7 investments you’ll ever need and, surprise surprise, my favorite firm, Vanguard, was listed first choice for five of the seven. Their founder, John Bogle, was a major proponent of index funds and it shows in their offering, as almost all of Money’s choices were low-expense ratio index funds.

Need another reason to have a mutual fund account at Vanguard? (No, Vanguard doesn’t sponsor this site!)

Blue-chip US-stock fund: Fidelity Spartan 500 Index (FSMKX) because it replicates the S&P 500 with an expense ratio of 0.10% (coincidentally, Vanguard’s version, the Vanguard 500 Index Fund Investor Shares (VFINX) is 50% more expensive with a ratio of 0.15%).

Blue-chip foreign-stock fund: Vanguard Total International Stock Index (VGTSX) because of its solid performance, beating 90% of its peers, and because it’s an index fund with an expense ratio of 0.27%. Another Vanguard fund, the Vanguard FTSE All World Ex-U.S. ETF (VEU), was listed as an alternative.

Small-company fund: T. Rowe Price New Horizons (PRNHX) is an actively managed fund, one of the few actively managed funds they selected, and is “one of the most efficient of the actively managed crowd.” Considering it is actively managed, an expense ratio of 0.8% is pretty good, about half the average.

Value fund: Oh look, another Vanguard fund – the Vanguard Value Index (VIVAX) and its 0.2% expense ratio and a record that trumps 78% of its peers. Value funds go after investments that appear overlooked or beaten down and try earn a little off those cigar butts and dividends, rather than looking for growth potential.

High-quality bond fund: Vanguard Total Bond Market Index (VBMFX) snags this category with a 0.2% expense ratio. Bonds are good to be the rock in your portfolio to give you some grounding as your other investments shoot up and crash down. 🙂

Inflation-protected bond fund: This last category was won by Vanguard’s Inflation-Protected Securities Fund (VIPSX) and it’s 0.2% expense ratio (Vanguard’s index funds are ridiculously efficient). “Among TIPS funds, Vanguard Inflation-Protected Securities has several things going for it, including lower costs and better management than you would get if you assembled your own TIPS portfolio. While the fund returned 6.6% over the past five years, you shouldn’t expect it to make a pile of dough. Its job is to protect the money you already have.”

 The Home 

Homeownership Isn’t A Short-Term Investment

Don’t buy a home to make money because you won’t.

At the end of May, my wife and I will have owned our home for three years. It was a home that we purchased six months behind the burst of the housing boom and one that has still appreciated in the time since, a testament to the strength of the housing market in the area between Baltimore and Washington D.C. In our little development, similarly designed homes have been selling in the $310k-$320k, or about $15k-$25k more than what we paid for our home. Some of those don’t have the full basement renovation ours has, some don’t have new windows (which means they’re 25 years old), and so one might be tempted to say that those homes would sell for a couple thousand more if they did have some of those amenities. Even so, does that mean we “made” $15k-$25k on paper on our home investment?

Nope. We’ve spent $7,000 on new windows and sliding doors (a great deal I think), about $900 to carpet the basement, and will soon spend approximately $5,000 on a new roof. Total those up and you have yourself ~$14k of expenses. Okay, so deduct that from the $15k-$25k and you have an appreciation of $1k-$11k, not bad right? Then consider that we’ve paid nearly $35k in interest payments to the bank (of which a third is returned at tax time) and you see how this “investment” has actually lost us money.

Homeownership isn’t a short-term investment. Not only isn’t it a short-term investment, the majority of the “reward” derived from homeownership has more to do with living a better life than having more zeros in your bank account. Even though we have “lost” money (granted, we would’ve “lost” more had we been renting), we’ve made lots of great memories in the short time we’ve been in this house and had the pride of homeownership.

Life isn’t always about $$$.

 Frugal Living 

BFP Garden Project: Need More Planters & Potting Soil

This weekend we took our potentially financially viable crop and turned it into a 100% guaranteed financial loss (but no worries, we’re building for the future!). As it turns out, tomatoes need about a quarter of my body weight in dirt to grow to their full potential and we weren’t even close to having that much space for them with the existing planters we had. We knew that tomatoes grew best in the ground but we didn’t have anywhere in the ground to put them that actually got any sun, so planters were our only other option. We clearly did not have enough planters for them so we visited the local Home Depot to pick up planters and some more potting soil.

Trip damage cost: $61.20
Total cost: $90.20 ($29 spent on the kickoff of the BFP Garden Project)

We bought three big pots (two 20″ wide and one 16″ wide) for some of the tomatoes and the eggplant, plus six cubic feet of potting soil. It turns out we got potting soil that was really nutrient rich and had to be mixed in with existing ground soil (it was the type of stuff that had lot of compost in it), so we really only used about 5/6ths of the $23.31 of potting soil we purchased, but now we’re splitting hairs.

Planters for Tomatoes

As you can see in the above, we packed in 4 and then 5 tomato plants in each of the bigger planters and then stuck a tomato with an eggplant in the smaller 16″ planter. We’ll see how the packed in party goes… we didn’t have any other place for the tomatoes so we did the best with the space we have.

I considered doing the proper corporate accounting method of amortizing the pots to make the financials work a little better but what’s the schedule for plastic planter pots? Five years? Seven years? Thirty? 🙂

Anyway, it’s possible that our $90 investment can yield, in its first year, $90 worth of vegetables but who knows. We’ll keep our eyes on the little guys and you never know!

Anyone have any more gardening advice? Both of us aren’t experienced in the ways of the green so any and all advice is appreciated!

 Frugal Living, Personal Finance 

How To Cut College Costs by 13%-25%

Carnegie Mellon UniversityWant to know how I was able to shave nearly 13% off my college costs?

Advanced Placement classes.

I was able to graduate college a semester early in part because I loaded up on Advanced Placement (AP) classes while I was in high school. Someone got it into my head that I could take these AP classes for free (not counting the nominal fee for the exam) and get college credit for getting high marks on the AP tests. At the time, my brain wasn’t thinking “oh, I can save money on college,” but rather “I can spend time now and have it count twice – once in high school and once in college,” so it was in part the bit of hustle inside of me that spurred me to action.

I took your standard science and math ones (Chemistry, Physics, Calculus, Computer Science) as well as a few “useless” (from a college credit perspective, not from a learning perspective) classes like Comparative Government, English, Art History, US and World History. The net result was approximately one semester’s worth of electives (and most notably skipping out on an calculus class offered at 8:30am only, you have no idea how happy I was to hear that).

For those of you looking to do this, my advice is that you do your research about colleges ahead of time to ensure that your time is spent most effectively. Also, consider taking classes that you may never get credit for but would ultimately enjoy (I was never getting any credit for Art History, but I learned a lot in that class).

Here are some tips:

  • Check to see if your potential colleges give credit for high scores and in which subjects, then see what those scores are. I didn’t know this but I was never getting credit for Comparative Government or Art History.
  • If they do not but you are still interested, take the class but skip the exam. You only need the exam if you want credit, if you can’t get credit even with a score of 5, just skip the exam.
  • The SAT/ACT and SAT II exams are more important. Given a choice, focus on the standardized tests over the AP exams (that’s not to say you can’t focus on both) because those tests get you into college, AP scores just get you farther along once you get admitted.
  • To take full advantage, you may need to load up on non-elective classes to finish early. My credits were about 50% optional electives and 50% required electives but none applied to my core or foundation-type classes (CMU accepted my AP CS marks but the class was taught in Pascal and I didn’t know C/C++, which was the language CMU used at the time, so I had to take 15-127) so I had to load up on those in the vacuum left by fulfilled electives.
  • Don’t burn yourself out. If you take too many AP’s, you might overload yourself and perform poorly on the exams. Most colleges will only award credit for 4’s and 5’s, so keep that in mind.
  • Enjoy yourself. The point of these AP classes is to expand your mind beyond the typical topics covered in high school. Art History isn’t something most high school students have the opportunity to take, so enjoy the classes and broaden your horizons. Without that one art history class, I would know absolutely nothing about art, I’ve never regretted taking that class (even if I got no credit!).

There you have it, AP classes are your way of shaving 13%-25% (you can get, at most, a year of credit according to the College Board) your college costs.

(photo by steven n maher)


Review: High School Money Book by Don Silver

High School Money Book by Don SilverMany folks in the personal finance community, both bloggers and mainstream media writers alike, have complained that our high schools should be teaching personal finance along with home economics and shop class. High school students aren’t being educated on the intricacies of dealing with credit cards and their fifty page T&C’s or preparing their taxes or even the fundamentals of saving. Well, Don Silver probably heard those calls and, through Adams-Hall Publishing, put together a book called High School Money Book.

The book itself is quite basic but comprehensive in its coverage of personal finance topics. While it’s targeting high school students, it really applies to anyone who is clueless about the breadth of personal finance topics. It discusses things on how to be frugal, handling debt and credit, being philanthropic, preparing for college, banking, paying bills, etc. It’s more a breadth type of book than a depth type of book. By this I mean it covers a lot of topics at a shallow level without going deeply into any of them. While it has been many years since I was in high school, I think this book hits the mark by educating the reader to the keywords they need to know and the processes they need to become familiar with once they start handling money on their own.

The only concern I have is whether high school students care, which is outside the scope of the book, and whether they’d sit down and read it in book form. With as much information as there is on the internet and the younger generation’s savviness with it, I would think anyone proactive enough to want to read something like this would go directly to the internet; those who are less proactive will probably skip it.

Either way, at a little over 150 pages, it’s a good brief primer on personal finance for anyone.

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