Frugal Living 
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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 
10
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Cut Just One Cup a Week

Cut out the morning coffee at Starbucks!

Bring a bag lunch!

Stop drinking alcoholic beverages!

Mmmmm CoffeeIf you’ve been trying to find areas to cut back on your budget, those are likely one of the first three things you’ll hear suggested, right? The Latte Factor! It’s horrible that you’re wasting money on coffee you can brew at home! It’s a travesty! Okay, except you don’t have a coffee maker at home, have hardly any time in the morning to brew it, and if you don’t have it… oh boy, your office better watch out because you’ll be one cranky man/woman/beast. And bag lunch? Forget it, you don’t have time to make the lunch, let alone lug it to work, stuff it in the fridge and then eat it alone at your desk later! Alcoholic beverages? That’s the high point in the day, you can’t take that away! Plus, people who go to happy hours earn more… and you want to make more money right? Of course!

Of course, all that was tongue in cheek but the “excuses” are legitimate. It’s difficult to restructure large parts of your day just to save a few dollars but sometimes it’s important to do so. So, rather than make wholesale changes that you’re likely going to abandon within a few weeks, if you can even get started, try doing it incrementally.

Brew your own coffee on Friday. Friday is usually the laxest of all days and many people come in later than their usual start time. Take advantage of this by brewing your own coffee. If you don’t have a coffeemaker, you can buy one for around $20 and a hundred pack of filters for around $4. Then, all it takes is some coffee and you’re on your way to brewing your own coffee. If you really want to be efficient, set it all up the night before and set it to brew before you wake up. You can wake up to the wonderful smell of brewing coffee just like in the commercials! So just brew it on Fridays and you can hit Seattle’s Best Coffee the other four days. If you can save yourself the $3 on Friday coffee habit, that’s $150 a year in savings a year.

Resolve to bring in lunch on Monday. You have all weekend to pack, and cook it if you need to, yourself a nice meal so you can’t complain you have no time at night because you’ll have all day. Monday is also the busiest of work days as everyone catches up from the weekend so you can take advantage by eating at your desk and getting more work done. By cutting out one day of $7 lunches and replacing them with $2 lunches, you can save yourself close to $250 a year. You can get something really nice for $250 a year (or save it!) just by eating lunch on Mondays.

Bag lunch on Monday, brew coffee on Friday – get $400 a year that you can use for whatever you want. As for cutting out alcohol, sorry but you’re on your own on that one. :)

(Photo by ahmedrabea)


 Cars 
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Calculate Your Car’s Cost Per Mile

A few years ago, with my last car, I did a little calculation to help determine the “cost per mile.” I was doing quite a bit of driving back and forth from Baltimore to Pittsburgh, then Baltimore to New Jersey, to visit my girlfriend (now by wife, so I suppose it was worth it :) ) and so this number was important for me to know. I also found that it helped make other decisions in my life easier because it gave me a very tangible cost associated with driving somewhere, such as to the gas station across town instead of the gas station on my route home.

The Calculation

The cost per mile can be broken up into three major categories and one catch-all:

  • Gas: Clearly the dominant value in the calculation, gasoline is something that has to be based on actual costs rather than estimated costs. You can’t take the cost of gasoline, the EPA value for your car’s mileage, and figure out based on that. Ignoring the inaccuracy of EPA values, though they’ve made a push to make them more accurate, your car is probably not the standard car. You have crap in your trunk, your tires are probably not inflated perfectly every single drive, and your maintenance isn’t going to be perfect (get that 30,000 mile checkup exactly at 30,000 miles?). So, keep a log for five fill-ups, reset your B trip odometer, and calculate your gas cost per mile that way.
  • Insurance: This value is easy, simply take your premium and divide by the number of miles you drive in a given year. The “rule of thumb” is around 15,000 miles a year, but if you have an especially long commute then you can increase that. You can always just throw in a guesstimate because what you use as your miles driven per year isn’t going to drastically affect this number. For example, if you pay $2,000 a year and you drive 15,000 miles, that’s 13.3 cents a mile. At 20,000 miles a year, it’s 10 cents a mile. Sure the difference is 33% but you’ll ultimately use this value for trips in the tens or hundreds of miles… meaning a difference of only 30 cents – $3.
  • Tires: Depending on how expensive your tires are, you might want to go through with this calculation or just consider it part of the noise. I know tires say they can last 30,000 miles, but I believe most of my tires run only maybe 20,000 miles. Either way, this math should be pretty simple. Divide the cost of the tires by the mileage and add it to the running total you’ve been using.
  • Everything Else: I always throw in an extra 3-5 cents to cover everything else, from windshield wiper blades to routine maintenance to oil changes. I figure that a $20 oil change put across 3,000 miles (I actually changed my own oil with synthetic but do it once every 10,000 miles) is small enough to be considered noise in the equation so I use the 3-5 cents catch-all value.

So, what’s the final number? The IRS business mileage deduction is 50.5 cents a mile, how close was your value to this one? When I did this calculation a few years ago, I found my value was close to the mileage deduction back then (it was 40-something cents) but that was before the spike in fuel prices. For comparison’s sake, my value for gasoline back then was 7 cents a mile based on a car that was running around ~32 miles to the gallon (Acura Integra and I was doing a significant amount of highway driving).

How do you use this number? Let’s say it’s 280 miles between my home in Maryland and my parent’s in New York. The tolls between Maryland and New York, I believe, are around $60 a round trip. Given the cost of fuel alone (7 cents a mile), the cost of the trip is over $100 compared to the cost of a Southwest flight that can be bought for $39 a round trip. So, driving alone would cost over a hundred dollars and nearly 5 hours – flying would cost ~$100 and 3 hours… it’s a no brainer and the math is facilitated by knowing the cost per mile.

Finally, your car’s cost per mile is only part of the story. In my drives to Pittsburgh or to New Jersey, tolls played an important role and often threw the entire equation out of whack. Back then, the toll for the Pennsylvania Turnpike was around $8 a round trip and nearly $50 a round trip to New Jersey. Another factor was time. I could take a $15 Chinatown bus from Baltimore to Grand Central in NYC, then jump on an Amtrak train out to New Jersey… but it would take me like 15 hours to make the trip and time is money! (and back then, that was time I could spend with my beautiful soon-to-be wife, and yes she reads this blog)


 Frugal Living, The Home 
9
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10 Homeowner Secrets That Save You Money Now!

This guest post comes courtesy of Fred at One Project Closer, a home improvement blog written by one of my friends. As a sign of how good of a friend he is, he still made to my wedding despite his basement being flooded by a burst water heater. And until I read his post, I had no idea he was late!

With rising energy prices, fear of a recession, and the stock market erasing the gains of the last six months, you’re probably looking to save wherever you can right? Well, today I have the opportunity to share ten fantastic tips you can use, many with hardly any up front investment whatsoever, right this very second to save yourself some money.

1. Insulate Your Hot Water Heater ($20.00 investment). Unless you have a newer tankless model, your hot water heater has a large reservoir of water it keeps constantly heated. Traditional hot water heaters are constructed with a relatively small layer of insulation between the inner water reservoir and the outer metal shell, requiring the heater to run frequently to keep the water hot. Manufactures under-insulate hot water heaters to keep the units small enough to fit into tight spaces. For about $20.00, you can find a hot water heater insulation wrap at your local home improvement big box. Upon installation, a typical homeowner will save between $3.00-5.00/month on energy costs.

2. Turn Down Your Hot Water Heater Temperature ($0 investment). Most people are very conscious of raising/lowering the thermostat on their central AC/heating system, but haven’t even considered lowering the temperature on their hot water heater. Your hot water heater should always be set to the lowest temperature that provides your household the hot water you need. Lowering the water temperature from 125 deg. to 115 deg. saves a typical homeowner about $3.00-$10.00.

3. Don’t Let the Water Run While You Wash Dishes ($0 investment). It sounds silly, doesn’t it? But the reality is that nearly all of the cost of running the water is in heating the water. Leaving the water running for 30 minutes could cost you as much as $3. Instead, use your dishwasher (just don’t use the built drying heater or a water heating option like sanitize rinse). Dishwashers use less than half of the water to perform the same task. Or, better yet, fill your sink basin and wash dishes with the water turned off. That method uses less than a quarter of the water of the first method.

4. Don’t Use Your Fireplace on Extremely Cold Nights ($0 investment). Traditional wood fireplaces require an open flu to allow smoke to escape. The air that’s leaving the house with the smoke has to be replaced with air from somewhere else. In most traditional setups, replacement air comes back into the house through pores open to the outside (outlets, leaky windows and doors, attic accesses, etc). On very cold nights, the cold replacement air coming into the house more than offsets any heat gained from the fire itself. As a result, using a fireplace on a cold night could cost $1.00-$3.00 in energy just to replace the lost heat.

5. Caulk Your Attic Access Door ($3.00 investment). Gaps in attic access doors allow heat to escape from the upstairs of your house. Since you don’t go up into the attic much anyway, caulk the rim of the door to prevent your energy from floating away. Estimated savings: $2.00-4.00 / month.

6. Replace Your Light Bulbs with Energy Efficient Models ($20.00-80.00 investment). Compact Fluorescent (CFL) technology has come a long way in the last 5 years. More than ever, CFLs look and behave just like incandescents. These bulbs use about 23% of the energy of their incandescent counterparts and last about 20 times longer. One 100-watt equivalent CFL can save a homeowner more than $60.00 over the course of its life. You shouldn’t wait for your incandescents to burn out either. Every day an incandescent burns, it wastes nearly 80% of the energy it uses. Since you’ll have to replace it when it burns out anyway, you should make the switch today.

7. Consider Replacing Your Refrigerator ($700-1000 investment). Refrigerators that are more than 10 years old use about 50% more energy than their modern counterparts. The older your model, the more inefficient it is. For models that are more than 20 years old, a homeowner can expect to recover the investment in as little as 2.5 years. If you can find a newer model on Craigslist or in the classifieds, you might realize a recovery period of as little as 1 year.

8. Change the Filter on your HVAC every 3-6 months ($5 investment). HVAC filters remove dust and allergens from your house as your HVAC circulates air for heating/cooling. These filters get dirty, eventually restricting air flow. When this happens, your furnace has to work harder to achieve the same temperature change – wasting energy. Changing the filter takes only minutes. If you haven’t changed your filter for more than a year, you can expect a ~$5.00/month savings in months where you run your HVAC the most.

9. Install (and use) a Programmable Thermostat ($50-$100 investment). Programmable thermostats allow you to adjust the temperature in your home based on the time of day, and day of the week. If no one is home during the day, it simply doesn’t make sense to keep the house at the same temperature. Typical homeowners can expect to see $10.00-$40.00 / month savings after installing these nifty little devices. Remember that a programmable thermostat will only save money if it’s programming features are actually used. So, get a programmable thermostat that’s easy to learn.

10. Set Your PC to Auto-hibernate ($0 investment). A computer, monitor, and printer can easily draw 300 watts. With electricity as high as $0.15/KWh, this equates to more than $1.00/day. If you only use your computer for 2 hours a day, setting the system to auto-hibernate (instead of leaving it on) saves as much as $25.00/month.


 Education 
1
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Buying College Textbooks Online

Biology TextbookOne of the biggest scams in education, besides shelling out thirty grand a year for a private university (just kidding Mom and Dad!), is the college bookstore. They sell textbooks at full price and then, at the end of the year, offer to buy back that textbook at a fraction of the price. Buy a copy of Machine Learning, new, for $153.44 and then they’ll offer to buy it back for around $20 at the end of the semester! It’s a racket!

What you should do instead is buy a used copy of Machine Learning for a 79.99 and tell the university bookstore to go screw themselves and their monstrous profit margins.

(Click to continue reading…)


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