The Simple Dollar
Baking soda and vinegar are two things that I always buy in bulk, simply because they both offer up so many uses at such an inexpensive price. Most of this post is going to consist of a list of things you can do with these items outside of cooking, but I’m going to restrict it to things I’ve done myself. There are many more uses out there.
Baking soda alone can be used to remove odors from almost anything, from refrigerators to carpet. Just sprinkle some in the offending area (on the carpet, in your shoes) and let it sit or put some on a plate and let it sit. It just sucks the odor right out of there.
If you mix enough water with baking soda to make a paste, it works well as a toothpaste, a facial scrub, and as a sunburn reliever. I actually have some baking soda paste applied right now to my left shoulder to alleviate sunburn. It will work on pretty much any minor skin irritation, too.
If you’ve got heartburn, mix a teaspoon of baking soda in a cup of water and drink it. It cures my heartburn more effectively than almost anything else.
Pour a spoonful in a dirty or smelly toilet bowl and leave it sit for a couple of hours. The odor will go away, as will at least some of the stain (if not all of it).
There are more esoteric uses as well, such as putting a couple pinches of baking soda in the water you use to soak dry beans to reduce the “gassiness” of the beans.
What about vinegar?
Pour some vinegar on unwanted grass or weeds at full strength and those weeds will shrivel up and die. This works great for sidewalk cleanup.
Use half a cup of vinegar in lieu of laundry softener to make your clothes feel wonderfully soft (there’s no vinegar smell, either). It also helps to brighten up bright colors.
You can remove many stains from fabrics by applying a mix of one part vinegar to four parts water. This mix gets rid of many minor stains. If the stain is tough, apply some pure vinegar directly to the stain (it gets rid of coffee stains, for example).
Mix five parts water to one part vinegar in a spray bottle to wash windows (it’s a lot cheaper than Windex and works just as well).
If you have some wilted vegetables, soak them in water with a teaspoon of vinegar and they’ll freshen up quite a bit.
If you have hard water stains, soak a cloth with vinegar and let the cloth sit on those stains. This does a great job of removing them.
You can really deodorize the garbage disposal by making some vinegar ice cubes. Toss these cubes down the drain, then run the disposal with some cold water.
These uses just scratch the surface – they just happen to be the ones I’ve found useful in the last year or so. A simple Google search will find you many, many more ideas (some untested, I’m sure).
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.
For most common items in a grocery store, you’ll find two distinct types of product.
On the one hand, you’ll have the “name brand” items, which are usually in distinctive packaging and with a company brand you’re familiar with. On the other hand, you’ll have the “generic” items, which aren’t packaged as distinctively and usually have either the store’s name, a brand name you’ve never heard of (but is often repeated throughout the store), or no brand name at all.
Most of the time, the only difference between these two types of items is prettier packaging and a significant difference in price.
Here’s a challenge for you. The next time you buy an item at the store and notice a generic version available, try the generic version if you haven’t already. Buy it instead of the usual version that you buy.
Now, you might find that you don’t like the generic version as well as the name-brand version with some products. For example, I’ve had bad experiences with generic garbage bags, so I won’t buy them. However, I’ll be willing to bet that you find more generic items you’re happy with than ones that you’re dissatisfied with.
So, the big question is how all of this saves you money. Let’s say, on average, you save $0.75 with every generic item you buy instead of the equivalent name-brand version. You go to the store and pick up ten generic items. On that particular trip to the store, you save $7.50.
Let’s be pessimists and say that you decide that only four of them are worth buying again. On future store visits, you’ll save $0.75 each time you buy that generic item instead of the name brand version. If you buy these four items each an average of once a month, you’re going to be saving $36 a year and you won’t notice a difference compared to what you already buy.
Of course, that’s a low-end estimate for your family. We use store-brand paper towels, salad dressings, saltine crackers, liquid soap, Kleenexes, and many other items. I would estimate that we save a couple hundred dollars a year simply by focusing on generics.
Many of those items, such as ketchup and applesauce, have identical ingredient lists and nutrition facts labels as name brand versions. As far as we can tell, they’re the same product – except that the generic version is substantially cheaper.
There are other items that might not be quite as good as the name brand version, but the quality difference is small enough that it doesn’t really matter. Kleenexes are a good example of this. The only time you’ll see a difference is if it’s going to be an intense use of the item, in which case you just double up on the generic (or, in my case, use a handkerchief). You’ll still save money.
In my experience, the big challenge with generics is getting past the mental block that name brands are somehow better. That “mental block” is largely the product of marketing. You know the name brands because they’ve spent money to ensure that you associate positive things with the product’s name. Generics don’t have that bond, so by comparison, they can seem worse.
Don’t fall into that trap. It will cost you money. Try generics, and if they fulfill your needs, stick with them.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.
All grocery stores are not created equal.
In our area, you’ll find food co-ops that specialize in fresh groceries and items with quality ingredients, but the prices are high. You’ll find chains that try to appeal to all shoppers, like Hy-Vee.
You’ll also find discount grocers. For me, the two store chains that fall firmly into that group in my area are Aldi and Fareway.
When I’m grocery shopping, I do the majority of my shopping at Fareway.
For me, it always comes down to what is really on offer at a grocery store. Is it clean? Are the items there easy to find? Are the prices reasonable? Do they have the items I actually need? Do they have items that I desire? Do they have a large, varied selection?
My experience has been that each store has its own balance between these features. In order to get some of the features listed above, you’re going to have to give up on other features.
For example, the local food co-op tends to excel with cleanliness, interesting items, and a varied selection, but it’s mediocre in terms of easy-to-find things and having everything I need, and it’s terrible in terms of price. The local all-in-one grocery store tends to excel with having everything I need and is average in about every other category. On the other hand, the local discount store excels on price and is mediocre at the other factors.
For me, the solution is obvious: I use all three of them. I buy most of the needed items at the local Fareway, where the prices are low and all of the items I need can easily be found. This takes care of most of my weekly grocery stops.
If I have more esoteric needs, I’ll go to the other stores, but it’s on a less frequent basis and it tends to be only for the specific things I need. I’ll go into the food co-op looking only for three or four specific items, and I’ll go maybe once a month.
Because of these choices, my weekly grocery bill tends to be a lot lower than it otherwise would be. However, saving that money takes a bit of extra planning. Most of the time, my meal plans tend to avoid unusual ingredients that can’t be stored for a long time (like fresh fruits or vegetables that aren’t commonly found). This way, I can avoid the more expensive food co-op or all-in-one store most of the time. I don’t avoid such meals, I just tend to set them aside for a later date.
The end result is a lower monthly food budget. The backbone of our diet comes from food purchased at a discount store, with some supplementation from other places (like the farmers’ market, the food co-op, the all-in-one grocery store, the warehouse club, and our garden).
Try out your local discount grocer. You might just find that it perfectly takes care of your weekly grocery list without emptying the cash from your pockets.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.
A few days ago, I posted an article entitled How much do you really make?, in which I discussed the fact that many jobs have additional costs and expenses that aren’t included when you simply look at the salary that a job pays you.
From that article, I received a fair amount of reader feedback about the issue of benefits. Benefits certainly do add value to any job position. The problem is that it’s not easy to quantify how much benefits are worth.
Some aspects of it are easy to calculate. For example, in the scenario outlined in this article, if two jobs have identical health insurance plans and one job covers all of the premiums while the second job does not, then there’s a clear cash advantage for the first job. Simple enough.
The same thing happens when you compare retirement plans. If one job offers 5% matching and another offers 2% matching, it’s pretty easy to calculate what those benefits are worth.
It gets much trickier from there, however.
Again, take health care plans. The specifics of health insurance plans vary widely. One plan might have a $1,000 deductible for everything, while another plan might cover 80% of all doctor visits and have a $500 deductible on other procedures. What are each of these worth? The value is going to be incredibly dependent on your situation.
To really know what they’re worth, you’d have to get quotes independent of work for health plans and any other benefits you want to match for each of the plans you’re considering.
The “easy” rule of thumb most people use is that the presence of a health care plan has a large, unspecified value. In other words, a job with such benefits is seen as always strictly better than a job without such benefits.
The problem? That perspective can cost you in terms of career advancement or career change. If you tell yourself that you “can’t” switch jobs because of the benefits, then you’re often missing out on chances that could put you in a much better place, both in terms of your career and your life.
For more than a year, I delayed switching to writing as a career because I was concerned about health care benefits. In my mind, I had basically attributed an extremely large value to them and because of that I was very afraid to walk away.
Our solution for this problem ended up involving a switch to the health care plan that my wife uses through her work, though it was more expensive than my own. However, I did do my own shopping around for health care plans during that process, and I found that it wasn’t impossible to find health care coverage. I used such services as eHealthInsurance to find some plans that worked for me at what I considered to be a reasonable cost.
If you are considering a career switch, don’t balk at the idea simply because of benefits. Price them out yourself and see where that puts you. If you’re able to switch to another job that eliminates the need for a commute, for a work wardrobe, and for lunches eaten out, that saved money can be enough to make up for a lost benefit out of your own pocket.
Do your own pricing of the benefits you need, and don’t use the presence of those benefits as an easy reason to not even consider a career switch that could change your life.
A community supported agriculture group is one in which members of a community can buy “shares” in a local farm. Those shares pay out in the form of a box of vegetables and, depending on the CSA, other items such as milk and eggs.
I’ll give you an example of a CSA in our area so that it becomes more clear. At the start of it, you pay $300 to buy a “share.” Then, for the next twenty weeks, you go to a pickup point on Tuesday afternoon and pick up your “dividend,” which is a box of vegetables.
The content of that box varies depending on what’s in season, but it usually has ten to twenty pounds of vegetables in it. (If you joined one of the “options” with the CSA, you might have eggs or milk or certain fruits in the box as well.)
So, over the course of twenty weeks, you end up with somewhere in the ballpark of 300 pounds of vegetables – in other words, about a dollar a pound. These are fresh vegetables, which means they’re going to usually be more flavorful than what you find in your local grocery store for a much higher price.
My experience with a CSA is that it can be a tremendous food bargain – with a few caveats.
First of all, you’ve got to be able and willing to deal with a large input of vegetables each week. Many of your meals are going to need a heavy vegetable component for you to be able to get through the vegetables you’re going to get.
This means a lot of making meals from scratch at home. If you’re willing to do that, then a CSA will provide you with a wonderful bargain. If you mostly eat out or eat prepackaged meals, then you’ll either have to change your habits or you’ll find a lot of the CSA share going to waste.
Second, you’re going to have to be comfortable dealing with a variety of vegetables. You’ll get different stuff every week, and you’ll have to figure out how to use it and prepare it in something your family will enjoy.
If your family is full of adventurous eaters, this isn’t a problem. For the most part, our family is extremely adventurous with our meals. We have a four year old who likes quinoa, after all.
Third, you’re going to have to adopt a routine of picking up the share. If you forget, then you lose money. If you can’t make it this week, then you lose money. Do that more than two or three times and the savings benefit of a CSA begins to disappear.
One tactic that helps with all of these issues is sharing a CSA with a friend or a neighbor. Split the cost of the CSA, then split the goods in an even fashion. You can either split up each week’s share or else alternate weeks.
If you’d like to find a CSA in your area, start at http://www.localharvest.org/csa/.
CSAs are a great way to get lots of fresh vegetables into your home at a very low cost. If you’re able to put up the initial investment and can handle the vegetables, it can be a real bargain.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere
When I was fresh out of college and enjoying my first post-college job, I pretty quickly established a daily routine for myself (particularly in 2004 and 2005).
I would stop at a coffee shop for breakfast and enjoy a $5 drink to start the day.
I’d drink a soft drink or two in the afternoon at work ($1 each out of the vending machine).
On my way home, I’d sometimes stop for another coffee (another $5), often in the coffee shop area in my favorite bookstore.
Some nights, I’d go out for drinks with coworkers or friends (another $10 at least).
The total for this was $10 to $30. Every single weekday. Multiply that out by 50 weeks, five days a week, and we’re looking at $2,500 to $7,500 a year disappearing in the form of beverages.
That was a significant portion of my salary. No wonder I was in debt.
I’m going to be the last person to tell you that it’s not completely fine to have a coffee or a soft drink or a hard drink as an occasional treat. I enjoy them all as treats myself.
The key word there is treats. You only need water to hydrate yourself. Other beverages are extra pleasures, and when extra pleasures become routine, they become expensive.
The challenge with a change like this is that beverages are often a part of our life routine, and it’s very easy to be defensive about our routines. “Give up my morning coffee? I’d rather die!” I’ve heard these kinds of refrains many times.
Just remember, though, that every beverage you enjoy that’s not tap or drinking fountain water is an extra expense. Every time you make the choice to drink something else, it’s costing you money.
Perhaps one choice isn’t that expensive. Even three or four choices a day might not be too much, at least for that day. However, when you look at that over the span of a year, as I did, it adds up to a whole lot.
The key is to make better choices in individual situations. When you’re tempted to drink a coffee or a soda, drink a cup of water instead. When you pack a cooler for a road trip, put some water bottles in there instead.
Make a couple better choices each day and stick with them, and soon those choices will become routine. When they become routine, you’re spending less money without a second thought, and that money can go toward achieving whatever goals you desire.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.
Everyone’s job has some sort of expense associated with it.
For example, my current work pretty much requires me to have an internet connection at home and at least one computer. If I don’t have these things – and I pay for them out of my own pocket – I can’t create posts and get them on The Simple Dollar. I would have to go elsewhere to post, which would create its own expenses.
I’m fortunate, though. My current work has no wardrobe requirements (which means no time or money spent shopping for work clothes, getting things dry cleaned, etc.), no commuting requirements (which means no time spent commuting, nor money spent on fuel and auto maintenance and auto replacement), no travel requirements (which means no time spent flying elsewhere, no nights spent away from home, and no incidental costs), no extra child care costs (because I can watch them from home if needed), and no social obligations to eat lunches outside the home or get drinks with coworkers.
My previous work had all of these expenses. Although it wasn’t an everyday thing, there were certainly days where I had to dress well for work. I had a commute that took me around twenty minutes each way. I had to travel three or four times a year, with those trips varying in length from three days to a week. I had to keep my children in daycare. I ate out with my coworkers a few times a week and went out with coworkers or other professional acquaintances once a week or so.
One way to really dig into this – a method that I’ve described before on here – is what I call the “true hourly wage.” All you do is sit down and figure out two key numbers.
First, how much time do you invest in actually working plus time spent in extra activities related to work, like commuting, travel away from your family, shopping for work clothes, going out for lunch, going out for other social events in the evenings, and so on?
Let’s look at an example. Let’s say you make $50,000 a year at a reasonably high-stress job. If you assume you work 40 hours a week with two weeks of vacation a year, your hourly rate is nominally $25 per hour. Not bad, right?
You might work forty hours a week with two weeks of vacation a year, but let’s say you’re commuting half an hour each way per day (another five hours per week). You also go out to lunch with coworkers as part of a “lunch break,” which eats three more hours per week. You have to properly wash your work clothes, which eats another hour per week. What about the extra time you spend thinking about work or stressing out about work? Do you have to spend some “decompression” time when you get home? Let’s give you another two hours per week for this. Twice a year, you go on a trip that takes you away from your family, which adds up to another eighty hours spent away from home per year. Twice a month, you go out with coworkers in the evening, adding up to another sixty hours per year. There’s also the time spent dealing with extra car maintenance and fueling stops – let’s say another ten hours per year. That’s an extra 700 hours per year that you’re not getting paid for – more than athird more than you’re on the clock.
Now, how much of your salary is devoured by your job? If you drive an extra 15,000 miles per year in a 25 miles per gallon car, that’s 600 gallons of gas plus five additional oil changes plus 15,000 extra miles on your maintenance schedule plus 15,000 miles closer to a car replacement. The federal government estimates the cost for all of this at being around $0.50 per mile – I’ll call it half of that and we’re still looking at $3,750 a year. Do you need work clothes? Let’s say this person needs about $250 in clothes per year. You eat out with coworkers twice a week for social reasons, which eats up $10 per meal, or $1,000 per year. You go out twice a month with coworkers in the evening and burn through $25 each time, which adds up to another $600 per year. Let’s say you have the American average of two kids that require some after-school care which costs $50 a week (we won’t even get into the nightmare of daycare for younger kids) – that’s $2,500 a year. That’s $8,100 in expenses just to keep you going at work.
What about taxes and so forth? You should be looking at your after-tax salary, so let’s lop 20% off your salary when doing this calculation.
So, your starting salary of $50,000 gets 20% lopped off with taxes and $8,100 in additional expenses chopped off, so you’re left with a salary of $31,900. You’re actually working 2,700 hours per year, so your actual hourly wage at work isn’t the nice $25 you thought it was. It’s actually $11.81.
Feel free to calculate this number for your own purposes. Figure up how much time you actually spend doing things that are caused by your job as well as all of the extra expenses associated with it. You might come up with a shocking hourly rate.
This isn’t to say you should live or die by this number. You shouldn’t.
The important thing to keep in mind is that salary doesn’t represent the real value you get out of a job. A job that earns $50,000 a year but has all of the requirements above might actually net you less for your time than a $28,000 a year job that is within walking distance of your house, has extremely casual dress, and allows you to walk out the door each night without a second thought.
Income isn’t everything. It’s just as important to have a job that doesn’t nickel and dime you, doesn’t fill you up with stress, and doesn’t quietly eat up more and more of your time. Those “features” eat up your income like nobody’s business.
Over the course of about five years, Sarah and I managed to pay off two car loans, replace both of those cars, pay off several student loans, pay off seven credit cards, pay off three or four additional consumer loans, and buy a house and pay for it in its entirety. We’re debt free because of those moves.
Don’t get me wrong, we were aided by the fact that Sarah and I both had strong jobs and The Simple Dollar and my computer consulting work were both notable revenue streams for our family. However, you don’t pay off $280,000 or so in debt over five years without other serious changes in your life.
Along the way, we made a lot of sacrifices.
We made our own laundry detergent, our own window cleaner, our own bread, and countless other things.
We strived to make every meal at home, and strived to make as many of them under $10 as possible (with enough food to feed the five of us with leftovers).
We gave up many of our older forms of entertainment (like going to the movies and going to live baseball games) and sold off many of our collections, some in their entirety.
We strung up lines in our basement to hang up clothes so we could save the fifty cents or so it would cost to run the dryer.
We made most of our Christmas gifts from scratch.
We would spend long stretches – more than a month at a time – not engaging in any entertainment with additional cost. That meant no going out and no buying of new entertainment material.
A large portion of our wardrobes came from secondhand stores.
On top of that, Sarah and I both devoted a lot of our time to earning as much as we reasonably could. Together, we built up The Simple Dollar and the computer consulting work and Sarah was able to take advantage of a few additional professional opportunities as well. These choices ate up a lot of our remaining free time for years.
These decisions (and many others) were not ones we had to make. They were decisions we chose to make. We achieved our goal of debt freedom so quickly because we made a lot of sacrifices along the way.
Naturally, we could have rejected any of these things. If we had listened to the siren’s call of “we deserve this” or “oh, this treat is just a part of my morning routine” or “it sounds like too much work” or “I want it and I want it now” or countless other excuses to open up the wallet, we would have never achieved our goal this quickly.
Trust me, I know. I make similar excuses when it comes to working out and eating a healthy diet. There’s always a reason not to do it.
That means I know firsthand how those excuses result in not achieving what you want and not making progress toward your goal.
If you want something in your life, you’re going to have to give up something else to get there. You can’t have everything. It doesn’t work that way.
What are you going to give up to achieve what you want? It really comes down to how important financial freedom is in your life. For us, we finally came to the realization that it was paramount.
For others, it might be a high priority, but not the highest. For yet others, it might be pretty low on the priority scale (but, honestly, those folks aren’t reading The Simple Dollar).
The higher the priority you give it, the faster you will achieve it. Keep that in mind every time you’re faced with a tough decision when it comes to your financial goals or other big goals you have in your life.
As for me… I think I’ll go jogging now.
Have you ever bought six tomatoes and found that you only really need four of them? Ever cooked two pounds of rice and only really needed one pound of it?
This actually happens at our house fairly often. We’ll make a recipe and find that our kids hate it, so they only eat a little and we have a lot left over. Or we’ll follow a recipe that “serves six” but actually produces enough food to feed a small army.
These situations mean that you’re stuck with fresh vegetables, rice, beans, or other staples that could certainly be used in a recipe, but to do so would completely throw off your meal plan and leave something else on the countertop for too long.
Don’t throw those extras away. And don’t just shove them into the back of the fridge, either, because that’ll just eventually result in throwing them away.
Instead, freeze them and use them at a later date.
Almost any extra ingredient that you have on hand can be frozen and used in the future. The trick is simply knowing how to freeze the item without damaging it.
For a one-stop shop, She Knows offers a great collection of tactics for freezing various fresh items. This will handle most of the things you commonly want to freeze.
For rice, I just put about two cups of cooked rice into a quart-sized freezer bag. I expel all of the extra air and flatten the bag for easy stacking. When I want to re-use it, I put a tablespoon of water along with the contents of the bag into a microwave-safe bowl, cover it with a plate, and microwave it for about 30 seconds. Stir it and it works great!
For us, the big key is to remember what you’ve frozen. It’s easy to forget what things you’ve frozen and tossed in the freezer if you do it regularly.
Our solution is to label. I usually use masking tape for labels so that I can just peel it off the bag and then reuse the bag for another frozen item after cleaning it.
Another good tactic is to keep a list on the front of your freezer detailing all of the frozen items that you’ll find in there, which can help a lot when planning meals and preparing a grocery list.
Whenever you throw away a staple food, you’re throwing away money. If it’s easy to put that staple food right into the freezer and then pull it out at a later date for a recipe, there’s no reason not to do it.
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. “Waskuya” (corn)
2. Illegal income
3. Interest rates and national debt
4. Playing the lottery
5. Managing financial progress
7. How much for retirement savings?
8. Bryce Harper and Mike Trout
9. Monetizing a blog
10. Dental care
For the past several days, our children have been visiting grandparents, leaving Sarah and myself at home without any children around.
The biggest difference is the quiet. Our house is so quiet now that it’s almost unnerving. When the children are around, there is so much laughing and singing and talking and playing that there’s almost always noise of some sort going on in our house during the day.
Without them, it’s quiet. It’ll be a strange thing to get used to when they grow older.
Q1: “Waskuya” (corn)
When I worked on a Sioux reservation here, I learned an even cheaper way to enjoy sweet corn all year round. The ladies made “waskuya” or dried corn all summer and saved it to eat during winter, making yummy corn soup. You take a mess of sweet corn, blanch it, take off the kernels with a tablespoon so you get all of the sweetness down to the cob, then spread it out on bedsheets on the grass. You walk around turning it every now and then so it dries evenly, then save it in jars or plastic containers or whatever you have. No freezer required. I’ve heard the Navajo ladies who have access to the oilfields and have made some bucks even sew it into bags like pillowcases and use their clothes dryers! A dehydrator would work too, but would use a lot of electricity over the summer.
Drying corn is a really good idea. Dried sweet corn still works as a really good ingredient in meals that cook for a while and allow the corn kernels to rehydrate.
I’ve used dried corn myself in many recipes, though I’ve never made it myself (it’s been gifted to me).
Given that many people don’t have the uninterrupted yard space (meaning devoid of children and pests) to use the “drying on a sheet” trick, the dryer technique seems particularly useful.
I’m really unsure how this affects our finances. Should we have a larger emergency fund? What about taxes?
I had to edit this email quite a bit so that it didn’t turn into a discussion of said activity, as that’s not really the issue here. She’s not pleased with her husband’s choices and they are looking at options to extract themselves from said illegal income, though it will take them some time.
My suggestion would be to contact a tax attorney. Attorneys are bound by lawyer-client privilege to not share what you’ve told them about your activities. Such an attorney would probably provide the best advice.
Your goal should be to minimize your legal liability should this end up in a bad situation. Thus, if I were you guys, I’d probably maximize my emergency fund just in case.
Q3: Interest rates and national debt
You often discuss interest rates as being cyclical and allude to a time in the future when we will again see safe investments like CDs and such at 5% APY. My concern is with national debt, being that if the Fed were to raise rates a few percent, interest on national debt could outpace GDP. In light of that, do you think we will really ever see any policy decisions but ZIRP and higher-than-reported inflation as long as the status quo is maintained? I’ve been a dedicated student to investment strategies, but I feel that the macroeconomic climate of late has made much of that knowledge obsolete. What are your considerations on the bigger picture and the savings/investment climate going forward?
I’m often frustrated when people want to make wild leaps with their finances based on their understanding of “macroeconomics.” Galbraith and Hayek didn’t understand macroeconomics well enough to make useful predictions that actually worked all the time, so why would a layperson think that they should bet their future on the macroeconomics they’ve heard and understood?
The best step anyone can take is to minimize their reliance on the dollar and maximize their self-sustainability. Own your house and your car. Have some supplies on hand so that you won’t starve. Have a strong social network of people that you can cooperate with in a bad situation.
If you want a hedge against economic disaster, take real steps. Don’t just move investments around based on ZIRP and debt to GDP ratios.
Q4: Playing the lottery
My mother loves to play the lottery. When I go visit her each week, she gives me some money to buy groceries with, but she insists that I buy $5 worth of lottery tickets for her when I do so.
I’d like to just take that money and put it in a savings account for her so she has some money for things that might happen to her, but I’m torn. Is that the right thing to do?
The lottery is a little spike of joy in your mother’s life. She buys those $5 worth of tickets because she gets to dream a bit. It’s also likely one of her few ways she has in her life to spend money that’s not revolving around a need (keeping food on the table and a roof over the head).
Let it be. It’s $5 a week and it brings her some joy.
Sure, it’s not the most effective use of $5, but there is no one alive that makes maximal use of their money. Everyone spends some of their money on frivolous things. This seems to be your mother’s frivolous thing.
Q5: Managing financial progress
When I bought my house last August I only had around $5000 in credit card debt, $7500 on a 3.5% car loan, and my student loans of $35,000 at 5%. I was planning to wait until December to buy, but was able to get my home at 4.25% fixed 30 year for only $132k when it had previously sold for $220k 5 years ago brand new. It was a HUD home, so it needed a little bit of TLC, but long story short, I have put less than $10k into my home and it’s now better than it was brand new, with some of the additions/changes I have made (wired whole-home Ethernet, upgraded kitchen appliances, etc).
Flash forward to today: I’ve made some financial mistakes along the way and am finding myself cash poor monthly, and am worried about the money “running out” before too long.
Overview of my finances:
$1400 credit card at 19.99% (min. monthly payment $50, have been paying over $100/month)
$1500 credit card at 17.99% (min. monthly payment $50)
$5300 credit card at 13.24% (min. monthly payment $115)
$2700 credit card at 0% (monthly payment $166, min. monthly payment $96, appliances purchased w/24 months same as cash, must be paid off by August 2013)
$4750 car payment at 3.5% (min. monthly payment $335)
Monthly student loan payments $360
Monthly mortgage payment (with PMI, taxes, insurance) $1175
Utilities in my home are split three ways, and are roughly $75/month doing a 12 month average
Water/trash, etc is budgeted at around $45/month (I don’t charge my renters and portion of this)
Total fixed monthly payments: $2371
Monthly take home salary from work is $2750
Monthly income from two renters is $700 (not including the 2/3 of utilities they pay)
Total monthly income: $3450
Current cash on hand: $1500 with no bills due
These fixed payments don’t include anything such as entertainment, gas, food, car insurance, etc.; with those things budgeted in, I estimate my expenses to be close to $3000/month.
I hate saying to myself, “I just have to make it to September, 2013″ but that’s how I feel. At that point, my car will be paid off as will my appliances, freeing up around $500/month in payments. Around that same time, I should also have the 19.99% credit card paid off (currently I’ve been paying around $100/month on it).
Now to my question (and unconventional logic): Of these things, what should I do to best free up some additional cash every month, so that I ensure that I am in the positive cash flow each month? Currently I am working to cut back drastically on my entertainment and food (non-grocery) expenses every month. I have thought that maybe I should pay off my appliances first, just to free up the $166/month. The more I’ve read back through this email, the more I think that would be a bad idea, not only because of the fact that it’s 0% interest currently, but also because paying off both of the higher interest rate cards would still net me ~$150/month in freed up money, and eliminate the interest payments from those as well.
Another potential alternative would be to sell my car, but I travel a lot for work, and need something that is reliable, gets good gas mileage, and is comfortable to ride in for extended periods of time. My ’07 Accord gets 29-30MPG highway, is very comfortable and highly reliable, plus has the built in GPS for making those trips to remote locations easier to follow. At 145k miles, I feel that the car has many years of service left, even though I’m currently putting nearly 35k miles on it annually between personal and professional usage.
You are not in a truly bad debt situation. I think the only mistake you made was buying a house before you were ready to do so, as you’re paying PMI and had to incur credit card debts to keep the ball rolling.
You have to decide what’s more important to you: the quickest route to a bigger monthly cash flow or the quickest route to a complete payoff of all of your debts. There isn’t a right answer here and different financial gurus will give you different answers.
If I were you, I wouldn’t sell off important things unless it were an emergency. Instead, I’d just keep following the path you’re on, which is a good one. Debt freedom doesn’t happen overnight.
Your ideas about charity are silly. Most of the people reading your blog are the people that should be receiving charity, not giving it. If you’re giving money away while you’re barely making minimum wage, you’re a fool.
I can’t tell you how much I disagree with that.
Charity isn’t about emptying your wallet for someone else. It’s about giving what you have to help someone who doesn’t have what they need. For some people, that might be time. For others, it might be their talents. For still others, it might be their money.
I consider it charitable work when I spend a few hours collecting food or sitting in a phone bank. Those choices don’t require me to spend a dime of my money. Instead, they ask me to give something else: my time. I’ve also given presentations for free to groups who have requested it; again, it’s my time and talent I’m giving, not my money.
Everyone has something in their life that they’re not using effectively, whether it’s time or money or talents. Simply giving a little bit of that excess to a group that can convert it into something that others desperately need is always a good thing.
Q7: How much for retirement?
My fiance and I are 30. After a year working at a horrible, low-paid job in his field, he has accepted a new job paying $91,000 plus excellent benefits. He has no retirement savings whatsoever, but the new job has a 401(a) with a 5 percent match. I have a very small 401(k) left over from my previous job. I’m currently in graduate school and surviving on loans.
I am trying to figure out how much my fiance should contribute to his 401(a) to save for retirement for both of us. I know he should at least hit the match percentage, but we’re both starting late on saving for retirement.
In general, a 401(a) plan that allows employee contributions is known as a 401(k) plan. 401(a) is a more general term than a 401(k), in other words. I’m going to assume based on your email that this is a 401(a) plan that allows for pre-tax employee contributions; in other words, a 401(k).
If that’s the case, your fiance should be putting in at least enough so that he’s saving 10% of his income for retirement at a bare minimum. Given that he’s not contributed anything as of yet in his life, 12% is probably a better target. So, that means he’d contribute 7% himself and scoop in 5% from his employer.
As for investment choices, he should try to get into a target retirement fund that most closely matches his 70th birthday. This will provide him with the simplest route to a properly diversified retirement.
Q8: Bryce Harper and Mike Trout
I’ve got to know what you think of the two really young guys who are making a big impact in baseball this year, Mike Trout and Bryce Harper. These guys are going to have 20-25 year major league careers. How do you think they will pan out?
The amount of talent being put on display by those two young guys this year is just incredible. It’s amazing that Trout is hitting over .350 and is a strong contender for AL MVP (let alone rookie of the year) before his 21st birthday (coming up in early August). Bryce Harper, on the other hand, is 19 (and won’t be 20 until after the season is over) and is hitting .275 (Trout only hit .220 at age 19 in the big leagues during his stint late last year).
When guys get off to career starts like this, all you can hope is that they don’t have a major injury along the way. These two guys have the potential to chase a lot of career numbers over the next twenty to twenty five years. It seems crazy to think about, but if they continue growing as baseball players do and hit their peaks a decade from now, these two guys could be chasing pretty much every career record in the books when they’re at the end of their thirties.
I truly hope these guys both are able to have injury-free and conflict-free careers, because it will be a lot of fun to watch.
If you’re starting from scratch, your best tool is Google AdSense. This will enable you to place ads on pretty much any website that you wish to create. The ads will be automatically generated based on the content of the site you’re placing the ads on.
If you’re going to ever mention a product, there’s a decent chance you’ll link to the product on Amazon. If that’s the case, you should sign up for Amazon Associates. You just link to Amazon like normal and you get a small cut of anything that the person who visits Amazon through your link buys.
There are as many affiliate-type programs as there are grains of sands on the beach, but that largely involves selling to your readers, which is a pretty poor idea if you’re getting started.
Q10: Dental care
What products are worth buying for home dental care? Is it worth dropping money on things like a Sonicare toothbrush or not?
All I can go by here is what my dentist told me, which is that if you brush your teeth at least once a day for two minutes and floss beforehand, your teeth should be just fine.
He seemed to indicate that while there is some variation between toothbrushes and toothpaste, it’s far far more important to just brush and floss every day regardless of what you use.
In other words, I wouldn’t sweat it too much.
Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.