Monthly Archives: January 2009

Dust Off Your Magnifying Glass to Be Frugal and Still Enjoy Life

Posted on by  at  6:00 am
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This is a guest post by MoneyNing, a personal finance blog that everyone (at least when forced to) agrees is one of the best out there at helping people save and increase wealth.  You can subscribe to his RSS feed or get email updates of his posts, where articles such as 50 Ways to Budget Travel and Save Money on Vacations will be delivered to you.

The details of our decisions can have a significant impact on our finances and wealth.  It is how individuals managed to save while still living a comfortable lifestyle.  It is a major reason why living below our means doesn’t mean depriving ourselves of what we want.  It is also how I can tell you that giving up coffee is not an option when we are discussing about being frugal.

Let’s be honest.  The “$4 coffee per day adding up” example has been thrown around so often that it’s improved my reading speed as I start skipping paragraphs.  While the math is pretty clear, it fails to address that people like me actually like coffee and would give up many material things before I would stop drinking.

It was frustrating at first because I wondered: Is there really no way to be frugal without giving up coffee?

Then one day, I got lucky and let a salesperson sell me on a coffee machine.  That day should be marked “my frugal tipping point” because that was the day I discovered the power of alternatives.

From then on, I found tons of other ways to save my family money without ever giving up anything.  Here are a few highlights:

  • TV – Our cable bill used to be $50 a month when we decided save money by cutting it. No TV? Oh we still get TV. Many shows are on the Internet nowadays, and we can order Netflix if we really wanted to. We just found $50 hard to justify when renting a movie is only $1 at Redbox, especially when we can still get TV by buying an HDTV antenna.
  • Groceries – Trying out different brands is actually quite fun. I also learned that while I love ice-cream, the mental desire is for ice-cream and not just Hagen Daaz ice-cream. Another habit we developed is to let the coupons and specials decide what our meal would be. Most of the time, we are undecided anyway so why not let those flyers help us? If chicken was on special, let’s have Parmesan chicken tonight. If eggs were for sale, omelet for breakfast sounds great.
  • Clothes – My wife still shops, but she likes to go to places like TJ Maxx or Nordstorm Rack where brand name items are sold at significant discounts. Cost of a pair of running pants retailing at $50 she bought recently? $7.99.
  • Eating Out – We still ate out on occasion, but we started skipping the deserts and drinks. If we really wanted something sweet, we went to a different place like an ice-cream parlor instead. It actually turned out more enjoyable since we increased variety.
  • Vacations – Most people are talking about not going to vacation at all this year, but instead of that overseas trip, why not go to somewhere domestic instead? If Las Vegas is too expensive, is driving somewhere close going to suck? If anything, it’s probably some place you’ve never been to which should be even more exciting!

Don’t let anyone tell you that a frugal life has to be about doing without.  You can still enjoy everything you want to do, if only you look into the details.

What Does Retirement Mean To You?

Posted on by  at  8:19 am
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Short post today as I’m home sick with a nasty bug.  Since I find myself at home on a workday, it reminded me of a great post I read at Bible Money Matters just yesterday on the subject of retirement.  Pete specifically asks, “Do You Ever Plan To Fully Retire?”

It’s an interesting question for a couple reasons.  “Retirement” means different things to different people, and that idea can change over time.  When I was a kid, retirement meant sitting on a lake fishing several hours a day, and basically being able to do whatever you wanted, whenever you wanted.  I suppose that is still true, to a certain extent.

Today my definition of “retirement” is centered more around continuing to find ways to contribute to causes you believe in, regardless of compensation.  In other words, I look forward to “retiring” from working for money so that I can begin working for something I believe in.  Not that I don’t believe in the mission associated with my current job, but let’s face it, most of us are not lucky enough to be able to wake up every single morning totally inspired by our 8-5 jobs.

At this point I’d like to turn things over to readers, and offer up the following question for discussion in the comments below.  What does retirement mean to you?

Have We Been Sold A Bunch Of Lies About Money?

Posted on by  at  6:00 am
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Here lately I find myself often reflecting on the current status of our economy, and wondering when and how things will shake out.  My 401(k) has been demolished.  Family member’s 401(k)s have been demolished, even those in target retirement funds that should have been comprised of more conservative options based on their upcoming target retirement date.

The value of our home has decreased, as it has for our neighbors, and for most around the country.  After countless scandals and bailouts, banks are no longer the trusted institutions they once were.  Inflationary fears drive investors to the market in an effort to stay ahead of the curve, but are those fears oversold.  Can we beat inflation (which is really currency deflation) by refusing to inflate our lifestyles and living frugally?  And so I wonder, has everything we’ve been taught to believe about finances just a big lie?

Markets Always Go Up, Given Enough Time

My grandfather is a product of the Depression Era.  He lived the ultimate market meltdown, and to this day believes investing in the market is only marginally better than gambling.  After all, most of us pick stocks, or a basket of stocks, from companies we know little about.  We know nothing of their day-to-day operations, their leadership team, etc.  Warren Buffet has made a mint buying what he knows, but what about the rest of us.

Last week I received a revised and updated copy of my all-time favorite personal finance book, Your Money or Your Life.  The timing could not have been better.  While much of the information is the same, co-author Vicki Robin has gone to great lengths to provide updated statistics, relevant figures for today’s market conditions, and updated stories throughout the book.  I am thoroughly enjoying reading the book through again, with more of an open mind than I did the first couple times.

The first time I read through Your Money or Your Life, and hit the section on savings as working capital, I thought it was a preposterous idea to invest in things like U.S. Treasure Bonds and CDs. After all, I was young, and had been taught since I was old enough to spell “stock” that those were the path to building great wealth.  Maybe; maybe not.

When the authors of Your Money or Your Life “retired” the yield on 30-year U.S. Treasury Bonds were hovering around 6%. Today they hover around 3%, but are trending up.  Still, that is the difference in $1,250 per month and $2,500 per month in interest on a $500,000 portfolio of bonds.  That’s pretty significant, and proof that any investment has environmental risks.  If I had half a million dollars, and rates were back up to 6%, I could live on $2,500 a month assuming I had no debt (including a mortgage).  It’s getting that $500,000 saved that is the hard part.

So, by diligently socking away money in my 401(k) and Roth IRA, only to watch most of my contributions melt away in a matter of months, have I been going about this all wrong?  Instead, should we be simply putting money in high-yield savings accounts, bonds, and CDs, and prepare to live off the interest?

I suppose that answer depends on a variety of factors, including our risk tolerance, age, and other individual situations.  There are a lot of people sitting on some huge losses, and if we sold now we would realize them, and miss out on a market rebound.  I can’t help but wonder how many will get out when and if that rebound occurs and they are made whole again.  That type of selling will probably work to stymie a future bull market.

After watching these wild market swings I’m starting to wonder if I really have the stomach for it.  Maybe I’ll join those described in Your Money or Your Life, and my grandfather, and devise a very simple plan for financial independence.

Large Student Loan Debt’s Place In Debt Snowball Plan

Posted on by  at  6:00 am
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In just the last week, two readers emailed in with similar situations. They are beginning to set up their debt snowball plan, and both have large student loans (large, as in excess of $50,000, more than half of their annual salaries).  Fortunately, both readers took advantage of consolidation opportunities and have locked in very low rates on their student loans.  Still, they are concerned about owing so much money on school loans in addition to other smaller debts.

We basically subscribe to the Dave Ramsey “baby steps” method of managing our finances, though we’ve tweaked his plan a bit over time to fit out needs.  According to Ramsey, things like large, second mortgages should go to Baby Step 6, “Pay Off Home Early,” which comes after paying off other debts, setting up an emergency fund, and funding retirement and college savings.  I believe this is also a good spot to move large student loan debts.

Both readers indicated it would take “years” to pay off their student loans.  If they could pay off the student loan debt, and all other debts within 12-18 months I might offer different advice, telling them to stick it out to become debt free before jumping on the remaining baby steps.  However, putting other goals on hold for years could be detrimental to their financial health, particularly the missed opportunity of compounding growth for things like retirement and college savings.

My advice is to continue to pay minimum payments on student loan debt until the following three things are in place:

  • All other non-mortgage debts have been paid.
  • A solid emergency fund of six months of living expenses is funded.
  • Contributions are being made to retirement and college savings accounts, if applicable.

At that point, I would continue to pay my mortgage payment, and begin tossing every additional penny I could scrape together towards repaying the student loan.  When it is gone, use that same intensity to pay off your mortgage early.  The entire process may take ten or fifteen years, but when you reach that point you can begin to build some serious wealth.

Please share your thoughts in the comments section, in the spirit of helping out these two fellow readers. In other words, feel free to disagree with me!

Be a Blogger Series Finds a New Home: Introducing SideHustleBlogging.com

Posted on by  at  6:00 am
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I’m excited to announce today’s launch of my new blog, Side Hustle Blogging!  It is a place to share tips, tricks and lessons learned on the subject of blogging.

Over the last year or so I’ve received a number of emails from new bloggers asking for direction on starting blogs of their own.  While I try to respond to everyone, I felt like I was repeating a lot of the advice, and rarely had a chance to follow up when I learned something new.

As a temporary solution, I began sharing the occasional “Be a Blogger” series post here at Frugal Dad, but I always wanted to separate the content by starting a new site.  I didn’t for a couple reasons. First, I thought, “Who the heck would want to read what I have to say about blogging?”  True enough; I’m still a relatively small fish in the big blogging pond.  But, I’ve learned a thing here and there, and made some mistakes along the way I might could help others avoid.

I was really pressed for time during the last half of 2008.  Many of you are aware of the family medical emergency we experienced, and juggling my family, work and blogging responsibilities was hard enough without adding a new blog to the mix.  While things haven’t completely settled down personally, I’m ready to get rolling on the new blog.  If we wait for the perfect time, we will wait forever!

It is my hope that Side Hustle Blogging develops into a place where we learn from each other. Anyone making their “side hustle” blogging should find something relevant, but the topics won’t stop at simply writing for the web.  I plan to include posts on topics such as monetization, marketing, scheduling, entrepreneuriship, taxes, etc.  You can see there will be some overlap in the themes I discuss here at Frugal Dad, but with a spin geared towards those who blog.

I look forward to seeing all of you over at Side Hustle Blogging!  Drop me a comment and say hello, or just take a few minutes to peruse the articles there.  And don’t worry, I plan to continue my daily blog schedule here at Frugal Dad.