Monthly Archives: April 2009

Your Biggest Financial Mistake?

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Jaime wrote in this week to ask a long question about patching things up with a friend who has failed to pay her back for a loan.  But it was her closing question that had an impact on me – so much so that I decided to share the question, and my answer, here for all the world to see.  Feel free to share your answer as well.  Maybe we’ll all feel better after this online confessional!

Jaime asks:

Please tell me you’ve done something equally stupid in the past.  I know we all have financial skeletons in the closet, but sometimes I feel like I’m the only one in my circle who screws up.  What was your biggest financial mistake?

Well Jaime, lots to choose from here!  I’ve made just about every dumb move with money you could make.  A few had more zeroes on the end of them than others.  But I don’t regret making them because they got me to where I am today.

Still, there is one very big mistake I made at 20 years old that still haunts me today, nearly twelve years later.  I leased a car.  It was an SUV to be exact.

2004isuzurodeo
Photo by Edmunds.com

I’d been eying the new Isuzu Rodeo for a several weeks, but never dared to step foot on the car lot (at least not during business hours) to get a closer look.  One morning, in a moment of weakness, I moved in for a closer look.  I had no money to put down, no trade in, and no business being on a car lot.  But, I was young and dumb and suffering from car fever.  It didn’t take long for the salesman to find me – in fact, he must have seen me coming from a long way off!

I started off perusing the used Rodeos, but none of them really struck my fancy.  The salesman effectively guided me towards the “new car” inventory on the lot, and that’s when I saw her.  She was sleek, yet rugged.  Roomy, yet compact.  It was a brand new Isuzu Rodeo.  This is the part of the story where I should have ran as far and as fast as my 1985 Buick Century (the reason I was on the car lot) would take me.  Instead, I ran to the salesman’s office to “work out a deal.”

Of course I was sold on the leasing option since I had nothing down and no trade-in to speak of.  I was told I would need nothing down, but would need to come up with the first payment and a few fees.  I scrambled together the cash and eventually drove off the lot with my new, shiny toy.

Fast forward a couple years.  The “newness” of the Rodeo had dwindled nearly as fast as the value of the thing. I was rough on the interior, and exceeded the mileage limits thanks to several trips to visit the new in-laws a couple hundred miles away.  It would have cost me money just to turn the Rodeo in at the end of the lease.  So, I financed the remainder in the form of a 36-month used car loan, extending the effective length of my car debt to nearly six years.

Fast forward another few years.  In a similar moment of “I work hard so I deserve it,” I ventured back to a used car lot (at least I stayed on the used lot this time) and drove away with a new-t0-me Chevy Silverado.  My trade in?  That same Isuzu Rodeo with about $1,500 left on the loan.  The dealership was nice enough to pay off my loan in exchange for me “taking the truck off their hands.”

Just a few months later, I realized I could not afford the Silverado payments and decided to put my new-to-me truck up for sale.  I took the first offer and received about $1,000 less than what it cost me to drive it off the lot just a few months earlier, finally ending the spiral of debt that old Rodeo put me in many years before.

Looking back, I realize I should have driven that old Buick until the wheels fell off. I should have saved and paid cash for a used car.  I should have never leased the SUV under terms I wouldn’t be able to live up to so I could turn it back in without penalty.  But like I said, all of those decisions got me to where I am today – for better or worse.

OK, I confessed.  So what was your biggest financial mistake?

Pinching Pennies Or Squeezing Big Returns: Which Is The Ultimate Path To Wealth?

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Just a few weeks ago, an old-fashioned friendly rivalry developed in the land of personal finance blogging.  One of the heavy hitters, Ramit of IWillTeachYouToBeRich.com issued a challenge to another top blogger, Trent of TheSimpleDollar.com. At stake was $1,000 to the winner’s readers’ favorite charity.  At odds were the two writer’s ideas on saving money and building wealth.

Ramit’s Take

Ramit encourages readers to focus on the big stuff – things like reducing fees and interest rates at your bank, and negotiating/shopping your car insurance.  Makes sense; after all these are often the “big” expenses that really add up in our budget.  Shaving 20% off of these types of expenses can lead to big savings.  And the effort required to find these cost savings might be better placed here than in some lesser expense category, such as food or household utilities.  As Ramit puts it:

I don’t have any issue with frugality, except that I think Americans are horrible at it and, for my audience, it’s a hopeless battle of telling them to say no to things — “no more lattes! no more eating out! no more enjoying life!” — which never lasts.

Ramit’s take is a popular one. His book, I Will Teach You To Be Rich, became an instant #1 best-seller at Amazon.com when released a few weeks ago. His advice resonates with young people, particularly those fresh out of school and looking for ways to save big and earn big.

Trent’s Take

Trent takes a different approach, overall, even though both bloggers have many ideas in common.  At The Simple Dollar, Trent often shares frugal tips such as how to make your own laundry detergent, homemade bread, and a number of other goodies.  He also shares many tips for finding ways to live cheap.  In fact, his book, 365 Ways to Live Cheap, is a mini-encyclopedia of cost-cutting tips.

Many of these tips require some time to pay off.  For example, Trent and I both advocate installing a programmable thermostat to reduce utility costs, particularly at night or when the house is empty during the day.  Programmable thermostats are not cheap, and they require a bit of time to install.  However, the benefits continue to pay off as long as the thermostat is in service – which should be for many years to come.

My Take

In short, I believe both bloggers are correct, and by combining their philosophies one could become very wealthy over the course of a lifetime.  It’s also worth noting that those of us who chose to live frugal do so for reasons beyond fiscal fitness.  Frugal living is about using less, or just enough, and recognizing the feelings of contentment that frugality generates.  It is about being better stewards of our resources – all of our resources.  It is about assigning value in the form of life energy to the things we purchase.  It is not a financial plan; it is a way of life.

I continue to be a fan of both sites, and their writers (and their philosophies).  While the “challenge” was diffused after Trent’s response, the arguments live on in the personal finance community.  Save more or earn more?  Be cheap or be frugal?  I say, take a little of what’s best from both.

With that I’m off to enjoy a latte – and yes, I’ll be using a coupon.

Living Off The Grid In Stages

Posted on by  at  6:00 am
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Ever wish you could just unplug from your current hectic life?  Maybe quit your stressful job, move to a farm with several acres, build your own solar panels, and spend your remaining time living off the grid.  Yeah, me too.

The problem is that this type of lifestyle seems so simple, but is terribly difficult to pull off these days.  Why?  Because we have become slaves to our stuff – myself included.  We have our houses, our cars, our expensive hobbies, our electronic gadgets, our new furniture, our designer clothes, etc.

We spend the majority of our lives working to pay for the stuff that keeps us from living a life with more freedom.  Along the way we usually manage to accumulate debt buying more stuff than we can afford.  So then we spend even more time working to repay the money we borrowed to buy the stuff that we work to pay for in the first place.  Whew!  It’s a vicious cycle.

farmhouse040509
Photo courtesy of iLoveButter

How To Break The Chains of Stuff?

So how do we break the cycle?  How do we join others who are living off the grid?  It isn’t easy.  I believe the very first step is to stop accumulating stuff.  Draw a line in the sand (or on your front porch), and vow not to allow anything else to enter your home unless it is a necessity or improves your quality of life in some way.  If something qualifies under those two conditions, you must save for it and pay cash.  No more borrowing!

The second step is to take a look around your house, and your budget.  Are you paying for things that you could really live without?  The $40 gym membership, or the $15 Netflix membership, may not seem like much by themselves, but how much of a nest egg would be required just to cover those expenses?  I mentioned the multiply by 25 concept in a previous post.  The idea is that you can estimate how much of your nest egg would be required to maintain your current expenses.  I used Netflix as an example:

At roughly $9 a month, our Netflix membership sets us back $108 per year.  To continue paying for Netflix out of passive income earning 4% per year, I would need a $2,700 ($108×25) savings balance.

So I would need to save $2,700 just to cover my monthly $9 Netflix membership.  Imagine how much a $500 per month car payment would require?  Frightening isn’t it?  When you think about things from this perspective it makes it a little easier to separate needs from wants.

mountainfarm040509
Photo courtesy of flattop341

Discover Your Passion

The next step in living off the grid is to discover your passion.  Ask yourself:  If you didn’t have to wake up tomorrow morning and work for money, how would you spend your time? Gardening? Fishing? Volunteering? Teaching?  Some people enjoy what they do (believe it or not), and wouldn’t want to give up their jobs.  The rest of us go to work to pay the bills, and look outside of paid employment for self actualization.

The point is to figure out what it is you want to do with your life, and figure out how to do that more often.  By eliminating bills, downsizing your home, avoiding the accumulation of stuff, etc, you might be able to afford to spend more time working on your passion, instead of your job.

Think In Terms of Sustainability

The freedom to unplug from the hustle and bustle of our current lives and “live off the grid” doesn’t come without sacrifice.  Many choose to give up creature comforts like cable television, an automobile (or two), or even electricity (paid-for energy, that is).  Some are able to harness the power of the sun through solar power, or wind, to generate power for their homes.  Imagine how nice it would be to lose that utility payment! Wells can supply water, and gardens or small farms may provide a percentage of a family’s food source.

I feel the need to pause here and add a disclaimer to this post.  My tone may have seemed preachy in the lines above.  I live in a neighborhood, have a mortgage and a car payment (almost gone), and education debt, and a job, and I’m an energy hog when it comes to air conditioning, and I failed to produce enough crops last year to build more than a couple salads.  I am about as “on the grid” as one can be.

But I’m also a daydreamer, and at times when I’m lost in my thoughts I think about how nice it would be to get rid of all this “stuff” and start over.  I think about raising my kids to be less materialistic.  I think about how much I would enjoy devoting more time to gardening, and raising my children, and coaching youth sports, and building projects around my house.  And then I ask myself, why can’t I do these things?  I know the answer, and I know what needs to happen, mechanically, to get there.  It’s getting there that is the hard part.

Additional Resources


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ALL YOU Magazine Subscription Giveaway – Three Chances To Win!

Posted on by  at  6:00 am

This contest is now closed.  Using random.org’s random integer generating tool we have selected three winners – comment numbers 12, 82, and 107.  Congratulations to Jenny, Street Preacher, and ~Kat.  I’ll be in touch with each of you over the weekend to coordinate getting your information to All You.  Enjoy your 1-year subscriptions! Thanks again to All You magazine for sponsoring this contest.

ALL YOU Magazine is geared to the value-driven consumer and offers practical, affordable solutions for every area of life.  The magazine features money-saving strategies, fashion ideas, easy-to-prepare recipes and more. ALL YOU is available at Wal-Mart stores nationwide and by subscription.

The April Issue

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One of the things my wife and I look forward to from ALL YOU Magazine is the coupons!  I often forget to look through publications like this for coupons, but it is a great source to supplement your weekly newspaper and other online coupon sites.  In fact, the April edition features $51 worth of coupons, including a FREE Rimmel Sexy Cures Mascara, and $1.00 off People magazine.

To make things easier, they even publish a coupon index to help maximize the savings in ALL YOU.

To get an idea of the types of articles featured in ALL YOU, check out their website at allyou.com.  Get tips for  for making your clothes last longer.  Learn how to go green and save money at home.  Get inspiration for creating your own price book.  Lots of frugal ideas here!

How To Enter The ALL YOU Giveaway

The folks at ALL YOU were nice enough to let me give away a 1-year subscription to THREE lucky Frugal Dad readers.  Entering is a cinch.  Simply leave your favorite money-saving tip in the comments for this post.  Be sure to include your email address in the comment form (not the body of the comment) so I can contact you if you are a winner.  When the contest ends, I’ll randomly select (3) entries, using random.org, and put winners in touch with the folks from ALL YOU to begin your 1-year subscription.

Comments will close Friday, April 10 at 11:59pm.  Winners will be announced the following day, Saturday April 11th.  Look forward to reading your favorite money-saving tips!

Triple Play: Eating Less Meat

Posted on by  at  6:00 am
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The following guest post is from Mike.  Mike writes at The Oblivious Investor, where he reminds readers to ignore the day-to-day craziness in the market and focus instead on getting the investing basics right. Subscribe to his blog for daily updates.

“Eating less meat is another of those triple plays–something you can do that is good for your health, good for the environment, and good for your wallet.” -Amy Dacyczyn in The Complete Tightwad Gazette

I’ve been vegetarian for a little over a year now, and I love it. However, I’m not here to condemn or criticize people who eat meat. (How could I? My wife loves a good steak.) And I’m not trying to convince everybody to immediately go vegetarian.

Instead, I simply want to suggest that the meat eaters among us try eating less meat. As Amy says, it can be good for your health, good for the environment, and good for your wallet. And as you’ll see below, it’s not as hard as you might think.

It’s good for your body.

While cutting meat from your diet certainly isn’t a cure-all, it does have its benefits:

  • Vegetarians have been shown to have lower rates of heart disease, type 2 diabetes, hypertension, and prostate and colon cancer. [source]
  • The average American consumes about 110 grams of protein per day, roughly twice the recommended amount. Cutting back on meat can bring you more in line with the recommended about. [source]

It’s good for the planet.

  • Producing a pound of animal protein requires about 100 times as much water as producing a pound of grain protein. [source]
  • Producing a pound of beef puts out as much carbon dioxide as driving a typical car for 70 miles. [source]
  • Producing a pound of beef creates 11 times as much greenhouse gas emissions as a pound of chicken and 100 times more than a pound of carrots. [source]

If you want to protect the environment, every little bit of meat you cut from your diet helps!

It’s good for your wallet.

The following prices are from our local market, though prices will of course vary depending upon where you live, where you shop, whether you buy organic, etc.

  • Cost of a pound of T-Bone steak: $6
  • Cost of a pound of chicken: $3
  • Cost of a pound of ground beef: $2
  • Cost of a pound of beans: $0.80

And guess what? Beans are delicious.

It’s not as hard as you might think

I hear two common concerns when talking with people about cutting back on meat:

  1. How will I make sure I get enough calories and protein? (Or, “I’ve tried going vegetarian before, and after about a week my energy level plummeted, and I felt like I was going to pass out.”)
  2. Most of my dinners are based around meat. What am I going to cook for my family?

To the first question: It’s essential that you maintain a proper level of protein in your diet. If you switch to eating salad for every meal, of course you’ll feel light headed all day long. There’s practically no protein and very few calories in a typical salad. (And who wants to eat salad all day anyway? Not me!)

If you only cut back slightly on the meat in your diet, lack of protein shouldn’t be a problem. If you decide to go completely vegetarian, the trick is to eat plenty of beans, whole grains, dairy, or eggs.

As to the “what will I make for dinner?” question, my answer is that Google Reader is your friend. Subscribe to a handful of vegetarian food blogs, and you’ll get meal suggestions in your Reader everyday. Surely one of them will look good.

And with that in mind, here are a few easy-to-make, inexpensive, delicious, healthy vegetarian meals (and blogs) to get you started. (Click on the pictures to see the recipes.)


Tomato Basil Cream Pasta from Vegan Yum Yum


Roman Beans and Polenta from WheatFreeMeatFree

Give any of them a try, and I think you’ll agree that meatless dinners don’t have to be seen as a sacrifice.