Monthly Archives: October 2010

Keep Going Until We Stop

Posted on by  at  5:00 am
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Hat tip to Baker from Man vs Debt for sharing the video below in a recent post. I thoroughly enjoyed the message, and could relate to quite a bit of what Scott Stratten had to say. Like Baker, I’m also now a follower of Scott’s blog Unmarketing.

If you can’t view the video, here’s a link

The Frugal Roundup

A Look Inside the Money Writers’ Wallets – Brip Blap, Million Dollar Journey,  Generation X Finance, My Dollar Plan, The Sun’s Financial Diary,  Lazy Man and Money. Unfortunately, I wasn’t able to participate in this group project, but I enjoyed peeking into my fellow writer’s wallets. (@The Money Writers)

How to Simplify Your Stuff and Honor Your Memories. This one hit home for me as I currently work through the process of going through my grandfather’s many possessions. (@Becoming Minimalist)

20 Favorite Dirt Cheap Meals. A handy list to keep around for those times when the grocery budget runs dry. Happy to see my favorite fall-back menu item–peanut butter and jelly sandwiches–made the cut. (@The Simple Dollar)

Rural Living Has Its Financial Perks. My wife and I would like to move at little farther out for many of the reasons cited in this post.  (@Northern Cheapskate)

11 Reasons to Ditch Your Television. I know this topic has been well covered, but this is one of the more thoughtful posts I’ve read on the subject. (@Man vs Debt)

7 Ways to Get the Best Fall and Holiday Travel Deals. Useful tips on saving money if you plan to do a little holiday traveling this fall. (@Wise Bread)

Best of the Rest

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Monitor Bank Rates. MonitorBankRates.com offers a free rate search and compare service offering the latest best rates on products ranging from certificate of deposits, savings accounts, checking accounts, credit cards, mortgages and insurance.

J.G. Wentworth. Thousands of individuals contact J.G. Wentworth every month to inquire about selling some or all of their monthly payments for a lump sum. For some, selling their structured settlement payments (annuities, settlements, lottery winnings, etc.) is not the best option; for others it clearly is. J.G. Wentworth’s team of experienced representatives will work with clients to customize options tailored to each individual’s needs.

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Giving Away Stuff: Things Come and Go, but Memories Last Forever

Posted on by  at  10:55 am
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I knew this day would come. It’s been nearly a month since my grandfather passed away, and we have started the slow and painful process of going through his things. For most of his life, he was a bit of a packrat, but fortunately began to try to cull his possessions a couple years ago.

Recent events have set me back on my mission to reduce the number of things I own. I had planned to start going through my things and finding 20-25 items to give/throw away per month. I have discovered the task is much harder than I thought, particularly now that so many things have sentimental value.

Skipping Rocks by Egan Snow on Flickr

Just Because You Get Rid of Something, You Don’t Lose the Memories

I wish I could properly attribute this idea, but I honestly don’t remember who told me this, or where I heard it. However, it is too profound not to share. When faced with the decision to keep something of sentimental value, but lacking practical value, it is important to remember that while you can give away things, you can also keep the memory of why you found that item sentimental.

For instance, I found a small box of rocks I had collected as a child during the many walks I took with my grandfather. Unbenownst to me, my grandfather saved those rocks for over thirty years, probably because they conjured up memories of us spending time together.

It is just one of the emotional discoveries I’ve found in the last few weeks, and I initially set it aside in a “Keep” pile. After reflecting on our good times, however, I came to the conclusion that those rocks really had no value. They were simply reminders.

I didn’t need the rocks to remember all those trips to the mountains to hike trails. I didn’t need them to remember the time we camped along a mountain stream and collected the smoothest rocks we could find – worn down by centuries of erosion from the icy currents.

Hanging onto that box would mean I’d have to find a place to store it, or display it. It would add to the number of “things” I have to worry about finding a home for. I decided it wasn’t worth it.

I moved the box to the “Toss” pile, but then decided I would give these rocks a more proper send off. One of the reasons I collected rocks as a kid was because I loved to skip them along the many mountain creeks and lakes we camped around.

So this weekend, I think I’ll take the kids to a local lake and we’ll skip these rocks across a new body of water. The rocks will eventually sink to the bottom, under many feet of water in cold darkness. But we will have created new memories that will stay on the surface. These memories will live on and be reflected upon warmly by both me and my children for many years to come.

A Simple Formula for Financial Independence

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This post first appeared two years ago here at Frugal Dad-back when there were far less people to see it. I thought I’d run it again to breathe new life into the concept of the “multiple-by-25 rule.”

I do my best to avoid complicated mathematical formulas. In my experience, mathematicians do a great job of taking a relatively simple process and making it overly complex by applying a series of inexplicable formulas. I guess that’s why I was happy to run across an interesting concept the other day called “the multiply-by-25 rule.”

The idea is that you can estimate how much is needed in savings to generate enough income to pay for an item. The only factors you need to know are how much something costs you now, and at what interest rate your money will grow.

Of course, determining both in this period of a inflation and fluctuating interest rates is tough, but you can get a general idea of how the math works by looking at a real-life example.

A Working Example

We are fans of Netflix because it offers a relatively frugal entertainment option for family movie nights. It’s cheaper than going to the theater, and cheaper than an expanded cable package. 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. Since most of my savings are now earning closer to 3% I would need to multiply my costs by a factor of 33.33% (100/interest rate).

This increases the amount needed to pay for Netflix after reaching financial independence by $900 to $3,600. Maybe I should just cancel Netflix!

A Bigger Example

I have heard stories of people paying off their homes, cars and all other debts and living quite comfortable on a couple thousand dollars a month, or less. Assuming our goal is the high end of that estimate, how much of a savings balance would be required to spin off $24,000 a year in income?

If earning:
3% interest, you would need $800,000
4% interest, you would need $600,000
5% interest, you would need $480,000

And you thought you needed to be a millionaire to retire early! This exercise does fail to account for inflation, both in terms of cheapening dollars and the costs of goods and services over time. I doubt Netflix, or a similar company, will continue to offer one-at-a-time unlimited rentals in the year 2030 for $9. However, running these numbers does emphasize the importance of minimizing the number of expenses you commit to early on.

Our Netflix membership alone puts us $3,600 further away from financial independence. Our cable bill, although relatively small at $12/month, puts us $4,800 away from retiring early. When you start to convert monthly expenditures to the amount of money required to cover their upkeep it really helps you prioritize what is important in your budget.

Homework:  Apply this formula to some recurring expense in your current budget and report the results in the comments below.  Does this required savings amount change the way you feel about continuing to pay for the item?

Dave Ramsey Built a $4.9 Million House: Good for Him, or Over the Top?

Posted on by  at  5:00 am
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Naturally, I am skeptical of anything found on the Web. However, this story appears to be legit. Dave Ramsey, the popular personal finance talk show host and author of The Total Money Makeover, built a$4.9 million home. It appears he did so with cash, so can’t fault him there.

In fact, I really can’t fault him at all. He earned his wealth and chose to spend it on a home. Now personally, I could probably find other things to spend nearly $5 million on. Heck, I could easily build a $1 million home and give the rest away. But I suspect Dave has done his share of giving.

On the other hand, isn’t it a bit ostentatious to build such a magnificent home atop a hill for all to see? Shouldn’t Dave Ramsey’s new house be a bit more modest? I guess the bottom line for me is that we really have no right to tell Dave how to spend his money. After all, he was stimulating the economy. Someone had to plan and build that home, decorate it, furnish it, etc. It probably created a number of jobs for the life of the building project.

Interested to hear your thoughts on Dave Ramsey’s new house (click for pictures). Good for him, or over the top?

Update: Dave Ramsey shared his comments on the subject on another blog. Read what he had to say.

The Frugal Roundup

What Does an Allowance Pay for? Over time, we are slowly increasing the kids’ allowance with the understanding it is to cover more “everyday” expenses. I still don’t expect them to buy their own sock and food…yet! (@The Simple Dollar)

2011 Tax Brackets. A look at likely tax changes for 2011 as well as some thoughts on how to plan for them. (@Oblivious Investor)

Buy Cell Phones Online With Amazon Wireless. Who knew that you could get some of the most popular phones for half of what it costs to buy them through Verizon.com? (@Christian PF)

How to Negotiate With Creditors. Don’t let creditors hound you for money. Fight back and negotiate your debt by following a few of these simple tips. (@Generation X Finance)

Homemade Vanilla Extract. Follow this simple recipe to make your own homemade pure vanilla extract for 5 times less than the cost of the store bought vanilla extract. It’s even cheaper than the store bought imitation stuff! (@DIY Natural)

Find a Great Second Job. Find a second job using Craigs List. Wealth Pilgrim shows you how to do it; step-by-step. (@Wealth Pilgrim)

How-to Pay Off Debt With The Income You Have? Not up for that second gig? Here’s a few tips for those that are looking to kill their debt, without having to work longer hours.(@Studenomics)

Best of the Rest

Support Our Sponsors

The Daily Middle. The Daily Middle is a group dedicated to helping those in the middle class cope with the coming financial crisis. And when they say “cope with,” they mean not just surviving the storm, but hopefully even prospering during it.

Monitor Bank Rates. MonitorBankRates.com offers a free rate search and compare service offering the latest best rates on products ranging from certificate of deposits, savings accounts, checking accounts, credit cards, mortgages and insurance.

J.G. Wentworth. Thousands of individuals contact J.G. Wentworth every month to inquire about selling some or all of their monthly payments for a lump sum. For some, selling their structured settlement payments (annuities, settlements, lottery winnings, etc.) is not the best option; for others it clearly is. J.G. Wentworth’s team of experienced representatives will work with clients to customize options tailored to each individual’s needs.

Lose the Cable TV, Gain Your Life?

Posted on by  at  5:00 am
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The following guest post is from Jerret Turner. Learn more about Jerret at the bottom of this post.

I decided not to renew my cable TV service once I moved my family to take a new job in late 2003. I find it’s easier not to start something if you ever have intentions of stopping later. My family lived in an apartment at the time and cable was included in the rent. So, the decision was a combination of not wanting to fork out money for the service and asking the simple question, “what if?”

However, just so we’re straight, I currently own a TV. And we do watch movies. My son and I are into Star Wars Clone Wars which I download from iTunes (don’t know if that counts as “having cable”). All this to say that I’m not anti-TV. Heck, I’m not anti-cable. But I did make a few observations last week I’ll share here.

My wife and I had family visit us last week. We live out of state so this was a rare occasion. These family members (heretofore known as guest “x” and guest “y”) will remain anonymous because they are the most generous, awesome people I know. This isn’t an exaggeration. And my purpose here isn’t to rant either. It’s simply to point out a few things.

The fact that I didn’t have cable never crossed my mind before they arrived. It didn’t occur to me that someone besides myself might actually have an interest in watching TV. Because that’s what people do when they’re bored, right? Watch TV. This is amusing because not having cable is old hat for me.

I mean, geez, I gave it up over seven years ago. It’s like not wetting my pants. I don’t do it but I don’t think about not doing it either. But my two nice guests did notice my TV deficit.

The first “I can’t believe you don’t have cable” shot across the bow came from guest “y” as mildly humorous comments about favorite TV shows. Followed by comments about DVRs and how, my goodness, without them we would be doomed to miss our must see TV and be subjected to commercials for eternity.

Then the torpedoes came out. Darned if the World Series doesn’t get played sometime every October. And, as usual, the NY Yankees were in the playoffs. A definite must watch for guest “x”. No problem, though. I was willing to pay $10 bucks for the privilege to watch the entire championship series online. I’d hook my laptop to the larger TV and we’d be good to do. Problem solved.

But, before long, the lack of 24 hour news channels nearly sunk guest “x”. I knew from experience that my broadband provider doesn’t do well with, shall I say, non-paid for streaming anything. I found this out after trying to watch college football online a few times via Australia. I know, don’t ask. But, hey, I drool uncontrollably over like college football. I’d reached the end of my “the interwebs and Google will solve world hunger” options.

So, after a mild case of jittery, mid-week TV withdrawal syndrome for guest “x”, I did the only thing I could think of—nothing. And, to be honest, I probably could have found a solution somehow. We could have hit a local restaurant to catch up on the day’s news. But something happened that made me decide not to relieve the situation.

One afternoon, I walked by the guest room and saw guest “x” snuggled on the bed reading a book with my three young children. I don’t know about you but if that’s what I get for giving up cable TV, I’m giving it up forever.

I’ll leave you with a few questions. Instead of thinking about what you’ll have to give up if you ditch your cable TV, what will you gain instead? More time to build relationships? More time to read stories to your kids? Whatever it is you gain, I can tell you first hand…it’s worth it.

Jerret Turner writes about personal finance issues from his own trials and errors. He also believes the best way to improve your personal budget is to earn more money.