Frugalize

Paying Off The Mortgage Early, A First Person Experience.

noreply@blogger.com (Paul) — Thu, 19 Nov 2015 23:02:00 +0000

Posted by Paul
11/19/2015

Is it worth it to try to pay off the mortgage early? Frugalize has had postings about that very subject:

One View On Paying Off The Mortgage Early
The Mortgage Prepayment Conundrum

I wanted to share a personal story about that this exact experience.

For my family paying off the mortgage has never been a major priority because:
1) We made sure to buy a house that we could afford so that the mortgage payment was never a back-breaker.
and
2) Thanks to the recent low interest rates the amount going towards interest never seemed THAT bad.

So our tenuous plan was to just continue on saving as much as we can towards retirement, rainy day fund, etc and not really worry about the mortgage.

Fast forward quite a few years and we noticed that the remaining principal in our mortgage was getting smaller to the point where if we used the money in our rainy day fund, a fund we were using to save up for a new car, and basically almost every spare dollar we had that we could pay off the mortgage.

Well we decided to go for it, and so far here is my advice. Don't do QUITE what we did. When we paid off the mortgage we really depleted our rainy day fund and a lot of our spare cash. We didn't touch 401k's or anything like that, but it still seriously depleted our cash reserves. Now of course that monthly mortgage payment was gone, and that's awesome, but it still takes time to replenish savings that have been building up for years.

Also, right after we paid off the house we had some unanticipated repairs that we couldn't really put off (our fence blew down in a wind storm, and some other stuff). For quite a few months it was like: "Well the extra money we have from not paying having to pay the mortgage is going to this repair, then the extra for the next TWO months is going to this repair.".

Normally these repairs would have been paid for out of our rainy day fund, but with that gone, it made us feel lacking in cash for quite some time. In fact it has been almost a year now and we are just now feeling like the lack of a mortgage payment is translating into extra cash.

So my advice is that paying off the mortgage is a great feeling, but if you thinks it's feasible and are considering I would suggest that;
1) You make sure you can do it without having to dip into retirement savings (or any other fund that involves a withdrawal penalty).

2) You don't have to COMPLETELY deplete your rainy day fund.

That second point is the one we missed.

Also one thing we did that worked out well for us is that when we paid off out mortgage we checked to see how much of our payment was going towards our annual property tax bill. We took that amount every month and had it set to automatically move into a savings account (so basically we were acting like our own escrow account). That worked great because when that annual property tax bill came in the mail we had the money ready to go.

Any other Frugalizers out there been down this road?

Using Money From Your Roth, What I Learned

noreply@blogger.com (Paul) — Wed, 15 Oct 2014 02:14:00 +0000

Posted By Paul
10/14/14

Hi Everyone,

I don't know if any of you out there are aware of it, but currently the rules with Roth IRA's are very interesting in that you are allowed to withdraw CONTRIBUTION money from your Roth at any time for any reason without penalty or tax implication.

This makes sense since the money you contributed to your Roth was already taxed as income, but a question I had was: Assuming I want this money, how do I get it and how do I know how much I can withdraw?

So the first questions of how you get it, is actually pretty easy. When I looked into it it seems like most companies that offer Roth IRA's have a pretty easy way to withdraw money. With my provider I can actually do the whole thing online and electronically transfer the money to my checking account and have it in a few days (really nice!).

So now for the question of how do you figure out how much you can withdraw? The while idea is that if I open a Roth IRA and over it's lifetime I've contributed a total of $1000 then today if my Roth is worth a total of say, $1200 I can withdraw that $1000 for any reason without penalty, but if I take out more than the $1000 I get hit with all kinds of penalties (unless of course I've hit retirement age and meet other requirements).

If you remember that you contributed $100 a year and you have had the Roth for 10 years that it might be easy to remember that you can take out $1000, but if you're like me and the amount you contributed to your Roth has changed over the years then the total amount you've contributed can be a tricky (but important) question.

So how do you get the answer? Well if you have had your Roth with the same company for its entire lifetime you can probably just call them and then can look up your contribution history.

But if you're like me and you MOVED your Roth at some point then your current company will only know the contributions you've made since the Roth has been with them. If you contact your old company and they can help you then great, but more likely you will have to go through your old tax documents and hopefully find your old 5498 tax forms or your old Roth account statements to track down your contributions. That's what I ended up having to do, and it was a big hassle.

My advice? Start a google doc or something like that and just enter your contributions for each year, that way if you ever do want to withdraw money early from your Roth IRA you'll know exactly how much you can safely take out.

When to refinance? My latest thoughts.

noreply@blogger.com (Paul) — Sat, 25 Aug 2012 04:24:00 +0000

Posted By Paul

It wasn't that long ago that I refinanced my mortgage and I remember that as we signed the papers the agent actually said: "Let's take a moment to appreciate how good a rate this is, it will never get much better than this."

Now I see that rates have dropped to the point where I am once again considering refinancing.

There are so many sources of advice on this topic everything from: "Only refinance if you can save at least one point on your rate." to complicated spreadsheets and formulas.

Well when I found myself trying to decide if I should refinance again, I realized that what I was really doing was deciding two things:

1) What was my primary goal?
2) What was I willing to commit to?

If you can answer these two questions then I think refinancing decisions become much more clear.

Here is what it was in my case:

What was my primary goal?
There are lots of perfectly valid answers to this question when it comes to refinancing. Some of the most common are:
"I want to pay off my mortgage as fast as possible."
A great goal. Once your mortgage is paid off then a huge monthly expense essentially disappears from your life.

"I want to pay as little in interest as possible."
This one often goes with the "fast as possible" one since the two often relate. It's annoying paying all of this interest month after month.

"I want my monthly payment to be as little as possible."
Another perfectly valid choice. A smaller payment can mean peace of mind. Less money you have to come up with every month.

What was I willing to commit to?
Here are some things that might come up when you consider this question:

"Can I commit to paying the closing costs?"
Another simple one. If you don't want to pay the money for the closing costs, then it simplifies your hunt considerably in that its becomes a question of the best rate you can get with zero closing.

"Can I commit to a bigger payment?"
If you refinance to a shorter mortgage (go from 30 year to 15 year) then not only do you get a better rate, but it generally means paying off quicker and less interest paid. The problem? It often means your monthly payment gets bigger (unless your rate increase is significant enough to offset it). Ask yourself if you are willing to commit to being obligated to make that payment every month.

"Can I commit to being in this house for a certain period of time?"
If you are CERTAIN that you are going to move in a specified time, or if you are CERTAIN that you aren't then your choices become a little more clear. For example, probably not much point in refinancing a house if you're going to move in a year anyway.

For me I found that my primary goal was to lower my monthly payment. Even if it means I have to pay it longer and I end up paying more interest in the long run. I also realized that I didn't want to commit to a bigger payment, and that even though I wasn't 100% sure that I wasn't going to move anytime soon, that I was at least able to commit to the idea that a move was not in my foreseeable future. I was also able to commit to paying the closing costs.

Once I figured that out, the refi choices became much more clear. For me I just did a straight refi to a 30 year fixed, and took the better rate. Of course my payment drops thanks to the lower rate and "resetting the clock" on the 30 year mortgage, but it also means that the amount going to principal per payment drops.

In this process I did discover something interesting. When I took the amount I paid in principal before the refi, and looked up how long it would take to reach that same amount of principal AFTER the refi if I just paid the minimum each month, the answer was that it would take me about 6 years. Wow.

I also discovered that if I did the refi and took the lower payment but kept paying the amount of my OLD payment (applying the extra to the principal) then the total principal I would pay each month is more than the total principal I pay each month right now. My thought is that I can keep doing that, but if something catastrophic happens where money gets really tight then I can just stop paying that extra and fall back to my nice small payment.

So I decided to go for it, so I am working on the refinance right now. I know lots of people try to approach this problem purely mathematically, but I find that difficult to do since often there are just too many unknowns for me. By focusing on two simple questions I felt like I was able to identify the choice that got me to my goals given the best information I had right now.

My Adventure In Personal Lending

noreply@blogger.com (Paul) — Wed, 22 Aug 2012 23:37:00 +0000

Posted By Paul

Hi Everyone,

How, I found this very old posting about personal lending just sitting in my drafts folder.

I'm posting it now even though I wrote this about 18 months ago.

So stay tuned for the epilogue on how it went.

-----

I recently learned a little about personal lending sites. They had me intrigued to the point where I decided to dip my toe in the world of personal lending.

I decided to open an account at Prosper.com and see what it was like lending money to random people.

First of all, it seemed very strange to be browsing listings of total strangers. There was a voyeuristic quality of perusing the loan listings of these people. It was fascinating to see how much money they needed and why (not to mention the interest rate they were willing to pay).

Since I was very new to this whole concept I decided to choose three different loans and loan each $25. The way these pages work is that a person who wants a loan asks for a certain amount, for a certain payback term with a certain interest rate. If the loan looks good you can contribute to the loan.

I chose two loans that were considered lower risk by prosper (with a correspondingly lower interest rate) and one high risk loan (with an interest rate of 31%). All three loans have a 3 year term.

It is kind of cool that you can just contribute $25 to a loan, so the total you need to play around is actually very small. The idea is that if someone wants to borrow $1000 they need to have enough lenders willing to contribute to their loan so that they reach their goal.

There are many strange aspects of this process. Some of the obvious ones:

-I don't honestly know if these people are using the money for what they say they are using it for (the listing says 'to payoff a credit card' but for all I know it could be going to a gambling habit)

-There is the risk that one (or more) of your borrowers will stop paying/declare bankruptcy/move off the grid, or who knows what.

My overall impression of personal lending? When I loaned out the money and every month when I get my payments (so far all three loans are being paid off on schedule) I feel like I'm playing some sort of game. I know that any form of investment can be viewed as gambling, but lending money to strangers using their internet posts to judge the likelihood of being paid back REALLY feels like gambling.

So for me, I think personal lending will just be a fun little hobby. Picking loans and watching the payments come in IS fun, but I don't think I will ever put anything more than "fun money" into one of these sites.

For some of the loans I contributed to I saw people that had made contributions in excess of $1500! I really don't see myself ever doing that. There seems to be so much uncertainty in the process that I would feel uncomfortable committing any significant amount of money to it.

Link: A cool tipping guide.

noreply@blogger.com (Paul) — Tue, 12 Jun 2012 19:45:00 +0000

Posted By Paul

If you're like me and always wondering about the proper etiquette for tipping, there is a pretty cool page that has an interactive 'tipping guide.'

I looked up several services to see if what I thought was the proper etiquette matched what was in the guide.

Check it out:

Tipping guide

A Tip For Estate Planning

noreply@blogger.com (Paul) — Sat, 09 Jun 2012 04:39:00 +0000

Posted By Paul

Hi Everyone,

Having had a recent experience with estate planning I thought I would pass on something that I learned from the experience.

A friend of a friend recently had a relative pass away. The relative had had a healthy long life, and had left behind some very clear estate planning.

The only downside was that the relative had listed a person as their executor that now lived overseas. It was difficult to locate and contact this person and created a lot of hassle.

Luckily they listed several alternate executors, but one issue they had was that they chose people that were about the same age as them or older. It makes sense that you would choose peers to be your executor candidates, but the problem came up that since the relative had lived such a long life the other candidates were all quite up there in years and didn't feel up to handling the role.

There were a few aspects of the estate that needed to be resolved quickly. The process of tracking down the overseas candidate, and getting the paperwork for them to decline the role took quite a while. Luckily the other candidates were easier to find, but when it was discovered that they didn't want to serve as executor it took additional time to get THEIR paperwork handled and then ultimately find someone to take over the role. Ultimately it all got resolved, but it ended up being a significant hassle.

My advice? Definitely list several candidates to serve as your executor, and try to update your estate documents accordingly if someone moves overseas or has some other event that would make them unable to serve in the role. Also be sure to let your executor candidates know that they are listed in your estate planning so that they can let you know if for any reason they no longer want to serve in that capacity.

Also I think that it's practical to have at least one executor candidate who is significantly younger than you, to avoid the situation where all of your candidates are in a place in their life where the hassle of handling an estate is too much.

Once my son is an adult I plan on making him an executor candidate, and hopefully I'll keep my estate planning up to date in case something happens that makes an executor candidate no longer able to do the job.

Saving while celebrating holidays

noreply@blogger.com (Paul) — Sat, 11 Feb 2012 04:50:00 +0000

Posted by Paul

Hi Everyone,

I wanted to share something that my family started doing recently that ended up being fun and also a good way to save money.

We noticed that in certain months we had quite a few holidays. For example my wife and my wedding anniversary is in February as is Valentine's day.

My wife and I started to 'split the difference' where instead of celebrating each holiday separately we actually pick a day between Valentine's Day and our anniversary and celebrate both with a night on the town.

It's worked well for us, not only do we avoid the Valentine's Day crowds in restaurants, etc but we also feel like we can splurge a little bit more since we're having one celebration instead of two.

We still observe Valentine's day and our anniversary, but with much more simple stuff like a small surprise treat or a dessert out with our family.

It has been a nice way to celebrate frugally without feeling like we are sacrificing.

Want to save money? Skip the kid's meal

noreply@blogger.com (Paul) — Tue, 22 Nov 2011 06:00:00 +0000

Posted By Paul

My wife and I often have dinner with friends (who also have little ones). Since the kids aren't quite up to restaurant age yet we get takeout from various restaurants around town and we take turns hosting the meal.

We have been doing this for years, and we generally orders kid's meals so that our little ones will have something to eat.

Just a few weeks ago while our friends were hosting we noticed that our little one wasn't really interested in the restaurant food we ordered for him that week, so our friends offered him some apples and mac and cheese (which he happily ate).

We decided to try that from now on, where both families agree to have simple kid food available when it is their turn to host, so we don't feel the need to include kid's meals in our restaurant orders.

We save money on the kids meals and if our little one ends up wanting to try our restaurant fare my wife and I are happy to share our food. We've noticed this works especially well since our little one seems to enjoy trying new foods so he often prefers trying our food as opposed to his kids meal which is often a fairly boring chicken finger and fries sort of thing.

Plus when we get all the little ones together they often want to play, so the meal part of the evening is often brief and we end up giving him a snack at home right before bedtime anyway, so why pay the extra money for the food he doesn't eat?

Ways To Save On Eating Out

noreply@blogger.com (Paul) — Sat, 19 Nov 2011 05:47:00 +0000

Posted By Paul

My wife and I are continuing our experiments to save money and we have been employing a strategy that is really working for us.

As with many people, eating out is a significant optional expense (especially if it gets out of hand), so my wife and I have been watching it closely.

One thing we did this weekend was that instead of our "usual" breakfast restaurant we went and had bagels and coffee at a bakery. It was still fun, we got out of the house and enjoyed a breakfast together as a family, but at a fraction of the cost. We made up for our light breakfast with an early lunch.

It was even better for our little one because we didn't have to wait for a table (our favorite dinner haunt gets crowded on the weekends) and it only took a moment to toast up a bagel so he only had to wait a couple of minutes for food.

We're looking for other ways to replace "eating out" with "snacking out" as a way to save money while still enjoying the experience of going out.

Article: Steps to thin your health risks, fatten your wallet

noreply@blogger.com (Paul) — Fri, 14 Oct 2011 05:43:00 +0000

Posted By Paul

A friend sent me a link to a great article that I wanted to pass on.

As my family tries to live a frugal life and keep costs (including food) down. We often run into a conundrum.

Often the cheapest foods are not the healthiest foods. This is something I run into a lot with restaurants (where the cheapest fast food options are often not very healthy at all), and also with groceries (where organic and fresher ingredients are often more expensive than processed foods).

My wife and I made the decision some time ago that spending a little more money now to eat healthier will pay off in the long run by avoiding various costly health issues.

Of course such a decision is based purely on supposition and we won't ever really know if we made the right choice, but it was nice to see an article that suggested that our philosophy had some merit.

Check out the article and tell me what you think:

Steps to thin your health, fatten your wallet

Article: Why Only Thinking About Affordability Makes You Poor

noreply@blogger.com (Paul) — Sun, 09 Oct 2011 03:49:00 +0000

Posted By Paul

I saw this article on a blog that I discovered today.

I really liked the article because I use the term 'affordability' a lot when I talk about money. When people ask me if I think it's okay for them to splurge on something I often ask the question: "Can you afford it?"

This article emphasizes that many people when answering that question are simply asking themselves: "Do I have the money now to cover the payment?"

It talks about how using that definition can lead you into some poor choices.

The article lists a set of other questions you should ask in addition to just basic affordability when making a financial choice:

Is it necessary or is it nice to have?
Is there a more economical version?
Would most people in your situation want to buy it?
Would you still buy it if you had time to think about it? In other words, is it an impulse decision?
How is that going to affect your short and long term goals?

I especially liked item 5....considering the choice in relation to your financial goals.

I think that now when discussing financial choices with people I'll have to ask the question: "Can you afford while meeting your other goals?" as a starting point for discussion.

Check it out:

Why Only Thinking About Affordability Makes You Poor

Pretetending You're Broke - Follow Up

noreply@blogger.com (Paul) — Sat, 08 Oct 2011 05:46:00 +0000

Posted By Paul

Just a little follow-up on the 'Pretending You're Broke' experiment, a couple of small things that I came across that ended up being great ways to save a few bucks:

My son and I have a standard routine where on Thursday nights we go and so something fun (generally his choice) and then after we go to a restaurant (also his choice) and get something to eat before heading home.

Well luckily my son usually wants to go to the same place, a kids activity center. We go there so often that we purchased a one year membership which has already paid for itself.

After the activity center we went to our usual restaurant where my 3 year old gets his usual meal. I often get food there myself but this time I just got a drink (well specifically I shared a drink with my son) and it was actually fun. I didn't really miss eating there and I just grabbed a bite as soon as we got home.

Another thing is that I'm getting together with friends this weekend. We often try to meet for lunch or dinner but due to our schedules we were only able to get together around 3PM so we're going to meet for coffee instead.

I realized that this was a great way to get together and save a few bucks. Instead of a full meal I'll just be getting a coffee. I still get to sit and chat with my friends, which is the real point of getting together anyway.

So far the 'pretending you're broke' experiment has been a really good experience.

Pretending You're Broke

noreply@blogger.com (Paul) — Sat, 01 Oct 2011 06:17:00 +0000

Posted By Paul

Like many families, my family is contantly savings towards various goals, and one thing we've decided to try recently is the "Pretend You're Broke" strategy.

We're not doing the super crazy version that I've heard of where you go to churches and other places in order to get food donated for the needy (which is not only extreme, but it seems the worst kind of immorality unless you actually are in dire straits), or where you steal office supplies from work or stop tipping servers (also not cool). Instead we're just going to try to take a month or two and pretend that we're broke as a way to manage our spending and really get a leg up on our savings goals.

For example, now whenever I consider buying a new book/dvd/etc., I ask myself: "Would I buy this if I lost my job and was trying to get by on unemployment?" Most of the time the answer is no, and so I just pass on the purchase or try to find a cheaper alternative.

A few things that have come out of this experiment are:

-My family is eating out less. We still dine out with friends occasionally, but we rarely do the "let's go the restaurant because it's quicker or easier" thing. It helps that we have a small child since in many ways eating at home actually is the quickest and easiest option.

-It's kind of fun to try to come up with cheaper alternatives when it's voluntary. Choices that would be depressing if they were a necessity become empowering when they are done voluntarily.

-We find that with a little one there are often cheap alternatives that the child actually prefers. Our little one is now at the age where he can actually say what he would like to do. I am often amazed at how instead of the pricier things to do (the zoo, child activity center, etc.) he will often pick things that are incredibly cheap or free (like he will want to go to the park, or once he wanted to go to CostCo and watch the tire center put the new tires on cars).

-Some of the things we've tried might become permanent parts of our life. We've discovered that cutting back on restaurants is a sacrifice we are happy to make when in return we get to make improvements to our house or put money towards a trip.

If you find yourself wanting to try to save a little extra money for something, try taking a month and pretending you're broke. We've already learned from the experiment.

Article: 8 signs you're flirting with financial ruin

noreply@blogger.com (Paul) — Thu, 29 Sep 2011 05:48:00 +0000

Posted By Paul

A cool little article. It listed 8 signs of financial ruin.

I thought the 8 signs they listed were good ones and I was happy to see that none applied to me.

I especially liked the signs that they listed like paying late fees on your bills or having bounced checks. The signs that aren't disastrous in themselves but serve as early warning signals of big problems to come.

Here is the article:

8 signs you're flirting with financial ruin

A Dry Run For The Budget

noreply@blogger.com (Paul) — Sun, 18 Sep 2011 04:15:00 +0000

Hi Everyone,

Sorry that I've been out of touch for so long, other aspects of the summer have kept me so busy that I haven't been able to post.

One new item in my world is that with a small child I've been thinking a lot about how to prepare for the future and possible expenses looming on the horizon.

For example, my kid isn't even school age yet, but I often wonder if private school might be something we'd want to look at sometime during his education (or if it's even something we could afford).

So as an experiment I did a quick estimate of what private school tuition costs per month (which by the way is very difficult since they seem to vary quite a bit) and I took that number and invented a monthly 'bill' for that amount.

So on the first of the month I take that amount and pretend to pay that bill. I actually take the money and just move it into a savings account that I created specifically for this purpose.

My hope is that this experiment will do two things:

1- It will give me an idea of how much adjustment it takes to cover this kind of bill every month.
2 - The money itself goes into a savings account that I can use for whatever (including giving me a head start on any future education costs).

It really is just an experiment to see what my family can reasonably afford and what kind of sacrifices we need to make in order to afford it. This helps me get a handle on large expenses that might be coming in the future and mentally prepare for these choices.

Article: Conspicuously Thrifty

noreply@blogger.com (Paul) — Mon, 27 Jun 2011 04:31:00 +0000

Posted By Paul

There was an article today on the Dollar Stretcher that really resonated with me because it reminded me of one of my very first Frugalize posts (here is the post from several years ago):

Conspicuous Consumption Gone Wrong

I still struggle with the idea of trying to wave the flag of frugality in a world that seems to focus so much more on showing off what you have (whether or not you can actually afford it).

One thing I have noticed is a definite change of attitude since our economy hit a slump. There seems to be a greater appreciation for stretching your dollar. However, I'm disappointed to see a focus on ways to still have a luxurious lifestyle while stretching your dollar, as opposed to the idea of trying to live a simpler lifestyle in general.

I suppose that's no surprise since the most common way I hear about the economic slowdown is in ads that are trying to encourage me to keep spending lavishly despite the situation.

The Dollar Stretcher article was great in that people suggested ways to be proud of their frugality without being overbearing. Several people said how frugality goes hand in hand with modesty, which I thought was a very nice point.

I liked the idea of being 'transparent' where you don't shout your accomplishments from the rooftops, but you do discuss your choices honestly when they come up in conversation.

Also, one of the comments specifically mentioned the book: "The Millionaire Next Door" which I read and reviewed in one of my first posts here:

Review Part 1: The Millionaire Next Door

One thing I have noticed that makes conspicuous thriftiness much easier is having a peer group that also views frugality and savings as something to be admired. I have two really good friends and we're all very practical when it comes to money and spending. It's great having friends who also consider living within your means to be a virtue. We don't try to "out miser" each other, but we also don't enable bad financial behavior.

I've seen people whose peer groups are all terrible with money, and they constantly encourage each other to overspend. It's like each person in the group serves as the "devil on the shoulder" for someone else. Always ready to provide a handy rationalization for a bad financial decision.

I'm sure that if you surround yourself with people who overspend it must feel very awkward to be the one person trying to live a frugal lifestyle.

Anyway here is the full article:

Conspicuously Thrifty

I Saved Some Money on a Keyless Entry Remote

noreply@blogger.com (Paul) — Tue, 21 Jun 2011 04:43:00 +0000

Posted By Paul

We have a car with keyless entry, and the remote started to wear out (not just the battery, but the actual buttons). It still worked, but you really had to push hard on the worn out buttons and it would often take two or three tries, so I decided to replace it.

I called the dealership to see what it would cost to get a new one, and I was told they cost about $150 each!

That seemed like a lot, so I decided to look around on the internet. I ended up here:

http://www.keylessride.com

It said that they could send me the correct remote for my car along with instructions on how to program the car to accept it. Since the price was much better than the $150 I had been quoted from the dealer, I decided it was worth a try.

I felt a little more confident when I entered the year/make/model of my car and the web page brought up a picture of a device that looked EXACTLY like the remote I had. I ordered one and received it fairly quickly.

The instructions had quite a few steps (a lot of insert the key, remove the key, etc. to put your car into 'learning mode'), but they were clear and also included tips in case you have trouble. I had my new remote programmed in just a few minutes.

I was even able to keep my old remote valid so now I have a spare. So instead of $150 the new remote was about $40. I will DEFINITELY use them again the next time I have a worn out remote and need a new one.

Article: Confessions of extreme penny pinchers

noreply@blogger.com (Paul) — Fri, 17 Jun 2011 04:12:00 +0000

Posted By Paul:

There was an article on CNN money that I thought was interesting. Here is the link:

Confessions of extreme penny pinchers

In particular I was intrigued by the 8th entry in the article where parents have their 3 kids taking turns picking the restaurant and paying for the half the meal while on vacation.

On the one hand it seems pretty extreme, on the other hand it is a great way to make the financial impact of eating out seem real to your kids.

My parents did something similar to me when we went on vacation. I had an allowance when I was pretty young, but sometimes for vacation my folks would give me a little extra spending money. They gave me the extra money at the start of the vacation with the condition that it was for the WHOLE vacation and it was mine to spend on any souvenirs or snacks that I wanted. I didn't have to pay for meals, but snacks and treats came out of my own money. Any money I didn't spend was mine to keep.

A similar idea, and overall I thought it was a good thing. It kept me from constantly having to beg my parents to buy me a churro/soda/balloon and I remember feeling very grown-up about being able to pick out and buy my own souvenirs. I remember that it was fun trying to find that "perfect" souvenir to buy, plus I think it was more pleasant for everyone to not have me running up to my folks every 10 minutes to beg for a quarter for a video game, or to buy me a lemonade.

I even remember once at a fundraising school fair when that I went to that my mom gave me $3 to buy "tickets" to play the different little games. At one of the booths they were selling plants for a dollar each. I remember thinking: "Wow, a dollar for a plant seems like a good deal, and I can plant it in the yard and enjoy it for a long time." so I bought one.

I remember my Mom being surprised and amused to see this 8 year old coming back with a potted plant and saying how it seemed like a much better deal than the carnival games.

Anyway, the article is worth a read.

Enjoy!
-Paul

Article: 10 ways to fight frugality fatigue.

noreply@blogger.com (Paul) — Thu, 05 May 2011 04:22:00 +0000

Posted By Paul

I saw this article that I liked because it focused on the psychology of frugality and saving, that it is just as much of a mind game as it is a number's game.

The general theme of the article reminded me of an earlier Frugalize post:

Crash Budgeting

Here are a few entries from the list with my added thoughts:

1 - Don't set goals too high: I see this one in so many places. People go from excessive spending to a super-frugal lifestyle, and they try to do it 'cold turkey'. More often than not they can't handle the dramatic change and they fall into their old patterns.

4 - Know your motivational style: This is a great point. I've talked to people about saving strategies and run into situations where their strategy would drive my crazy and vice-versa. It's important to find a system that works for you.

7 - Find a money buddy: This one is great. It is SOOO handy to have a person that I can discuss money items with that has similar goals to me and that can give me an objective opinion without their own agenda (i.e. my money buddy isn't trying to sell something).

9 - Go public: Obviously I like this one since it was what started this whole blog in the first place.

Here is the full article:

10 Ways To Fight Frugality Fatigue

Article: 10 Reasons You Aren't Rich

noreply@blogger.com (Paul) — Tue, 05 Apr 2011 03:15:00 +0000

Posted By Paul

A little article on mistakes people make with money. A nice summary of how different people view their finances and the pitfalls associated with them:

10 Reasons You Aren't Rich

A Proud Frugal Shopping Moment

noreply@blogger.com (Paul) — Tue, 29 Mar 2011 05:04:00 +0000

Posted By Paul

There have been several articles of how you can save money by purchasing things used. I wanted to share a recent outing where I really saw that philosophy in action.

It all started with wanting to get my kid a jigsaw puzzle. He's only 2 1/2 years old so I was looking to find one with at most 25 pieces (preferably big pieces that were durable).

I went online and found a puzzle that looked great. It was a 20 piece puzzle and had nice thick pieces made of wood.

The problem was that the puzzle cost over $20 (and that didn't include shipping). Even though the puzzle seemed to be just what I wanted it seemed a little pricey for something my kid would outgrow in a year or so.

So coincidentally that evening my wife and I had planned an errand that took us near a Goodwill store. I decided to postpone my online purchase and see if the Goodwill store might have something that would work for me.

We totally hit the jackpot, there were stacks and stacks of kids puzzles. We ended up buying one large piece floor puzzle, two 'puzzle packs' (each pack had 4 puzzles of a dozen pieces each), a 15 piece Winnie The Pooh puzzle, and finally a Lite-Brite that we happened to see.

For ALL of the above we paid $12. So not only did I pay half of what the online order would have cost me but instead of getting one puzzle I actually got 10 (plus a Lite-Brite).

I'm going to have to try to be more aware of when I am looking for something that might be easily found at a Goodwill or other secondhand stores. Buying used is ESPECIALLY good for toddler toys where he will inevitably either outgrow or destroy the item.

Article: 5 Things You Should Buy Secondhand

noreply@blogger.com (Paul) — Thu, 24 Mar 2011 04:00:00 +0000

Posted By Paul

Here is a link to an article listing 5 things that you should always try to purchase used if you are trying to save money:

5 Things You Should Buy Secondhand

A Little Household Frugal Tip

noreply@blogger.com (Paul) — Sun, 27 Feb 2011 06:18:00 +0000

Posted By Paul

A nice little household frugal tip that I read on the Dollar Stretcher:
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Whenever you open a can of fruit, instead of pouring the liquid/juice down the drain, save it in a salad dressing type container. Then add some balsamic vinegar, extra virgin olive oil, and spices to your liking to make a delicious salad dressing.

I also use it for braising meat, such as pork or chicken, and it makes the meat so much more flavorful. The store bought fruit flavored salad dressing can run about $4. You can make your own for a fraction of that. Enjoy your own gourmet salad dressing!
Krys in WA
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I thought this was a cool idea since our little one has taken a liking to canned fruit so we've been buying quite a bit recently. Seems like a good idea to use the juice for something instead of just pouring it down the drain.

Diversification In Action, Another Plug For Tracking Net Worth

noreply@blogger.com (Paul) — Sat, 19 Feb 2011 05:24:00 +0000

Posted By Paul

Long time readers of Frugalize will know that I watch my net worth very closely. (see a posting from 3 years ago tracking your net worth)

One thing I didn't mention in that article was that another advantage of tracking your net worth is that you automatically get an idea of how diversified you are (or aren't), and how that's working out.

About 7 years ago I started noticing that A LOT of my net worth was in real estate (i.e. my house). That was to be expected in that my house (like many houses at the time) was growing in value quickly. As my house became more valuable it became a bigger and bigger part of my total net worth. My other investments were doing fine as well, but they just couldn't keep pace with the crazy real estate market.

My reaction to this was to make it a point to focus more on OTHER types of savings. I wasn't someone who thought that real estate was going to just keep going up forever, so I decided I didn't want to have too much of my net worth tied up in real estate. Instead I focused on my emergency fund, and other types of investments. They weren't quite as exciting as the real estate market at the time, but I figured that since I'd already gotten a piece of that I didn't need to put all of my eggs in that one basket.

So today I realized one consequence of this choice was that in the last year or so my net worth has been tracking steadily up, even though the value of my home has been steadily trending down (Of course knowing the value of your home is always tricky, but I just use zillow for simplicity, and figure it is at least in the ballpark).

So even though my house is losing value, overall my net worth is continuing to grow. This is a direct consequence of having made other investments years back that offset the cooling real estate market now.

It's nice to know that my net worth isn't completely driven by the value of my home.

I think I'm going to stick with this strategy of always trying to stay diversified. I get a piece of every boom, and of course every bust as well. Thanks to the fact that I track my net worth I can honestly say that so far the strategy is working for me and overall I'm coming out ahead.

Making sure my relatives have their wishes followed.

noreply@blogger.com (Paul) — Fri, 11 Feb 2011 05:45:00 +0000

Posted By Paul

First of all sorry that I've been out of touch for so long, for the longest time I felt like I was so busy with stuff that I didn't have time to come up with a topic for this blog, but then I realized that a lot of the stuff I was dealing with was COMPLETELY relevant to this blog.

Also, sorry for the lame title of this posting, I couldn't think of anything clever.

Anyway, one of my new year's resolutions was to make sure that I knew my role when it came to my older relatives (parents, aunt, uncles, etc.) and their health directives. In particular I wanted to go to each of my CLOSE older relatives and ask them:

1) Did they have someone designated to make medical decisions on their behalf if they were medically incapaciated.

2) Did they need me to serve in that capacity in any way.

3) If so, then did they have a living well or any other info they could give me to make sure I knew what their wishes were.

It wasn't the easiest conversation to have because it's never fun to talk about these sorts of scenarios. I didn't want it to sound like I was sniffing around for an inheritance so I made sure to focus on HEALTH decisions (since I really have no expectations of inheriting money from anyone).

In some cases I was surprised to discover that my older relatives thought that I meant funeral arrangements, they'd say something like: "Oh, I already have a plot reserved." or something like that.

When I explained that I was more wondering about if they were in a coma or something and needed someone to make medical decisions for them, some of my relatives would just say: "Oh, just do what the doctor says." or "I don't want to be kept alive by machines." and figure that this was sufficient.

In cases like that I had to push my relatives a bit since telling me the info doesn't help if I'm not the person designated to make the decisions, and of course if I AM that person then I want more specific info as to their wishes.

I told them that if they had already designated someone else that was fine (even better than fine since it's not like it's a duty I look forward to), but if not, then I wanted to make it clear that if they wanted me to be that person then I wanted them to fill out a living will (and give me a copy) so that I would be able to follow their wishes if the situation came up. The last thing I want is to get an emergency call where I need to make a medical decision on behalf of a relative and have to guess at what to do or (even more frustrating) to know that they have a living will but it's somewhere in a drawer or safe deposit box where I can't get to it.

Also, with some of my closer relatives (specifically my parents) I also broached the subject of financial matters. For example I'm already a joint account holder on the bank accounts of my parents. I don't do anything with their accounts but it is good to know that if some emergency came up that I could access their accounts. This is especially good for piece of mind since my parents travel. It's good to know that if they were stuck somewhere and needed me to wire money for an emergency that I can just walk into a bank and help them out.

I'm also talking to my parents about setting up power of attorney, but I'm still working out some of those details. I hope to learn more about what I need to do in the near future as my wife and I are going through and getting all of our estate planning setup as well.

If anyone out there has been through this and is willing to share, I would appreciate any suggestions that people have.