Two months ago we decided to pull the plug on daily delivery of the local paper, after having been a subscriber for 29 years. We kept the Sunday paper for the bonus features and advertising supplements. For the rest, we concluded that everything we needed we could read online at the paper’s website - for free.

The paper didn’t really push back hard when we downsized our subscription. Based on recent trends, it was probably relieved that we at least kept paid Sunday delivery.

However, they called Mrs. ToughMoneyLove back a few weeks later with a new proposal: Would we like to receive the Monday through Saturday papers also? “No” she said. “We had already made that decision and it was way too soon to change it.”

“Wait” they said. “We mean for free.”

Yes, the local paper wanted to give us for nothing what we had been paying for over the past 29 years.  My wife figured - why not - can’t hurt except for a few extra trees. “How long?” she asked. She was concerned that this was one of those “try it free for a month then we start charging you again” deals.

“For a full year” they said.

Wow.

When I heard this, I tried to figure out the rationale. All I could come up with is this. Because we are a paid subscriber for one day per week, the paper was permitted to count us as a daily subscriber for purposes of ad rates, as long as we were willing to accept daily delivery. In other words, whatever revenue the paper lost from our subscription fees, it could compensate for by maintaining its subscriber base at a higher lever for presentation to potential advertisers.

Desperate but perhaps an effective marketing strategy in desperate times.

I feel bad for some print newspapers, having been overtaken by online media and a general dumbing down of the populace.  Most traditional publications are trying to find a profitable spot in the online world. But that requires a complete rework of what they write and how they write it.

So now we have the morning paper again. And yes I am at least scanning it every day. The paper has shrunk dramatically. I suspect that it will eventually shrivel up completely and die, along with much of our traditional culture. What replaces it - such as endless online blather about celebrity escapades and death - is not much of a trade-off. It’s too bad that the area in which I read the most - business and personal finance - receives the least attention in the paper. That tells you something about why we are financially illiterate as a national consumer group.

I’m curious if any of you have come across desperate marketing measures comparable to this?

These semi-radical developments in the business world also make one wonder about the nature of changes we will need to make on the personal finance level so as to survive and prosper in a changed financial world.

I am off to my 40th high school reunion tomorrow so you probably won’t be hearing from me again until Monday. Wish me luck as I step into the wayback machine! While I am away, take a look at this week’s Carnival of Personal Finance.

Photo credit: David Reece

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But it is now clear that the fallback funding strategy favored by many Democrats in Congress is “tax the rich.”

Here are many of our wise Congressional leaders lined-up together. If you have money - they want it. Can you see it on their faces? Somber and intense. When it comes to taxes, they don’t fool around. (Photo credit:  WSJ)

Many people don’t seem to like the rich. Many in Congress seem uncomfortable being rich while others are not.

There are also different opinions on who qualifies as being “rich” such that they should be paying for health care and other benefits for everyone. Small business owners are in for some serious trouble according to the House plan. I fear for the employees of small businesses that are forced into providing benefits they cannot afford.

For those who are embarrassed about being rich, I have a practical suggestion. Instead of projecting your feelings onto others by taxing them, just surrender your own wealth to the government to distribute. (That means you, Ted Kennedy. After all, the only thing you did to acquire your wealth was to be born into the right family.) That solves two problems. You purge yourself of wealth-guilt while saving the government the trouble of creating new wealth-targeted taxes.

If the government continues its trend of refusing to say “we cannot afford that”, the taxpayers - the “rich” included - will be stretched to the breaking point. Recent estimates are that only 47% of tax filers for 2009 will pay any federal income taxes. Is it sustainable for 53% of us to pay the costs of uncontrolled government spending for everyone?

At this point I’m not sure what will happen if the rich (and not so rich) “break” under an increasingly large tax burden. Tax revolts don’t work because you get put in jail. Some of us who are closer to retirement may accelerate our plans, because continuing to work will bring diminishing returns all the way around. Indeed, if the new plan provides part-timers and the non-employed with affordable health care options even before Medicare eligibility at age 65, who knows what might happen to fed-up, late stage baby boomers?

Or we may all just reluctantly trudge along with pre-Reagan era marginal tax rates.

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First I will concede that the title of this post - the “dirty” side of frugalism - is literally accurate but somewhat misleading. I’m not offering up celebrity gossip or stories of crime and deceit.

Instead, I’m going to tell you about my visit to the local dry cleaner. But stay with me - it’s relevant.

Being employed in a somewhat conservative profession, I reluctantly pay to have some of my shirts and other clothes professionally cleaned and pressed. I don’t like it and do the least I can get away with, thereby earning Mr. ToughMoneyLove the title of worst-dressed attorney in my firm.

One of the habits I have developed since the economic crash of 2008 is to ask small business owners I encounter how things have been going for them.  I popped that question this week on the nice Korean-American owner of a local dry cleaning business. Based on the demographics of the community in which we live, my prediction was that she would tell me that business remained steady.

I was wrong.

She told me that her cleaning business had fallen off  ”due to the economy.”

Before I analyze that statement, I have another confession to make.  I had been cutting back my use of cleaning services even before 2008. First, I intentionally buy and wear fewer clothes that require professional cleaning. Second (and this is going to sound bad), I sometimes wear a shirt twice before taking it to the cleaners. Yes, I am a cheapskate. I try to be selective in which shirts I recycle through the closet. I do have minimal sensory standards, if you get my drift. So far so good. No one has complained to my face.

Back to the owner of the dry cleaning business. Why would her business drop off in an upscale residential area? Are folks working less? Or are they like me, wearing clothes longer before cleaning them?

I’m thinking the latter. Being frugal and saving money in a tough economy means tolerating a little extra dirt for a little longer. And there is nothing wrong with that. I can tolerate it if you can.

The question is:  When things get better, will we get cleaner? Or will the dirty side of frugalism stay with us? I think that service businesses like dry cleaning should adjust to a permanent decline in business. There’s nothing like actually doing without something temporarily that will teach a consumer that you can do without that something permanently.

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The theory is this. For some products, it can make more financial sense to spend extra to buy higher quality because it will save money over the long term. By “higher quality” I am not referring to more bells and whistles. In this spending category, I’m referring to design and build quality that can extend the useful life of the product.

I’m thinking that the traditional backyard grill may be one of those products.  I’ve owned plenty of them.  Father’s Day brought me by far the most expensive and presumably highest quality grill ever - a stainless steel and aluminum Weber gas grill. I think the extra cost will be worth it. Actually, I think this grill may be the last one I will ever buy. Let’s hope so.

I took my new grill to our Kentucky lake home, which I anticipate we will own longer than our present Tennessee home. The grill I had up there still functioned, but being a low end grill at six years of age, it was in a state of rapid decline.

The grill at our Tennessee home was 15 years old and no longer operational. It was a high quality natural gas grill when purchased in 1994. Recently it developed gas leaks that are safety problems. Since I had already replaced the burners once a few years ago and rust was starting to generally take over, I determined that the wisest course of action was to send that old grill to the grill graveyard. I brought the old bargain grill from the lake back to Tennessee in an attempt to squeeze another grilling season or two out of it.

My trip to the dump (actually a county “convenience center”) was interesting. The dumpster designated for metal trash had at least three other grills in it. In fact, I see grills scrapped almost every trip I take to the convenience center. I’ve never seen a stainless steel Weber grill in there. That’s a good sign.

Products like grills that are kept outdoors and operate at high temperatures are perfect candidates for the “buy quality” strategy. Durability of such products can closely correlate to the quality of materials used. Higher quality materials will last longer and of course will cost more. With a little extra attention paid to protection and maintenance, it is logical to believe that you will receive an excellent long term return on your larger initial investment.

There is one more component of the “buying quality” theory that some folks overlook. Spending a lot more to buy more quality makes the most sense for products that you use a lot. I grill almost every night when we are at the lake in good weather so the usage factor is there for spending more. As a counter-example, it would not make economic sense to buy a high end power tool that you are going to use once a year or less.

So that’s my “buy quality” story for backyard grills. What are yours?

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Net Worth

During the second quarter, our net worth increased 4.7%, which I am satisfied with, given the volatility of the markets. We continue to increase our cash position in anticipation of possibly changing our overall retirement investing strategy. I am reading but have not yet finished Zvi Bodie’s book on Worry Free Investing. I am a long way from pulling the trigger on an ultra-conservative investing strategy of the type that Bodie suggests but it is definitely on the table for consideration. Many of the investing “rules of thumb” have truly become “rules of dumb.” My job is to identify those “rules” that still make sense and those that should be discarded completely.

Investment Performance

Our year to date return on all investments (also known as our internal rate of return) stands at +6.6%. That compares favorably to the year to date performance of the Dow (-7.18%) and S&P 500 (-2.67%). Interestingly, the NASDAQ is up 11.35% YTD.  I suppose that’s what happens when folks are optimistic about certain tech stocks while financials continue to burden the broader indexes.

Another investment category I am following with curiosity is gold. The GLD ETF is up 3.54% for the year but down 4.4% in the last month. Once again, there is little to be learned from these numbers except that emotion appears to drive gold performance as much or maybe even more than stocks. If a nuclear event were to break out, I’m guessing GLD goes sky high. But who wants that?

OVerall, recent market trends are negative. I think it is clear that most of our managers of the economy have misjudged conditions, something Obama and Biden are now openly acknowledging. Investors are reacting accordingly, around the world. The predictions on whether deflation or inflation is in our near future are inconsistent.

All the more reason to take a close look at Bodie’s ideas. More on this later.

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The entire IOU scene is hilariously chaotic. Almost immediately, Craigslist became a market for trading IOUs at discounted values. Then the feds step in and declare that California’s IOUs are actually investment securities that are subject to SEC oversight. I suppose that if this goes on much longer, the Obama administration will have to create a new regulatory bureaucracy for “securities” issued by deadbeat state governments. An appropriate name would be the CUSC or the  ”Completely Unsecure Securities Commission.”

I feel bad that I am singling out California state politicians for criticism. After all, the local politicians are equally inept. Case in point: Los Angeles is also broke yet ponied up $1.4 million to help “celebrate” the life and death of a drugged-up, self-mutilating entertainer. Can things be any more ridiculous? Can a tax-funded “Whacko Jacko Memorial Park” be far behind? This is what happens when the entertainment industry runs things. Maybe they should declare the entire city “Neverland” and sell admission tickets to everyone who enters.

Do I feel sorry for Californians? Nope. Most of them voted for the fools of finance that run state government. Others are too [insert negative term here] to leave the state and find a more rational environment in which to live. Or maybe they love the exhilarating feeling of wondering when the next wild fire or earthquake will break out. Perhaps they are concerned that Mexico will take over what they leave behind. Wait - isn’t that happening already?

I know and respect a number of folks who live and work in California. I just can’t figure out why they stay. It’s going to get worse and they have options. Oh well. I suppose its none of my business, as long as the federal government resists the call to bail out the state’s finances. In my book, California is not “too big to fail.”

Image credit: Mr Jaded

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Upon my return to the working world, I had to dispense with the idea that I could remain in a cell phone free life. I won’t bore you with all of the reasons but here is a biggie: I have a few important clients who have become accustomed to calling my cell phone at random times. Cutting them off would be bad for business. ‘Nuf said.

So I took a trip to the AT&T store to have them confirm that my three-year old phone with the weak battery was in a terminal condition. It was.

The Spending Temptation

At that point it would have been very easy for me to utter the magic words “iPhone 3GS,” plunk down $300, and be done with it. My wife owns an iPhone and loves it. It now has decent integration with our firm’s network resources, and has all of those cool “apps” available. Believe me - I was tempted. But I decided to look at other options. I gathered information at the AT&T store and then headed to Best Buy. They have most of the phones that AT&T sells and often has deals that are better.

I found a touch-screen LG phone on sale - for $50 - that was very similar to my deceased phone. It was a Windows Mobile device just like my old phone. It integrated 100% with our firm’s network and application resources, even better than the iPhone. It was smaller, had full voice commands (which I love), pocket versions of all Office applications, and integrated WiFi and GPS. It was not as “cool” as the iPhone and no gigantic “app store” was available. But I had done fine for three years with a Windows Mobile phone. Did I really need to spend an extra $250 to have access to features and apps I didn’t actually need in my pocket?

Before I finally answered that question, I asked the Best Buy sales person to power-up the LG phone so I could test it. Alas, they had none in stock. I had to leave town on business the next day. Was this yet another a sign that I should pull the trigger on the iPhone?

The Spending Decision

Again, I resisted the temptation. I dropped my SIM card in an old flip-phone that my son had used until the display failed. But I could place and receive calls with it. It bought me some additional time to resist the temptation of the iPhone.

Upon my return, I visited another Best Buy that had the LG phone in stock. I tested it and found it acceptable. For some applications, a stylus would be required but I am used to that. I bought it and put it right to work. Had it synced up to my office in ten minutes. So far, so good.

Does part of me still wish I had an iPhone? Sure, the gadget freak part of me does. But I believe I made the right call.

When making a spending decision for a product like a cell phone, it seems you have several choices at the interface of behavior and personal finance. In this case, the choices might be: (a) proudly telling yourself (or your friends) about having bought the latest $300 iPhone with access to 250 cool apps; or (b) proudly telling yourself or your friends that you found a $50 phone that has everything you need plus you have $250 leftover in your pocket. I resisted the temptation of (a) and chose (b).

If you are an impulse shopper (which I try not to be), you never really consider (a) or (b) at the pre-purchase stage. You buy now and maybe later you start thinking about it. That rarely works.

Finally, I need to throw a quick shout-out to son #1 for recently having made a similar decision. He is also a gadget guy and really wanted one of the new iPhones. Instead, he found a fully featured phone offered by Amazon - for free, with service activation. He resisted and saved big. Good for him. We need more of that discipline at all stages of our lives.

Do any of you have similar stories?

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