This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Thursday, December 20, 2007

In search of the frugal bulb

Posted by Matt

Here is yet another post inspired by the recent energy audit. One of the bonuses that came with our audit was a set of free compact fluorescent bulbs. We received three of the spiral bulbs to put in the pendant lights over our kitchen island and three enclosed floodlights in our foyer.

I was initially excited when I read we would be getting these with the energy audit. CFL's use less than the quarter of the power required by an equivalent incandescent (reducing electric bills) and they can last ten times as long (reducing replacement costs). From the CFL Wikipedia article linked above:

"A household that invested $90 in changing 30 fixtures to CFLs would save $440 to $1,500 over the five-year life of the bulbs, depending on your cost of electricity. Look at your utility bill and imagine a 12 percent discount to estimate the savings."

BUT....then I found out that the CFL's do have a few significant drawbacks:

  • The CFL bulbs are dim when initially lit and get brighter as they heat up. They probably reach maximum brightness after only a few minutes, but this does make them a poor choice for the foyer. We typically flick those lights on when guests arrive or when we are on the way out the door, so we often only see them as dim. Also, [from Wikipedia] "The life of a CFL lamp is significantly shorter if it is only turned on for a few minutes at a time: In the case of a 5-minute on/off cycle the lifespan of a CFL can be up to 85% shorter, reducing its lifespan to the level of an incandescent lamp. The US Energy Star program says to leave them on at least 15 minutes at a time to eliminate this problem." So much for the foyer bulbs.
  • The CFL's contain mercury, so they can't be thrown in the garbage. Our energy auditor instructed us to take them to a local recycling center. Also, if they break, you have to be very careful with the cleanup (use damp paper towels instead of a vacuum and seal everything used in plastic, THEN take to the recycling center).
  • The light quality is just not quite right. We figured having the CFL's in the kitchen would allow us to maximize our energy savings as those are the lights we most frequently use, but their high usage level also means we want the best light quality possible.
  • Cost wasn't an issue for the initial set, but they are slightly more expensive than regular incandescent light bulbs. This was the least of our concerns as their longer service life reduces their effective cost.

So, I haven't exactly been won over by the CFL's yet, but I'm in no hurry to remove them either, so I am saving some money there. If nothing else, hey, free light bulbs.

Just before we had the new CFL's installed, I read an article about LED bulbs. These sounded even more promising than the CFL's! They are solid-state (meaning MUCH less fragile), turn on instantly to full brightness without flicker or hum, produce no heat, use 1/3 the electricity of CFL's and last 5-10 times as long. AND, no mercury. I found the bulb recommended by the magazine online and read the manufacturer's claim that this bulb would save me $450 over its lifetime. Good thing, too, because the price was $99 "on sale".

Everything I'm reading about LED's indicates that they are the future of lighting (plus, it looked so COOL), so I decided to put up the money to see for myself. I ordered a bulb.

Now, before I give you the results of my experiment, I must admit that the manufacturer does not intend this particular bulb as a replacement of the standard incandescent bulb used in most home applications. It produces a directed white light, which I could have tested better with a desk lamp (if I had one). When I received it, I put it in one of the kitchen pendants to compare with the overhead incandescents and the CFL's in the other pendants. In comparison, the light was very cold and bluish. Just for fun, I also tried it in a lamp and the pictures show the difference (incandescent on the left):

If you haven't guessed by now, we did end up sending this bulb back. However, I did so very reluctantly. I'm so impressed with the light bulbs efficiency, and durability is always a big plus for me, but I'd like to find a bulb with light quality that is better suited to our applications, and also wait for the prices to come down before committing to upgrading the whole house.

One final point that I want to make on behalf of both the CFL's and LED's is that they will be especially important as enabling technologies. Right now, there are a lot of alternative energy options available (e.g., solar, wind, etc.) that are still maturing to the point where they can handle all of our modern energy needs. Reducing our energy requirements by using these new types of bulbs has the potential to make alternative energy sources feasible much sooner.

The future is bright!

Wednesday, December 19, 2007

Daycare Flexible Spending Arrangements

Posted by Matt

My wife Leah and I went through our companies annual enrollment process recently and found that we had a new option to evaluate this year: the Dependent Daycare Flexible Spending Arrangement (aka Daycare FSA). If you aren't familiar with these, they are essentially an account that you automatically make pre-tax contributions to via payroll deduction and then claim reimbursements from when you incur daycare expenses.

Daycare is a significant expense, even though our son only goes three days a week and we have him in a home-based center instead of one of the larger "institutions" like KinderCare. Quick aside; the home based daycare:

  • has two care providers and only about 5 or 6 kids, which is a much better ratio than we found at the larger centers
  • offers three organic meals a day plus snacks
  • has a crib or bed for each child in a dark bedroom away from the play area
  • offers "Parent's Night Out" on some weekends, so we don't have to find a babysitter and our son can be in an environment he knows. It is fun for him, too, as the kids usually watch a movie and eat a special dinner (breakfast food, pizza, etc.)

All these great features and more mean that our daycare dollars are money well spent, but it is still a lot of money. Even at three days per week, the cost would exceed the $5000 annual maximum contribution for an FSA, and our son will probably switch to full time next year, so we'll appreciate the tax break.

There is also a federal tax credit available for dependent daycare expenses, but expenses paid via the FSA can't be claimed for a credit, so we had to go through a worksheet to figure out which was better. The one we used is proprietary to my company, but you can easily find similar worksheets online (click here). Essentially you have to calculate the tax benefit for each option and take the larger of the two. Make sure you have last year's tax forms available as the calculations require you to know things like your tax bracket and adjusted gross income. I also found a nice rule of thumb:

As a general rule, if your adjusted gross income (AGI) is more than $ 14,000, the Dependent Day Care FSA may provide greater tax savings.

We determined that the FSA was our better option and decided to set aside the full $5000. We'll probably spend more than that and I believe that we will be able to claim the tax credit for those additional expenses. I should note here that the money set aside it "use or lose" for the designated year, so be careful when determining how much to set aside. (In 2005, this was softened somewhat with the addition of a 2 1/2 month grace period to carry over unused money to the following year.)

We signed up through my employer, though the plan from my wife's employer was fairly similar. Starting in January, my take-home paycheck will be reduced in order to fund the FSA. As we make payments to the daycare, we just have to submit a claim form (with receipt) for reimbursement. The reimbursement is done via direct deposit, which is nice.

If you have children in daycare (care for senior dependents living at home is also eligible), definitely consider this option. It just takes a little effort to submit the claim forms, but the savings are definitely worth it. I did the calculations on scrap paper, so I don't have the exact number, but I think our projected savings from using just the FSA will be about $1600.

Tuesday, December 18, 2007

Article: 6 Money Dilemmas

Posted By Paul

Found a cool article on CNN Money today that listed some of the classic "which should I do" scenarios and gave suggestions and information.

The six scenarios the article talks about are:

1) Pay off a credit card OR fund your 401(k)

2) Save in a Roth 401(k) OR a regular 401(k)

3) Lease a car OR buy a car

4) Prepay your mortgage OR invest

5) Buy a home OR rent a home

6) Take Social Security early OR late

Here is the link to the article:

Six Money Dilemmas

How does your family control spending during the holidays?

Posted by Matt

I just read a great article from Bankrate about de-commercializing the holiday season. Not only are they helping readers save money, the tips have some other nice side effects like making families spend more time together.

We've used several of these suggestions in the past, and I wanted to share my favorites.

  • Secret Santa - we do this with my immediate family and also with groups of friends. I really like the fact that you don't have to try to come up with something for every person and you can instead really focus on finding a present that your "assigned" person is going to love (even if it costs a little more because you aren't spending so much money trying to get a gift for everyone). We usually make the name draw part of the Thanksgiving holiday and young children are excluded, meaning they get gifts from everyone.
  • Spending limit - we do this in conjunction with Secret Santa, but it can also be used if you are buying for large groups. If the limit is set appropriately for the group, it can prevent situations where one person feels guilty for receiving a very expensive present from someone for whom they just bought a candle. I personally think that the whole mental process of deciding whether you are spending "enough" on a person's present is one of the craziest parts of the holidays.
  • Family outings - memories last longer than gifts. Take the family out to dinner, to a movie, or even up to the mountains for a ski trip.

Friday, December 14, 2007

Using our state tax rebate (kicker) constructively.

Posted by Matt

The kicker checks have arrived! In my original post about kicker checks, I indicated that I was planning to put my check into a Roth IRA. I then changed my mind about starting a Roth IRA at all, so what am I going to do with the money?

I wish it were up to me. Truth be told, the money was budgeted for spending before it ever got here, but I thought it would be worth listing what I think are some positive ways that we're using the money. As I mentioned previously, we've incurred some "extra" expenses associated with our new house.

And we have more coming soon:

  • Energy efficiency measures recommended during our energy audit. (Write-up coming soon!)
  • A new drain to divert water from draining into our crawlspace (getting bids and considering a little more DIY).
  • New furniture (looking for more home decor suggestions).

Obviously, the arrival of the check comes at an opportune time, and we'll be looking forward to our tax return, too!

Thursday, December 13, 2007

If I'm self-employed, am I still eligible to retire?

Posted by Matt

The answer is yes, but don't take my word for it as I'm NOT self-employed. I've heard the question from a few people, though, so I thought I would share a link out to another blogger who wrote on the topic of self-employed 401k's.

The 401k is obviously not your only sound retirement account option, but if your business is doing well enough, you may max out the contribution limits on other tax-advantaged account types (i.e., Roth IRAs).

Money in the mail

Posted by Matt

Just found another helpful tip in my local paper that will put money in my wife's pocket. In this article, readers are alerted that they may receive what appears to be junk mail, but is actually a claim form for a class action suit against some of the major credit card companies.

I was just curious when I read this, but then became excited when I found that my wife had received just such an envelope.
The suit refunds cardholders nationwide who were overcharged for foreign
transactions from Feb. 1, 1996, to Nov. 8, 2006.
If you receive a similar envelope, the deadline to file is May 30th.

Wednesday, December 12, 2007

My Emergency Fund

Posted By Paul

I've been thinking about my emergency fund recently. Specifically I have my emergency fund invested in:

-One share of Berkshire Hathaway B.
-Some fairly conservative mutual funds.
-A CD ladder
-An Internet Savings account.

I'm thinking that since my emergency fund is really more for having the money there in case of a rainy day, that I shouldn't worry too much about the returns. I'm thinking I might keep the Berkshire Hathaway share, CD ladder, and ISA, but ditch the mutual funds.

I was thinking of either starting a second CD ladder, or just putting the money into my savings account. The interest rate isn't exciting but perhaps for an emergency fund the safety is more important than the return on my investment.

Something for me to think about.

Got My Kicker Check

Posted by Paul

Like many Oregonians I got my kicker check in the mail yesterday, and I must admit I have no idea what to do with it.

My wife and I have been doing a good job of controlling spending and saving a little extra each month so there's no urgent bills to spend it on. Thanks to the Simple System For Saving Money that we use we're probably going to end up saving most or all of it.

I was tempted to spend it on a new TV, but to be honest with the crazy state of the economy I think that a little more money in the emergency fund might be a good idea.

Anyone out there doing anything really cool with their kicker check?

Dear Craig, I give up

Posted by Matt

Brace yourself for a rant today, readers.

Have I ever complained about how many flakes I run into via Craiglist? After moving into our new house, we discovered that we had a few extra pieces of furniture and computing equipment. We've had some okay luck with posting on Craigslist in the past, but this has been a bad month. I've had several people respond to my ads and indicate that they would like to come buy the item for sale. I email them back, provide my phone number and never hear from them again.

Those are the easy ones.

The people who drive me nuts are the ones who tell me that they are on their way over, money in hand and then they never show up. I often have to go out of my way to hang around the house and wait for these people and then don't get so much as a phone call.

Okay, rant over. That's not solving anything, right?

So, I've got an alternative to offer you, at least if you are selling electronics. Check out http://www.secondrotation.com/ If you can locate what you're selling in the list of products they are buying, you just have to answer a few questions about its condition and they will then tell you what they are willing to pay for it. If you accept, they send you a shipping label (free shipping), you send the product in, they confirm it matches your claims and they send you a check.

Most of the items that I have to unload are not on SecondRotation's "wanted" list (they are mostly older), so I may have try the office bulletin board or just donate the items.

Any other suggestions from our readers?

Tuesday, December 11, 2007

Spending your kicker check the right way

Posted by Matt

If you haven't received your Oregon kicker check yet, think long and hard about whether the state was waiting for a check from you. If you owed payments on child support, student loans, income taxes or court fines, the state took the liberty of taking those payments right out of your kicker check.

I'd previously advocated for putting kicker money into a savings account, but the state is putting it to even better use by forcing people meet their financial responsibilities.

Why Do Bond Funds Go Down?

Posted By Paul

Okay, this is one of my favorite things about Frugalize, the opportunity to have a question that I don't know the answer to, take some time to find out the answer, and then share the answer in the hope that someone else may be wondering the same thing.

So the question I had was:

"If a bond fund is a mutual fund that invests in bonds, and since bonds are essentially loans to corporations or the government that have an interest rate, then how can a bond fund go down in value?"

Is it loss from defaulting on the bonds? Money so that the fund manager can buy nice things for his or her family?

My thought was that such a fund would be conservative (that's true) and since they're just sitting there accumulating interest, that they should only go up in value (that's not true).

The part I was wrong about was that in addition to holding bonds until maturity, bond fund managers can and do trade them on a secondary market. Bonds are constantly being bought and sold on a market not unlike the stock market. The basic mechanism for bond value is the idea that if interest rates go down then older bonds become more valuable (a super simple example: if the current interest rate for bonds is 5% but you have a bond with an interest rate of 10% then people will be interested in that bond and will want to buy it). The opposite is true as well, if interest rates go up then people would rather buy a new bond than an old one with a lower interest rate so that bond becomes less valuable.

It's also true that sometimes entities default on their bonds, but this is generally rare, and it's also true that bond funds have expenses that include paying the fund manager to manage it (for more info on mutual fund expenses see the posting on 'A Few Quick Tips on Mutual Funds'), but usually these don't significantly factor into the value of the fund. Generally the fluctuations in a bond fund relate to the value of the fund change as the bonds within it fluctuate in value.

Confusing? You bet. I guess one thing to keep in mind is that even the conservative bond funds aren't a sure bet. So if you ever need to invest your money in something that has absolutely no risk, then you'll have to start looking at things like CD's, savings bonds, and savings accounts.

Monday, December 10, 2007

Our inexpensive area rug solution

Posted by Matt

As anyone who has ever moved into a new house knows, the costs don't end with the close of escrow. We've had lots of little expenses since moving into our new place, plus a few big ones. We're still prioritizing some of the latter, but there was one thing that we definitely wanted right away: a rug for the new family room.

In the last remodel in this house, the owners (who owned it prior to the people we purchased from) put really nice tile in throughout the family room, kitchen and nook. We like the tile, but it is much too hard for our son to crawl around on and we liked the area rug the sellers had in the room when we first saw the house. We only briefly considered putting in wall-to-wall carpet in the family room, as that would likely have involved significant effort and expense to tear out the tile.

I'd never shopped for rugs before, and wasn't sure where to look. I picked up a Pottery Barn catalog I found somewhere and found a very nice 9' x 12' rug. Price tag? $1149!! Skip that. We then went to a local rug warehouse store with a huge showroom. We found a really nice rug there that we both liked: $1300! I can't remember if either of these prices included a pad.

My mother-in-law directed us to a website and catalog for a company called Flor. They make carpet tiles, and we liked the idea of being able to customize, install easily and individually wash the tiles, but ultimately decided they were also a bit expensive ( I think around $6/sq. ft.).

Luckily, we spotted a carpet store on the way home from a soccer game one day and popped in to see what they had to offer. The salesman recommended we purchase an area rug cut from a remnant. He didn't have a style we liked, but we did buy a rubber padding layer to put down underneath the rug we hoped to find.

While we waited for that store's inventory to rotate, we discovered another place selling remnants and found a very nice 12' x 12' piece there that they were able to cut to the necessary shape. They also sent it out to have the edges bound and the whole process took less than a week from when we placed the order. My wife haggled a bit for a discount, so final cost for the rug came out to $348. Added to the 122.40 we had paid for the pad, our total for the project was $470.40. We could have spent even less, except that we wanted to get a product that was comfortable, looked nice and would last. I was glad that we shopped at a couple of places as the less expensive styles that we liked at the first few places were lower quality than what we eventually purchased.

The padding was on a roll, but it was very easy to work with and we just trimmed it with a box knife. The carpet went right over the top of that and we are very pleased with the end result pictured above (especially our son, now that he can roll around and play with his toys on it.)

I'm glad we put in a little extra effort to try to save some money on this rug, because eventually we'll probably need another rug over the hardwoods in the living room!

Thursday, December 6, 2007

Adviser or Not?

Posted By Paul

So it was about 12 years ago when I decided to try to find a financial adviser. I thought it would be a good way to get an early start on my finances.

I went with a financial adviser that was recommended by the head of accounting at the company I worked for at the time.

Here is a quick summary of the various actions I took based on the suggestions of my adviser and how good the advice was in my opinion:

1) He suggested that I start a Roth IRA. Overall I thought this was a good decision. I like the Roth IRA and I'm glad I started one early.

2) He suggested I buy a house. This was a great decision. I certainly would have purchased a house at some point but his suggestion to buy a house earlier than later was a great decision for me.

3) He suggested I invest in a Variable Universal Life policy. I was intrigued by this concept, and even started one for a time, but after researching it further and watching the returns, I decided that this wasn't something I was interested in and stopped the policy and cashed it out.

4) He suggested various mutual funds for my IRA. This generally worked fine as my IRA got returns that were decent (though not spectacular).

5) He suggested some low-risk funds for my "emergency fund". This also generally worked fine as my emergency fund grew at a conservative and tolerable level.

The reason I'm writing this article now is that as I got older and got more interested in finances, here are some things I decided I didn't like:

-The funds that he had suggested had high expense ratios.

-The funds that he suggested often had loads involved with them.

If you're not familiar with those terms then read my earlier article:

A Few Quick Tips On Mutual Funds

So I recently decided that I wanted to manage my money more directly. Towards that end I did the following:

-I moved my Roth IRA and Rollover IRA into Vanguard (I like their no-load funds and low expense ratios)

-I moved my emergency fund into a discount brokerage account (specifically eTrade).

I don't think my adviser was very happy about this, since I was essentially taking away the portion of the fund fees that were going to him. I decided that the money he was making off of me was essentially his cost for his advice. Ten years ago I was willing to pay for that advice but now I felt knowledgeable enough that I wanted to try it myself. So why continue to pay for advice that I no longer really needed?

It wasn't that the funds my advisor put me in were bad, in fact they were perfectly fine, but I decided that I wanted to find out if I could do as well (or maybe even better) on my own.

I figure that I can try this for a year or two and if I end up doing terrible then I can always call up my adviser again. I plan on simply buying some funds and holding, I certainly don't plan on crazy day trading or anything like that so I suspect that I'll do just fine, and hopefully enjoy the process and learn a lot.

So having gone down this road with my adviser would I recommend it to someone? I'd say yes under certain specific conditions.

For example, let's say that you DON'T KNOW MUCH about saving and investing and DON'T WANT to learn about it, then an adviser might be a good idea. However financial adviser plus no interest in learning about it yourself is a potentially dangerous situation. If you effectively give your adviser carte blanche to handle your money then they could easily steer your in directions that are somewhat lucrative for you, but extremely lucrative for them. If you want to not be involved in handling your own money, then I would not settle for anything less than an adviser that you trust completely (like a close relative or family friend if possible).

Also, if you think you might be interested in handling your own investing and savings at some point in the future but don't feel comfortable jumping in on your own, then an adviser might be worth it for a little while as a way to learn about things.

The way I see it, having a financial adviser got me focused on savings and investing very early and the money I saved (and made off of the savings) more than made up for the costs of the adviser. However, the very fact that you are reading this blog suggests that you are interested in learning about investing to the point where I would think your probably don't need an adviser. With the resources available on the Internet (like Frugalize!) it's easy to learn the basics of investing and as long as you don't do anything too crazy at the beginning (like sinking ALL of your money into one stock), then you'll probably be fine.

Instead of an adviser, I would suggest trying to find people to discuss your finances with like friends, family and coworkers. I know that money is often considered a taboo subject but it's not like you have to compare bank statements or swap paychecks to talk about saving and investing. I have a small group of people that I discuss finances with and I find their non-biased, first hand information to be incredibly useful.

If you do decide you want to get an adviser then I have some basic advice for you. First, make sure that you get one that is willing to clearly discuss how they make their money. If they ever try to make it sound like they're working for you for free, then be VERY suspicious. Second, don't think that having and adviser means that you shouldn't be VERY involved in your finances. An adviser should only provide you with ideas. The final choice of what you do with your money is ALWAYS yours. Don't blindly follow the advice of your adviser. Ask questions, bring up ideas of your own, track your returns. You are paying for their advice, make sure it's worth it to you.

Save on building a new home; recycle an old one.

Posted by Matt

I received a press release a few weeks back from a woman on my soccer team. It's about an unusual idea that could save a lot of money, although it sounds like it is primarily intended as an environmental project. She is going to "recycle" a HOUSE. She is calling it the "Reuse Everything eXperiment" or "REX" for short (the house is on Rex Street in SE Portland).

From the press release:

You see it all over town – old homes bought, removed from the land and new homes built in its place – it's progress, it's expected – but it comes at a cost – tremendous amounts of landfill waste. Shannon has bought an old home in Westmoreland on 21st and S.E. Rex Street and wants to build a new home. She, along with her contractor, is going to attempt to reuse 100% of the old home in her new construction project. It all begins on November 28th at 10:00am.
I'll have to check with Shannon when the project is done to find out if it is actually a money-saver, but regardless, it is a great example of thinking creatively about how NOT to add to our landfills. If you're interested in following the story, Shannon is chronicle it in the REX blog. Check it out!

Wednesday, December 5, 2007

TOOLS: up a point today

Posted by Matt
I really liked Paul's recent fix it yourself article, so I thought I'd share some similar stories. We recently brought a contractor/handyman into our new home for a few simple tasks.
  1. Install a full-height pantry cabinet we purchased previously.
  2. Install wood trim around an unfinished shelf in the master bedroom.
  3. Add some shelves to our master bedroom closet.

Total bill: $314.5 Materials: $12

I had the terrible realization after our contractor had left that I could easily have done everything he had done if I had simply had the right tools. I don't mean to demean contractors, as a highly skilled contractor is indeed an important and valuable person to know. If you need help finding a good one, my wife and I are fans of Angie's List. My point here is that these jobs were relatively simple ones that required more tools than know-how.

The pantry was a big-ticket item, although my wife was able to save more than $2000 off the first bid she got by shopping around and having me put it together. Admittedly, there were probably even cheaper things we could have put in, but our new kitchen is fairly nicely appointed and we wanted the pantry to match the rest of the kitchen cabinets. Remember, we plan to be here for a while. One of the main reasons that we brought the contractor in was that I was a little worried about damaging such an expensive item.

The primary concern of the installation process is making sure the pantry comes out level, but really all that required was putting in some shims and then attaching it to the wall studs (with a drill, which I've got). There were a few minor complications I couldn't have dealt with, the first of which was a metal heater vent that needed to be cut in half (reciprocating saw) so that the pantry wouldn't rest on it unevenly. Also, there was some trim that needed, well, trimming (circular saw) and an electrical outlet that had to be capped off (which I could have done with my flat-bladed screwdriver and some wire caps that I had).

The trim project in the master bedroom was simpler, except that it required cutting the trim pieces at an angle (miter saw). Really, that was the crux of the project. The contractor used a finish nailer to attach the trim pieces, but I think I could have done just as well with a hammer.

The third project was almost sad. We have a closet organizer in the master bedroom closet, but wanted more shelves and less hanging space. All this required was cutting (circular saw) a 16" deep white board to the right length to fit between the existing shelf mounts. The contractor spent several hours on this; I'm not sure why. There was no detail work to be done, no finishing, no installing or fastening. Just cut to length and slide in. But it did need that saw.

Now, the whole time that the contractor was working on these projects, I was running around the house doing the things that I DID have the tools for. The one that stumped me was the one that inspired this post. There was a bedroom door that would not latch because the latch and wall plate were misaligned. I simply needed to widen the cutout for the plate slightly (less than 1/8th inch). I wasted about a half an hour trying to fake my way through it with a screwdriver and then the side of a drill bit (I know, I know; I'm embarrassed). When the contractor returned from his lunch break, I borrowed his chisel and finished the job literally within 3 minutes. That's when I realized, "this stuff's not rocket science. I can figure it out; I just need the right tools for the job."

With just the tools we DO have, my wife was able to:
  • install cabinet rollouts in the master bathroom
  • mount a swing-arm makeup mirror on the wall

and I was able to:

  • Replace a tub spout that had a leaky diverter
  • Mount our rear speakers on the wall near the ceiling.
  • Take apart our dryer, reroute the vent from the back to the side, replace the plug with one that is compatible with our older 220 outlet, and put it back together.
So, for anyone facing a similar set of projects, consider the questions that I ponder in the wee hours: how much would it have cost me to purchase the tools needed for the jobs that we hired our contractor for? Less than $302.50? Now, how much money could I save on all our future home improvement projects (I still have a few lined up) if I was outfitted with these tools?

Now it finally makes sense when I hear someone mention "investing" in tools. I'll also consider the local tool library for tools that I would use really infrequently and that would be cumbersome to store and/or maintain.

Tuesday, December 4, 2007

Article: Roadbloack to a subprime solution.

Posted By Paul

Hi Everyone,

On CNN Money today was an article about the subprime lending crisis and the search for a way to help people keep their homes.

Here is a link to the article:

Roadblock to a subprime solution.

Since I recently wrote an article about mortgage backed securities, I was especially interested in the part of the article that mentions them:

"A large part of that plan, it's been widely reported, is to broadly rework adjustable rate mortgages (ARMs) for all borrowers who qualify and freeze their interest rates before they jump to unaffordable levels.

But investors in mortgage-backed securities, who buy the loans wholesale from lenders, aren't exactly jumping on board."

So it sounds like investors in mortgage backed securities are VERY interested in the current state of the real estate market.

I'm trying to learn more about MBS investments, so it was interesting to read about them relative to the current market.

I'm still hoping that among our readers that there are some first hand accounts of investing in mortgage backed securitues that people would be willing to share.

Financial auto-pilot

Posted by Matt

I'm a big believer in simplifying whenever possible, and finance is an important area for it. I've written previously how I try to limit the number and types of different accounts I have, but even more important is trying to get to a place where I can just relax and not think about any of it very much.

Obviously I still think about personal finance a lot (or you wouldn't have anything to read!), but my hope is that some day I will have finished evaluating all of my investment options and settled on a limited set of recurring service providers and I can make everything totally automatic. The extent to which we are able to do this is, in my opinion, one of the great examples of the contributions of information technology to our modern lifestyle.

Let me illustrate with my Verizon cell phone bill.

Step 1: I created an account on their website so that I can access my information without having to wade through telephone menus.

Step 2: I signed up for paperless billing. This means less mail to retrieve, sort, open, read and recycle (and saves trees!).

Step 3: I signed up for automatic payment by providing my bank information and giving my consent to have them withdraw the money directly from our checking account.

Each month, my total involvement amounts to reading an email from Verizon that tells me how much money they are taking out this month. This is a step I don't want to skip, as I do like to keep tabs on it. Can everything be this easy?

Well, I've done it with our mortgage, property taxes (part of the mortgage payment) and almost all of our bills so far, and I'm trying to remember to set it up every time I get a bill that I have to pay manually. Also, my retirement savings is automated through my employer-sponsored 401k (and Social Security withholdings) and my son's college savings is set up for an automatic monthly transfer from my checking account. We do still write the occasional check: for soccer dues, payments to our daycare providers (which vary), etc. Some of you may be thinking, "I do that with my bank's Bill Pay service", and I tried that, but it still felt like something that I had to manage, more than just monitor.

I should say that this strategy isn't right for everyone. If you are still living paycheck-to-paycheck, then you need to be very involved with all of your vendors to make sure that your payments are timed in such a way that your checks don't bounce (and you don't have to pay the associated fee). Once you have a little bit of cushion between your expenses and your income, however, automation can help by preventing you from forgetting to make a payment.

In an ideal world, I would never touch cash and everyone who I bought goods and services from would just take the required payment and leave me a little electronic receipt. I guess that when we get to the point where we can use debit cards everywhere, we will have arrived (or maybe it will be when Burgerville offers me a charge account.) I'm really hoping that the future will hold the possibility of being able to transfer money directly to other people's bank accounts. I still have to cash a load of checks every few months when I get reimbursed by all of the players on my soccer team for the dues payment I make, and it would be nice if they could just wire it to me. I know that Paypal offers a service like this, but that is yet another account to set up and maintain and I'm hoping that my bank will just offer it someday.

One last note: I'm not the only one that has seen the benefits of automation; among others, J.D. from GetRichSlowly lists automating finances as one of his keys to living debt-free. (By the way, congratulations are in order for J.D. as he just made his last payment on debt he has been carrying for twenty years. Way to go! Check out his site for lots of great advice and motivational stories about getting out of debt.)

Monday, December 3, 2007

More free phone calling

Posted by Matt

I recently posted about a device that lets you make free phone calls, even free 3 way calls, but just the other day found a service that will let you set up free conference calls with up to 150 people! Check out: http://www.freeconference.com/ConferenceCall.aspx

I haven't set up an account with them, but was on a call with someone I know who hosted a call this way and it seemed very straightforward. When you set up a conference, the system sends an email to all of the people that you indicate you want to invite with instructions on how to access the conference.

The one drawback I found is that the call-in number is not necessarily toll-free, so callers (including you) may have to pay long-distance for the call. If they are using a company line or a cell phone with free long distance, that might not be a problem, but it is something to consider.

This could be a relatively inexpensive option for small businesses to try out phone conferencing. If anyone tries it out, please post a comment relating your experience with the service.

Friday, November 30, 2007

Money radio and a warning for eTraders

Posted by Matt

I just posted the other day about the Magic Jack that my wife heard about on Clark Howard's radio program, but if that didn't inspire you to check out his website, then this post is intended to be another plug. He has a ton of great tips for making smart financial decisions and I like that he isn't always focused on just getting out of debt and trying to solve problems. That IS an important service provided by Dave Ramsey and lots of personal finance bloggers, but there are a lot of people out there that are beyond the stage where they need motivation and coaching through the hard realizations and choices. We need to find the inside information and hidden deals!

Here's something I learned from Clark's posts today: Did you know that eTrade was on the verge of going under? The relevant article was actually about FDIC insurance, which Frugalizers should already know all about if they read our previous article on the topic. Anyone who had more than $100k with eTrade would have been in trouble if Citadel hadn't bailed them out. It just goes to show you that it is as important to be educated about financial service vendors as about their products. Anyone considering Countrywide right now? No? Good.

Check out the Business section of the paper, read this blog or others like it, turn on the radio....just do your homework; the information is out there! Give Clark's site (http://clarkhoward.com/) a quick skim or find out when you can listen to him on your local radio station.

Thursday, November 29, 2007

Blocking the evil temptation of catalogs

Posted by Matt

Okay, maybe "evil" is too strong a word. But I know I can't resist thumbing through the REI catalog when it comes around, even if I don't need anything. And how many furniture upgrades are at least inspired every year by the Pottery Barn catalog?

It always bothers me that so much paper is being wasted to produce catalogs of things that we don't need. Even if you recycle, producing them is so wasteful, and most people just toss them into the trash!

How can we get out from under the barrage? It takes time to opt-out of every catalog as you have to do each one individually, usually by phone and during the hours when you are trying to be productive. My mother-in-law found us some help. Check out Catalog Choice.

This is a great non-profit that takes your address and allows you to select from a long list of catalogs that you don't want to receive. No phone calls. I signed up in less than five minutes. If enough people did this, the retailers might have to reduce the number they produce every year (currently at 19 BILLION!)

A Few Quick Tips On Mutual Funds

Posted By Paul

I found a great web page resource for mutual funds that I thought people would find useful. It's:


It lets you look up some great info on a mutual fund for free.

Here are a few key bits of info they provide that I find useful when evaluating a fund:

Front Load %
Deferred Load %

If you don't know what those are, the basic idea is that the front end load is a percentage that is deducted as a fee when you buy the fund (if you invest $1000 into a fund that has a 5% front end load, then $50 comes off the top and $950 actually gets invested). The deferred load is the same idea only it comes out when you sell the investment.

What do I look for? I look for funds that have no loads. There are lots of funds out there that don't charge loads and I have yet to come up with a compelling reason to pay them.

Expense Ratio %

The expense ratio is the percentage of the funds assets that go to administrative fees. What should you look for? Look for funds that have low expense ratios. What should you consider too high? Well I'd look very carefully at any fund that has an expense ratio that is greater than 1%. If the expense ratio is high it better be performing much better than similar funds otherwise I see no point to paying the added expense.

Morningstar Rating

This is how much Morningstar likes the fund. The best rating is 5 stars. Even though Morningstar is not necessarily the final word on funds, I'd look closely at funds that Morningstar doesn't at least rate at 3 stars (they have a detailed description of how they arrive at their rating on their page).

Performance Graph

I really like the graph because it shows the performance of the fund vs. the category of funds in general. If the fund consistently performance below its category I view that as a sign that it isn't a very good fund.

Morningstar Risk

This is just Morningstar's characterization of how risky the fund is (on their page they have the full description of how they determine their risk rating so I won't repeat it here). Looking at this field gives you a quick way to determine if a fund meets your risk tolerance.

When I'm evaluating a fund one of the first things I do is go to Morningstar and see how it looks. I can quickly get an idea on the loads and expenses for the fund, as well as its performance and risk. I can get all of the info I need to make a first glance judgement on a fund on a single page for free!

Wednesday, November 28, 2007

Free phone calls (almost)

Posted by Matt

This should be a quick tip, and I have to give my wife credit for discovering it. I think she said she heard about it from Clark Howard's radio show, which apparently has pearls like this all the time.

The tip is to use something called the "Magic Jack" to obtain "free" phone service. This is a device that plugs into a USB port on your computer and also has a port to plug in a plain old telephone line (or POTS line; yes, there is actually an acronym for this!)

You can use almost any kind of phone that you would ordinarily plug into the wall with the little plastic square jack (aka RJ-11), with the difference being that you don't pay for telephone service; not even long distance! The only charges I could find were the initial cost for the tiny device ($39.95) and $19.95 to continue the service for an additional year after the first year is up. The site didn't seem to contain any information about what would happen in year three, but it did have a small tag indicating that this is still a beta product (albeit beta 4.0). In other words, it is still in the last stages of testing.

Even if the company providing the service doesn't last past the first year, I see a great opportunity for savings here if you make a lot of long distance calls on your home phone line, or even if you are paying a significant monthly fee for local service. This only applies if you already have Internet service (which is used to carry the phone signal) and don't figure the cost of that in.
I'm not going to order one just yet, as my wife and I use only our cell phones (like Paul). But I'm starting to have more and more long teleconferences from home, so I'll remember this if I start exceeding the minutes in my cell phone plan.
If anyone else orders one of these, please share your experience!

Tuesday, November 27, 2007

Fix It Yourself Or Call A Repairman?

Posted By Paul

I've never considered myself to be especially handy around the house. My first instinct when something needs to be fixed is to call a professional.

However, a little while ago I decided that I would make a specific effort to handle more repairs around the house myself. Partially as a way to hopefully save money, but also as a way to learn more about fixing things in general.

The first thing I discovered is that it's really hard to be handy around the house without at least a basic set of tools. I spent some time accumulating tools (I would buy them, or ask for them as gifts when people wanted to know what to get me), and before long I had a basic but versatile set of tools (which I'll list here):

1) A ratchet set.
2) A set of wrenches.
3) A hammer.
4) A rubber mallet.
5) Some vice-grips of varying sizes.
6) An adjustable pipe wrench.
7) A set of screwdrivers.

Without at least a basic set of tools you have very little chance of successfully fixing something around the house.

So whenever something broke around the house I went with the philosophy that if I try to fix it myself then as long as I don't make it worse I can always call a repairman later.

Here are some of my experiences:

At one point our refrigerator wasn't defrosting properly. I contemplated trying to fix it myself but I quickly discovered that a modern refrigerator is a pretty complicated device so I ended up calling a repair man. In this case the problem ended up being a bad circuit board (amazing that refrigerators have circuit boards now) that the repairman took care of in a few minutes. In this case calling the repairman was the right call since it would have been nearly impossible for me to diagnose that the circuit board was the problem.

The next thing to go was our dryer. The tumbler spun but it never heated up. I decided to take a shot at this and this wasn't too bad. Thanks to the internet I found instructions for gaining access to the inner workings of my dryer (be sure to search for your specific dryer, I assumed you accessed everything from the back but many dryers are best accessed from the front or sometimes even from inside the drum). Once the dryer was open it became pretty clear what was wrong. It was simple to spot the heating coil and when I noticed that it wasn't warming up when I ran the dryer I removed it and found that there was a gap in the coil wire. I found an appliance parts and repair store that was able to order a replacement coil, I put it in place, and the dryer was as good as new.

The next thing to go was our clothes washer (you're probably starting to think that all of our appliances are junk but these incidents took place over several years). It seemed like it wouldn't drain properly and the display gave an obscure error code. A quick search of the internet suggested that the drain pump was either clogged or broken. When I opened the washing machine up I was able to spot the drain pump pretty easily. I noticed that the motor shaft looked stripped so I decided to remove the motor/pump and order a new one. Once again the appliance store was able to order me a part. This time it was a bit more of a gamble since I wasn't 100% sure that this was the problem, but when I got the new motor/pump I noticed that the new part was MUCH better designed and more durable than the one that was in there originally (which gave me hope that in fact this WAS the problem part and also annoyed me a little to think that they didn't design the more durable part in the first place). It only took about 10 minutes to install the new part, and the washer was good as new.

I know practically nothing about appliances but I am amazed at how much you can accomplish with a few basic rules:

1) Search on the internet for the problem and see if anyone else has run into it and posted a solution.

2) Take the thing apart and look for a part that is obviously broken and replace it.

3) When you take the thing apart do so CAREFULLY so that if you do need to call a repairman you haven't broken anything and made the problem worse.

The more you start trying to fix things around your house the easier it becomes to dig in their and poke around, and thanks to the internet you have a whole world of expertise at your fingertips.

Welcome me back to the 21st century

Posted by Matt
I hope no one missed me too much while I've been away. We finally went through our big move, the holidays and a week without any Internet access. It feels great to be back online. Just wanted to write a quick post to say hello and let everyone know that I will be posting on a couple of new Frugalize topics related to my recent moving experience very soon (though I need to catch up at work today).

Huge thanks to Paul for taking up the slack while I've been offline!

Monday, November 26, 2007

Millionaire Next Door Review Pt. 3: Economic Outpatient Care

Posted By Paul

This is my third and final posting in my review of The Millionaire Next Door. There is a lot of interesting information in this book, and so far of all the books I've read on finances, this book best captures my philosophy on how to handle money.

One chapter in this book that I thought was really interesting was about "Economic Outpatient Care" or EOC which just means giving money to your adult children (and grand children).

The book views EOC as both natural (isn't one goal of accumulating wealth to provide for your children so that they can have advantages that you didn't have?) and potentially dangerous.

Why dangerous? The authors describe that sometimes the most well intended gifts often hurt your child's ability to get their financial life together. That instead of giving your child an advantage you are essentially enabling them to start a pattern of living beyond their means.

For example, let's say you have enough wealth that you can afford to help your adult child buy a nicer house in a nicer neighborhood than they could normally afford. Good right? According to the book, maybe not.

The problem is that let's say by helping your adult child into a $500,000 house when they could normally afford a $250,000 house you are also prematurely forcing them into a $500,000 house lifestyle. That even beyond the mortgage and insurance and property taxes, that having a $500,000 house will probably have an impact on other aspects of their lifestyle.

For example, they may need to pay for landscaping fees to keep the yard looking nice because they don't want to have the only house in the neighborhood with a few weeds in the yard, or they may spend on a nice car because their old car looks out of place in their neighborhood.

The point is that often these well intended gifts set off cycles of consumption beyond their child's means.

Also, the book takes a strong stand against cash gifts to adult children. To quote the authors:

"We found that the giving of such gifts is the single most significant factor that explains lack of productivity among the adult children of the affluent."

The authors view cash gifts as a form of financial enabling. A way of teaching your children to remain financially dependent on you and to never mature financially. Especially if the gifts are given regularly and frequently.

So do the authors think that you should never share your wealth with your children? Certainly not. They give several examples of how to share wealth with your children constructively. The most basic one being to help pay for your child's education. The authors consider this sort of gift to be money spent "teaching your kids to fish" and that this seldom has negative consequences.

They go into great detail describing other common repercussions of giving your children Economic Outpatient Care. As a person that plans to have wealth and plans to have children I found this section of the book to be great food for thought.

Wednesday, November 21, 2007

What is a Mortgage Backed Security

Posted By Paul

I was recently asked about Mortgage Backed Securities (which I'd never heard of before), so I've been doing some research into them which I thought might be of interest to the group. Here's what I've found so far:

A Mortgage Backed Security (MBS) is a way to invest in the mortgage market by buying a share in a conglomerate of mortgages. I'm going to talk about something called a pass-through MBS which is the simplest type.

Let's start with how you get one. You contact a bank or broker and put some minimum investment into an MBS (I read that the minimum is usually at least $1000).

So just as an example, let's say that you take $10000 and put it into an MBS. What exactly did you do?

Well you took your 10 grand and put it into a fund that is a conglomeration of a bunch of mortgages. It's almost like you loaned someone a $10,000 mortgage.

In fact, a lot of the interesting facets of an MBS can be understood by imagining that you took your $10,000 and loaned it to someone. So I'm going to illustrate what I've learned about MBS by comparing it to loaning the money to someone (we'll call this fictional person Joe Borrower) as a mortgage.

So first off, to invest in an MBS you need to go to your bank or broker and buy a share of an MBS. You give them your $10,000 and in return you get a bond for that amount with a specific maturity and a specific interest rate.

Using our metaphor, buying the bond is very much like making a fixed rate mortgage loan to Joe B. his mortgage will have a term (let's say 30 years) and a specific interest rate (let's say 5%).

So in the mortgage world Joe B gets a monthly bill for his payment. His payment starts off as being mostly interest with some principal going to the $10,000 he borrowed from you. As the years go by more and more of each payment will go towards the principal.

An MBS works the same way. Every month you'll get a check for a certain amount. At the beginning the amount will mostly be interest, but some amount of it will also be part of the $10,000 that you invested in the first place. As time goes by the interest will decline and the principal will increase.

Now lets say that Joe B always pays his mortgage the standard amount. Then for 30 years he will get a bill for the exact same amount and will pay that exact amount. At the end of the 30 years he will have paid off the $10,000 (along with a lot of interest).

It's the same for an MBS. In an ideal case you will get the same amount every month. At the beginning it will be mostly interest, and will gradually transition. At the end of the 30 years you will have your $10,000 back plus the interest that you received over the years.

It's a lot like YOU are the mortgage lender. Sounds pretty cool right? Well here are a couple of small wrinkles. You'll notice above that I said that your payment in an ideal case remains the same. What do I mean by that?

One problem is what if Joe B can't pay his mortgage? Well you have the house as collateral so that helps, and of course in a real MBS you are just one small part of a large conglomeration of mortgages so the risk of any one person defaulting on their loan is diluted.

Another concern with an MBS is what does it mean to you if a lot of the holders of the mortgages in your MBS start to pay off their mortgage early? Well it means exactly the same thing as if Joe B decided to put extra money towards his mortgage payment every month. The total payment you get would get bigger (because he's putting the extra money towards it) but in the long run you're not making as much interest as you would have if he had stuck to the standard payments. So if Joe B keeps paying his mortgage down early then you will end up getting your $10,000 back sooner, but you won't get as much interest.

Other problems relate to interest rates. Let's say that after a year interest rates have gone from 5% down to 2.5%. What is Joe B likely to do? He'll refinance of course to take advantage of the better rate. What does this mean to you? Well it essentially means that he pays off his entire loan early (the refinance pays off the old loan and creates a new one, but you don't own a piece of the new one). If a lot of people in your MBS conglomeration start refinancing then instead of getting your money back slowly over 30 years with a specific amount of interest you could get a bunch of your money back right at the start and then be done in a much shorter time with less interest paid to you.

Another scenario, let's say that a year after making your loan to Joe B at 5% interest rates have shot up to 15%. What's Joe B going to do? He's going to hold onto that mortgage for dear life because he wants to keep his awesomely low interest rate. What's the problem here? Well if interest rates have shot up to 15% you might be able to get a much better return on your $10,000 with a CD or a plain old savings account, but you don't have the $10,000 because it's been lent out to Joe B. You'll get it all back eventually (with interest) but you may be hating that you're making a mere 5% on your money when you could be making more in some other low risk investment.

So can you get out of the MBS early? Apparently yes by selling your bond, but using our metaphor again let's say you want to sell your mortgage to Joe B to someone else. They pay you some amount and they take over the loan. Well how excited do you think people will be to take over Joe B's 5% mortgage when they could take over a new mortgage paying 15% instead? In this case you may have to sell your mortgage at a discounted rate if you really want to unload it.

So I paint a somewhat gloomy picture of the MBS, but look at it from a different standpoint. If people in your MBS pay off early then the worst thing that will happen is that you'll get your $10,000 back sooner and you won't make as much interest as you'd hoped. If interest rates shoot up and you do nothing then the worst that will happen is that you'll end up with your $10,000 back plus some interest, just maybe not as much as you could have made elsewhere.

Compare this to stocks where if you invest $10,000 then you could easily lose all or part of your initial investment. This is why MBS investments are considered to be quite conservative.

This is a pretty rough description of what an MBS is, and this is just from my own research into it. I read that often the minimums to get into an MBS are high (in the range of $10,000-$25,000), but that it's considered a very safe investment.

Also, you may be thinking that there are administrative costs related to keeping track of all of these mortgages and sending out payments, and wondering how those expenses are paid. You're correct to think that and the answer is that some small percentage of your interest goes to administrative costs to maintain the MBS.

I'm curious enough about mortgage backed securities that I'm going to keep doing some research into them. If nothing else it's interesting to think about how a mortgage is viewed from the lender's side (and a mortgage lender is more or less what you become when you put money into an MBS).

If anyone out there has invested in Mortgage Backed Securities I would be very interested in hearing from them to get a first hand account of the process. Also if anyone sees any mistakes in what I've written here please let me know. Since I'm so new to MBS investment vehicles I might have misinterpreted something I read at some point.

Tuesday, November 20, 2007

Got My Free Credit Report

Posted By Paul

In an earlier post on simple things you could do to get in control of your finances the following was listed:

Know how lenders see you. Take seven minutes to download a free credit report at annualcreditreport.com. (For year-round monitoring, get a report from one of the three major credit bureaus every four months.) If you spot an error, notify the bureau (online, by phone or by mail) and the creditor (call and also send a letter). You won't find your credit score here, so when you request a report from Equifax, pay $7.95 for your FICO score, the most commonly used score. The range is 300 to 850 - 700 and above is good.
I decided to go ahead and do this since I had never seen a credit report before. I used this web page to get one of my credit reports. I didn't bother getting my FICO score as I was more curious about the credit report part for now. The process for getting a credit report is pretty easy. Make sure that you do this from a computer with a printer so that you can print out your report and go over it closely.

I won't go too far into the specifics of what is in a credit report. It's pretty self explanatory once you see one. The short version is that it is an identity thief's dream come true so be very careful with it. Don't go printing it out and leaving it in your car.

I looked mine over for anything unexpected and luckily there wasn't anything there that didn't make sense.

I then promptly put the credit report in the fireplace and burned it. Figured that when it comes to identity theft it's better safe than sorry.

It's good to know that getting an credit report can be done annually, easily, at no cost to me. I think I'll try to start checking my credit report at the beginning of each new year starting in 2009.


Friday, November 16, 2007

What Is A Target Date Retirement Fund?

Posted By Paul

A fairly new feature on the mutual fund landscape is a create called the 'Target Date Retirement Fund'.

What is it? Well the idea behind it is that if you're investing for retirement you should invest in more aggressive and risky investments when retirement is far off, but as you approach retirement you should start to move your money into more conservative funds so that a sudden drop in the market doesn't hurt your nest egg right when you need to start using it.

Generally what people do is something where in their 20's and 30's they focus on the more aggressive mutual funds, then in their 40's they move into the more moderately aggressive funds, and then as people start to approach retirement age they move into the less risky funds.

If it's such a simple process then why can't it be done for you? Well that's what a Target Date Retirement Fund is. So let's say you plan to retire in 30 years, then the idea is that you could buy a Target Date Retirement fund that is targeted to that timeline (these sorts of funds generally have names like 'Target Retirement in 2035') then sit back and let the fund manager handle allocating your investments and gradually transitioning it to more conservative investments as time goes on.

I am intrigued by this idea since it seems about as close to a 'set it and forget it' fund as possible. In fact one of our Roth IRA's is in a Target Date Retirement Fund. If nothing else it seems like a simple place to put your money until you decide if you want to put it elsewhere.

One thing I have read that you need to be careful about is to not take too much advantage of the 'set it and forget it' mentality. Specifically if you have such a fund, check it periodically to see where the investments are. Perhaps the fund managers opinion of 'acceptable risk' when your 10 years away from retirement is different from yours.

A nice thing with these funds is the fact that you can change your risk levels by changing funds. For example, let's say that you plan to retire in 30 years so you put your money into a 'Target Retirement in 2040' fund. You then decide that this fund has more risk in it than you'd prefer, and you're willing to give up potential returns in favor of less fluctuations in your fund. You can move some or all of that money instead into a 'Target Retirement in 2035' fund. The fund manager doesn't care if you actually plan to retire by the target date or not, and by making this move you've transitioned your investments further along in the transition from aggressive to conservative.

I am quite new to Target Date Retirement Funds but I think I'm going to look into them more closely. My hope is that I can use these Target Date funds to create a gradual transition from risky to conservative investments while also moving between funds to fine-tune the risk tolerance more closely.

Thursday, November 15, 2007

Saving Money When Planning Your Wedding

Posted By Paul

I noticed that the bridal shows are revving up, which made me think back to when my wife and I were planning our wedding. We wanted to pay for our wedding ourselves (when we got married we were both "grown ups" with jobs and homes so it seemed silly to expect our families to chip in), and paying for everything ourselves really gave us total control over what our wedding ended up being.

Planning a wedding is a great test of a relationship and I think in some ways the way you plan your wedding can set the financial attitude for your whole marriage. Here are some tips that came from my wife and my experience of planning a wedding:

Focus On Good Enough - You hear the phrase "The Perfect Wedding" all over the place, especially once you dive into the world of planning your wedding. One thing my wife and I did on the first day of planning our wedding was agreeing that we were never going to worry about making things perfect, we were going to focus on making things good enough. Not to say that we wanted things to be ugly, messy or chintzy, but the idea was that we weren't going to drive ourselves crazy chasing some arbitrary ideal of the perfect wedding.

Identify Your Priorities - My wife and I sat down and discussed what was important to us in our wedding. For example, my wife has a large family and they all live nearby, and her family is really important to her. Even though one of the easiest ways to make a wedding cheaper is to make the guest list shorter, my wife's priority was to be able to invite her extended family. We also both wanted to have good photographs of our wedding, so we made paying for a photographer a priority. Once we agreed on our priorities we knew that we needed to save money in other places to accommodate what was important to us. It made it much easier to cut back on things when we could keep our eyes on the prize of what was important to us.

Set Your Budget From The Start - My wife and I took a look at our finances and decided what we could afford for our wedding. We took that amount of money and put it into an account, and ALL money for the wedding came out of that account. Two very important things came out of this decision. First we only spent money that we had (I cringe when I hear about people who start off their lives together with a big credit card debt thanks to wedding spending gone out of control). Second, being able to tell at any moment how much was in the wedding fund made it easy to stick to our budget.

Don't Buy Into The Hype - The wedding industry tries to convince you that your wedding is the most important day of your life and that your wedding day will be ruined if you don't have ice sculptures and a custom tailored tux. Don't believe it.

Remember What's Important - My wife and I went to a quinceanera party that really brought the whole thing home for me. The party was held in a school gym, where tables had been set up. The food was simple, delicious, and plentiful, served on paper plates with family and friends serving as "waiters". For drinks paper cups and two liter bottles were handed out. The venue was not opulent but all friends and family were welcome. The food was not fancy, but it was delicious and served in a way where you felt like you were part of a family dinner. There was no DJ or hired MC, instead there were sincere speeches of welcome and affection from the family. I have never been to a better example of how you can throw a big party on a reasonable budget by focusing on what's important, and not getting distracted by things that don't matter.

Do It Yourself - My wife and I saved a lot of money by making the centerpieces ourselves, doing our own flower arrangements, making our own programs, and all kinds of things that you can do yourself if you just take the time to do it. Not only did we save money by doing all of these things ourselves but my wife and I really enjoyed having a wedding where so many aspects of the wedding were literally made by her and I.

There are hundreds of articles out there with tips for saving money on your wedding, but I hope that my suggestions provide a way to come at the daunting task of planning a wedding with the ideas and attitude to keep you on budget.

Wednesday, November 14, 2007

Buying a Mattress

Posted By Paul

Not too long ago my wife and I went shopping for a new mattress. Our current bed had been given to us and even though the frame and box spring were great, we decided we preferred a firmer mattress.

So off we went to go mattress shopping, and wow, what a terrible industry that is. I know car salesmen get a bad reputation but they've got nothing on mattress salesmen. I had heard that one of the big reasons why mattress salesmen are such vultures is that no one goes shopping for a mattress unless they plan to buy one (which makes sense). You may just be looking around for fun when you walk around a jewelry store or a sporting goods store, but who thinks it's fun to browse around mattress stores? The sales people know that anyone in a mattress store is probably planning on buying a mattress in the very near future and they take full advantage of that.

After going to a couple of mattress stores and getting the same high pressure sales tactics my wife and I decided to try comparison shopping. We had made note of each mattress that we had found comfortable at the different stores. I think one was called the Royal Rest (or something like that) so I decided to go online and search for other prices. I was amazed that I couldn't find a link to that mattress anywhere that listed a price, and I couldn't even find the mattress listed on the website of the manufacturer. That struck me as odd. I tried calling 1-800-mattress for pricing, and the phone conversation went more or less like this:

Me: I'm interested in hearing a price on the Royal Rest.
Operator: Oh, sure, that's brand X, you must have seen it at Beds-R-Us.
Me: Yes, that's right, how did you know that?
Operator: They change the name of the mattress for each retailer.

So from the call I discovered that 1-800-mattress didn't service my state (I hear they're very popular on the east coast, and would be VERY interested to hear comments from people who have used them). I also discovered that mattress companies actually rename their mattresses for different retailers. So the Royal Rest at one store, will be called the Slumber King at another store. Why is this done? The main reasons are:

1) It keeps me from being able to easily comparison shop.
2) It makes it almost impossible for anyone to actually take advantage of the "If you find a comparable mattress at another store, then we'll give you the difference plus $100."

If anyone out there has ever taken advantage of such an offer, please post a comment or email us, so far I have yet to find anyone.

The mattress industry is perfectly designed to make it almost impossible for a consumer to make an informed decision. The mattresses are named different things at different stores, and on the surface all mattresses more or less look the same.

I've also heard that mattress stores that "save you money" on a mismatched set are often just giving you the illusion of savings. They'll offer a mismatch set discount which is really just a fictional discount that makes you think you're getting a deal. I've even heard (though I've only just heard) that mattress stores will often specifically mix up sets in their inventory so they can have these mismatch sets sales.

Considering my experiences with mattress stores, I would believe just about anything. The pressure tactics we received were so non-subtle that is was practically insulting. Everything from stories of "one day sales" to scare tactics of horrendous back problems from buying poor quality at another store.

One of my favorite techniques that you see at a mattress store is the "one or the other" tactic. Which is a pretty simple sales technique where they get you to try two mattresses and then ask which you like better. Then they bring in another one to compare to your current favorite and so on. The key is that you always have your favorite mattress in mind so the hope is that eventually that's the one you'll buy.

Oh, one technique if you ever decide to brave a mattress store that worked well for me was to go in and say that you were looking for a mattress and planned to buy one as soon as some windfall arrived. In our case the story was that we were getting a tax refund and planned to use the money for a new mattress. It provided us with a simple "no we won't buy today" story that kept the salesman from bothering us too much, plus in our case the story happened to be true.

So what did we end up doing? Well we ended up going to a CostCo where they not only had mattresses, they also had samples set up that you could lay down on just like at the mattress store (only without the vulture salespeople). Sure we felt a little silly laying down on mattresses in the middle of a crowded CostCo, but the mattress was so much cheaper that we didn't care.

In fact, the mattress was so much cheaper that we figured that even if we decided after a few months that our mattress was terrible and that we should have purchased a more expensive mattress from a mattress store, that it was worth the risk to try it.

The result? We love our mattress. We've had our mattress for almost two years and it's great. With part of the money we saved we bought a couple of fancy foam pillows and a foam pillow top for the bed. Not only is it super comfortable but it was SOOOO much cheaper than the mattresses we were considering at the mattress stores, plus we didn't have to joust all day with a salesperson to haggle down to a fair price.

I should say at this point that neither my wife nor I have any back problems so we're pretty easy to please as far as mattresses go.

I'd like to hear stories from other people out there, as far as what worked for them, or if they had more pleasant experiences at mattress stores.

I found this one web page that seemed to have some good info on buying a mattress:


Also if you go to:


This web page lists various sales tactics common to mattress stores. If the sales people at mattress stores use even half the tactics described in this web page, I don't know how they can sleep at night.


Tuesday, November 13, 2007

Saving money, one dollar at a time

Posted by Matt

Chances are good that you've got a store somewhere near you where every item for sale in the store costs one dollar. There are at least two of these chains in our area; The Dollar Store and Dollar Tree. I never really wanted to shop at either one; they are kind of depressing inside. Obviously they have to keep their costs low, so they don't put a lot of effort into making the place look nice, and the quality of the products can only be so good.

However, my frugal wife has, over time, put together a short list of items that she always buys at the dollar stores. These items are typically either short-lived or do not vary widely in quality no matter where you buy them.

  • Party supplies: gift wrap, gift bags, etc. My wife recently went shopping for invitations and found a pack of 8 for $8 at a regular store. She decided that was too much, but was able to find the exact same product at the dollar store. 8 invitation cards for $1!

  • Pet toys. When we owned dogs, we bought all their toys there. Much less expensive, so we didn't worry when the dog chewed through them in a week. I don't think they have an actual pet toy section; we just bought stuffed animals or rubber balls.

  • Plastic food storage bins (i.e., tupperware).

I should also pass along my wife's warning not to buy food at the dollar stores (did that go without saying?). She reports that most of what they have is near the expiration date, and I'm guessing it probably isn't prime stuff, anyway.

Monday, November 12, 2007

Putting Off Savings, Another True Story

Posted By Paul

I knew a guy who was in his 20's and had the philosophy that he wouldn't save money until he turned 30. He figured that his 20's were for fun and that included fun spending, and that when he turned 30 he'd start saving money.

Unfortunately I learned about this friend's philosophy when were talking about what we were going to do now that we had both just been laid off.

This friend was a hard worker and he made it through the layoff and job hunt process without too much pain, but the whole experience could have been less painful and stressful for him if he'd just saved a little more money earlier.

If you're thinking that you're too young to worry about savings, remember that rainy days come to all people regardless of age. Don't think that financial responsibility and having a fun life are mutually exclusive. I've noticed that as I get more on top of my finances that the peace of mind from not having to worry about money is a big factor in my daily happiness. Plus by being responsible and saving money most of the time, I can splurge on the occasional fun things guilt free.

Friday, November 9, 2007

Wedding Planning, Buying An Engagement Ring

Posted By Paul

As we enter into a popular time for couples to get engaged and start planning their wedding, I wanted to take a moment to write about buying an engagement ring. Why? Because if you do a google search on buying a diamond, you come up with some amazing results.

For example, one diamond buying guide that I found on the internet includes phrases like:
"Buying a diamond means investing in a piece of forever."


"You can rest assured that the diamond you buy will be a sound financial investment."

It was these sorts of phrases along with phrases that I heard at jewelry stores while looking that made me want to write this article. Phrases like: "This is one of the most important purchases you'll ever make." and "This ring is a symbol of your love, so you need to make sure to get something of the highest quality." make me cringe, since I suspect the salesperson wouldn't use these phrases if they didn't work.

Just today on the radio the DJ was talking about buying a diamond ring and in her overview she said (quoting from memory here):
A two-carat diamond is now the standard, and when you figure that you may have your wedding ring for your whole life, it's a good investment.


There have been a lot of yellow diamonds on the market currently, being presented as a cool style, but THESE ARE NOT WHAT WE WANT LADIES.

Why does this bug me so much? The diamond marketing machine in particular and the diamond industry in general is one of the most terrible industries in so many ways (just google 'blood diamond' or 'conflict diamond' to learn some of the darker aspects of the industry). But I wanted to really focus on the marketing machine that exists around diamonds.

First of all, just to make it clear that I'm not trying to preach, when I proposed to my (now) wife I had a diamond ring. Why? Because I knew that's what my wife really wanted. This is a choice that I made (and a choice that she made), and a choice that you should make but I wanted to offer a few tips from my experience:

1) Remember, a diamond is NOT mandatory - I have several friends who chose to get sapphires, emeralds, or some other stone, not to mention friends who prefer a simple wedding band. I applaud these people who decided to forego convention and focus on what THEY wanted and not what society told them they needed.

2) If you do decide that you want to get a diamond, try to focus on how the diamond appears to the naked eye. There are all the guides out there that talk about the "4 C's" of diamonds, and often when you go to a diamond store they will be more than happy to have you examine a diamond using a magnifying glass. Try to remember that the whole point of buying a diamond engagement ring is to have it end up in a setting and on your wife's finger where it will pretty much sit all the time. One of the most common things I saw in stores that sold loose diamonds was their tendency to show you a diamond on a stark white sheet of paper (accentuating any color deviation) and offering you a magnifying glass (so you can pick out any flaw that the stone might have). Think about every time you've admired a friend or relative's wedding ring. How often did you ask the woman to take off the ring so that you could look at it with a magnifying glass?

3) I recommend taking the time to figure out what's important to you (by 'you' I ideally mean the bride and the groom since I consider a ring to be a big purchase so why not start off healthy marriage habits and discuss the purchase together). Just like any other purchase, decide what "features" are ones that you are willing to pay for. For example, maybe you want a really big diamond and are willing to live with it being a little yellow-ish, or maybe you are fine with a smaller stone but really want it to have a clear color. If you want the ring selection to be a surprise (I actually think ring shopping together is fun), then doing a little investigation (ask questions about what's important to the bride while window shopping at a jewelry store at the mall).

4) Don't think of a diamond as an investment. You hear this one a lot from salespeople. Even if you buy the idea that a diamond is a sound financial investment (and I REALLY don't), the idea of buying a wedding ring is that you'll have it for the rest of your life, so why consider something an investment if you're never going to sell it? (If there was a savings account that let you deposit money, but never let you withdraw it, would you consider that a good investment?).

5) I know several people who had a diamond that was in the family that they reused it in some way (for example using the stone in a new setting). The end result was a ring that was cheaper AND had a family history. A very cool option if it's available.

6) If possible find someone you trust when buying your ring. If you can find a trusted friend or a family member who is part of the jewelry industry then that's a huge bonus. It's not about finding someone who will give you a great deal, it's just about finding someone who will give you a fair deal and won't try to rob you blind.

7) I really would suggest that you not finance the ring. The ring is the first purchase in your journey towards married life, why make that first step purchasing something beyond your means that puts you in debt? If funds are low, that's nothing to be ashamed off, you can buy a smaller ring with a plan to upgrade it at your five year anniversary, or buy a CZ ring and replace the stone when you can afford it.

Most of all try to keep in mind that in many ways buying a diamond is a really an absurd purchase that our society tells you you need to make. In my opinion the sole purpose of a diamond on a ring is to look pretty to the naked eye. Contrast that with a cubic zirconia which looks just as pretty as a diamond (I don't know of anyone who can tell the difference with their naked eye). So why are you buying the diamond? It's essentially this strange sense of needing a real diamond as opposed to a fake one, but why? What difference does it really make? If you wanted to buy a new car for $50,000 but there was a different model that was the same in EVERY way except some of the parts could be shown to be different (not better, just different) when seen under a microscope, and the other car cost $500 which one would you buy?

Again, I'm not saying that you shouldn't buy a diamond ring, but just keep the absurdity of the whole industry in mind when you go shopping and make sure you don't get too sucked in by all of the hype out there.

I did find one reasonable diamond buying guide here at wedfrugal.com that had a lot of common sense advice:



In the last few years my wife has totally gotten into CZ jewelry. One year as a gift we went to the store and she got to pick out a CZ tennis bracelet (diamond versions cost well into the $2000+ range). She has discovered it's just as pretty, it was SOOO much cheaper, and another added bonus is that she doesn't have to be all paranoid about losing it when she wears it out.