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!

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.

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.

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.

• A few minor household fixes and additions.
• A new rug for the family room.

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!

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.

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?

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.

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!

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!

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.

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.)

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.