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.

Wednesday, January 30, 2008

Weatherization incentives

Posted by Matt

I just wanted to post a quick follow-up on my weatherization project and let everyone know that it all worked out. I received the incentive check today for the full amount promised: $1150!

Thanks Energy Trust!

Emergency fund....I'm open to suggestions

Posted by Matt

Didn't I JUST get one of these rate drop notices from HSBC? Sheesh, they're at it again.
Dear MATTHEW, We are writing to inform you that based on the recent drop by the Federal Reserve, HSBC Direct has adjusted your Online Savings Account rate to 3.80% APY*. At 8x the national savings average**, you are still earning one of America’s highest savings rates.
And there's likely to be ANOTHER Fed rate drop soon (today!), so I'm going to start shopping around for new places to put my emergency savings account. I want it somewhere where I can get relatively quick and easy access to it (Paul recommended safety and liquidity in one of his previous posts about savings), but it would be nice to get at least a little bit of return (i.e., I'd like to outpace inflation).

I'm meeting with a financial advisor this afternoon, so I'll let you know what he recommends. If any of you have any good ideas, let me know!

Tuesday, January 29, 2008

Laid Off: Day 7

Posted By Paul

I'm sorry I haven't been posting more, but I've been busy revving up the job hunting machine. Here are some things that I have done so far:

-Updated my resume. This for me was top priority. You never know when you're going to make a contact that has job lead potential and the first step in the job lead process is almost always a resume. I updated mine as soon as possible (not only did it get me thinking towards the future but I was able to update it while my work at my old job was still fresh in my mind), and I had the luxury of having a couple of good friends review it for me for feedback. Updating a resume seems like such a simple task but it can easily take a day or two to get it really polished. Also since you're never sure when you're going to find a job lead I try to carry a few nicely printed copies of my resume in my car. One of my proudest job hunt moments was back in 2001. I was having lunch with a friend and they had brought a friend of theirs along. Turns out this friend of a friend worked for a company that was hiring. I gladly took their business card and was able to reach into my bag and give them a copy of my resume that we were able to talk about right at the table.

-Got references lined up. This was step two. Several people at my old company gave me their contact info and said I could use them as a reference. I made sure to get in touch with them and get their contact info and confirm that they were willing to be a reference. In addition I try to give my references some lead time every time I expect that they will be contacted (essentially every time a potential employer asks for my references). The idea is that a professional reference is someone acting on YOUR behalf as part of YOUR job hunt, so you should give them every opportunity to do it well. I once got a call from a company asking me to be a reference for an old colleague of mine (I'll call him John Doe). I'd worked with John, but it had been a few months and I've never been particularly good with names. When they told me the name it actually took me a few moments to remember who they were talking about. Once I remembered I was able to give the best reference I could, but those few awkward moments where I was struggling to remember who John Doe was probably didn't reflect well on John Doe. Cases like that are not only impolite, but if I am totally surprised by a call from some company asking for a reference for someone, then I simply can't give as good of a reference as I could have if I had been given some warning. Also, I suspect it's annoying for companies to ask for references and be told something like "I can get them to you in a day or two while I line them up". If a company goes to the trouble of checking your references it probably means you have a good chance of getting a job, don't give them any reason to hesitate, have those references ready to go.

-Wrote a "basic" cover letter. Fairly often you are asked to write a cover letter (even with resumes sent via email). I try to include a cover letter whenever possible, but I try to make sure it's a GOOD cover letter. I don't just have one cover letter that I use for every job I apply for. I think that a hiring manager can smell a form-cover letter a mile away, and I think it sort of makes your whole application feel like junk mail. Instead I keep a general outline for a cover letter that I try to personalize for each company I apply for. I think that makes a MUCH better impact to whoever reads it.

-Kept in touch with my colleagues. I really like to keep in touch with the people I worked with. Not only is it nice to have a group of people to encourage each other and share the experience with, but it can often be a great opportunity to share leads. The obvious thought is that these people are competing with me for the same jobs, and that's probably true, but the way I see it, there are enough jobs to go around, and usually the benefit far outweighs the potential risk. For example I came across a job lead where I didn't have all of the skills required, but I knew an ex-coworker who did. It was easy for me to send the job lead to them. Not only do I help them out, but if they end up getting the job, that's one less person looking for jobs in competition with me. Perhaps I find a job that requires relocation that I don't want to do, but maybe one of my colleagues is willing to do that. I can send it to them and help them out and maybe they'll return the favor. Also, let's say I get a job. It's common to still be contacted with job leads for days and maybe even weeks after (simply because a lot of people with your resume think you're still looking), and what a great opportunity to say: "I'm no longer looking, but I have colleagues that would be perfect for this job."

-Claimed unemployment. Not much to say here, it's nice that you can now file your claims online.

-Took a good look at my finances. This is an important step. Thanks to our emergency fund my wife and I can weather this storm for a long time if we have to. Our hope is that between my company severance and unemployment we won't even have to touch our emergency fund, but boy it sure is nice to have it there.

-Made plans for health insurance. As part of my severance my company is covering my health insurance for a couple more months. That's great but I've already started looking into health insurance options. I know people who will let their health insurance lapse as a way to save money while job hunting, but I REALLY think this is a terrible risk to take. If you go without dental or vision for a while to save a few bucks I think that's fine, but to go without basic medical insurance...just don't do it if you can possibly avoid it.

-Made some goals. I try to find and apply for 2-4 new jobs every day. That may not sound like much, but it's actually a pretty good pace. I've found that by trying to find a minimum of two new job opportunities each day (and I mean realistic job opportunities, I'm not trying to apply to be a pharmacist or some other job that I'm totally unqualified for) it forces me to keep hunting around for leads, and it keeps me from burning out on the job hunt.

-Kept a positive attitude. There are lots of jobs out there for someone who is willing to learn and work hard. I believe that keeping a positive attitude not only makes your "forced vacation" more pleasant, but it also keeps you from appearing burned out or desperate when you interview with someone.

-Been patient. I've submitted my resume to several places already but I have to remember that it could easily be a week or two before I am contacted by a company that's interested in me. Though companies are often eager to fill spots, many places only evaluate submitted resumes once or twice a week, so depending on when your submitted your resume it might be a week before someone even looks at it.

Well, that's about all that's going on here. Hopefully soon I'll be able to post some stories that are about preparing for and going on interviews.

Wish me luck!

Monday, January 28, 2008

Stimulus plan

Posted by Matt

So, what does everyone think of the proposed economic stimulus plan? I'm torn.

On one hand, I'm certainly excited at the prospect of receiving a big, fat $1500 check later this year.

On the other hand, I find the idea very troubling. First of all, where is the government going to get all this money? Oh, right, we can just tack it on to the deficit, pushing it to nearly record-levels. I'm not an economist, so I can't really say whether that trying to forestall a possible recession is worth such drastic measures. But I do have an even more fundamental concern.

The benefit of the stimulus package is predicated on the assumption that Americans are going to run right out and spend most of the money. From the first article I linked to above:

Q: How likely are consumers to spend the money and help the economy?
A: Some will spend every penny and then some. Some will save it all. In 1975, people spent about 40 percent and saved the rest, according to the Federal Reserve. In 2001, people spent about 70 percent.

Also from the article:

Q: What's a smart financial move to make with this money?
A: Either pay down any credit card debt or save it for an emergency, said Ken Robinson, a Cleveland certified financial planner. "Most people don't have nearly enough saved for a rainy day."

Frugalizers know that planning ahead beats short-term fixes; now we just need to demonstrate that we know it to our government and hope that they pick up the lesson.

Friday, January 25, 2008

The perfect (credit) score

Posted by Matt

You've seen the ads with the annoyingly smug guy who asks, "Do you know your FICO score?" right?

So, do you? Most people probably have a general idea of whether they have a relatively good or bad credit rating, but knowing your score is even better. If you are applying for a car loan or mortgage, the lender will probably have to access the information and can let you know, or you can buy a report.

Even more important than getting that number, though, is understanding how it is determined and structuring your financial activities accordingly. The exact algorithm has long been a closely guarded secret, but I read an article in the local paper that describes the factors that influence scores.
  • Payment history
  • Amounts owed and relationship to credit limits
  • How many years you have used credit
  • How often you apply for credit and open new accounts
  • Types of credit, such as a mortgage, auto loan, finance company accounts or retail accounts. Bank cards can help your score more than those from a department store or gas station. Some consumers try to help their score by closing unused accounts. But that can backfire because reducing credit lines and eliminating a long-term account can be seen as negatives.

The second point is the most interesting point to me. I remember that when I first started to make a little money, I got to the point where I could stop using the credit line at my bank. I think I had only been using it as a very poor type of emergency fund, transferring a little money to my checking account when it got low to avoid overdrafts. Once I built up a savings account, I closed the credit line. I didn't realize it at the time, but that action probably really hurt my credit score. That was the only credit I was using at the time, so what I should have done is kept the line open in order to keep my ratio of debt to available credit low. Live and learn; I just wish I had learned in time for the information to be more useful.

One last good quote from the article:

What's the profile of a person with a near-perfect credit score?
"If we're talking about predicted credit risk, the ideal consumer is a very conservative money manager...It's somebody who has two or three accounts that have been open as long as the U.S. has been a country, they have never, ever been late, they do use the credit occasionally, but they always pay it down to zero or to low balances."

Wednesday, January 23, 2008

Laid Off: Day 1

Posted By Paul

So did anyone out there read my article:

You've Been Laid Off Now What

Well I'm re-reading my own article because just yesterday my company laid off everyone in my department.

If you had told me a week ago (or heck two days ago) that I was going to be laid off I would have said you were crazy. It was THAT much of a surprise for me.

So I thought I might as well blog about the experience in the hope that my experiences might be of help to someone out there.

So here goes:

I was pretty shocked yesterday. I've been laid off before, but this one really was a big surprise to me. I was literally working right up until they told me (and my colleagues) that we didn't have jobs anymore. Most of us were in such a daze that we just wanted to clean out or desks and go home, so I did just that. I was home by 1PM. I had lunch with my wife and my friend Matt and then just sort of moped for a while.

By 3PM I was bored with moping so I decided to go back to work and drop off the last couple work-owned items that I needed to bring in and make sure I hadn't left anything behind in my desk. I then ran a couple of errands and came home.

My wife was gone that evening (she teaches at a community college) so I had the house to myself. It really gave me some time to process all this. I was certainly surprised but that wore off quickly. Of course there was also anxiety, but there was also a new feeling that it took me a while to identify.

It was guilt. Even though my wife works I still make most of the income for our household (or at least I did before I got laid off), and I was feeling guilty about the fact that I wasn't bringing home a paycheck anymore. The last time I got laid off I was single, so this feeling was new to me.

Now all of this guilt was just of my own creation. You couldn't ask for a more supportive spouse than my wife. She's been sympathetic, optimistic and encouraging, and not once did it even enter her mind that in a way I was letting her down.

I know this because I talked to her about it. I didn't think that my guilt had any basis, but it felt good to talk about it with her. I still feel bad that we're going to cancel a weekend trip to the coast and that our upcoming anniversary celebration probably won't be the fancy dinner out that we originally planned, but we both realize these are just some of the things you have to do try to save your pennies when household income is down.

So that said I've been facing forward and diving into the job hunt. I'm updating my resume, and I've already applied for unemployment. I plan on sending out resumes hopefully tomorrow.

I've also been keeping in contact with my colleagues who were laid off (we created a google group for "alumni" of our company). Not only has it been nice to have a sort of email support group, but we can all help each other network as we try to find jobs.

I've started a t0-do list so that I'll stay on top of things, and I am also planning on adding a few "personal improvement" items to the list as a way to make my time off not just all job hunting and anxiety. For example I plan on taking a CPR class (something I've always wanted to do but never had the time) and do a few projects around the house.

Okay, I'm off to work on my resume. Stay tuned for more updates as the days go by.

Energy audit and weatherization followup

Posted by Matt

Does anyone remember my post about energy audits? I can't believe that it has been three months already, but I finally have enough information to report out on the results of our audit and what we did about them. I anticipate this will be a long post, but I'm going to spell out the details of:

  • how we went about getting the audit done

  • what energy-saving measures we decided to implement

  • how we got INCENTIVE CHECKS from the government

  • and how much energy we are saving so far

...so I hope that the long read will be worthwhile.

Step 1: Set up the energy audit

The best place to start is probably your local gas and/or electric company. We contacted a local non-profit called Energy Trust and scheduled with them.

Step 2: The audit itself

On the morning of our scheduled audit day, I was surprised to see several huge electric utility trucks (with bucket cranes) pull up outside our house. It turned out that they were NOT part of the audit, but were just coincidentally there to work on some power lines. Whew. Our auditor showed up on time in her own car. She worked independently and it only took a few hours for her to go through the whole house. In addition to energy auditing, she also did some tests on our water system because Energy Trust has a partnership with our local water company. Before I tell you the results, I just want to point out again that there was NO charge for any of this.

The water audit:

  • We received several new (free) sink faucet aerators to save water.
  • The auditor found a leaky toilet tank flapper (using dye pellets) in our hall bathroom and replaced it.

The energy audit:

  • The rooms that we reported the coldest were (surprise) the ones that had the least insulation above them in the attic.
  • The crawlspace was completely uninsulated except for under the addition.
  • At least one exterior wall at the front of the house lacked insulation.
  • Some of the older heating ducts were not sealed at the joints and were not insulated. I learned that as much as 25 percent of the heat from a forced-air heating system may be lost through leaks in the ducts.
  • Our laundry room is especially cold and we discovered that it is completely uninsulated, open to the crawlspace (via the washer pipe runs), and open to the outside via an open dryer vent.
  • Our hall bathroom was being vented to the attic instead of the roof (which can lead to rotting wood from the moisture).
  • We could save money by installing CFL bulbs and received 6 for free. They start off very dim unfortunately, but then get brighter the hotter they get. The bulbs in enclosed cans in the ceiling got especially bright, but we learned they would probably burn out more quickly as a result. The bad news is that we will have to take them to a local recycling center for recycling because of the enclosed mercury. I also asked about LED lights, and was told they are still a bit too expensive to be worthwhile. (Read my "In Search of the Frugal Bulb" post for my report on that.)

Step 3: Determine which recommendations to implement

Insulate crawlspace - This was the biggest no-brainer. It has one of the highest payback rates and we could expect a good gain considering that we didn't have any insulation under the floor. Also, most of our uninsulated plumbing was installed close enough to the flooring that it would be covered by the insulation, too.

The only bad part of this was that one of previous owners had left almost three hundred glass bottles of water in the crawlspace (don't ask me why) and we had to spend several hours hauling them out before the contractors would work down there.

Insulate attic - The areas of the attic above the additions were already fully insulated, but we had some other areas with only a little bit of insulation and some areas with none at all. We decided to bring it all up to an even level. Two separate contractors both told us that that they would have to route the bathroom vent to the roof to meet code requirements, so we threw that in also.

Air and Duct sealing - there are expensive tests that can be done that involve hooking a blower fan up to the house and the duct system to determine how much of your heated or cooled air they are allowing to escape, but we elected against having these done. The maximum rebates would not pay for the test itself and the insulation contractors were going to do all the patching work anyway (seal the penetrations in the floor and ceiling and seal the duct joints with mastic and tape).

The process of insulating the walls involves cutting a hole in the interior drywall between every pair of studs and blowing insulation in, so we elected NOT to have that done until we are ready to repaint.

I also thought we should invest in some heavy drapes, which the auditor said would reduce heat loss from our large windows, but my wife felt that the house would be too dark and depressing.

I did a few other easy jobs myself. I put some weatherstripping ($3) on the bottom of the door between the laundry and family rooms, which blocked the cold draft coming through. I also replaced the external dryer vent with one that has a valve to keep cold air from coming in that way ($8).

Step 4: Locate a contractor and have the work done

This was pretty easy. Energy Trust provided a "trusted ally" list, so we had a few come out to the house. Their estimates were close, so we picked the one that could get the work done the most quickly: All Weatherization. They had two teams come in (one in the attic, one under the house) and got the whole job done in a day. The total cost was just over $2500.

My only complaints were that their compressor kept tripping a breaker on the circuit that our router was plugged into and that their was a terrible smell after they left. I think it was from the mastic they used to seal the ducts. I'd recommend having this work done in the spring or fall, if possible, so that you can leave the doors and windows open.

Step 5: Submit incentive requests

Energy Trust offers several rebates and all we had to do was fill out and fax in a single form (Form 300A) along with a copy of our contractor's invoice within 120 days of installation. I spoke with an Energy Trust rep yesterday who gave me the breakdown of what we will actually receive.

  • Duct insulation: $100 (50% of installation cost up to $100)
  • Attic insulation: $375 ($.25 per square foot)
  • Crawlspace insulation: $675 ($.45 per square foot)

Grand total: $1150 or about 45% of the total cost!

The check should arrive in mid-February, which works out to about 6 weeks from submission time and included a brief delay in getting our contractor to confirm that he had been (promptly) paid.

Note: We didn't apply for the duct sealing rebate because it required the expensive testing I mentioned above, but if you're interested, the incentive is $1 per CubicFeetMinute reduction (max $400).

Step 6: File for tax credits

Not surprisingly, figuring out the tax rules was one of the more complicated parts of the process. After several phones calls and visits to the IRS website, I determined that we could receive a federal tax credit for 10% of cost of materials ($140 for us) by submitting IRS Form 5695. I've added that in to the pile for our accountant to deal with.

There is an Oregon state tax credit (25 percent of the eligible cost, up to $250) available for duct sealing, also. The process is to submit an Oregon Department of Energy application form (provided by the contractor) and we then get a certificate that shows our credit amount. We claim that and just retain the certificate for audit documentation. Unfortunately, I didn't realize that the contractor had to be certified by the Oregon Department of Energy, so we won't claim this on our return.

Step 7: Monitor ongoing savings

Of course we are hoping that this project will pay off in the long run, so we're keeping an eye on the bills. I called the gas company and was able to convince them to at least tell me that the previous owners' highest bill in 2007 was $247.18 (184 gas units) in January. We just received the January 2008 bill and it was $184.27 for 129 gas units. We used almost 30% less gas than previous owners, so I hope that at least some of that was because of the insulation and not just because they ran the gas fireplace constantly or kept the thermostat at 72.

I'll have to check the electric bill in the summer also, to see how much we save on AC.

Step 8: Enjoy a cozier home
We were really hoping to make a big difference in this area, but unfortunately we still have a few cold rooms. We've since discovered that our relatively new furnace is undersized for size of the house. My only guess is that it was installed just prior to the remodel that added several hundred square feet, but I haven't confirmed that yet. We're still working on this one, so if you want to read a REALLY happy ending, let me refer you to Clark Howard's write-up of his weatherization project.

The final test is for me to ask myself "Am I glad I went through this process?" I would say yes, with the caveat that anyone else considering it should be willing to put in a fair bit of effort and really run the numbers to determine which weatherization measures make the most sense for their individual situation.

Hopefully this post will help you through the process.

Tuesday, January 22, 2008

Rate drop(s?)

Posted by Matt

If you haven't already heard, the Fed cut the rate significantly today, by 75 basis points. That in itself might be a cue for some people to start thinking about refinancing debt, but don't move too quickly. Another rate cut is likely on the way.

My wife and I may be shopping for a new improved mortgage soon!

Monday, January 21, 2008

Staying ahead of the game

Posted by Matt

Did you see my recent post about my disappointment with my savings account? Well, I just got more disappointed. I read an article last week that inflation was 4.1 percent last year, meaning my savings account is just barely keeping me ahead. At least it reminds me why I don't just keep my savings under the mattress.

I guess we all might need to be a little more aggressive about pay raises this year. I've had some in the past that were less than 4% (with reassurances from my manager that that was still above average), but didn't think about whether that worked out to an effective pay decrease for me.
You might also try to be particularly frugal with common expenditures like your grocery and gas bills as the article points out that these generally rose faster than inflation (e.g., gas went up 8.2% and eggs rose 29.2%!!)

Friday, January 18, 2008

Reconsider the second fridge

Posted by Matt

How many of you have a second refrigerator in your garage? If you do, have you given any thought to what that is costing you?

My wife started making a case for an additional refrigerator or freezer while we still lived in our last house, but after we moved she suggested that we get a new refrigerator and move the aging (but well-maintained and high quality) fridge left behind by the sellers into the garage.

Her thought is that we could save money on some of our groceries by buying more items in bulk (especially meats), if we only had more freezer space. Hard to argue with saving money, but I kind of liked the old fridge and didn't look forward to the expense of a new fridge on top of all the other things we've purchased for the new house already.

Well, the debate has finally been silenced and we have the electric company to thank. In their latest newsletter (yes, I actually read these top to bottom each month), I found an article that brought up an interesting new point on the topic and brought my wife and I into agreement.

Here's the gist of it: Second refrigerators are usually 1) older, less efficient models and 2) operating in uninsulated garages. The article indicates that the combination of these factors can really drive up the amount of energy used to run the refrigerator. Beyond the environmental negatives of this (which were what made the case for my wife), there is also the small matter of paying (according to the article) up to 200 dollars per year for that extra energy! Is it worth it? Can you save $200/year by buying that much more frozen food? We already save by stocking up on some frozen items from Costco; we just need to be more careful with our freezer capacity. And that's what we've decided to do. Thanks PGE!

One final note: having the fridge in an uninsulated garage probably won't contribute significantly to the cost factor in the winter months if you live somewhere that gets really cold, but if you do, why bother with a fridge anyway? Consider putting some of your frozen food outside! We've got a small cart that ended up on the (covered) back patio during the move and has become a convenient place to stash our extra drinks.

Thursday, January 17, 2008

Time is all we have

Posted by Matt

You know what I hear a lot? "I don't have time."

Let's go with a finance-related example. Let's imagine that you are in the market for a new mortgage and you ask me for a suggestion. I'd probably suggest a basic plan something like this:
  1. Gather your income and asset information.
  2. Call several mortgage lenders and request written good faith estimates from each.
  3. Put all of the GFE's next to each other in a spreadsheet or on a new sheet of paper in such a way that you can compare them line item by line item.
  4. Determine your criteria (e.g., total out-of-pocket at closing, interest rate, monthly payment amount) and evaluate each lender against it.
  5. Identify which lender has the best offer and then call the others to see if they can beat it.
  6. Take the best deal.

Simple right? You definitely want step 6, but you realize that the process above will take many hours and possibly span multiple weeks, and that is when I hear the familiar refrain...."I don't have time for that!" (Lest I be called a hypocrite, let me be the first to admit that I've said the same thing far too many times to count.)

I've been conscientiously working to purge that terrible excuse from my brain. Whenever it pops in, I internally correct myself and try to verbally respond with "I haven't made that a high priority." This has helped me so far, and for more things than just working on my finances. When I think about the things that I haven't accomplished, I have to ask myself questions like "Did I prioritize TV today?" This has helped me hold myself accountable for things that need to be done.

Going back to the mortgage example above, you can ask yourself "are all the things that I want to do over the next few weeks more important than potentially saving tens of thousands of dollars?" Maybe they are. I will grant that there are people with VERY busy lives (most people that I know these days) and I'm not going to try to force my priorities on you. If your job keeps you busy all day and you want to spend time with your children or relax in front of the tube when you get home, by all means do so, but acknowledge that those things are your priorities. If you want results, there are no substitutes for informed decision making and putting in the legwork.

Now I've gotten a little preachy and I didn't mean to do that, so let me cut this short. The thing that I've learned and that I'm trying to share is "Time is ALL I have." It is my responsibility to allocate it according to my priorities.

If you like that, use it and pass it on.

Wednesday, January 16, 2008

Are Internet Savings Accounts on the way out?

Posted by Matt

I received this disappointing bit of news not too long ago:

We are writing to inform you that based on the recent drop by the Federal Reserve, HSBC Direct has adjusted your Online Savings Account rate to 4.25% APY. At 9x the national savings average, you are still earning one of America’s highest savings rates.

I was pretty enthusiastic about my Internet Savings Account when I first signed up, but now I hear that the Fed is likely to drop the rate again soon. How low will HSBC go? Is it time to start exploring new places to keep my savings/emergency fund? I checked other ISA's and HSBC definitely isn't the highest, but I don't want to hop from bank to bank chasing quarter points, either (see more on this from Paul here).

I'm also wondering whether I should put any more money into my savings account at all. It contains plenty of cash to cover most small to medium emergencies, so it might be worthwhile to start thinking again about putting my extra money toward real long-term investments (i.e., bump up my retirement savings rate) or maybe paying extra on the mortgage. Paul and I have debated the latter several times and I don't think we've come up with a really solid answer yet.

Have any of our readers paid off their mortgages early? If so, would you make that same choice again?

Tuesday, January 15, 2008

Article: Confessions of a Car Salesman

Posted By Paul

Hi Everyone,

I found this really interesting article where Edmunds.com paid a journalist to go "under cover" and become a car salesmen. Once he learned the ropes they had him write an article about his experiences.

It's a long article, but I found it very interesting.

Check it out:

Confessions of a Car Salesman

Monday, January 14, 2008

Cost of Entertainment

Posted By Paul

I've been a member of Blockbuster Online for quite some time now. When Blockbuster launched the program the single disk program cost $9.99 and for that you could have one disk at a time and you could also take a mailed-to-you disk in to any Blockbuster store (there was one conveniently located to us) and trade it in for any in-store disk for free.

Since my wife and I like to watch movies at home this ended up being a great deal.

However, over the last few months Blockbuster has gradually changed their plan and prices. Now our plan costs $11.99 for the one disk plan and we can only exchange it in the store twice a month. This isn't a terrible plan, but it's starting to make me wonder if it's worth it.

Managing entertainment costs is something I try to keep an eye on since it's one of the most obvious ways to save a little money here and there. If the Blockbuster Online costs continue to rise I might just cancel my membership.

Is anyone else out there dealing with this?

Friday, January 11, 2008

Bye bye, cable TV!

Posted by Matt

I think I can finally safely report on the outcome of yet another decision we had to make when we moved into our new house (this won't be the last): namely, the decision of what to do with our cable television service.

In our old house, we subscribed to Comcast's "Expanded Basic" plan, meaning the networks and a few cable channels, but no pay channels or on-demand service. For that, we paid around $45 or $50 per month (after a discount for also subscribing to their Internet service). We have also subscribed to a 4-disc-at-a-time Netflix plan for $24 per month for over two years now and have been very happy with it. I got to the point where I couldn't stand to watch regular TV because the commercials were so intrusive.

So, I was making all of those exciting phone calls to transfer our services to the new house and I thought, why even bother with cable? The only show I was even still watching on TV was "The Office" and I was downloading them afterward anyway. My wife and I both zoned out occasionally to HGTV, but I knew I wouldn't miss that. So, I started exploring alternatives. Comcast was the only cable provider, but there was also the satellite providers DirecTV and Dish Network. The prices were roughly similar with only slight variations in the channel lineup and I dismissed them pretty quickly.

Next, I went out and actually bought an antenna. Yes, the old rabbit ears. I did a bit of research and found that our neighborhood was supposed to have pretty good reception. I talked to a sales rep at Best Buy who told me that the best models in the current generation of antennae have an internal signal amplifier, so I picked one up for about $30 (on-sale, of course). I was very excited when I first hooked it up; we picked up about 20 different HDTV channels and the reception and picture were amazing! Except for when they weren't. Every once in a while, we'd see large swatches of pixels wash across the screen, especially if anyone was walking around the house. One day, we inexplicably lost over half of the channels. We sadly decided to return the antenna. I think that if I were really into network television, I'd probably explore installing a roof antenna, although I suspect our HOA probably wouldn't allow it. No real loss.

The last televison service option I explored is still relatively new: FiOS TV. We decided to use Verizon for our Internet service in the new house to take advantage of their fast new fiber-optic network and learned that our TV could hook up to the same connection. Like the satellite providers, it was still pretty expensive and didn't really have anything that compelling.

So, where did that leave us? We rely totally on Netflix these days for all our television watching. We decided to take some of the money that we were spending on cable previously and bump ourselves up to the 6-disc plan for $35.99 per month. I'm not sure if we'll stay there, but we found that we would occasionally run out of things to watch on the 4 disc plan, mostly due to the weekend postal lag. This is less of a problem now that we are ordering more television shows, as they usually have more content per disc and last longer. Even if we stay with the 6 disc plan, it is still cheaper than cable, and I always feel like we have a lot of choices of things that we actually WANT to watch at home.

The only drawback so far is that our friends with cable aren't able to discuss the current season of shows with us, but that isn't a problem this year.

Just the disc service is adequate for me, but there are two more important features of Netflix I think are worth mentioning. The first is the "Watch Instantly" feature that lets us bypass the USPS and stream some titles directly to our computer screens. I use this for TV shows, because sitting in a chair in front of a computer for 2 hours to watch a movie can get tiresome (especially since I sit in front of a computer for 8 hours a day at work) and it doesn't really work well for more than one person. That does bring me to the second important feature, however: Netflix has announced that they are partnering with hardware manufacturers to bring the download service directly to our televisions.

The cable and satellite companies have resisted user-driven programming for far too long and Netflix is finally helping us achieve the ability to watch what we want, when we want. If you haven't yet, check them out.

Thursday, January 10, 2008

Financial Choices, Good vs. Better

Posted By Paul

I was working in the yard and thinking about how I view savings and investing, and my rambling thoughts started to take shape into a set of rules that I call 'Good' and 'Better'. The idea is that in my opinion people spend a lot of time focusing on the wrong financial view.

Good: Focusing on making sure you income is growing.
Better: Focusing on making sure you are living within your means.

I've known a lot of people who were incredibly focused on their incomes. They wanted to make sure that they were constantly making more and more money year after year. Now I certainly agree that income is important (and so is income growth), but I often see that in all that focus on income sometimes people lose sight of the basic idea of living within their means. For example, someone works feverishly to make a great salary and because they work so hard and burn themselves out to make that money they spend lavishly on cars, boats, and all kinds of toys to make the most of the their limited free time. These toys require even more money to maintain the lifestyle so they have to work even harder. The result ends up being that their finances turn into a very fragile house of cards, and just one layoff or recession results in financial ruin.

Good: Bargain hunting to make sure you save money on purchases.
Better: Focusing on simplicity to make sure you don't buy a lot of stuff you don't need.

You ever see the one where someone buys some expensive toy that they really don't need and can't afford, and they work VERY hard to make sure they get a good deal? Remember that getting a great deal on something you don't need is still more expensive that not buying the thing in the first place.

Good: Focusing on finding ways to save pennies here and there.
Better: Focusing on ways to save LARGE amounts of money.

I've always thought it was odd to see people who will save and return their aluminum cans religiously for the nickel deposit on each can but will then turn right around and spend $100 a month on a premium cable package they rarely use, or blow $200 on an impulse buy. I don't mean to say that you're a bad person if you have cable, or if you indulge on a fun purchase. The point I'm trying to make is that it's great to work to save your pennies, but it makes very little sense (cents?) to save your pennies if you're wasting dollars.

Good: Focusing on your investments to make sure that you are getting good returns.
Better: Focusing on making sure you're saving a lot.

It's great to search around and find your best investment based on what you want out of it, but sometimes it can be overwhelming to try to find the perfect investment (mostly because there is no such thing as the perfect investment). Don't worry too much about finding the perfect mutual fund or that CD that gets you .1% more, instead focus on saving the money in the first place. The way I think of it is that if I have $1,000 and spend a lot of time finding a CD that pays me 5% on that $1000 as opposed to 4.9%, the result is that after a year I will have made $1 more. Instead of researching CD's as a way to squeeze every penny, if I could use the time to shave $10 off of my monthly budget then after a year I will have saved an extra $120!

Wednesday, January 9, 2008

Think refill, not landfill

Posted by Matt

I recently posted about some options for saving money on printer ink, but just found yet another option that I'm pretty happy about. There is a tiny shop very near where I work called Island Inkjet that will refill your inkjet cartridges for you, with several benefits over the other methods I discussed.


  • I had my HP #15 cartridge (black ink) refilled for $15.99. A replacement from HP.com would have cost $29.99.
  • I had my HP #78 cartridge (color) refilled for $21.99. The HP replacement would have cost $34.95.
If you read my last post, you know that the least expensive option is still to refill your own cartridges, but convenience has a value, too.

  • I didn't have to deal with the mess
  • The refilling process only took the experts a few minutes
  • The refill tech also cleaned the print nozzle on the color cartridge, which I didn't even know was needed.


Another thing that you don't get with DIY is the benefit of specialized knowledge and experience. The tech at the shop gave me the exciting news that our older black ink cartridge has twice the capacity of the current cartridges being sold by HP and that the older color cartridge has EIGHT times the capacity of the new ones. Also, they can be refilled up to ten times. I'm certainly glad I didn't recycle the used cartridges and just buy remanufactured ones!


The last point I have to make is hinted at by the title of this post, which I stole from a sign at Island Inkjet: refilling printer cartridges is a more environmentally friendly option than trashing them. Island Inkjet refilled 2 million cartridges last year, but that is only a small part of the 300 million that are tossed out annually. We can do better!

All in all, I was very satisfied with the process and would recommend this service to anyone.

Tuesday, January 8, 2008

Gold is going crazy!

Posted By Paul

A long delayed follow up to my earlier post:

Investing In Gold

Some of you may have noticed that the price of gold has been shooting up recently. Apparently as the stock market falls and the word 'recession' starts to pop up many people start to run from securities and instead put their money into gold.

I only own a little bit of gold, but it's nice to see SOMETHING I've invested in going up nicely in recent weeks.

I may have to remember this tendency for gold to increase in value when investors get nervous and perhaps purchase a little more gold in the near future.

Monday, January 7, 2008

Consumption junction: the outlet mall

Posted by Matt

Did any of your mothers tell you that you aren't supposed to buy anything for yourself during the holiday season? Mine did, and it is a pretty good tip. If you buy everything you want, then people don't have anything to get you and you end up with generic gifts that you don't really need.

We all know how difficult it is, though, to put the blinders on when you are at the mall. My suggestion is to look and even try on, but keep your hands off of your wallet/purse. Keep a list of things that you like and let a close friend or spouse know about them. Chances are that others will be asking that person for input on gifts for you.

Okay, so hopefully that helps you limit your spending on yourself during the holiday season, but what if you didn't get everything you wanted, and now you have a handful of gift cards or cash from grandma to spend?

You can do what we did this year: head to the outlet stores. Not everyone has these close by, but if you are anywhere near a big city, you should have several. If you've never been, outlet malls are similar to regular malls and have most of the same stores, but usually bigger and more remotely located. In the past, it seemed that the outlet stores were dumping grounds for last year's styles, uncommon sizes and blemished merchandise. This can be true, to an extent, but these days so many people are looking for deals at outlet malls that the retailers started mixing in the new and good stuff, too (at full price). As a result, you have to be careful to make sure that don't end up driving 50 miles to buy a new sweater for the same price as you could have got it from a local store.

Here are the tips my wife and I came up with after our visit.
  • Don't go too frequently if they are out of the way (consider gas and time costs)

  • Look for deals as many prices are the same as at the regular retail store

  • Make sure that the inexpensive items aren't irregular or damaged

  • Check return policies...sometimes you have to return to the outlet

  • Comparison shop ....Leah found a pretty good deal on a pair of shoes at one store, but kept looking and found them at another shop for $10 less

  • Go with a list!

For me, the best of these tips is the last one. It is too easy to convince oneself to buy something because the price is just "too good to pass up." I passed up a $15 sweater that I thought I wouldn't wear nearly as often as the $30 sweater that I'm wearing today. My clothes shopping list isn't actually something that I write-up for each trip, either. I started a list last year of what I think constitutes a complete wardrobe for me and I'm still trying to fill it. Eventually I hope to get to the point of only having to shop for replacements when things wear out.

How did I do? I bought 2 nice new merino wool sweaters and 2 new polo shirts for about $80, all of which was on my wardrobe "need" list. Definitely a savings over what I would have spent locally.

Friday, January 4, 2008

Article: Capital Ideas

Posted By Paul

Wow, what an odd coincidence. The article that Matt just posted about was also sent to me by my sister and I wrote a similar "how I stack up versus the rules" article, I thought it would be cool to have both of our articles, so here is mine:

My sister sent me this article recently that I thought was interesting:

Capital Ideas

I thought the article was really interesting since it gave some guidelines for where you should be financially. I thought I would summarize the guidelines in the article and see how I'm doing relative to them.

"$10,000 is now about the average credit-card debt per household, according to cardtrak.com."

How Am I Doing?
I'm doing great here, credit card debt is 0.

"At 30, you should have your highest levels of debt (including mortgage, student loans and credit cards) to earnings, with total debt double your annual earnings. As you age, that figure should get smaller, and stay below 1:8. At the age of 45, debts should equal your annual salary."

How Am I Doing?
Since I'm sort of half way between 30 and 45, so I guess following the guideline would imply that I should have about 1.5 times my annual salary in debt. Assuming that since I'm married I should consider total household salary, then my calculations say that my debt to income ratio is almost exactly 1:1, so it sounds like I'm a bit ahead of schedule there.

"You should also aim to be saving 12 percent of your income annually, and the savings you amass should exceed your annual income in your 30s, says Farrell. By the time you are 40, you should have 1.7 times your income stashed away for retirement, and by 50, aim for three times your earnings."

How Am I Doing?
My wife and I actually save more like 15-20 percent of our salaries. It says that by the time you are 40 you should have 1.7 times your income stashed away for retirement. Currently my wife and I have about 1.85 times our salary in retirement accounts, so it looks like we're ahead of schedule there.

"Lenders (at least the sensible ones) like to see borrowers keep their housing expenses—including mortgage payments, insurance and property taxes—to 28 percent of gross income."

How Am I Doing?
I think a rough estimate is that our total mortgage, insurance and property taxes are about 10% of our gross income.

It looks like according to this article my wife and I are living a pretty savings heavy lifestyle. It looks like we're ahead of schedule as far as our savings and that our cash flow situation looks pretty good.

In fact my stats would look even better if the stock market hadn't taken such a beating in the last month or so.

Modern financial rules of thumb.

Posted by Matt

By now most everyone knows WHAT they should be doing financially; things like watching your spending and saving for retirement. The questions that arise usually center around HOW MUCH?

Am I saving enough for retirement and how does my nest egg look so far?
Am I carrying too much debt?

These are the kinds of things that can be explored in-depth with complicated financial spreadsheets, but most people aren't that interested. If you want a quick rule of thumb, check out the Newsweek article a friend of mine passed along. I thought it would be fun to see where I stacked up.

Household income: I learned from the article that our household income is safely above average, although I don't think that people should really be that concerned about where their income is compared to other people's. It is more important to make sure that your spending is appropriate for whatever income you have. At least the article didn't list an arbitrary income goal, although they did mention an outdated rule of thumb that suggested your income in thousands should equal your age.

Minimize credit card debt: We pay off our full credit card balance every month, but I didn't take any pleasure from learning that that put us $10,000 ahead of the average US household. It is more than a little scary to think that so many people owe that much on credit cards.

Debt equal to twice earnings by age 30: I was amused to read that age thirty is supposed to be the debt high-water mark. That was probably right about the age where I finally got back to absolutely ZERO debt after paying off my student loans and car (and before buying a house). Our current debt is WAY past the "double our earnings" mark, but only until we sell our previous house. After that, we should be about on track as the mortgage on our current house is the only debt we will have. The article recommends getting to zero debt by age 65, but I hope we beat that deadline!

Saving 12% of income: check. I got there a year or two ago and just bumped up to 15% in 2007. That's probably a good thing as my retirement account only surpassed my income less than six months ago. I'll probably need the extra boost if I'm going to get to 1.7x by the time I'm forty (I'm 36 now).

Housing expenses below 28% income: Not currently; that darn second mortgage payment again, but we should fall under the wire after selling the house and paying it off.

The eat and sleep test: This was a quaint little idea, although I have to point out that you can eat well and sleep well; you just have to put them both near the top of your priority list. And shouldn't they be?

Thursday, January 3, 2008

Energy budget leveling

Posted by Matt

Paul wrote a post about budgets previously, but I just wanted to share one more bit of information that can make the budgeting process easier.

From Paul's post:

After a while I discovered that many of my utilities varied, but only a little each month (like my phone bill). Once I realized this I included the average amount as an expense in my budget and if my bill was less than the average one month I'd add the extra into my surplus and if it was more I'd subtract it.
Great idea, Paul. But our readers might point out that one category of utilities varies by more than just a little. If you're thinking "yeah, energy bills", then I feel your pain. The monthly gas bill in our last home went from the $20/month range in the summer to the $200/month range in the winter. That's an order of magnitude change! Having a nice cash reserve in savings keeps us from having to worry in months when our spending goes up, but if you need more stable expenses, check with your utility companies to see what kind of billing programs they offer.

Our electricity provider provides a couple of different options for paying an average payment each month, as does the local gas company. Check them out!

Wednesday, January 2, 2008

Catching up from holiday spending

Posted by Matt

Happy New Year, readers!

I hope everyone is ready to get back to Frugalizing in 2008 and that you didn't miss us TOO much as we took some time off for the holidays. Let me tell you, it was a bad time to be posting anyway. I think any advice I could have given for saving money last month would have felt hypocritical, as we had a huge spending month at our house. There were the usual gift expenditures, sure, but we are also still getting little small things here and there for the new house.

One small thing we still need: fireplace tools. We've had gas-only fireplaces in our last few houses, so we didn't think about them until our furnace went out on Christmas Day and we tried to tend to burning logs with our BBQ tools! We were trying to save on the furnace repair bill by not calling someone out on the holiday and paying triple-overtime, but if I had only known then what I know now, I could have saved even more (and not scuffed up our spatula).

Apparently there is a simple part called an ignitor in gas furnaces that burns out every three to four years. The furnace repairman that came December 26th spent about three minutes pulling out the old one and putting in a replacement (no tools and just one wire to disconnect). Total bill: $163. I might try to get the jump on it burning out again by picking up a spare ignitor at a local appliance parts store (the same one that sold me parts to side vent my dryer, incidentally) that sells them for $50 to $60.

That unexpected expense was actually more painful than a much larger one that we had planned for that same day. We finally got our attic and crawlspace insulation installed! I have a detailed write-up in the works, but I'm waiting to see how much incentive money we get back from Energy Trust. Stay tuned....just a little while longer!

Oh yeah, and our old house hasn't sold yet (RMLS#8000353, in case you know someone who is looking), so we're still making double mortgage payments. (Sigh) But, just like in 2007, we're still doing our best on a daily basis to try to save money on the things we do decide to buy, so keep reading. We'll share whatever tips we can!

Article: Retirement Plan Interrupted

Posted By Paul

An interesting article on CNN Money about how stretching your housing expenses too far can put you in a tight situation:

Retirement Plan Interrupted.

Tuesday, January 1, 2008

Happy New Year!

Posted By Paul

Hi Everyone,

Happy 2008! I'm back from the holidays and eager to tackle 2008.

As I mentioned in a previous article "Adviser Or Not", 2008 is going to be a year where I handle all of my financial decisions myself.

I'm excited to see how this effects my household net worth. My basic goals for the year are:

1) Don't chase returns - by this I just mean that I plan to avoid the idea of trying to move your money around a lot hoping to chase "the latest thing".

2) Save, save, save - I also hope to continue to save a lot of money. I've got this idea kicking around that maybe I need to worry less about making great returns on my investments and worry more about saving so that I have more to invest. The idea is that maybe I can save $500 and find a risky investment that might return 8%, but maybe with some work I can save $1000 and find a safer investment that will return 4%. This is something new I've been thinking about and it will probably comprise a post of its own, but I thought I'd mention it.

3) Invest smart - by this I want to really try to take the time to ask myself "What am I investing this for?". My hope is that by answering this question I'll be able to make better decisions in my investments.

Well, more posts to come, but I wanted to wish everyone a happy new year. Are there any readers out there with financial resolutions for 2008 that they would like to share?