Pennywise and Poundfoolish

Frugalbabe Saves a Chunk of Green

[Note:  Good Morning!  No I'm not dead, or quitting.  I'm letting Frugalbabe take over for a day!  She had this awesome post that attacked the problem of water use on a lawn from the point of view of changing the vegetation to low-water intensity vegetation]

Remember in 4th grade science class when you learned about the water cycle, and how there's a finite amount of water on earth - with a very small percentage of it being fresh water?  Some of our resources - like trees - can be replenished over time, but as our global population grows, we're heading towards a day when we run out of some very necessary resources.  We've all been hearing for years about how we need to conserve water.  We learned in elementary school how to fill a milk bottle with plaster and put it in the toilet tank to reduce the amount used to flush.  We know we're not supposed to let the water run while we brush our teeth, and that short showers are better than baths.  Although most of our needs for water can be reduced, they can't really be eliminated.   But what about the water we use on our yards? 

Unlike bathing, drinking, and flushing toilets (you can only "let it mellow" for so long...), watering lawns is not a necessity.  We do it because we like what a lush green lawn looks like.  But there are alternatives.  My husband and I xeriscaped our front yard last spring, and we just finished doing the same thing to our side yard last week.  Last fall my husband tore out all the very thirsty grass in our backyard and replaced it with a drought resistant grass that needs hardly any water at all.  He planted the seeds in September, and within a few weeks it was a beautiful green carpet that stayed green all winter, with no maintenance at all.  We now only have a little strip of "normal" grass along the north side of our house, which requires very little water since it's on the north side, and is also under a shade tree.  We live in a very dry climate.  It's not a desert, but it's pretty darn close.  Before we started looking for ways to reduce the amount of water needed in our yard, we were watering our grass every two or three days for six months a year.  Just to have green grass. 

Our front yard cost us about $300. On the other end of the spectrum, I have a friend who spent $10,000 to have a landscaper professionally xeriscape her yard, so there's obviously a huge range in terms of what you can spend on a yard.  Now that our yard requires very little water, we're saving money on our water bill, and we feel better about the impact we're having on the environment.  The plants we selected for our yard are native to our area, so they grow well with very little maintenance - we spend almost no time at all in our yard these days, but it still looks really good. 

I think some people shy away from xeriscaping because they think it means they have to just have rocks and mulch in their yards, without any plants or color.  But if you look for native species that thrive in your area, they'll grow with whatever rain water you get.  If you live in Arizona, you can have an amazing cactus garden.  If you're in a high mountain area you could have a beautiful yard full of wildflowers in the early summer.  There are lots of options that require a lot less water than a carpet of grass. 

I've seen HOAs that forbid xeriscaping.  This should be illegal, and is an issue for city councils to address.  But that's another matter.  For now, how about looking at ways that communities can encourage residents to xeriscape and ultimately reduce their water usage?  If your town gave out free rocks, mulch, and native perennials, would you take advantage of them and redo your yard?  What if there was a tax credit for xeriscaping?  Or a voucher you could get at the city office that would be good at a local nursery where you could buy your own xeriscape supplies?  Check out your city and see what you can find.  Ours offers free xeriscape classes, has a sample xeriscape garden where we got most of our plant ideas last year, and offers as much free mulch as people want at the recycle center.  What does your town do to encourage people to use less water in their yards?  What would it take to get you to move away from thirsty grass in your yard and switch to something that uses little or no water?

I've always thought of myself as environmentally aware, and I've tried for years to reduce, reuse, and recycle.  But now that we have a baby, my passion for environmentally-friendly living is redoubled.  I want our son to grow up in a world full of trees and birds and bees.  I want there to be fresh water for him to drink, blue skies above him, and snow-capped mountains in the distance.  We're veering dangerously towards a world without these things, and it makes me sad. There are so many little things that we can all do to protect the earth, and many of them are very budget-friendly.  You don't have to go out and spend 25 grand on a hybrid car - there are lots of simpler, cheaper ways to "go green."  What changes have you made to be more environmentally-friendly?  Did they end up saving you money as well? 

 

picture credits www.daviddarling.info

Did you enjoy this article?  I encourage you to add FrugalBabe.com to your Google Reader, bookmark or whatever, because she's got some cool stuff there.  Plus I'll be posting a super-cool article there as well.

Car-free dreams

Everybody, I'm sorry I haven't been as active for this week as I would like to be, I'm working 10 hour days at a refinery and trying to make some money and get kind of an "inside scoop" on the real deal behind Big Oil.

Wish me luck, tonight I have a fight (and another one next Saturday) at Kalahi Martial Arts in Mount Vernon, Wa.  Hey, a guy's gotta do SOMETHING to keep himself sane, right?

I recently decided to eliminate my cars from the family budget and pocket the savings. My personal effect on the environment will be huge. As will the effect on my pocketbook and retirement plan.

For right now, we’re only getting rid of my wife’s gas-guzzling truck. I’m still going to be driving 17 miles a day to my security job. When I get back from Iraq, though, I’m going to get rid of the other car as well. We’re going to be spending our tax return on bicycles to get us around town. I think this will really go a long way toward making our lifestyle sustainable both financial and environmental.

To find out if you really need your car, you should do a couple of things.

1. Map out your dollar cost per day of running your car, and also alternatives.

2. Map out the time cost of driving and the time cost of alternatives.

3. Try it! For one week try using the bus to get to work. That’s 5 days, no car (I would say 7 days, but most people don’t ride the bus for work because they don’t seem to “have the time”).

4. Add the cost of insurance for the each driver into your cost of driving. Most people don’t do this, but it’s very important to add in all the costs associated with each plan.

So how am I going to get into bus-riding when I am driving more than 10 miles away? Well, I plan on switching to a completely car-free lifestyle when I come back from Iraq, which means I have the better part of a year to look for a job closer to home or find a good job somewhere else to move to.

I really think that that’s what it’s going to take—a change in lifestyle. I believe that “sustainable” means that you need to change your practices to suit a lifestyle of “minimal inputs, minimal waste, maximal re-use”.

I hear a lot about bio-fuels (currently a very trendy thing, which I have denounced for years) contributing to the global food crisis. In many gas stations they dilute their gasoline with an ethanol-gasoline blend. I don’t think this is a good enough (or even a halfway-decent) solution- people simply need to get rid of one car. This will put most Americans back in the situation they were in when they had to share a car.

Noimpactman does a great job of explaining why you cannot “buy your way to being green”.

Eliminate waste and become rich

When I visit my friend’s places, I often find that they are living an unsustainable life because they waste a lot. The chief thing that they waste is often money. True, they live within their paycheck-to-paycheck needs, but anybody who wants to retire one day understands that this is not enough—they know that they need to put a good portion of their paycheck towards building assets.

Eco-Hack: cook. Plain and simple.

By simply cooking at home, you can cut down on

• Money spent on packaging made from cardboard (saving trees) and plastic (reducing our dependency on foreign oil).

• Money spent on processing mediocre raw product

• Emissions from processing mediocre raw product

• Total food costs. These savings can be over 50% in some cases. Possibly even more if you were to join a CSA.

And you can increase

• Your bottom line. You will have more money to spend on cool stuff.

• Your health. It’s pretty much certain that eating pesticide-free products are better for your health.

• Your family time. In many countries cooking is the center of the family life. This is particularly true with my wife and I (who are always trying to outdo each other), and we intend to make sure that our baby will have the opportunity to spend time with her parents cooking. I could write a book on this, but luckily Barbara Kingsolver already did. Look up “Animal, Vegetable, Miracle” for a look into what you probably wish your family life was like.

There is one consequence of cooking at home that may be a bad thing or a good thing depending on how you handle it. You will have plenty of kitchen scraps to fill up your garbage with. This means a higher garbage bill for you. Not exactly a good idea if you’re trying to cut your budget, right? Well, fear not! Kitchen scraps make great compost. I know—you’re probably thinking “no compost! I don’t have the time!  It's gross!” Well, fear not—I’ll bet that if you just post on freecycle or craigslist, you’ll probably find somebody near you who’s willing to pick up your kitchen scraps for their own compost. I’m willing to be that there’s even companies that make a living off of neighbors scraps.  Anybody know of any?

Visiting other people’s homes taught me that a poor person with a sense of creativity often has more potential for wealth than a person with a decent job, but poor spending habits. But let’s examine what it is that we work for:

• Covering the necessary bills. This doesn’t mean luxuries like a cell phone (yes. . . it really is a luxury)—it means stuff like rent/mortgage, health, food, entertainment, debt.

• Financial security for the future.

I have to ask—how secure are you if you are relying on a system that guarantees you will have utility bills that will increase with time (ever heard of a rate increase?). By taking control and installing solar or wind power and a rain catchment or grey/blackwater retrieval system, you never have to suffer from a rate increase ever again.

With two of the principles our economy is based on being that idea that people will spend what they make, and increases in pay cause increases in consumption spending, most of budgeting is a game of “hiding” money from yourself. The net result is that your future requirements are minimized. When you take control of your food and utilities, you maintain control for the rest of your life. Your requirements shouldn’t increase with time, as most people’s consumption stays relatively constant—there’s just more people drawing upon the system. The advantage of taking control of your utilities is not only never paying utility bills again, but you can also pocket the energy savings (and the extra equity in your home as this becomes a more and more desirable trait due to future energy crunches), and put this little bonus into your retirement..

I recently posted about the fact that I’m getting rid of my cars as a part of an effort to save a ton of money each year and do something good for the environment. Well, by not spewing out tons of pollutants, I am also cutting my expenses by a minimum of $3,600 per year with additional savings as gas prices rise (you don’t really think they’re going to fall, do you?).

The carfree thing is probably the biggest lifestyle change that I will really have to deal with. Installing solar panels and/or wind power and a water system is a one-time deal that will not require any additional energy from me to maintain year to year. So the potential savings could be thousands per year after everything is said and done.

I wonder how many millions of dollars is being missed by corporations and businesses that refuse to “go green” and save redesign their products to be cheaper to manufacture, and more energy efficient to build?

sell the truck, retire early

We currently have two vehicles-- a truck and a car.  Both officially get 28 mpg, however I hypermile, so I've been able to get upwards of 45 mpg on my car.  The truck has provided much-needed utility during the two moves we've had in the last year.  It was also given to my wife by her grandfather-- which was why I was somewhat surprised when she said she was thinking about selling it.  When you think about it, it makes sense:

1) we're a single-income home

2) she's pregnant and not going anywhere for a while

3) anywhere she does need to go can be reached easily by bus or taken by family

4) a monthly pass costs significantly less than the cost of gas

However the idea of eliminating my own car as well intrigued me.  What would happen if we were to go from a 2-car family, down to a 0-car family and we rode bikes instead.  What I came up with astounded me.  Saving $3,600 per year (roughly the cost of operating both vehicles, and their insurance at the first couple of years--not including gas) for 20 years would put me at over $115,000 in my 401k!  That's not including the normal saving that other car-owning people are saving.  Additionally, with fuel costs bound to continuously increase (they'll never go back to the old days of $1.20/gallon), that $3,600 amount is based upon gas prices which means that you'll continually increase the amount you're saving.

What do we get out of eliminating our vehicles?

1) Excercise-- with all the obvious benefits

2) Time to stop and smell the roses-- just like money that you put away to savings before you even recieve your paycheck, I have a hunch I won't miss the time spent my vehicle.

3) Face-time-- My wife is trying to launch a photography side-business.  Being outside, on the bus and interacting with people gives her a chance to practice her networking skills and build her business.

4) Build Wealth-- as prices for gasoline soar, this will eventually cause an increase in average salary across the board.  This "cost of living" increase, instead of keeping our family afloat like the rest of the motorized world, will just be icing on the cake and accelerate our retirement and house-purchasing goal.

5) Family time-- Biking, unlike driving a car, is something that kids can do with you at almost any age, giving you some additional bonding time (and it tires them out faster, I'm sure!).

6) Anywhere (almost) that we want-- most of what we want/need is within a 5 mile radius.  That's not a bad length (so I'm told) to bike on a daily basis.

7) Completely custom-- I can customize my bike any way that I want it to be.

If there's any additional points to be made, I hope people will fill them in with the comments.  It's going to be some time before we actually get this all together, but I'll look forward to it and keep all 9 of my readers posted. (that means. . . tell your friends to subscribe to Pennywise and help me improve this blog!)

"Maxed Out" describes middle class nicely

This is the second video posted on youtube.  I encourage everybody to check out the whole video:

Concerned about your credit card debt?  Check out these real-life options for getting out of debt:

• Antishay
• Get Rich Slowly Forums

The great thing about these two websites is that they are from people who have gone through the pain described in the video; revolving credit, no financial plan, abusive creditors and predatory loaning practices.  They kicked the credit cards and so can you!

The Myths And Misconceptions About Passive Income

Everything takes work.  One thing that I see around the net is the idea of generating "passive income".  Only one step removed from get-rich-quick schemes, these ideas purport to make people money without putting in residual effort.  Things like book-writing, rental properties, and. . . that's about it.  Every once in a while blogging comes up as a means to generate passive income.

They're wrong.

Blogging takes an enormous amount of time and dedication.  As does any form of creativity, and any other business endeavour.  Here's how your "passive income" endeavor will work:

1. you'll find somebody who will actually publish you and advance you money, then you'll write one book out of the million or so published pieces of literature.  Maybe you'll make residuals off of it, but most will end up lost in a library somewhere.  You'll need to work continuously on marketing your project.
2. you'll get some serious money together and then buy an apartment building or duplex.  Then you'll kick your heels back and relax. . . until you have to collect rent, fix their leaky faucet/tub/toilet/roof/etc, or any of the other things that come along with owning your own home.  You just get to do it more often!
3. Perhaps starting a blog and using adsense/adrevenue will be your big get-rich scheme-- it won't.  Yeah sure, for the lucky few who work at great content and good marketing of their blogs will see some income, but in increments of .15 cents. . . you read that right-- that's 15/100ths of a penny.  2000 clicks will get you 300 pennies.  Thanks for the $3.  Guess I should spend more time to make more money.
4. You will find out what your passion is, you will find a way to make good money from your passions and not feel like you're "working" at all.

The bottom line is that "passive income" is still something that requires time, energy, and drive.  That being said, GeniusTypes has some decent strategies for developing passive income with a minimal time investment.  This is perfect for the three days off that I will have, the question is, what will I do? 

My stepdad used to have a friend say to him, "how much time do you spend making money?"  He would reply with the number of hours he worked in a day.  That, of course, was not the question.  What always got me was the answer: "if you spent just one hour a day making money then you're better off than any of your peers who spend 14 hours a day working at a job."

What will you do with your free time?

Consequences. . .and common sense leveraged for your benefit

I've learned a lot about consequences over the last few years.  I've also learned a lot about strategy and tactics.  Three parts of strategy are:

1. know what you're getting into
2. act at the right time
3. set yourself up for future success (endgame)

Today I will concern myself most with number 3-- set yourself up for future success.  Too often we see people acting without thinking about how the endgame will work in their favor.  They buy stuff without thinking about how the lack of cash and the ensueing debt will affect them.  People do things without thinking about the waste products created (or the opportunities to make money from them).  Then they decide not to take opportunities without first asking themselves if there's even any real risk involved, and if there's any reward.

These people are forgetting about the endgame.  It's a term used to describe how you set yourself up for possible what-if scenarios after a major action.  This attention to endgame is useful when worried about a counterattack, and it's useful in the personal finance world because when you make a major purchase (or any serious decision), you have to know where the outcome places you in terms of not just your goals, but also the various what-ifs that can spring up.  It's important not to get hung up on the what-if question, but nonetheless, the question is very much worth asking!

Consequences and Endgame

When we talk about consequences, we usually think about the negative part of consequences, but there are positives as well!  Consequences are merely the reactions of previous actions.  They don't have to be horrible, but they also don't have to be convenient:

Example:

The consequence of me being financially irresponsible is that I don't have money when I need it, but it goes much deeper than that; let's say I have bad financial habits and don't know it-- that means that I will not have money and therefore whenever I need it, I won't have it.  Seems simple doesn't it?  Well you wouldn't believe how many people out there don't have money because they make poor decisions every day that caused consequences months later, then proceed to blame whatever else is in their lives.

The same goes for other parts of your life too:  If you eat poorly and don't know it, you'll develop health problems.  If you live wastefully, you're going to have to suffer the consequences; in short, ignorance is not a shield against consequences.

Light at the end of the tunnel

One good thing about consequences is that they work both ways.  If you set yourself up for failure, "The Rules" state that you will have to fail; if you work towards setting yourself up for success, you will succeed.

Cause-effect-effect-effect. . .

I worked for a year saving up money before I moved in 2007.  My savings allowed me to keep my head above water financially and even store away $5,000 while some of my coworkers who made upwards of 2 times my income were struggling financially.  The consequence was that I was able to quit my job and live comfortably for 5 months while I got settled in a different state (good).  Unfortunately I didn't spend it wisely that last month so I was really panicking trying to find a job (bad).  The consequence of not looking for income when I could have been.

We all have consequences that create a result which creates more consequences.  It's in how much we are willing to see the chess game of life unfold in our planning sessions that determines how we will dominate the endgame.

In short, if you get hit by life. . . stop getting hit.

A penny saved is $3 earned

“A penny saved is a penny earned”—words that grew out of the early 1900s . . . back when two pennies could buy you a complete lunch.  Three pennies could buy you a higher-end lunch (where I live), and a dime—a dime could afford you a gourmet dinner!

Taking frugal advice of your seniors is a great idea, but it’s important to realize that you need to adjust for inflation (because they certainly won’t).  Adjusting for inflation will make great-grandpa farmer Earl appear smarter than the greatest financial tipsters on MSNBC today.

An amount of money at 3.5% interest over the course of 90 years becomes more than 300% larger.  That means that the penny of your grandparents is more like $3 today.  In other words, if you save $3 a day, you can end up with more than $1,000 by the end of the year.

How do you afford that?

How do you afford $90 a month, $21 a week?  First of all, if it was sound enough advice for your grandparents— who went through the depression for cryin’ out loud— it’s probably something that the average person today can deal with.  But just in case you need a little help:

• Save your dollar bills.  If you deal with cash, you have—in some ways—more opportunities to save money and build wealth than your card-carrying friends.  At the end of each day, put the leftover dollar bills into a jar and save it until the next time you go to the bank.  You’ll probably have a couple of dollars a day left over.

• “Keep the change”—round your purchases up to the nearest dollar, two dollars, or whatever.  Whatever the difference between the product purchased and your amount rounded to, you stick that money into savings.

• Know what your priorities are.  I do this by systematically eliminating things I like for a week and then adding it back.  If it feels like a waste of money, I simply stop buying.  If I can’t live without it (perhaps it actually makes me less happy), then I keep it—for now.

How envelopes controlled my spending: low tech personal finance

Most great personal finance advice seems to come in the form of low-tech solutions.  Something that I have been employing for the last few months that seems to work well: envelopes.

The concept is simple:  I have about 6 non-electronic bills (meaning there’s no way to pay them online).  I consider eating out a bill, and I also consider entertainment a bill—if you make having fun a priority, then you are able to regulate your spending in this area.  Anyway, I write the amount that I have budgeted for each pay period (usually a monthly budget divided by two) and label what that envelope is for.  Then I put in the exact budgeted amount (no cheating) into the envelope.  That’s it!

Sound’s easy, doesn’t it?  Here’s where the savings come in.  Most people go over budget for a few reasons:

1. Too easy to access their reserve funds— Either by not budgeting or making the mistake of making those funds accessible while you’re still in “impulse-spend” mode.  Keep emailing me—I have a million different ways to control this one; I’ve even gone so far as to freeze my debit card in a bag of water!

2. Budgeting— As I mentioned before, the simple act of budgeting at least lets your conscience know when you’re probably due to reign in spending.

3. Not budgeting for one item or another because “it’s not that big of a deal”—this system relies upon you sticking to cash for all of your non-internet purchases.  I have a friend that had not budgeted for gasoline!  After asking her what she can realistically expect to pay in a month for gas, it came out to just enough for her to be able to make a major goal of hers come true.  “Creep” is a term that will be coming up several times in the future of this blog about sustainable personal finance.

4. Not having fun— What makes personal finance and frugality a horrible and stressful subject for many people is the approach.  After all, who wants to spend their days thinking about ways to not spend their money?  You have to include things like entertainment in your budget, and separately include eating out—this way you not only find out how important entertainment is to you (by going without for a couple of days after you’ve already spent all your cash), you will also begin to plan ahead within that budgeted amount.  As you practice sticking to your budget, you become better at finding more and more fun activities to do with your friends.

5. Not adjusting limits— With a system as inflexible as “cold, hard cash” in place to make sure you don’t go over your limits, you have to make sure you are also getting your needs met.  Not adjusting your limits when absolutely necessary for your happiness is a major reason why many budgets—and diets—fail after the first month.

Back to the meat

Each paycheck gets cashed and divided into its corresponding amounts.  Whatever is left over goes either to your electronic bills for the month, or directly into savings.  What you find left over in the envelope at the end of the month gets put directly into savings immediately—no questions asked (before you can spend it at the coffee shop!).  This way, you’re guaranteed to save those $5’s and $10’s that you may not have spent the prior pay period.

Boiling it down

What this all ends up looking like is this: each paycheck that comes it, you are basically treating yourself (as a consumer with a j.o.b.) as an employee while You (the moneymaker with all the real dough) act as the employer.  This technique is used by people in real-estate all the time—when they make huge windfalls of cash, the smartest ones tend to continue living on the same budget (perhaps a little splurge here and there), while they sock the bulk of the commission away in their 401k (as tax-saving tool).

By creating a budget that you are at least willing to try—and then modifying it throughout the season to one that you’re content with—and dealing with the surplus in a way that sets you up for success, you can live frugally and not even realize it!

My job interview tomorrow

Tomorrow I have a job interview with a firm willing to pay a starting wage of $20 per hour.  This is literally like winning the lottery, so wish me luck!