Introspection Found in a Suit

Over the weekend I was honored to be an usher at the wedding of two great friends.  We had a really great time celebrating, and I got that warm fuzzy feeling that you get at a wedding when you know that the couple is truly meant for each other.  I also had to Dress to Impress and wear a suit.  I hate dressing up.

I've reached the point in my life where I can no longer get away with khaki pants and a button-up shirt at formal gatherings.  This was very apparent when I under-dressed for my cousin's wedding last summer.  It was an outdoor wedding on a hot summer day and I thought comfort and practicality would prevail in the wardrobe choices of the guests.  I was wrong.  While I hate dressing up, I learned that I hate under-dressing even more.  Who wants to stick out and look like a schmuck in front of the whole family by being the only guy not wearing a blazer?  I felt like a lightening rod for the biting wit of my judgmental family.  Ugh.

I own a nice suit that I bought three years ago to wear to my job interviews as graduation approached and I had to secure a "real job."  Unfortunately, a sedentary job and diminished athletic activity has taken its toll on my physic.  Thus, in order to avoid any hushed Chris Farley jokes at my expense I needed a new suit jacket.  The marketing machine of the local mens formal store was kind enough to sucker me into buying more that I intended by offering the evil and manipulative "free" bonus.  With the purchase of a $99 blazer I was awarded a pair of free matching pants.  The sales person also convinced my wife that I needed a new tie to complete the package.

I planned to buy a $79 blazer and instead got a $99 blazer, matching pants, and a tie.  After alterations and taxes the total bill was $160.00.  I'm a sucker, BUT at least I didn't look like a schmuck at the wedding.  I also took solace in the fact that this entire package is exactly half of what I paid for my last suit.  Yep, my last suit that was worn about a half dozen times and outgrown in three years cost $320.  

The way I look at it today is that I've made progress.  I've realized that the way I dress does matter from time to time.  I've realized the direct costs of being in bad physical shape, and since January I've been at the gym 3-4 times every week.   I've grown more frugal and spent half as much to buy a suit, simply by ignoring the brand name.  Finally, I've realized that I am not a financial robot and that slips and compromises are a part of the process. 

Who knew that buying a suit could be such an introspective process.  Thanks for reading.

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Costs of a Luscious Lawn

As Spring has crept up on me and it is time to start working on some outdoor projects. One of the most pressing is the dirt and weed patch that is lovingly called my back yard. It is a mess and far from the fun and functional space I need.

To address the problem I've started with a little research. Starting with no clue about cultivating a grassy yard I have learned that in my part of the country there are two options: burmuda or fescue. Burmuda grows like a weed and is very tolerant of the hot sunny climate and better suited to lower amounts of watering. On the downside, burmuda is totally brown 5 months out of the year and never the soft carpet of green I would ideally grow. Fescue on the other hand is an attractive green color year round and can be made to flourish. Its weakness is that it is best suited to shade and requires very regular watering.

Fescue depends so much on regular watering that the local garden center recommended it only if we were willing to install a sprinkler system and run it 4+ days a week. My frugality, moderate as it may be, prevents me from ever seriously considering a sprinkler system or signing up for massive water bills just for the sake of a better shade of green. After facing water restrictions from drought last summer I am also weary to be so wasteful. Thus, I feel I am left with burmuda as my only real option for my yard.

Now I also have to determine how I want to approach "installing" the grass (I'm an engineer, not a gardener). The two basic options are to seed the lawn or buy sod. With each choice there are a number of secondary choices.

Surface seeding involves tilling the whole yard and adding lime and compost. As another option, I could seed the yard with a special "plug" planting device. What should I do about aeration? On the upside, seed is relatively inexpensive, ~$150 would cover the whole yard. Unfortunately each step in the process requires buying extra products and renting equipment that are costly instead. Finally, none of this comes with any guarantee of results.

If I choose to sod the yard there are is a different slate of challenges. The largest of which is the upfront cost of the sod which would run a minimum of $720 even if I choose to install it myself. Self installation of sod is again without a guarantee of results, but it has a benefit of far fewer complications and no special equipment required.

I've also considered putting the whole process in the hands of an expert. The companies I have called will charge about $40 a month for application of an assortment of fertilizers and weed killers. Lime application is $33 once per year. Profession seeding or sodding of the back yard would run over $1,000 for either option, but seeding is cheaper and will condition the soil in addition to just adding grass.

For now I'm stuck in decision paralysis. None of the available options really meet my budget constraints or my original idea of a luscious green yard all year round. I am currently leaning toward buying sod and installing it myself. It would serve as a trade off for me to provide the labor but pay extra to simplify and streamline the process. I am open to all comments and suggestions. How much is a gorgeous lawn worth and what route would you take to get it?

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Your Brain Makes Building Wealth Hard

One of the first steps to overcoming a challenge is to recognize there is a problem. If you do not know where your stumbling blocks lie it is often impossible to achieve the results you desire. In the wealth building process there are multiple challenges, but one that many people don't recognize is your own brain. Our brains developed to do a great job helping us hunt, gather, and reproduce. Unfortunately our brains are not particularly suited to the challenges of creating wealth.

There is [relatively speaking] a new field of study called Behavioral Finance. The basic idea is that investing decisions are made by people, and people are influenced by psychology in addition to the pure numbers of the markets. In fact, investors (being human) are subject to quarks of neurology, biochemistry, and evolutionary anthropology which in turn influence all of our money decisions.

So, now that we realize that there is more to investing than just the numbers, what does that mean? First off, it means that your brain is not always aligned with your aspiration to build wealth. In many cases your brain can drive you to do the wrong thing with staggering regularity. The best example is the tendency to sell your investments (in panic) during a market downturn.

Everyone knows that to make money a person must "buy low, sell high" but in practice most investors jump on the bandwagon when the market seems to go up, up, up and then sell to stop the pain as the market falls. What is the result? The average investor buys stocks when they have already gone way up and sells after they have dropped. This is a "sell low, buy high" strategy that will loose money every time. Why then do some many people follow this pattern?

The short answer is people "feel" the pain of a loss in the market much more strongly than they "feel" the joy of a gain in the market. Think about this, if you have saved a nest egg of $200,000 which would effect your emotions more, gaining $20,000 or loosing $20,000. The vast majority of people are more emotionally impacted by the loss. In order to stop the pain, they sell the stock. This effect is call Myopic Loss Aversion and has been studied and documented in the majority of people, professionals and amateurs alike.

Behavioral finance relates to several other important ways in which your brain sabotages your finances. It has uncovered important data about why people have such a difficult time saving, budgeting, and investing for the long term. It turns out we are nearly all subject to a Stone Age era inability to evaluate the benefits of long term returns versus instant gratification.

Centuries ago it was much better to have a bird in hand (to eat tonight) than to wait a few weeks or months to be able to eat two birds. If you starved now, doubling your "investment" isn't worth anything (you'd be dead). This is one key reason our instincts fail us when it comes to evaluating market returns. Market bubbles and crashes are another example of psychology creeping into our investing reasoning (and reaping havoc).

In other words, behavioral finance has some impact on nearly all aspects of our financial lives. Now that we know there is a problem, lets do what we can to create wealth for ourselves in spite of our brain.

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Break the Spending Cycle

Just like being on a diet, being frugal seems to go in cycles.  One month we may get our ship going in the right direction, and BAM, the next month we totally drift off course.  In the months leading up to buying our house we saved hard, almost 50% of our income.  For three weeks after we closed, we went into a buying spree that left us with $4,000 of debt.  Some of these purchases were legitimate needs, but much of it was not.  We spent money to celebrate our milestone ($400 for a self thrown house warming party anyone?) and rebel against our months of restricted spending (how about a flat screen TV?).  We went from spending 50% of our income to spending 200% of our income in an instant.

By starting this blog I took the first steps in reigning back in the excess that accompanied home ownership.  Today I am taking another step to try and address some of the recurring expenses that sneaked their way into the budget.  By addressing regular monthly bills I will make a lasting impression on my budget.  Rather than require my will power to hold up next month as if this were a spending diet, I've trimmed my lifestyle instead.  To continue the weight loss analogy, what I did today is like starting an exercise routine rather than some fad two-week juice diet.

The first bill I trimmed is the $41 a month land-line telephone bill.  The most basic telephone hook up from AT&T is $16 and change per month.  Next we add another $9 to add the 2-Option package for Call Waiting and Caller ID.  My wife deems it absolutely necessary to have the ability to screen calls and insists we have Caller ID.  Call Waiting is almost useless but it comes as a package deal.  We also have $2.99 for long distance service which to my knowledge has never been used.  Finally there is an assortment of taxes and fees that bring the total up to $41.

To go about reducing this bill I had very few options.  One would be to convince my wife that we don't need Caller ID.  I was unsuccessful in this task so I moved on.  I did some research and learned that AT&T is currently offering an online-only long distance package that is FREE.  That's right, no charge at all, and a fairly reasonable $0.12 per minute.  Since we never use this except for maybe in the event of an emergency this is great.  It will knock $4.52 including taxes off of our bill.  Next month we should be charged only $36 for telephone service.

The next bill to go about reducing is the satellite TV.   At present it runs $81 a month for the top tier service with two premium channels, High Def programming, and a DVR.  We currently get a $27 credit each month that covers the HD service and the DVR, but that credit will go away in August so the the bill will jump to $108 a month.  That is just too much to pay for TV.  We hardly watch the premium channels so that is the first place to start.  Dropping those will reduce the bill $15 + tax or down to about $65.  For a while I was watching Showtime frequently for several of their series, but lately these shows have been out of the lineup.  Dexter, Weeds, and Californication are great, but I'm not sure if they are worth $16 a month.  All of them will eventually be available from Netflix so today I am going to call and get rid of the premiums.

It may not be a lot but with a couple of phone calls I have trimmed a bit more than $20 a month from my budget.  I can now allocate the extra money to paying down my debt just a little bit faster.  If you factor in the interest savings it will cut a full month off of my repayment plan.  It will be a great day when I am finally free of my consumer debt, and this little action will bring me that much closer.

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What is an Emergency?

Save an emergency fund!  This is one of the most important first steps to getting control of your finances and stopping the cycle of reaching for the credit card when things get tough.  I even made saving an emergency fund Millionaire Rule #5.  I've scraped together almost $2 grand for my emergency fund over the last year, and that is great progress. Right?  

My problem today is that my car needs work, but I don't want to raid my emergency fund.  The $400 repair bill seems small enough for me to pay out of my regular living money, but history has shown that I won't tighten the belt enough.  I know that if I pay this bill out of normal income I will run out of money by the end of the month.  When the money runs out the immediate response will be to reach for the credit card for groceries and gasoline that I've got to have.  Spending more on credit is exactly what I shouldn't do.

However, I would almost rather seem my credit card balance go up than see my emergency fund balance go down...   I know it is crazy talk, but it took so much to build it up I don't want to use it!  I like knowing if a real emergency happens I have the money to cover it.  I also like looking at the nice balance and watch it continue to grow each month.

So here is the real question, how do you decide what constitutes an "emergency" and justifies raiding savings?  For example, I needed to buy two pairs of shoes (one for the gym and one for work) for which I hadn't planned.  Is that $100 expense for shoes enough to raid the emergency fund?  What about redoing the brakes on the car? What about text books for my wife?  It seems there is a possible emergency that doesn't fit into the budget every month.  Ugh.

In the last two months I've spent significant sums on these unplanned expenses.  Fortunately I've also had a significant inflow of cash from selling unused items on eBay that has covered these expenses.  That extra money was originally earmarked for paying off debt.  Instead of paying down my debt I chose to pay the bills and let my balances tread water.  This seems like a decent trade off, but in reality is is the same as if I had paid down the debt and later (when money got tight again) run the credit card right back up.  That scenario may have actually saved me some interest now that I think about it.

I'm a little confused about how I should be using my emergency fund, and a little frustrated with all of the unbudgeted expenses that have popped up.  Please leave some comments to let me know what you think.  Thanks for reading.

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Millioniare Rule #9

Buy a House and Cars You Can Afford
As a part of the Millionaire Rules series it is important to address the two largest purchases most people make in their lives. The choices you make about where you live and what you drive can drastically effect your long term ability to create wealth. If you allocate too much money to these budget items it is almost guaranteed that you will find it difficult to save and invest for the long term. A lifetime of fugal living, epitomized by the "latte factor" is quickly dwarfed by these two massive financial commitments.

I am not sure if these terms are universally used, but where I'm from it was common to hear someone called car-poor or house-poor. Contrary to what you might expect, it is NOT someone who lives in an ugly house or drives an ugly car. Instead, the term refers to someone who has stretched themselves too thin by buying a house or car they truly can not afford. All too often the explanation for a friend's absence at a party or night on the town was because of our friend's car-poor status. Even worse than missing out on the social scene, if your goal is to build wealth, overextending can be a giant mistake.

The purpose of a car is to provide transportation. This is important because so many people try to think of their car as an expression of themselves. If you are an outdoors person you should drive a Jeep, if you are eco-friendly you should drive a hybrid, if you are a macho man you should drive a big truck, and if you are a young professional you should drive a Infinity, BMW, or Mercedes. With no exaggeration, this mindset can ruin your long term hopes at building wealth.

In some locations transportation is best served by avoiding cars all together and using public transportation. I've spent time in several cities where this is by far the best way to get around. In other places, there is no way around owning a car. Unfortunately, I fall into this category myself. However, when I visit New York City or Chicago, you had better believe that I use public transportation whenever possible. It saves money, frustration, and time in most big cities.

If owning a car is a necessity, it is important to know that the value of your car falls rapidly from the moment it is driven off the dealer's lot. Some cars loose 30% of their value in the first year alone. Knowing this, it is often wise to buy a used car where someone else has suffered this massive initial depreciation so it does not hit your bottom line. Another alternative is to buy a new car, and then literally drive the car until it is ready to be sold for scrap. The benefits of this method are to spread the depreciation over the full life and mileage of the car, and it ensures the the car had not been abused or poorly maintained by its previous owner(s).

Now, the million dollar question. How much to spend on your car to begin with? If it isn't a status symbol or personal expression piece, it should be pretty simple to find a safe, reliable car with room for four people and some luggage brand new for around $15,000. If you want to buy a used car, great low mileage cars in good condition can be found for half of that amount. A person striving to become a millionaire has no business driving a car that costs half of their salary or more. If you make $50k do not buy a $25,000 car! If you make $80,000 do not buy a $40,000 car!

A rough rule of thumb is that your car payment should never be more than 5% of you salary on a 48 month loan. Based on a loan at 6% and a 20% down payment this works out to be a $4,375 car for someone who makes $20,000, $10,700 for someone at the median income of $48,200, and $22,200 with an income of $100,000. How do you stack up? This is of course, if you finance the vehicle at all. Alternately, if you are already well on the way to wealth, spending about 1% of your net worth would be an equivalent rule of thumb.

Now to talk about housing. First of all, do not buy a house if it is cheaper to rent an equivalent house. Run some numbers about how much it will really cost to own and make a well informed, educated decision. When dealing with housing it is important to realize you will have to make the payments for 360 months to pay the mortgage in full. Other than marriage, this is the longest commitment most people ever make.

The old rule of thumb was to buy a house that was equal to 2.5x your salary. This rule has been updated somewhat to account for lower interest rates, and now the rule is to spend less than 30% of your gross income on your home. In most cases a mortgage that is 28% of your income fits the bill. To put this in perspective, on the $48,200 median income a person should hold a mortgage of no more than $192,000 assuming a 5.75% interest rate. A sizable down payment of at least 10% is also prudent, to establish a reasonable price ceiling of $213,000 for the purchase of a home.

Next, we should also consider how much space is needed. It is a waste to buy more house than is necessary to live comfortably. A rough approximation of 1,500 sq ft for a family of four and 1,200 sq ft for a couple is what I would recommend. This is about 30% smaller than the median American home but should still meet all of the basic needs. Buying less house frees up money for saving, investing, and building wealth.

Contrary to common wisdom, it is poor financial advice for your home to be your largest "investment." Homes typically appreciate at roughly the same rate as the economy as a whole, where as stocks produce a much larger return. Ideally it will be possible to invest far more money each month than is spent on housing costs. Every dollar you save instead of spending on housing will be able to compound and build much more wealth than if it were tied up in a slowly appreciating house.

If you are willing to make wise purchases for these two large budget items, it will go a long way toward building wealth. It can take a life time of pinching pennies to amount to the benefit derived from a single thrifty choice when buying a home or picking out a car. Be sure to think long and hard before making the type of commitment that has the potential to either take you leaps and bounds toward becoming a millionaire or instead leave you car-poor and struggling.

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Wedding Season Has Arrived

Today I got my fourth wedding invitation in the mail today. Three of my friends and one of my wife's are getting married this Spring and early Summer. I have responsibility to be an usher at one, but so far I don't have any mandatory tux rentals. Still, the travel is certainly going to add up and we aren't going to have very many free weekends once this starts. I think it might be a bit much.

Going back to my post a few days ago, Gift Spending: Am I Cheap?, there will also be lots of gifts to buy. Some of these friends have been out on their own for several years now, so they don't necessarily need the basics like pots, pans, and kitchen appliances. I don't like to buy gifts that never get used either. I think this may be an occasion where a $30 gift card for each lucky couple is useful and appropriate. Sound reasonable?

I also need to get my out of shape self to straighten up my diet. My suit was a tad tight last time I tried it on, and that was probably 15 pounds ago. It is a nice $300 suit and I certainly can't afford to buy a new 'fat man' suit. A financial incentive should keep my going to the gym 3-4 days a week but I'm not sure if it will be enough to keep me out of the chocolate chip pie my wife baked last night. Yum!

The next task is to fit these costs into the budget so I can save up for them right? I'll let you know in a few months how successful I am with that task. Love is in the air, but dollars don't grow on trees.

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Gift Spending: Am I Cheap?

First, let me start off by saying, "Happy Valentine's Day."   My wife and I have decided to postpone our V-day celebration until tomorrow, so for me today is just another day.  It will allow us to make our celebration a part of the weekend and enjoy the special day a little bit more.  It will also let us have the house to ourselves for a whole night without interruption.

When I start thinking about Valentine's Day the first thing that comes to mind is flowers, chocolate, and other gifts.  In my attempt to be responsible with my money I would prefer to minimize the emphasis on gifts and instead spend romantic time with my wife.  I don't like to buy flowers; they die.  I don't like to buy chocolates; they are consumable.  I don't like to buy other gifts much either!

Okay, so am I a jerk or what? 

In my family gifts were approached very gently.  My parents gave us gifts twice a year, birthdays and Christmas.  We did other special things for the minor holidays but not presents.  The gifts were not particularly lavish and not particularly stingy; $100 range for birthdays and $300 range for Christmas.  We were middle to upper-middle class and this seems reasonable to me still. 

In some years it would be a little more or a little less in order to fit the circumstances.  I know that the year my brother asked for a telescope my parents went all out.  Mom taught astronomy at the community college level and this was a veiled excuse for her to indulge.  I'm pretty sure they spent $500 that year for my brother's main gift, but in a way it was also a gift for the rest of the family too.  When my wife and I were getting ready to buy our house my parents gave us a very generous Christmas gift to buy furniture for the house.  In other years it is much less.

Our family did not stress gifts between siblings or from the children to the parents.  These gifts were normally either hand made or bought for less than $20.  We also did not buy gifts or expect to receive them from our extended family.  Most years (but not all) my grandparents would send between $10 and $20 for these occasions but never more.   As we got older and outgrew the traditional children's birthday party we did not exchange gifts with our friends either.  A phone call, card, or more recently an email, IM, txt, or Facebook poke is all that we might expect; even then it was not a big deal if someone forgot.

Now that you understand my background you might begin to understand why I feel that gifts are such a minor part of celebrating birthdays and holidays.  I never felt that there was anything wrong with this approach until my wife and I got engaged.  Her family is completely different.  Gifts are expected from each member of the family on a birthday and everyone buys everyone else gifts for Christmas.  My old Christmas budget of $50 for family gifts is now more like $500!  In her family, the price ceilings for each gift are about double what we ever spent in my family.  Each side of grandparents gives everyone $500 each year for Christmas and $250 for a birthday!  That is several times what I ever got. 

My wife also has a tradition of exchanging gifts with her closest friends on their birthdays.  She normally spends around $25 but if there is something special that catches her eye or if it is a milestone birthday like 16, 18, 21, 25, ... $50+ would be in the range of possibility.  My wife is a wonderful generous person and I love it, but getting accustom to her approach to gifts has been a difficult transition for me.  I feel like a cheapskate.

I'd like to hear what others think about gifts and how their family approaches the topic.  Thanks for reading.

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Ninja Bill Part Duex

For the second time within a week I have been hit with a sizable unexpected expense.  I picked up the term ninja bill from other bloggers, and it means any expense, for which you had not budgeted, that sneaks up on you.  The first ninja bill of the week is some car repairs for my wife's Dodge Caliber (you can read more about it here: Dreaded Ninja Bill: Car Repair).  My utility bills are my most recent unexpected expense.

I will start with a little history, my wife and I purchased our first home at then end of May, 2007.  Since our purchase, we have had very little variation of our utility expenses.  The water and sewer bill comes from the local coop, and it has been within a few cents of $45 every month.  Our trash service, electricity, and natural gas are all provided by the city utility company.  This bill has been was consistently around $150 for May-July and September-November.  In August the bill peaked slightly at $180.  

Base on my first six months of usage, I set up my budget for the gas, electric, and trash bill to be $180.  That covered my peak usage during that time and if the bill turned out to be lower I would simply have a little cash left over at the end of the month.  Starting in late November our gas furnace started running regularly. The bill for December jumped up to $210 with over half of that being the cost of natural gas to heat the house. 

Now, I live in the South and had never expected it to cost more to heat my house in December than it would to cool it in August.  It made sense to me that year round average temperatures run about 75.  In the summer it is normally in the upper 90's and in the winter it is normally in the lower 50's.  Yes it can drop down to freezing for a night or two but not very often; about as often as it jumps into the low 100's in August.  The bills from my apartment jumped between $110 in the spring and fall and $150 in the summer and winter.  There was very little difference between heating and cooling.  Apparently heating with gas is much more expensive than cooling with electric A/C!

So to continue the story, yesterday I got my bill for January.  I had to do a triple take because I could not believe what I saw.  $324!  That is almost double my baseline utility costs.  The natural gas alone was 70% of the total cost.  I really wish now that I had pushed for an electric heat pump in the new house.  I also got a water and sewer bill for $54 which is a 20% jump from every other month we've lived in the house.  In all, my utilities this month are $153 more than budgeted.  Ouch.

Thankfully, I have the money to pay the bill.  I've been selling unused items on eBay and it just so happens I have an extra $400 this month.  I had planned to use it to accelerate paying off my credit cards, but in this case my debt snowball will have to wait.  Now I realize that $324 is nothing compared to the bills all of you Yankees face each winter, so please don't get too mad at me for complaining.  The real message of this post is to remind people to budget for realities like cold weather in winter (Duh!) and keep from getting smacked with a ninja bill like me.  For the future when I get an nice low $150 utility bill I will make sure to bank the savings to keep me above water when I get a whopper like January.

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Dreaded Ninja Bill - Car Repair

This past Friday I took my wife's car into the dealer for service.  It had been acting up, and so I wanted to get the problem fixed before we take a few moderate distance road trips over the next few weeks.   When you apply the break at highway speeds the steering wheel would shake and vibrate.  At slow speeds I could detect uneven breaking.  I have limited knowledge of cars, but I was pretty sure the brake rotors were warped.

This car has a short history of warped rotors.  After only 7,000 miles of driving I had to take it in with virtually the same problem.  It was covered by the warranty and I walked out the door free of charge.  Now, at 27,000 miles the problem has returned.  Because I have a 30,000 mile bumper-to-bumper, and based on how this was resolved last time, I was ready to have the problem fixed under warranty again.  This time however, I learned that brakes are only warrantied for one year or 12,000 miles.  I am going to owe $180 for new rotors, $90 for new brake pads, and $130 for labor.  Hello ninja bill.  I tried to argue that brake rotors should last longer than 7,000 or 20,000 miles (I've heard at least 30-50k miles depending on driving style and conditions).  I'm not super happy about the $130 labor charge either.  I can maybe understand paying for parts which need to be [prematurely] replaced due to wear and tear, but the labor should be covered for a vehicle that is under warranty as far as I'm concerned. 

The service has not actually been completed yet because the dealer did not have the parts in stock.  This strikes me as odd because brake rotors and pads are very basic components. The Caliber has also become a very common car on the roads these days; one would think Dodge would stock basic parts for their own cars.  Anyway, the parts were ordered and I have an appointment for this coming Friday to have them installed. 

As well as the dealership, I have been considering another options to get my car fixed.  A friend has offered to help me do the installation myself, and I found after market brake rotors for $39.99 and break pads for $49.99 (set of 4) from a major auto parts supplier.  This would obviously save a lot of money, but I don't know if the parts are equivalent quality to the official Dodge MOPAR brand parts.  I have found mixed reviews of after market brake parts from a few Google searches.  I am also a little uncertain about my abilities and the work required to install them myself.  I have always justified paying a mechanic by saying, "people pay me $50/hour to fix their computers so I can afford to pay them $50/hour to fix my car."  We each specialize in our own areas and pay for that level of expertise. 

For now I have both the dealership and the auto parts store ordering the rotors and pads I will need.  Sometime soon I need to make a decision about spending $400 to have the work done by a professional with name brand parts or do it myself with third party parts for $140 and an afternoon of my own labor.  Decisions, decisions...  Comments and suggestions welcomed.

On a completely different note, today the Carnival of Personal Finance #138 was posted over at I've Paid for this Twice Already.  The carnival has a neat Superbowl theme that is a nice festive twist.  My post Is Social Security a Rip Off? was included.  Two articles that caught my attention and I highly recommend are Why Being Frugal Sucks, In The Long Run from Money Management and You and The Problem with the Economic Stimulus Package from Early Retirement Extreme.  I am definitely in the camp of personal finance bloggers that see frugality as an exercise is self deprivation and frustration.  If you put your 401(k) and Roth IRA on autopilot, buy a house you can afford, and drive cars that match your means there is nothing wrong with spending what is left without worrying about maximizing every cent.  Spend your money, have fun, and know if you get the big money decisions right you will end up wealthy.  Jacob's post about the economic stimulus package comes to the opposite conclusion as my article, $1,200 Out of Thin Air.  His analysis of the situation is that borrowing (through federal deficit spending) to feed the spending itch of a debt addicted culture is a bad move.  He has a good point and you should check out his article.  My primary disagreement is that the money we are borrowing is at below market rates and we'll come out ahead by financing our domestic growth at such a low interest rate even if the spending is a symptom of a cultural spending addiction.  I think that once the interest rates on the debt climb (and they will!) we will gradually and organically adapt to the higher rates by reducing consumption and increasing savings. I can't be sure who is right, only time will tell.

That's all for today.  Check back again soon and be sure to subscribe to my RSS feed.          

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Spending on [Hidden] Holidays

Does it ever seem like there is ALWAYS a holiday or special occasion right around the corner? I never manage to remember all of the birthdays, Hallmark holidays (Mother's Day, Valentine's Day, etc), or excuses for a party. It seems like there is always a special reason to 'bend' the budget or make an exception. For example, I had the Christmas season all worked out. We had even bought all of our gifts and had them wrapped. Everything was ready except... I forgot my mother-in-law's birthday was a week and a half before Christmas, and we needed to buy a second gift for her. I also picked up a few board games and some snacks to contribute to our family get-together before Christmas. Neither was in my budget. I came across this great article in the NY Times by M.P. Dunleavey that seems to explain the problem of money that disappears. J.D. at Get Rich Slowly also wrote about the article and sees the same problem in his life.

My problem with the article was that many of the 'leaks' in their financial plan were things that I consider reasonable spending. For example, picking up a prescription, volunteering to bring dessert to a dinner party, and buying a birthday gift for a friend. In my opinion, spending money on these types of items is not optional. It is a part of a healthy balanced life. The trick is keeping these types of expenses in balance with the rest of your life. Include them in your budget. For 2008 I plan to add a 'Special Occasion' category to my monthly budget with about $50/week to spend. By adding these lifestyle expenses to my budget I can ensure this does not end up adding to my debt and it forces me to keep everything in balance with my financial goals.

As I've written before I do think that the Big Things are the most important. A $30 a day leak in my finances that did not fit into any budget category becomes a big problem. It does remind me that there is a cross over from where small spending amounts to large sums. But to combat this I do not think it is a good idea to take away your ability to socialize or give gifts. Socially handicapping yourself to get rich later is not the kind of life I aspire to.

For the next few days I will be traveling to my in-laws for Christmas. I'll try to check in and make a few posts; no promises. I'll also be working to leave the plastic in my wallet too. Merry Christmas!

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Life of a Pet Turtle Worth $300?

I've get a pet turtle. I like my turtle, but... I don't love him. His name is Donatello and I got him as a [late] 20th birthday present. That makes him a little over 4.5 years old. When I got him I liked the idea of having a pet turtle. I liked that he is virtually silent (he does not have a squeaky exercise wheel like a gerbil), he is more fun to play with than fish, and he was allowed to live in the dorms.

He was bought from a vendor on the side of the road near Orlando, FL. He was one of hundreds of babies about the size of a quarter in a large tank mounted in the camper top of a pickup truck. Honestly my whole family was amazed that he survived the 10 hour drive home. Everyone was equally surprised when he survived a whole semester at college under my care. After a little research I learned that turtles are very long lived, and this species regularly lives over 20 years once they get to adulthood. Now I have a problem.

My life has changed a lot since college. In particular I've met my wife and moved from a dingy college apartment to a nice new house. My wife doesn't have a problem with the turtle per se, but she does have a big problem with "pond water" in the house. The way she sees it the turtle is a bed of bacteria and "gross" for our guests to look at. So far, that's not been too much of a problem because he lives in my office and is rarely bothered by others.

Once a month I buy Donny a new carbon filter for his water pump and some new turtle pellets. The total cost is about $5 per month. I swap out half of his water every month and every three months I empty the whole tank and scrub it out. This does not keep it spotless, but its way better than the average drainage pond. The last couple months there has been an algae problem and lately his aquarium has green slime for the first time. This has led my wife to double her complaining about the "pond water" because it is actually a little icky (again this is a new problem).

Right now he lives in a standard 20 gallon aquarium. I upgraded him to his current digs two years ago when he outgrew his 5 gallon plastic cage. Now my friend has again out grown his tank. I noticed that his shell is starting to grow a ridge in the middle (apparently a symptom of caging too small). It seems like he now needs at least a 46 gallon aquarium and a full 55 gallon might be a good idea. I spent an hour at the conglomerate pet superstore last night and the turtle's new house is going to cost at least $300. That is $300 for an animal that cost $30 on the side of the road.

My wife threatened to put him in a nearby pond. I know that would be a death sentence, but I really don't have $300 in the budget. It is also unfair to keep a turtle that I'm not caring for properly. Should I put his new house on the credit card? Should I let nature take its course in the wild? Either way I'll be upset with myself. Suggestions?

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Good Fences Make Good Neighbors

I need a fence. I need a fence for several reasons, primarily because my wife wants one for privacy. That falls into the need category because I promised we would buy a fence shortly after moving in. To be fair to her, there are a number of other reasons to get the fence too. They include my desire to get a dog, the poorly supervised kids from down the street that tramp through our yard, the construction work that will soon begin directly behind our house, and the fact that most of the neighbors have one so it is an expected feature of homes in our subdivision. It has now been six months, and I've continuously put off the purchase. Finally today I got off my butt and had a guy come out and do a full estimate for how much is it going to cost. The problem is I'm afraid I bit off more than I can chew because I don't have the cash.

The number on that harmless piece of paper nearly took my breath away. It was more than double the already inflated amount I had in mind. I figured that it would take a small team (2-3 workers) two days to install. I thought the labor would work out to be $500, the materials three times that ($1500) and then the company would take a 10% or 15% cut on the top. In other words I think a reasonable cost would be $2200 and a wildly inflated price might run up near $3k. Boy was I wrong.

The total estimate I was given was $6,625.70. Wow, that is a lot of money (for me anyway). I had budgeted for my tax refund (likely $700-900) and my next non-bonus bonus, plus maybe a few hundred out of my savings would cover it. Now I'm about $4,000 short and trying to figure out how I'm going to make good on my promise.

A quick aside about my non-bonus bonuses. I get paid every other week. That works out to 26 paychecks every year with two months that get an 'extra' check. When I make my budget I don't include those extra checks and live on what I net from two checks. That means that twice a year I get a nice chunk of change for a big purchase. One day as I'm getting ready to retire I will use them to pay down my mortgage and as I become more disciplined about being frugal I can use them for investments (and in this case purchases that retain their value like a fence). Back to the story...

The guy who did the estimate was very happy to explain how they use a whole 80 lbs of concrete for every post hole and use triple pressure treated, kiln dried, defect free wood. He explained that their employees are workers comp insured, criminal background checked, and legal (made a really big deal about this one). Mr. Fence also explained the two different warranties that are included and a dozen other things to justify the costs that have nothing to do with giving me privacy. I'm not a fence expert but it still seems like a ton of company overhead that adds up to a ton of dough. Finally, the one year no-payments no-interest financing was explained to me in great detail. The guy seemed honestly surprised that I was more interested in how much the fence cost as opposed to how much the minimum monthly payment was going to be.

Now I have difficult choice, do I go back on my word and wait about another 18 months to install the fence. OR I can postpone my debt repayment plan (not taking on any more debt) and buy the fence. OR I can take out a loan from my local credit union to pay for the fence and all of my cc debt in one swoop and pay it off over 36 months at roughly the same dollar amount I'm paying on my cc's now. None of these options work. It may be time to show my commitment to building wealth and take the tough medicine. I just don't know if I can do it. Thoughts?

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Help! My Spouse Hates Personal Finance

I've tried hard throughout the last two and half years (since we got engaged) to involve my wife in financial decisions and regular checkups on of our finances. It hasn't worked. In fact, it wasn't until my wife and I started dating seriously (when she was 19 years old) that at my urging, she got her first bank account of any sort. I couldn't believe it, but she kept all of her money in cash hidden in a book until she was a college sophomore.

Today I completed my monthly net worth tracking. As I always do after I update our marital balance sheet, I brought up the topic to update my wife. My darling wife's eyes immediately glazed over. She hates numbers, math, and budgets. She hates that when she asks to spend money I almost always respond, "sure, just remember we only have X dollars in the budget for that type of purchase this month." The concept that buying something now curtails her in the future tends to frustrate her. When the topic of money comes up she immediately changes the subject or says, "Baby, that's your AREA." In short, my wife HATES personal finance.

Thankfully we don't fight about money. She has struck a bargain with me that so long as she always has what she needs and a few of the things that she wants the rest is up to me. We have talked deeply about what we consider needs and wants and on that we agree. We also have talked about big ticket items like cars, houses, and children and we agree on them as well. My wife is fine to remain completely in the dark about our immediate financial situation. This allocation of responsibility initially made me uneasy but I'm now convinced that this is exactly how she wants it and it will never change no matter how many budget meetings I try to have. It works for us, but I don't know about anyone else. I still worry about what would happen if I were ever in an accident, I've even considered putting life insurance into a trust to care for her so it requires no budgeting or investing on her part. Is that too much? I don't know.

Here are a series of articles and blog postings dealing with couples and personal finance. I hope that the advice presented can help you and your spouse share your financial lives together in harmony.

• Twelve Important Things To Talk About When Your Relationship Gets Serious
• How to have a Successful Budget Meeting with Your Spouse
  
• Money & Relationships (2) How to Stop Fighting over Money
• Questions On Talking About Money And Relationships, Answered (Part 1)
  

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