Saving in the home

The desire to reduce spending is a common one. Some people want to free up extra cash in their budget to pay down other debts more quickly. Some want to use extra cash to boost savings and retirement account balances. Others simply want to enjoy the peace of mind that comes with having a little bit of extra cash left over at the end of each month. If you have been looking for ways to save, the good news is that you may be able to find savings right in your very own home.

Insurance Savings 
Many people today carry multiple insurance policies. If you are like others, you may have a homeowner’s or renter’s insurance policy, life insurance, auto insurance, and health insurance. Finding cheap life insurance as well as cheaper coverage for all of your insurance policies can help you to save a considerable amount of money. You can compare rates with a price comparison site to find savings. You can also consider other options for savings such as increasing your deductible or lowering coverage slightly.

Energy Savings 
There are numerous ways homeowners or renters alike can save money around the home. Simply adjusting the thermostat a few degrees cooler in the winter or warmer in the summer can provide you with considerable savings. Installing and programming a programmable thermostat to adjust the temperature daily when you are out of the house can also save you money. You can consider getting your heating and cooling system serviced annually, as this has been shown to improve how efficiently these systems operate. Further, consider getting a home energy audit to identify do-it-yourself projects that can yield savings. For instance, an energy audit may indicate you could save money by installing new weather stripping on doors and windows.

Grocery Savings 
Many people who have the desire to cut down on expenses have already made the decision to avoid pricey meals at restaurants. In the process of eating at home more frequently, the home grocery bills also increases. Through meal planning efforts and improved shopping strategies, you can save money on your grocery bill. For instance, consider not just the price of ingredients that are used to prepare a meal, but also consider if that meal will provide leftovers that can be eaten for lunch or dinner. Some meals are considerably more expensive to prepare, and these can be prepared on special occasions rather than on a regular basis. Also consider preparing meals based on seasonal ingredients as well as items that are on sale in your grocery store on a given week. This requires flexibility while in the grocery store. It is often best to shop for food during non-peak hours so you can have increased freedom to compare prices and find great deals on your food purchases.

Through the above steps, you may be able to further reduce your monthly expenses. These strategies and steps can help you to save money each and every month, and this money can be used to pay off debts, add to your savings, or provide you with added peace of mind each month.

How to Afford College Tuition without Student Loans

A college degree is a must have for anyone wishing to succeed in today’s job market, but being able to afford one isn’t always easy. Today, many former college students have horror stories of graduating with tens of thousands of dollars in student loans and struggling to find entry level jobs that will allow them to afford repayment. However, going to get your degree, whether you are a non-traditional or traditional student, doesn’t mean you have to be prepared to leverage your financial future. It simply means that in order to make college tuition more affordable, you need to be prepared to do some of the following:

Go to Community College

A four year degree is required by many employers, but that doesn’t mean that you have to spend all four years at one university. By taking community college classes during your first two years, you can get all your basic requirements out of the way and will only pay a fraction of the cost to do so. If you have high grades, transferring to a four year school will be a breeze and you will be more likely to attain scholarships.

Fill Out the FAFSA

Many students, both traditional and non-traditional, don’t fill out the FAFSA because they believe that they or their parents make too much money for them to qualify for any federal assistance. Regardless of how much money you make, you should always fill out the FAFSA. Even if you are on the higher end of the national salary average, you may still be eligible for additional grants and scholarships that will make tuition more affordable.

Apply for Scholarships

You don’t have to be just out of high school, sporting a 4.0 GPA, or be an all-state sports star in order to obtain scholarships. Anymore there are thousands of scholarships available to all sorts of candidates, and sites like Fastweb and Scholarships.com make it easy to locate them. For many, all you have to do is complete a 500 word essay or complete a quick survey to be eligible for scholarships that can be as high as $5,000.

While Discover law school loans may be a must if you get in to Harvard Law, knowing that you education will pay for itself upon graduation makes that investment worth it. However, if you are going to school simply to get a degree, taking on thousands of dollars in loans may cause future financial burdens that will keep you from attaining your professional goals.

There’s Money to be Gained by Losing Weight

With January already half over with, many of us are second-guessing our New Year’s resolutions in favor of easier lifestyles. While it’s certainly not inspiring to give up on any resolution, those who made it their mission to live healthier lives ought not to give up now. Yes, your health is of the absolute importance and thus is the primary reason why a commitment to diet and exercise in the year 2012 should be maintained. But in addition to this fundamental incentive, there are immediate financial advantages to maintaining a healthy weight as well as long term reasons to do so as well. For those in need of a boost of motivation to continue on the path to diet and exercise, consider the following ways doing so will surely save you serious sums of money:

Less spent on food costs: Any dietitian will tell you that the primary cause of overeating is the acceptance of enormous portions at mealtimes. When you make an effort to eat less in order to lose weight, you’re certain to save money by not spending so much on food. In addition to smaller portions, you’ll also be avoiding expensive midday snacks, further increasing the amount of available income you have on a daily basis.

Less spent on travel costs: 30 to 50 lbs can make a big difference in a vehicle’s fuel economy over time. If you lose that much weight, you’re certain to spend less on gas in the long run. But fuel costs can also be curbed by preferring to walk and bike more often through a dedicated workout regimen. New Yorkers – walk instead of ride the subway. Midwesterners – dig that bike out of Kansas City self storage and ride it to work.

Less spent on insurance: The healthier life you lead, the less life and health insurance is going to cost. The simple way to guarantee a cheaper rate is by losing weight, as the body-mass index is one part of your health that insurance companies take very seriously. While quitting smoking and reducing drinking greatly will drive insurance costs down more, getting yourself to a healthy weight will reduce your costs.

Less spent in your free time: In addition to the savings accrued from eating less in your spare time, leading a more active lifestyle is sure to be cheaper than preferring pay-per-view and trips to the mall on the weekend. Forget about the gym, which is admittedly not very cost-effective; public parks varying from urban gardens to nature preserves provide you with the venues necessary to enjoy an active day without spending a dime.

If you’re thinking about giving up on those December 31st aspirations to get into shape, don’t quit just yet! The personal finance benefits of such dedication are simply too good to pass up, in addition to the improvement to your health.

The economics of reading: Travel-hacking the cheapest reading material

I was on vacation in Mexico last week.  On the way there and back we had somewhat long layovers in Dallas…. and what’s a good trip to the airport without a stroll through the bookstore to load up on reading materials? The things is I love books but am not crazy about bookstore prices. It seems I’m inspired to buy a book at exactly the most expensive moment. I can’t stand the idea of paying full price for a hard cover book, particularly when I could have prepared by checking out a book from the library or buying from Amazon.

For some reason or another — perhaps the same reason that I write this blog — I became consumed with identifying the cheapest reading materials. I delved into the world of media statistics to help to uncover whether newspapers, magazines, or books stretch your budget the farthest.

Approaching the problem

The first way I looked at the problem was by researching the average number of words and price of each type of media and computed the subsequent cost per 1000 words.  It turns out that a newspaper is by far the cheapest thing to read per word, whereas hardback books are the most expensive.  But who reads every single word in a newspaper? That would take 5 hours, assuming you read at 250 words per minute.

Pages Words per Page Avg. Price $ per 1000  words Minutes to Read
Hardback 308 400 $26.43 0.21 493
Magazine 47 800 $4.86 0.13 151
Paperback 300 350 $8.30 0.08 420
Newspaper 39 2000 $0.99 0.01 312

A more sensible approach

I estimated how long it would truly take to read each option.  The only data point I could verify was that magazines take 43 minutes to read on average, according to a trade organization. If you look at the problem this way, a paperback is the cheapest, followed closely by hardbacks and newspapers.  Magazines are still the outlier and expensive compared to the rest.

Minutes Price Cost per Minute
Magazine 43 $4.86 $0.11
Hardback 1,200 $26.43 0.02
Paperback 900 $8.30 0.01
Newspaper 30 $0.99 0.03

The takeaway

As I suspected, we’re throwing our money away by buying magazines at airport news stands.  They are a lot more fun to read but you’re paying for all those glossy pages and full color pictures.  If you’re taking a short flight, buy a couple newspapers; if you’ve got a longer flight, perhaps buy a paperback as well.

A business idea

I have a business idea (or non-profit) that would be a real value add for travelers.  Imagine there were airport kiosks where you could exchange books and magazines that you’re finished reading.  Say you’re coming off your flight, you could swing by and drop off your reading material.  Got a connection — trade out your book for new ones.  Showed up at the airport without anything to read?  Donate $1 to get something to read.  The kiosks could also offer bottled water at distinctly non-airport prices. The operation would be mostly supported by voluntary donations.  Hopefully the donations would be enough to cover rent and one employee.  What do you think?

New Goal: I will be mortgage free in 5 years

Mortgage free in 5 years
The house in question

I have a new financial goal that I wanted to share with you — I will be mortgage free five years from today.  On the morning of March 30th, 2016 I will wake up and check my mortgage loan balance to see this sweet looking figure looking back at me:

$0

Today I’m putting a stake in the ground.  It’s going to be a huge challenge and I don’t have all the details figured out on how I’m going to achieve it, but I know that it’s possible.  And it wouldn’t be fun if it didn’t seem damn near impossible.

The facts

As of March 1st, my mortgage balance was $214,569.  It’s currently a 3.25% ARM and the margin is 2.25% over the 1 year LIBOR.  Essentially to get the rate you take the LIBOR (London Interbank Offered Rate) and add 2.25% and then round it up to the nearest 1/8th of a point. The first five years were interest only and I barely made a dent in the balance, ie I didn’t pay any extra interest.  My original mortgage balance was $216,000.

Why am I doing this?

After my experience with extreme frugal living in February, I’ve realized that these kind of challenges are motivating and inspiring.  I’m far more likely to do this if I declare it online.  I want to be totally debt free and this is the last piece of debt that I have.

Why this is stupid

If interest rates stay as low as they are right now (which I doubt) then my money would be put to far better use by investing it.  Also, mortgage interest is tax deductible, so my effective rate is lower than 3%.

Why it just might be smart

I’m likely to save more than I would if I weren’t doing this.  The goal will force me to look at my spending and identify other income sources to accelerate the payoff. The money that is likely to fund this challenge would otherwise be sitting in accounts earning between 0-1.29%.

Current balance

I drew down $13,000 of my emergency fund this month to pay  it down.  I currently have an ample emergency fund ($31k or so) that I will slowly reduce to contribute towards this challenge, which will give me a nice head start.  The current balance as of March 30th is $201,569 and prepaid through April.

What do you think?  Have any of you paid off your mortgage already?  How did it feel?

5 Frugal Leaps of Faith Worth Reading About

I’ve been on hiatus for the past week with writer’s block. It’s been strange — every day of the $1000 challenge I knew exactly what to write about. Writing came automatically. Independent thought on a new topic wasn’t required.  But since the challenge ended, I’ve been struggling to come up with ideas…. here’s to hoping the ice melts.

Now that my frugal experiment is over, at least for the time being, I have to live vicariously through other’s adventures.  Check out some of the other extreme experiments with money going on in the blogosphere and beyond. For some reason, I’m was inspired to order them in terms of perceived difficulty using the US trail rating system for skiing.

For those just starting out…the kiddie slopes:

Stephanie is a business school finance professor who is spending 365 days on a budget.

More difficult:

The Saved Quarter Challenge calls on readers to save 25% of their incomes and offers tips to achieve this lofty aim.

Advanced… moguls and glades:

W. Hodding Carter did a series in 2009 and 2010 for Gourmet Magazine where he was practiced a frugal lifestyle with his family of six.  I’m impressed by his use of barter, chicken acquisition, and a bit embarrassed that we both used the same tactic of driving in neutral downhill to save gas. His articles were stuffed with useful tips.

Point of no return:

Scratch Beginnings: Me, $25, and the Search for the American Dream is the story of recent college graduate Adam Shepard who decided to prove that the American dream was possible.  “With a sleeping bag, the clothes on his back, and $25 in cash, and restricted from using his contacts or college education, he headed out for Charleston, South Carolina, a randomly selected city with one objective: to work his way out of homelessness and into a life that would give him the opportunity for success. His goal was to have, after one year, $2,500, a working automobile, and a furnished apartment.”

The Compact is a Yahoo! group of environmentalists that has awowed not to buy any new products and to live a more minimal lifestyle in 2011.

What other challenges have you spotted on the web?  Any that should be added to this list?  Where would they fall?

Photo courtesy of @kmichiels

$1,000 challenge Day 28 update: The finish line!

Very tuckered crossing the finish line at the Country Music Half Marathon last year (second from left in black)

28 days ago I began a frugal challenge to spend less than $1000 for the month of February.  The hope was that this challenge would give me a better sense of the value of a dollar and empathy for those who are less fortunate.  Selfishly, I  craved some degree of authority about living a frugal lifestyle, because while I blog about frugality, I also spend more in a year than the average American makes.  In this post I’m going to reveal how whether or not I succeeded, what my final spending totals were, and a bit of what I’ve learned from this adventure.

At the outset, I feared sticking to this meager budget was impossible. I had to cut my non-housing expenses to $450 (an 82% reduction, from an average of $2500 a month).  As the days in January wound down, my anticipation and anxiety grew. I gazed at spreadsheets dumbfounded at how the numbers were going to come together. I knew the spending targets were theoretically achievable, but I was suspicious I wouldn’t be able to do it….maybe $1500 or $1300, but there was no way that $1000 was going to pan out.

Then it was go time, and my enthusiasm and early wins with two no-spending days gave me the reassurance I needed to know that I could succeed.  It was a month of eating in (many hot dogs for dinner and peanut butter and jelly sandwiches for lunch) and lots of saying no and smart spending.  Ultimately, the challenge was just enough of a stretch.  I spent $998 in the month of February.

Final Spending Recap

Date

Description

Amount

Feb-1 Rent $550
Feb-1 Kroger – Groceries 31
Feb-1 Kroger – Gas 20
Feb-4 YMCA – Gym Membership 49
Feb-4 Friends of pfblogs 6
Feb-4 Shell – Cigarettes 8
Feb-4 Entertainment 10
Feb-4 Donation 2
Feb-4 Gift for Baby Shower 10
Feb-5 Homeless newspaper 1
Feb-7 Subway tickets 5
Feb-7 Donation 1
Feb-7 Cash Withdrawal (net of business expenses) 3
Feb-7 Shell – Gas 10
Feb-7 Shell – Cigarettes 16
Feb-8 Car Insurance 34
Feb-9 CVS – Lighter 1
Feb-12 Kroger – Gas 53
Feb-12 Kroger – Groceries 59
Feb-17 Kroger – Lunch 2
Feb-17 Donation 20
Feb-18 Cigarettes 8
Feb-18 Burrito 6
Feb-20 Kroger – Gas 20
Feb-21 Shell – Cigarettes 8
Feb-22 Restaurants – Bread & Co 6
Feb-23 Kroger 10
Feb-24 Tigermart – Gas 15
Feb-24 Tigermart – Cigarettes 8
Feb-26 Kroger – Groceries 10
Feb-26 Kroger – Gas 11
Feb-27 Shell – Cigarettes 6
Total Spent $998

 

What did I get in return? A whole lot more.  One big thing I took away was a major life skill — I learned to cook for myself.  Until the challenge began, I was living a bachelor lifestyle and eating out for lunch several days a week and getting take-out most nights.  I regularly spent $500-$600 on food each month.  It wasn’t necessarily because I didn’t want to cook, but just inertia. I didn’t know what to do with a piece of frozen chicken or have the right ingredients in the house to prepare much of anything. Guess what I spent in February on food? $124.

There were other aha’s along the way. Now I get why you might shop at Dollar General instead of Costco or put just $10 in the gas tank… because you can stretch a fixed income a lot further.  I learned the sad fact that if you really analyze your expenses, almost everything is discretionary if it needs to be… like visits to the doctor, auto insurance, and even prescriptions.  I learned that I often use money as a bargaining chip to make life easier and buy my way out of situations and that there are often more creative solutions available.

Thanks to my friends that bought me meals against my protests, colleagues who rooted me on, and readers that offered feedback and tips along the way. Finally, it has been wonderful hearing the inspiring stories of changes each of you are making in your spending.  To thank you and honor the commitment I made at the beginning of the month to donate my savings this month to charity (roughly $4400) I have a deal for you: If you are one of the first 44 people to tweet or share this post on Facebook and leave a comment,  I will donate $100 to the charity of your choice.  Let me know if you’d like the donation to be in honor or memory of someone.

I’ll start by giving the first $100 to the Nashville Rescue Mission.

$1,000 challenge Day 24 update: pain at the pump and more!

The challenge for my Frugal February is simple: I am trying to live on $1000 or less and detail my triumphs and trials along the way.  This month is a crash course in living a frugal lifestyle close to the federal poverty line. This experience will make me a better advocate for frugality on this blog and more empathetic and compassionate towards those for whom this way of life is not a novelty.  To ensure that I don’t violate the spirit of the challenge and blow all the money I’ve saved on a down payment for a Nissan Leaf, at the end of February I will donate what I have saved to charity. For those of you that are just now tuning in, here’s the link to the video where I explain some of my other motivations for taking on this challenge beyond my innate penchant for being a human guinea pig.

Day 24 is coming to a close.  There are only a few days left and I’m really getting down to the wire. February ends next Monday and I have only $29 to spend in between now and then. I’m determined to hit the target, but it’ll take some ingenuity to get there.   I don’t really have any plans, except I know that I’ll have to be smart about my spending on food, gas, and cigarettes (a recurring theme in my bare-needs spending).  Here’s my plan on each front:

Food: I will not go grocery shopping when I’m hungry and I will use my remaining grocery money to “fill in” with purchases of items like milk, bread, and eggs that can be used for multiple things.  I will also dig deep and try to make meals from what I already have.  Fast food and restaurants are obviously out of the question – unless someone else is paying.

Gas: Because I’m constantly only putting $10 or $15 in my tank, I keep having to go back to the gas station.  Also, $10 isn’t buying a heck of lot of gas right now as you’ve probably noticed.  With all the uncertainty from Twitter Revolutions in the Middle East, the price of gas has gone through the roof  Now I’m all for freedom of expression and toppling oppressive regimes, but seriously, February was just not the choicest month for these shenanigans.

Cigarettes: A lot of you have commented on Twitter and on the blog that I should give up smoking for February.  This is something I’ve considered. With the stress of living frugally, quitting smoking would just be too much (this is a silly excuse, I know).  I am smoking cheaper cigarettes but I haven’t quit.  Baby steps!

Spending breakdown….

Date Description Amount
Feb-1 Rent $550
Feb-1 Kroger – Groceries 31
Feb-1 Kroger – Gas 20
Feb-4 YMCA – Gym Membership 49
Feb-4 Friends of pfblogs 6
Feb-4 Shell – Cigarettes 8
Feb-4 Entertainment 10
Feb-4 Donation 2
Feb-4 Gift for Baby Shower 10
Feb-5 Homeless newspaper 1
Feb-7 Subway tickets 5
Feb-7 Donation 1
Feb-7 Cash Withdrawl (net of business expenses) 3
Feb-7 Shell – Gas 10
Feb-7 Shell – Cigarettes 16
Feb-8 Car Insurance 34
Feb-9 CVS – Lighter 1
Feb-12 Kroger – Gas 53
Feb-12 Kroger – Groceries 59
Feb-17 Kroger – Lunch 2
Feb-17 Donation 20
Feb-18 Cigarettes 8
Feb-18 Burrito 6
Feb-20 Kroger – Gas 20
Feb-21 Shell – Cigarettes 8
Feb-22 Restaurants – Bread & Co 6
Feb-23 Kroger 10
Feb-24 Tigermart – Gas 15
Feb-24 Tigermart – Cigarettes 8
Total Spent $971


Image courtesy of Stephen Poff via Flickr

What I never knew about food stamps

One of the objectives of the $1000 challenge was to get a better understanding of what poverty really feels like. Some might say that I haven’t gotten the best flavor of that, having gone on business trips and allowing my friends to treat me to dinner (twice). It’s a fair point. So today I decided to reflect on the original intent of the challenge — among other things, to learn about benefits and other assistance programs available to those living in poverty.

After rent, food makes up the largest component of my $1000 budget. So how do people that are living on a $1000 a month get by and still eat complete and balanced meals? I’ve known that food stamps exist, but I haven’t really known the first thing about them. The first thing I learned is that SNAP (Supplemental Nutrition Assistance Program) is the new name of the food stamp program since 2009. There aren’t actually stamps any more, essentially a debit card that is given out to recipients that is good for food purchases.

What really had my curiosity peaked: Would I be eligible for food stamps (or a food debit card) if I were actually making $1000 a month? I decided to look into it.

The USDA has a handy online calculator that lets you estimate what your benefits might be. After inputting information about my hypothetical income ($1000 gross) and assets ($0), the calculator revealed that I would likely qualify for $36 to $46 per month.

Some interesting facts about the Supplemental Nutrition Assistance Program:

As of November 2010, there are 43.6 million people in the United States receiving food assistance as part of SNAP, or 14% of the population. On average they received $134 per person per month in 2010 or $293 per household. All in all, it’s a $68.3 billion dollar program funded by the federal government. And it appears that likely due to the economy, the number of people collecting food assistance has risen dramatically, from 26 million in 2006 to 43mm in November 2010.

Picture by clementine gallot via Flickr

I totally relapsed on a burrito

Today is Day 19 of the $1000 challenge.  I have spent $904 of the $1000 that I’ve allocated for the month of February.  9 days left!  I wanted to post an update because it’s been a few days, but I’ve got to run off to work so stay tuned for more of my frugal antics.  Let’s just say yesterday I totally relapsed on eating out and ordered a take-out burrito.  Full spending details below:

Date Description Amount
Feb-1 Rent $550
Feb-1 Kroger – Groceries 31
Feb-1 Kroger – Gas 20
Feb-4 YMCA – Gym Membership 49
Feb-4 Friends of pfblogs 6
Feb-4 Shell – Cigarettes 8
Feb-4 Entertainment 10
Feb-4 Donation 2
Feb-4 Gift for Baby Shower 10
Feb-5 Homeless newspaper 1
Feb-7 Subway tickets 5
Feb-7 Donation 1
Feb-7 Cash Withdrawl (net of business expenses) 3
Feb-7 Shell – Gas 10
Feb-7 Shell – Cigarettes 16
Feb-8 Car Insurance 34
Feb-9 CVS – Lighter 1
Feb-12 Kroger – Gas 53
Feb-12 Kroger – Groceries 59
Feb-17 Kroger – Lunch 2
Feb-17 Donation 20
Feb-18 Cigarettes 8
Feb-18 Burrito 6
Total Spent $904
Remainder $96
Remaining budget per day $7