David L. Farquhar, computer security professional, train hobbyist, and landlord
Want an easy $10 project that will save you $30 a year for the life of your home while also giving a noticeable quality of life improvement? Insulate hot water pipes in your basement.
Here’s a Department of Energy writeup on how to do it. Or you can follow along with me.
So I’m only a week into the family budget and I’ve already cheated on it. Look inside the envelope containing my lunch money, and you’ll find $8, a few loose coins, and an I.O.U. for $30.
I can explain. Really.For the last couple of years, lunch has usually been a Healthy Choice frozen meal. They’re easy to find on sale, they heat up quickly, they have a pretty wide selection, and there’s practically no work ahead of time involved with them. Unfortunately, I found a lot of them have hydrogenated oils and high fructose corn syrup in them. The only thing healthy about those is the calorie count.
Not wanting to slowly poison myself, my wife went looking for an alternative. She found one: Kahiki, a line of Asian-inspired frozen meals. They’re made with natural ingredients and usually weigh in at a reasonable 300-400 calories. There’s just one problem: They’re a lot more expensive than Healthy Choice.
This weekend my wife and son were away, so I had to fend for myself. I wandered into the nearest grocery store Saturday night looking for something to eat when I spotted a display of Kahiki on sale at two for $6. I bought four.
Later that night I told my wife, and she reminded me that each of those packages has a 55-cent coupon in it. That drops the price to $2.45, a very appealing price point for a Scottish miser like me. So I cut out the coupons, went to the store, and bought four more. I then proceeded to walk out to the car, cut out those four coupons, walk back into the store, and use the fresh coupons to buy four more. Then I did it all again. Pretty soon I could cut the coupon out of the package without even opening it by following landmarks on the outside.
If anything, I felt guilty only buying $30 worth. At $2.45 a pop, I can come in $11 under budget for next month. And if Costco gets another shipment of the Thai noodles I like any time soon, I can eat those a couple of times a week at $1.09 a pop and save even more.
Maybe I’ll buy another four late in the week. I already have the coupons cut out.
Nearly 20 years ago, as I sat in a high school English class, the teacher told us all about the American Dream. And then she said there was one generation that wasn’t going to experience that dream, and she pointed at us.
As grim as things look right now, I can look around myself and see people proving Mrs. Susan Collins wrong, and that makes me happy.I guess she read somewhere that the U.S. economy had basically peaked. I vaguely remember reading something like that sometime in the late 1980s. It would have been just like my Dad to find an article like that in a magazine, rip it out, tell me to read it, and tell me not to let it happen to me.
The current prevailing theory is that as the rest of the world develops, our economy will grow as well because they’ll be better able to afford to buy our stuff. Hopefully by the time that happens, we’ll still know how to make something here.
The real threat to the American Dream right now is the sense of entitlement. When I look at the American Dream, I look at how my Dad lived when he was my age, and I have him beat hands-down. I have a house in the suburbs, and I own it outright. When Dad was 33, he lived in a slum. Well, not quite a slum. It was the former Toledo Motor Lodge, converted (badly) into apartments. The way Mom tells it, it was even worse than it sounds.
The problem is that we’ve been brainwashed not to compare our lives with where our parents were at our age. We’re supposed to have a better life than them right now. And if you’re under the age of 40 and your parents are white collar workers, that’s not a realistic expectation at all.
If my Dad were alive today, he would probably make 2-3 times what I make. Osteopathic radiologists with 30 years of experience make more money than systems administrators with 10 years of experience. What if I’d followed his footsteps and become an osteopathic radiologist like he was? He’d still make more than me, because radiologists with 30 years of experience make more money than radiologists with five years of experience. Who wouldn’t rather have the guy with 30 years’ experience reading their x-rays?
But that’s something my family has been dealing with for generations. Dr. Edward Andrew Farquhar started practicing medicine before the Civil War, and when you trace him to me, I’m one of only two generations who didn’t follow his footsteps. When it comes to the American Dream, it’s hard to compete with your father when your father was the town doctor. It isn’t all just handed to you.
But that’s a blessing in two regards. That means anyone who’s deserving of the title can be the next town doctor. That’s good for everyone, because unspeakable things happen when I have to look at something that’s bleeding a lot. If I were the town doctor, lots of people would probably bleed to death.
And any time someone says the American Dream is dead, I look at my neighborhood. It’s overrun with Bosnians. More than 50,000 Bosnian refugees ended up in St. Louis in the early 1990s.
I wish every city in the United States had 50,000 Bosnians move in, because they’re the best thing that’s happened to St. Louis in a very long time. They found jobs, worked hard, saved money, and bought run-down houses in declining neighborhoods. I can remember (barely) some of those neighborhoods, and they’re a better place now because of it. The neighborhoods not only look better now, but they’re safer.
Some of the children of those refugees are grown now, with jobs and families of their own, and increasingly they’re moving into the suburbs. In other cases, first-generation Bosnian immigrants are upgrading to houses in the suburbs.
It’s clear how they do it. Besides having a regular job, they always have something going on the side. Maybe more than one. They shop at thrift stores and garage sales, and they negotiate hard. They treat every dollar like it’s their last. And they’re always looking for an opportunity, or trying to make one.
They’ve tried to maintain their distinct culture, but what they may or may not realize is that they’re more American than their neighbors down the street who’ve been here for four generations.
I hope they’re still going at it when my son is old enough to pay attention. Because I intend take him out and find some Bosnians in action. And when I do, I’m going to point at them and tell my son to watch everything they do. Because for anyone who’s willing to do what the Bosnians do, the American Dream will always be alive.
Joseph brought up some good points in the comments for the previous entry, and I don’t think a short response does them justice. He wants to know what the personal finance experts have to say about the current economic crisis.
Suze Orman actually went on TV a few weeks ago and called it an opportunity of a lifetime. I’ll explain.Joseph says this feels different from other recessions. I think it’s because it is. It’s more like 1929. The major difference is what people were investing in.
The biggest problem in 1929 (besides the crash) was that Herbert Hoover didn’t realize until it was too late that we had a big problem on our hands. That’s not the case this time. Although Bush and McCain were denying it for a long time, both readily admit now that we have a problem.
The cause of our problems today is twofold. One, we should have had a recession in 2000-2001 and we didn’t have much of one. The Fed lowered interest rates to stave off recession, and the result was something of a boom. Both political parties blame the other for this, but basically, under their encouragement, everyone and his uncle was willing to loan people way more money than they could realistically pay back. (Republicans liked this because it was deregulation; Democrats liked it because minorities who previously couldn’t get loans suddenly could get them in spades.) Then, when too many people failed to pay those loans, the banks ran out of money, so now we have banks failing.
I remember seeing Suze Orman come on TV on Sunday morning years ago and warn this was coming. The reason was simple: Too many people were in over their heads in debt, and eventually it was going to catch up with us. She even had the timeframe about right.
It didn’t take a prophet to see it. We started having problems when large numbers of adjustable rate mortgages started resetting. One month, people could make their payments on everything. The next month, their mortgage skyrocketed and there wasn’t enough money left to buy a day’s supply of Ramen noodles, let alone make car and credit card payments.
Soaring gas and food prices didn’t help either, of course. Then again, that’s all interconnected too. Back in 2001, Ford and GM started offering 0% financing, and their primary products were big gas guzzlers. Increased consumption raised fuel prices, which in turn raised the price of everything.
But for those who are able to pay their bills and keep their jobs, the opportunity of a lifetime is nigh.
Stock prices are down. Nobody knows if they’ve hit bottom yet or not. But they came back after 1929, and they’ll come back after this crisis too.
My grandfather was a wealthy man. He started his medical practice sometime during the Depression. He died in 1980, long before I could have a meaningful conversation with him about money. I can only speculate how he made his money, because the living relative who might have firsthand knowledge isn’t especially honest or reliable. I believe he bought stock in the 1930s at depressed prices sometime after he graduated from medical school. While those investments certainly didn’t pay off immediately, by the time the ’50s and ’60s rolled around, he still owned that stock, which he’d bought at Depression prices. At those prices, he might as well have stolen the stock.
I believe the same opportunity exists today. This isn’t the time to cash out your 401(k) accounts–it’s time to max out your yearly contributions, if you can afford to.
A similar situation is beginning to exist in real estate. If William Nickerson (the original make-a-fortune-in-real-estate guy) was still alive, he’d be having a field day. Nickerson made at least $5 million in his lifetime by buying distressed properties and turning them around. Before this crisis is over, there’s going to be a lot of distressed property that needs fixing up.
The bottom line is that the people who have no debt, or who have a reasonable amount of debt under control don’t have anything to be afraid of right now as long as they’re able to stay employed. They have numerous opportunities, in fact.
For one, they’re in an ideal position to convert pre-tax retirement plans into Roth IRAs, which are tax exempt on the back end. You take a tax hit when doing that, but this is the time to take that hit–prices are down.
Two, they can buy stocks and/or real estate at depressed prices, hold on to those assets, and in 20 years they’ll be rich. Once again, let’s go back to 1929. The Dow Jones Industrial Average peaked that year at around 380. If you take the worst case scenario, buying at the peak and then crashing, it took 25 years (1954) for the DJIA to get back above 380. But once it did, it stayed above that level for good.
But aside from that extreme scenario, it’s very difficult to find any 10-year period where stocks didn’t make money.
About a year ago, the DJIA was near 14,000. Today it’s below 9,000 and threatening the low 8,000s. There’s no historical precedent for it to drop lower and stay lower, and there’s no historical precedent for it to stay stuck at any level either. There’s every historical precedent for it to reach 14,000 again, and it’s much more likely for it to do it in less than 7 years than for it to take 25 years like 1929. Between now and then, individual companies will go under, but that’s why you don’t invest solely in one company. Buying an index fund that tracks the S&P 500, for example, spreads your risk over 500 large companies. If General Motors evaporates, you lose a little. But if GM gets its act together and the stock soars, you share in the gain.
Finally, when it comes to real estate, all those people who had bad mortgages have to live somewhere. It’s a terrible market to sell, but if you’re inclined to buy properties and rent them out, the environment is ideal for that and will be for a very long time. People who have enough saved up to pay cash can pretty much monopolize this game for a while, since loans are hard to come by.
There’s a positive for the country as a whole too. Did you get sick of the rest of the world buying up our companies because their economies were booming while ours stagnated? Now everyone’s in the same boat as us, so we’ve probably seen the end (at least for a while) of ruthless international conglomerates buying U.S. companies and then slashing everything that moves.
Overall, I do think this bust is a net positive for society, and not just for the reason I just mentioned. I read not long ago that many people under 40 consider the American Dream a birthright, not something that takes work and ambition. Society as a whole has been using borrowed money to artificially raise lifestyles up into the next-higher income tax bracket. Today’s crisis may put an end to that, and ultimately, that’s good for everyone, although it will be painful in the short term.
My wife and I are adopting an envelope system.
We did OK budgeting up until now–I’d say paying off a mortgage 5 /12 years after I moved into the house qualifies as OK–but it doesn’t work as well when there are multiple things you’re saving for.The problem is that we want several things like new windows and new kitchen cabinets, and my wife kept asking when we’d be able to afford to get them. I never had an answer.
This week I sat down with a spreadsheet and made up a budget. I entered everything we spend that I knew, then I asked my wife about the things she knew. When we didn’t have an exact figure, we estimated. An estimate is better than nothing. Then I added line items for the things we want to save for.
So then we got some envelopes, wrote the line items on them, and put the cash inside. When the money runs out, we’re done spending on that for the month.
But really what I’m hoping is that the envelope system will cause us to be more careful spenders on most things. We’ll adjust when there’s a shortfall (when we need diapers and formula, we need them, and if the quantities change, something else has to give) but I’m hoping that in a lot of instances, we’ll be able to find ways to cut back a little. And then, of course, we can get those windows and cabinets more quickly.
And beyond that? We still have lots of things to save for, so having a system to do it will help us get there. We may or may not get there faster, but it’ll be a lot easier to know where we are and to project endpoints.
Now, as far as plans. I’ve had plenty of conversations about whether John Cummuta’s plan, the one I used, is better or if someone else’s plan is better.
As long as the plan has you paying down debt and not making risky investments (that’s not to say all investments are risky–but many financial books are just get rich quick schemes), and most importantly, you’re able to stick with it, I don’t think there’s a huge amount of difference. What bothers me is when I see people fretting over the differences in the approaches, and then not following any of them. The person being interested in helping people moreso than yelling at them also helps.
Like I told my insurance agent earlier this week: If you pick the wrong plan and pay your debts in the wrong order, you’re in debt one more month. Whichever way you go, you save thousands of dollars, if not hundreds of thousands.
So I had a chance to try a registry optimizer out on a typical PC. It’s a 2.7 GHz Celeron, made by HP, restored with the factory restore discs. So it was as pristine as any consumer HP PC ships from the factory.
It helped. You’d think the opposite, of course.I used NTregopt. There’s no point in paying for a registry optimizer.
It ran for what seemed like a very long time, and it trimmed about 11% off the size of the registry. Not a lot, but this was a fresh PC (supposedly). More importantly, after running it, boot time decreased by a good 20 seconds, and once it booted, I had a wee bit more memory available.
I also ran JK-Defrag on it. What it found wasn’t horrible, and it only took about 15 minutes to clean it up.
So the stock HP computer runs more nicely now. And if one were to remove all the HP crapware that comes with it (remember, it’s only crapware if you won’t use it), that will help, but doing a registry optimization and a quality defrag will help even more. Not quite as much as a fresh Windows install slipstreamed with the current service pack and all patches, but for most people, close enough.
Utility programs are no substitute for adequate system memory and a respectable graphics subsystem. That’s probably why people who build new PCs twice a year don’t think much of them. But for the rest of us, utility programs in skilled hands can squeeze more life out of an aging PC. I’d be willing to submit the six-year-old Compaq I’m using to type this as Exhibit A.
My wife came upstairs last night. “The mouse froze,” she said. I walked downstairs to the computer. Sure enough: Frozen mouse, no caps lock light, no vital signs to speak of. Ctrl-Alt-Del didn’t do anything either. I shut down, powered back up, and got the black screen of death.I pulled the power plug and waited a minute, then plugged back in. It powered on, but crashed while Windows tried to boot. So I repeated the sequence and went into the BIOS hoping to find some health status in there.
A couple of coworkers were talking about taxes, deficits and the national debt this week. One of them looked my direction and said, “I’ll bet Dave can figure out how to pay off the national debt.”
It’s actually not as hard as it sounds.
The biggest problem is that we’ve convinced ourselves that the national debt is impossible to pay. I believed this back in the mid-1990s, when it was around $4 trillion. Today, it’s right around $10 trillion. (Note: That was in 2008. In 2016 it’s about $19 trillion. So double any of the dollar figures you see from here on out.)
I have no idea why I never found this sooner: papercdcase.com.
Type in an artist and album name (or publisher and software name) and a track list, and this thing generates a PDF that you can print and fold into a paper case/envelope, complete with spine.I printed a couple at work for discs I use frequently. I think it would take about 10 to really master the folding technique.
This is much cheaper than buying plastic jewel cases, the result is more useful, and you’d still have to print and cut out inserts to put in that jewel to make it useful anyway.
I’ve made these myself manually, but it’s much easier to just type the information into a web form and have a computer do the formatting for me.
I took a phone call tonight from my old college fraternity. I’ve been trying to be nicer when they call asking for money. The organization and I see eye-to-eye on virtually nothing, but the poor pledges who have to make these phone calls every year have no control over any of that.
We actually ended up having a nice conversation about the transition from college to high school.I can’t say it’s something I’ve ever talked about, but the transition was a bit rough for me in some ways. I wasn’t valedictorian, but I generally took harder classes than many of the people who outpaced me in GPA. In some of my classes I was more like a teacher’s assistant than a student, because I knew the subject matter better than the teachers did, and they would readily admit it.
Frequently I was the smartest guy in the room, and I liked it that way.
In college, I was never the best at anything. I told him one of my classmates is now the beat writer covering the Cardinals for the St. Louis Post-Dispatch. That’s the caliber of person I found myself competing against.
It was hard to settle for being good, or very good, when I’d spent the previous 12 years being elite.
Yet, it wasn’t until I got over my ego that I actually managed to even be good. Considering my course load, my first-semester 2.8 GPA wasn’t all that bad, but it was a lot closer to average than I’d ever been. I never dropped below 3.0 the rest of the way, but I never approached my high school numbers.
I guess it was good preparation for adult life. There’ve been times when I was the smartest guy in the room again. But it doesn’t happen very often at work. But at work, the guys who are smarter than me who also have bigger egos than me also aren’t all that happy.
Give me a choice between being content and being the star, and I’ll take contentment every time.
I only talked to the 18-year-old pledge for about five minutes, so I didn’t go into this kind of depth. I don’t think he wanted to hear that kind of a lecture from a stranger 15 years older than him.
There are lots of other questions I would have liked to ask him, but I know the answers to all of those are the same as they were in 1993, and I can’t change any of that for him. I don’t know if that brief conversation that resulted from me asking how his studies were going helped him. But maybe it did. Or at least I didn’t make him feel any worse.