Saving money

Time to winterize the house…

Dave Farquhar Saving money , ,

We had a day last week where we topped 80 degrees and set a record, so small wonder I never thought winter would actually get here.

But we’ve had our first good freeze and it looks like that’ll be a weekly thing from here on out (assuming we don’t get multiples every week), so it’s time to winterize the house.I learned about plastic film window insulation when I was in college and lived in a drafty old barn–it wasn’t really a barn, but it felt like one–where the inside temperature was rarely higher than 60 during the winter and space heaters were strictly prohibited. It’s best to buy the stuff at the end of the winter and save it for next winter, but if you’re like me, you always underestimate how much you need.

The tape that came with one of my kits seemed strong enough to hold a car together, while the tape that came with another kit isn’t suitable for wrapping a present, let alone holding plastic to cold aluminum window frames. I ended up using packing tape to hold part of the plastic to a window, since I ran out of good tape.

Of course when I was finished with one package, I ended up with three odd-sized pieces, none of which fit any of my windows. So I tried an experiment. Out came the packing tape and the scissors. I taped together the odd-sized sheets to make one suitable for one of the windows, then I put it in the window. It held together just fine when I hit it with the hair dryer to shrink it into place. I don’t think this method will get wife approval, but it works. I guess I can tell her that Red Green would have used duct tape.

I also changed my furnace filter. My size was sold out at all of the usual places I buy them, but I happened to find them at Big Lots for $1.79 each. They’re rated for two months instead of three and they probably don’t catch as much, but they’re definitely better than the clogged filter that was in there. I don’t know when the last time was I changed the filter. Shame on me. For $1.79 I need to be changing it every month because it’ll save me a lot more than that if I don’t do it, at least in the summer and winter months.

I also went looking, without success, for insulation pads for electrical outlets and light switches. I have some double-sized ones and other oddities that I didn’t have a good fit for. When I came home I still didn’t have a good fit. So I ended up removing the plate, taking a styrofoam meat tray, and cutting my own with a hobby knife. It’s not quite the same material commercial insulators are made from, but it has good insulating properties and it’s hard to beat the price.

Of course I’m looking for other ideas, but these three things are a good start. I installed a programmable thermostat about two years ago and it paid for itself in the first month. The basic models cost half as much now.

Addendum: After sealing the sliding glass door and two of the three largest windows in the house, last night after the programmable thermostat kicked down I noticed that the temperature in the house dropped by about a degree an hour. The temperature inside the house started at 70, and the low overnight was around 30. I know under similar conditions earlier in the week, the temperature was dropping at least two or possibly even three degrees an hour.

I think that plastic is going to pay for itself very quickly.

In honor of Southwestern Bell and AT&T getting back together

Dave Farquhar Saving money , ,

In honor of Southwestern Bell and AT&T getting back together, here’s how to do your own phone wiring.

How to retire a millionaire without doing much of anything

Dave Farquhar Saving money , , ,

I just finished reading The Automatic Millionaire by David Bach. It’s a good book. It promises to turn just about anyone into a millionaire in one easy step–if you do it right, you can make one phone call, do nothing else, and retire a millionaire.

I recommend the book.He’s saying essentially the same thing a lot of popular financial advisors right now are saying, but the spin is a bit different. You have to market something.

Essentially, what he says to do is to open up some kind of an IRA, be it a 401(K), 403(B), or Roth, and set up automatic deductions every month that happen before you get a chance to spend any of your paycheck.

If you were to start doing such a thing at age 16, it’s entirely possible to pile up more than $13 million by retirement age. Of course the later you start, the less you’ll pile up, but $1 million is within reach for most Americans.

It’s a boring way to make money but it works.

Of course he also advocates paying off all debts early, which makes it possible to save even more.

I believe that over the next decade, the rich are going to get richer and the poor are going to get poorer, maybe much poorer. People will blame the politicians, but I don’t know that politicans have much control over this situation. Here’s what I expect will happen.

A lot of people are getting non-traditional mortgages without necessarily understanding all of the terms. In many instances, at the end of five years, they will owe the entire cost of the house. Large numbers of people aren’t going to be able to afford to do this, and they aren’t going to be able to afford to refinance because they won’t be able to afford the higher monthly payments.

The homeowners will be forced to sell. And since so many of these mortgages are being handed out now, at some point there will be more sellers than buyers. That will be the end of today’s real estate boom. Thosee who have cash will buy these houses at depressed prices and rent them out to former homeowners who can no longer afford to buy a home.

When the real estate market recovers, which it will, the people who bought lots of real estate at bargain basement prices will be extraordinarily wealthy–both from the rising value of the property they bought, and the money they made by renting it out.

I know what I need to be doing. I’m ahead of the game on paying off my mortgage. I need to get better about dumping money into a Roth IRA. And right about the time I make the last payment on the house, I expect I’ll get my yearly bill from the county, and for the first time ever, the number on it will be lower than it was the year before. That’ll be when I know it’s time to go for a walk and look for For Sale signs.

This is a good time to be buying financial books, using their advice to get your finances in order, and wait for up-and-coming troubled times. Because for the people who get out of debt now, the next depression (let’s not mince words here–when the economy is in the toilet, it’s called a depression) will be an opportunity.

A reminder about the most obvious money saver

Dave Farquhar Saving money , ,
A reminder about the most obvious money saver

I haven’t written about being a tightwad in a while. Not to worry, I’m still a big cheapskate–every dollar I save has a cascading effect. Remember, paying just an extra $10 a month on your mortgage is enough to shave a full month off the back end. So let’s talk about coupons.

The first thing about coupons is to resist the temptation to have to use them. Sometimes a generic still costs less than a name brand with a coupon. If that’s the case, put the coupon away and buy the generic. And if the coupon is for something you’d never buy anyway, resist the temptation to buy it just because you can get it for a quarter less.

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Relief for high gas prices?

Dave Farquhar Saving money ,

My local paper ran a story this week about E85, which is a gasoline/ethanol blend that’s 85 percent ethanol.

The good news is, your vehicle may be E85 compatible without you knowing it.

E85 is difficult to find, and you don’t get as many miles per gallon with it, but when gas prices are over $2/gallon, the price undercuts gasoline enough that you get more miles per dollar with E85.

The fuel has its critics. No, you don’t get as many miles per gallon with it. No, it’s not as cheap to process as gasoline. But let’s think about a few things.

E85’s primary ingredient is corn. Corn happens to grow really well in the United States. Would you rather depend on American farmers or OPEC? I’d rather take my chances with American farmers. So it takes more energy to produce a gallon of E85 than it takes to produce a gallon of gasoline? Grow more corn!

Not all cars are E85-compatible. My Honda Civic is among them. While it’s theoretically possible to convert incompatible cars to run on E85, the EPA has made conversion illegal. I wonder how much OPEC and Big Oil had to pay to make that happen?

This is clearly a case of the government talking out of both sides of its mouth. Auto manufacturers get credits for making a certain percentage of its vehicles E85 compatible, but the end result of these incentives has been the production of ever-larger trucks. So if your name happens to be Ford or General Motors or Daimler Chrysler, you can use E85 as a loophole. If you’re a consumer looking to save a couple of bucks and/or support the farmer a few miles away and/or cut down on the amount of smog you produce during your commute to work, you can’t use it.

Another nice thing about E85 is that it does a nice job of cleaning out your fuel system. A clean fuel system is an efficient fuel system, so running your car on E85 whenever it’s convenient can improve your fuel economy when running on conventional gasolines as well.

Some people complain about the inefficiency and say it’s not that much cheaper. But cheaper is cheaper. If you have to fuel up four times a week and you save $2 each time you do it, at the end of the month you have $8. That’s more money than you save by using a credit card with gas-related incentives on it, and people don’t seem to object to using those.

I don’t know what it is about gasoline that clouds people’s thinking. I overheard a couple of coworkers talking this week about their vehicles and fuel economy. One is disappointed in his SUV’s fuel economy. It gets 20 miles to the gallon. So he wants to trade it in for a Suburban, because, in his words, “It only gets 4 miles to the gallon less.” Only four miles to the gallon? That’s 25 percent. When your fuel economy is that low, every mile to the gallon counts. That 25% decrease in fuel economy, at $2 per gallon, translates into $10 more per fillup. It’s worse at $3 per gallon, of course.

E85 isn’t the long-term solution (hydrogen is), but it looks like a reasonable way to take some of the bite from the current crisis.

The road to financial independence

Dave Farquhar Saving money , , , , ,

Early in The Millionaire Next Door, Danko and Stanley single out the Scottish. When my wife, Emily, read it, she said, “That explains everything about you!”

When I read it, I thought it explained everything about my two grandfathers–one was rich, one was poor, both were Scottish, and both spent their money pretty much the same way.

I’ve been reading a lot of these kinds of books because I’m not going to let what happened to us back in May ever happen again.But I blame Emily. She’s the one who started bringing me these kinds of books.

So what am I doing? I can’t list everything, but I can definitely give enough examples to highlight this Scot’s mindset.

Pick up that quarter. You know that adage that if a lawyer drops a quarter, it costs him more money to bend down and pick it up than to leave it be? Forget that. A lawyer standing in a parking lot isn’t billing time. I always pick up that quarter. I’m not a vulture–if I see someone drop a coin or three, I pick them up and hand them to the person. But if it’s on the ground and there’s no sign of the rightful owner, it goes in my pocket, whether it’s 75 cents or a penny.

Be scrappy. When I was out of work, I walked around picking up aluminum cans. At 45 cents a pound with a 10-pound minimum (a pound is roughly 35 cans), it was a slow way to make money. But if you’re out walking for exercise anyway, pick ’em up. I pick up cans when I spot them in parking lots, and I save the cans the local hoodlums throw in my yard. The last time we took cans in, we got more than $8. That pays for dinner for a night or two, if you cook. I only gather cans when someone’s not paying me to do something else, but during those times, why not?

Pay down your debt. Once Em and I got on our feet financially and it was clear we wouldn’t have to live off our savings anymore, we paid off our cars. We’d been making extra payments anyway. By paying off her 5-year loan in 3 years and mine in 2, we probably saved $3,000 in interest charges. That 3 grand is going to come in handy.

And that’s Biblical: Romans 13:8 says, “Owe no man anything, except love.” Does that mean my home mortgage and my car loans are sin? Yep. At least we’ve got two sins out of our lives.

If you can’t pay it all off, make extra payments. Even tiny extra payments help. Do a Google search for a financial calculator. Plug in your home mortgage. Many will figure the effects of extra payments for you. On my mortgage, just $10 a month pays off my house a full month sooner. A lousy ten bucks a month eliminates a single $1,000 mortgage payment. I can come up with 10 bucks. About 18 months ago I quit buying a doughnut and coffee at work, taking a thermos and a couple of packets of oatmeal every morning so I’d quit spending $1 a day on those things. The total savings per month was almost 20 bucks. Packing my lunch saved another couple of bucks a day. You get the idea.

Initially I was doing it for hobby money, until I realized how much more I would save by eliminating debt first. Once that $1,000 mortgage payment and $300 car payment are no longer over my head, I can buy a lot more $10 train cars. Even if the price doubles by then, which it probably won’t.

Keep an eye out for business opportunities. My brother in law has the right idea. He and his wife bought the laundromat in the town they live in. They have to fix something once a week, but compared to their regular jobs, it’s easy money. Within a few years it will have paid for itself and the money will just be there.

He’s looking to start another business too. Ethanol costs about $1.84 a gallon and the price is steady. That’s 70 cents less than a gallon of gasoline sells for in their town. So a lot of farmers use ethanol. Many would anyway, because they’d rather support corn farmers than middle eastern oil tycoons. So he’s looking to buy an ethanol station.

Emily and I moonlight selling stuff online. She loves shopping at thrift stores and yard sales. I spotted a copy of How to Make a Fortune With Other People’s Junk and bought it (with a coupon, of course). We’re not following it exactly, but it put us on the right track. We’re small time but we’re profitable, and now she’s getting paid to do one of her favorite things.

The goal isn’t the high life. This might be the most important thing. The reason most wealthy people stay wealthy is because their goal isn’t a swanky $500,000 home in a ritzy suburb with two new foreign luxury cars in the driveway all the time.

Don’t get me wrong: I may not drive a Honda Civic all my life. But I could see myself driving a Toyota Camry or a Honda Accord whether my net worth was $160,000 or $16 million. A BMW or Mercedes (or a Lincoln or Cadillac, for that matter) does nothing to improve quality of life.

The goal is something completely different: not to be anyone’s slave.

A year ago, whenever my phone rang after hours, I had to answer it. If I failed to answer the phone more than maybe once a year, I was afraid I’d be fired. So I picked up the phone and did whatever the person on the other end asked, whether it was reasonable or not, whether it made sense or not. Sometimes that meant I had to cancel plans. But it meant extra money, and I thought it proved how indispensible I was.

And it was all over one Thursday afternoon. There were cutbacks at work, and my position was eliminated. So I got in a car that belonged to Honda and drove to a house owned by the bank, where I sat down (at least the couch was owned by me) to figure out how much money was in the bank and how many months that money would last while I looked for another job.

Freedom is being able to say yes when the phone rings because it’s the right thing to do, not because it’s what you have to do in order to support your lifestyle. Freedom is when it doesn’t matter if your job evaporates because you boss’ boss’ boss screwed up and lost a horrific amount of money because the main reason you’re working for him is because it’s more interesting than sitting around at home watching daytime TV.

Most people don’t have a job. Their job has them. And the main reason is because their lifestyle has them.

In a way I’m glad I learned this at age 30. I’m also very glad that Emily understands it, and that when I can’t explain something peculiar about the way I spend or (more often) don’t spend, she trusts me. This doesn’t work very well when only one person is on board.

And as long as both of us can hold down a job for about five years–a reasonable expectation, since both of us have done it before–we’ll get there.

Counting change

Dave Farquhar Saving money ,

I’ve long used the technique of saving pocket change to pay for stuff I want, but don’t really need. The problem has been turning that big pile of change into a form that merchants will accept.

The problem with the Coinstar machines in the supermarket is that they take a cut, sometimes as high as 10 percent.Some banks and credit unions will process the change for customers for free. The problem is finding which ones will.

I now have two answers. Kansas City-based Commerce Bank will, but only at certain locations. You’ll have to call your local branch.

My wife banks at US Bank. When she called and asked the same question, they said they’ll process the change for free and deposit it straight into the checking account.

That’s just two answers, but two answers is better than a big pile of change sitting on a dresser doing nothing. It’s always best to get the money into an institution as quickly as is convenient, where it can work for you, either by paying bills (your mileage will vary, but paying just an extra $10 per month on my mortgage cuts a full month off the payment schedule) or drawing interest, however miniscule it might be. It’s better for your quarters to be gathering pennies than for them to be gathering dust.

Making a curtain rod on the cheap

Dave Farquhar Saving money ,

The boss, er, fiancee, is redecorating. Among the casualties: the curtains that came with the house when I bought it. Along with them, the curtain rods are going, since the new curtains don’t fit on the old rods.

New curtain rods cost $25 or more. Here’s how I made one for her for around $10.First, I scored some 7/8-inch dowels at Hobby Lobby on sale for 50% off. I got four dowels. Three seem to do the trick but I didn’t want to go back. I also bought a single dowel the same measurement as my biggest drill bit. This is for making pegs to hold the dowels together. We also bought a couple of decorative wood turnings to put on the ends. We used the size of the opening on the turnings we liked to determine the size dowel to buy. The total damage was about $4.50.

Next we went to Lowe’s and bought a pair of hangers. Those were 6 bucks.

I measured the center of the large dowels and then punched a small hole. This is just to guide the drill bit. Then I found a small bit and drilled a pilot hole. Then I drilled a larger hole with my biggest drill bit. Then I inserted the small dowel and cut it off to make a peg.

I repeated for three dowels, since that was roughly the length I needed. Of course my measurements ended up drifting a bit. No problem, I just rotated the dowels until they lined up. Then I glued it all together, put it on my sawhorse, which has a grooved end, and set a couple of big pieces of oak plywood on the top to hold it straight and together. Then I set the heaviest thing I could find–in this case, my drill press–on top and let it sit.

After I repeat the process, I’ll have a 9-foot curtain rod. Just cut it to length, put the turnings on the end, stain the rod and the hangers (or you could paint them), put the hangers on the wall, and then put up the curtains. Cheap and easy, attractive and functional. Can’t beat that.

Gas-saving sites miss the obvious

Dave Farquhar Saving money

I saw a link today called "Gas Stations Hate Us." It promised money-saving tips. I clicked on it, of course. It had some advice I hadn’t heard anywhere before, like a good credit card for gas rebates, and to fill up in the morning because when it’s cooler, you get more gas per gallon.

It also had some advice on vehicles–it pushed the Toyota Prius, for instance. But it missed something obvious.Now, I have no objections to people trading in their SUVs for a Toyota Prius like the site suggests, on principle. Anything that cuts your fuel consumption is a good thing. The problem with that is there’s a long, long waiting list to buy a Toyota Prius, so you can’t follow that advice. And a lot of people aren’t going to take that advice just because of the Prius’ styling.

But there’s a less drastic way to cut your gas consumption:

Drive the speed limit, and drive nice.

I drive I-70 through St. Louis at least once a week these days. In the course of doing this, I noticed something. An awful, awful lot of people want to drive 70 on I-70. But the best way to find someone who wants to drive 80 on 70 is to pull into the fast lane, speed up to 70, and pass someone. Someone will be on your bumper in a heartbeat. And there won’t be anything you can do about it either, because on the left side, there’ll be people doing 72, 75, or some other speed faster than you, so you can’t even get over.

And of course, once Dale Earnhart gets past you, he floors it for about 10 feet, then slams on his brakes just before he kisses the bumper of the guy who was ahead of you who was doing 72. Then the whole game starts over again, until the maniac gets off the road, either by arriving at his destination or a cop pulling him over. It’s not the latter very often, unfortunately.

The speed limit on the stretch of I-70 that I’m describing is 55 miles per hour, by the way.

I got sick of trying to keep up. So I just pull onto 70, stay as far to the right as I can, and set my cruise control for 55. Sure, people zoom past me. Sure, I get there about five minutes later than I would otherwise. But you know what? I feel a lot better when I get there. I’m less tense.

And my gas mileage jumps. At 70 MPH, my Honda Civic seems to get 32-33 miles per gallon. At 55, I get closer to 38.

I’ve also taken on another habit. My Civic just happens to have a tachometer, so I can look down and get a quick idea of how hard my engine is working. If my engine is doing 3,000 RPMs or more, I back off. My Civic is a light enough car that it can get up to speed even if the engine only does 2,200 RPM. The engine doesn’t work as hard, which saves gas. And I don’t hit the brake pedal as much, which saves gas. And yes, it’s possible to develop a feel for how to keep your RPMs low while maintaining a constant speed. Dale Earnhart won’t appreciate you when he gets right up on you, but if you’re on a stretch of road where the speed limit is 35, do you really need to accelerate to 35 in four seconds?

Now, I’d love to tell people to buy a Toyota Prius. I really would. Because the only way the price of hybrids is going to come down is if more people buy them. But I thought about a hybrid when I bought my Civic. I thought about it long and hard. And this was when gas was $1.35 a gallon and people were bellyaching about it.

My Civic cost me right around $16,000. A hybrid would have cost me around $24,000. That’s an $8,000 difference. Assuming $2 per gallon, which is actually less than it costs today but it makes the math nice, the price difference would buy you 4,000 gallons of gas. That’s enough gas to drive at least 120,000 miles. A lot of people don’t keep their cars long enough to drive that far. And that’s not even the break-even point. Assuming a Prius gets 50% better gas mileage than my Civic (it doesn’t), the Prius doesn’t start paying for itself for another 60,000 miles or so.

I think it’s better to buy the most fuel efficient conventional (or diesel) vehicle that meets your needs for size and space, then drive like you would if there was a cop behind you all the time.

As it sits now, I get about 38 MPG driving that way. If I were better about using fuel injector cleaner and changing my air filter, I might get closer to 40. With better spark plugs and a really good synthetic oil like Mobil 1 or Ams oil, I might get 40. That’s not Toyota Prius territory, but it’s better than some people report getting from their Honda hybrids.

Survey sites, revisited

Dave Farquhar Saving money

Back in December, I warned against paying anyone $35 for lists of survey sites.

If I was convinced then it was a bad idea, I’m even more convinced now.The hucksters promise you can make a hundred dollars an hour or more. If you do the math, that can be true–I suppose if someone offers you $35 to take a survey and you finish it in 15 minutes, you’ve essentially been paid $140 an hour–but that’s numbers trickery. You’re not going to get enough surveys to do a 40-hour week at that rate, unless you’re a whole lot luckier than I am.

I signed up at several paid survey sites, starting in late November. Within a week, I got a couple of $10 surveys. After a month or so, a couple of $25, $35 surveys came in. It was nice. Some of the surveys took longer than others, but I don’t think any of them took me much more than 30 minutes.

I think I may have made $100 in my best month.

But here’s the rub. The marketing research people who do these sites don’t want career survey takers. If you take a survey about, say, potato chips, they don’t want to hear from you again for another six months.

My best month, I made about $100. These days, I’m making more like $5 a week. I’m not complaining, because it’s usually a fairly easy five bucks, and while that’s a small amount of money, it’s about the smallest amount of money that you can actually do something with. But is it worth paying $35 to get at a list of people who are willing to shoot five bucks your way every once in a while? No.

The other thing that works against paid surveys being the secret of the universe that leads to financial independence is the speed. Some of them pay you within a couple of weeks. Some of them take months. If your rent is due next week and you’re a few bucks short, don’t count on filling out a bunch of surveys to make up the difference–you’ll be lucky if the money gets to you in time to help you with next month’s rent.

So don’t pay that survey site. If you’re curious, click that link above to the entry I wrote back in December. In the comments, there’s a link to a good site with links to literally hundreds of survey sites, both paid and unpaid. Sign up for a Yahoo mail account and use it to register for a few sites and see what happens. Maybe you’ll do better than me and make a couple hundred bucks one month. Maybe you’ll just make $15. But at least you didn’t pay $35 to find out.