I want to feel for this ad executive, but I can’t

There’s a problem in this world, according to Mike Zaneis. It’s ad blockers.

On one level, I can relate to the guy. Ad blockers cost me between $500 and $1,000 a year, personally. But on another level, I have no sympathy for him. Because there’s so much problematic advertising out there. If you ever try to download something from one of the major download sites, good luck. There are 14 download buttons. 13 of them are ads that deliver something other than what you want, or ridealong stuff you don’t want. Somehow, Mike Zaneis thinks that’s OK, but blocking ads is wrong.

How about misleading ads that talk about government programs that don’t exist? I see an ad promising me a mortgage bailout every day. I’d love for Mike Zaneis to explain to me how this is ethical.

There are hundreds, if not dozens, of spammy news stories that are really just advertisements, preying on ignorant people, spreading misinformation and damaging society, littering the web today. Stop eating cumquats and lose 20 pounds! Buy gas at precisely 7:05 AM and gain 4 MPG! Here’s how Warren Buffet is preparing for the apocalypse! These things don’t work, and I haven’t figured out how these newsvertisements make anyone any money except perhaps through profiling, and I’d love for Mike Zaneis to explain this. There’s a guy named Kevin Trudeau who made a career of spreading this kind of stuff. He’s in prison now. The difference between Trudeau and this stuff is that Trudeau pitched it in late-night infomercials charging $19.95 rather than giving it away for free and turning the people who read it into the product–something Mike Zaneis denies anyone thinks is a problem.

But the worst of all are malvertisements–advertisements that plant malware on your machines. If I run computer code on someone’s computer who doesn’t belong to me, I’ll be hanging out with Kevin Trudeau in prison for the next 20 years. But for some reason, it’s ok to do this in the name of advertising. I’d love for Mike Zaneis to explain this, too.

But unlike Mike Zaneis, I’m not complaining. It might be nice to be a professional blogger, but I’m better off with my day job than I would ever be as a pro blogger. It’s nice when I make a little money off this web site, but a lot of what I write is to support that day job–I can find what I need at a later date very quickly if it’s on the blog. That content never makes me a dime. I have some niche content that makes virtually all of the revenue I see, but I’m hesitant to elaborate much further lest someone like Mike Zaneis launch a site and steal all that traffic.

But that’s the thing. I adapt. I have to do that in everything I do. I can whine about how I don’t make the kind of revenue I made in 2005, but the fact is, if I were willing to change a few things, I probably could make more now than I did in 2005. About 5% of what I write accounts for all of my revenue. If I could devote 20% of my content to those subjects, I’m sure I would make considerably more. Since that would require me spending four times as much time thinking about and doing different things from what I do now, I haven’t made that shift. But if I ever needed to, I could.

Mike Zaneis thinks people who create and use ad blockers are out to extort him. They aren’t. They’re trying to encourage certain limits on acceptable behavior. That’s one reason I’m careful about the kinds of ads I let run on this site. There are certain categories–profitable categories–that I don’t allow, such as ads for gambling sites, political ads, prescription drugs, and get-rich-quick schemes. Some of those categories were profitable for me before I discovered my account was using them, but taking money from those behaviors would be wrong, so I stopped doing it. There was nothing illegal about those ads, but there was nothing ethical about them either. So I draw the line there, because some things are much more important than money.

Mike Zaneis draws the line at a different place, and he’s trying to start a war. I’m not convinced it’s a war he can win, and I have no reason to root for him.

It’s time for the plug-in Prius to prove something

Over the past year, I grew tired of hearing people say nobody wants electric cars. There are certain people, who for reasons I can’t figure out, want the masses to believe nobody wants electric cars. I don’t know why the Chevy Volt is a flop.

But what I do know is that there’s a dedicated number of individuals who have been putting plugs on Toyota Priuses so they can charge them overnight, and these modified Priuses are popular. Starting now, that’s no longer necessary–you can buy one with a plug on it.

Read more

So, should I buy a different car?

Charlie posted a link to some controversial advice that it’s better to keep your car rather than get something more fuel efficient.

The advice makes a lot of sense when you do the math.I bought a fuel-efficient car in 2003. I had no choice; I had to buy something. My lease was up and I wasn’t going to buy that car. So I figured I should buy something really fuel efficient and reliable, so I bought a year-old Honda Civic. I’m still driving it today and it’s been a great car.

Now let’s say I’d bought something less fuel efficient, like a Hummer H2, that gets 14 MPG. If I drove that to work every day, I’d burn 29 gallons of fuel per week, and I’d be hurting. With gas at $3.53 a gallon right now, that would be $102.37 per week, which is ridiculous.

So let’s say I had my eye on a 2005 Hybrid Honda Civic priced at $17,000. It gets about 45 MPG. So it would burn a reasonable 9 gallons per week, at a cost of $31.77. The car would save me a cool 70 bucks a week.

It would only take 243 weeks for that car to pay for itself. In other words, not quite five years.

Of course if I traded in the Hummer, I wouldn’t have to pay the full $17,000. If I could manage to sell that H2 for the $18,000 a used Hummer H2 is supposedly worth, then it would make sense to do it. If I could get $10,000 in trade for it, it would take two years for the hybrid to pay for itself. That’s still worth doing, but it’s probably longer than you would expect.

This is proof that buying a car is often an emotional decision.

To make it a logical decision, you need to figure out what you’re spending in gas per week, then figure out what you’d spend driving something else. Subtract the difference, then divide the cost of the car by that savings.

This was a big reason why I bought a conventional Civic rather than some kind of hybrid back in 2003. I would have paid about a $7,000 premium for the hybrid. It probably would have paid for itself, barely, by now. But at the time I made the decision, gas cost less than half what it costs now.

In some cases, it would make sense to switch. But you have to be near the extremes (such as from Hummer to hybrid) to do it. The further you get from that kind of extreme, the less sense it starts to make.

Don’t let a salesman or what the neighbors say sway your decision. Do the math.

Paid in full.

This week, my wife and I drove to the bank and signed some papers initiating a wire transfer to our mortgage company.

Yesterday, I had the satisfaction of logging into the mortgage company’s web site, clicking on my account, and seeing the words “paid in full.”

I moved into this house in October 2002. Five years and eight months later, I own it outright. Between the house and our cars, my wife and I have paid off nearly $180,000 in debt in those five-plus years.We aren’t completely debt-free yet. We still have some student loans from my wife’s college education.

Some would argue we should have paid those before the house. I opted against it because one of the loans has a very low interest rate (lower than the house), and because the payments are small. If I walk into work tomorrow and find out I no longer have a job (that very thing happened to me not once but twice in 2005), I can easily make those student loan payments. Scraping together enough for a mortgage payment is harder.

But I’ve gotten ahead of myself. Here’s how we did it.

The debt snowball
The trick is to make your minimum payments on all debts, but pick one debt to pay off first. Then scrape together some extra money to pay it off sooner.

In my case, I started with my car. The payment was about $300. I tried to pay at least $600 on it. Sometimes I paid $900. When I got my tax refund, I paid a whole lot more than that.

By mid-2005, I owned the car outright.

By then I was also married, so we turned our attention to my wife’s car. Her payment was also about $300. So we paid $300 plus $600, the amount I’d been paying on the other car. I had a better job that summer, and we had my wife’s income too, so it wasn’t all that long before I realized we had enough surplus piled up in the bank to pay that off too. So we did.

And that left the house. The mortgage payment was around $1,000. So we paid $1,900. When we started making more money, we increased that. In recent months, I’ve been paying $3,000 on the house since I now make quite a bit more than I made in 2005.

Last month, I noticed we were very close to having enough in the bank to pay the house off while still leaving a comfortable emergency fund. I called the mortgage company to find out exactly how much we’d need to do it, and to get payoff instructions. I figured out that every month we didn’t pay the house off was costing us more than $200. So scraping was worth it.

Finding extra money
I’ve always been a tightwad (just ask my family), but in my late 20s I fell into some bad habits. I didn’t rack up debt, but I definitely wasted more money on conveniences than I needed to. I saved a lot of money the last five years or so by packing a lunch and bringing my own coffee and breakfast to work.

Do the math. I used to spend $2 on coffee and breakfast, plus $5-$6 for lunch. Call it $8/day. Figure 240 working days a year, and that’s $1,920.

I figure I whittled my daily food bill down to about $3 per day, so I saved $1,200 per year. That’s $4,800 over the course of four years. That alone allowed me to pay the house off at least nine months early.

Don’t let other people spend your money
But this is the big one. Everyone has their own ideas what kind of car you should drive, what home improvements you should be making, and other status things that really don’t matter that much.

I drive a 2002 Honda Civic with more than 100,000 miles on it. I know some people look down on that. But the car is still in nice shape, still runs like new, and has never needed anything more than routine maintenance. Plus it consistently gets 35 MPG.

If I had traded that car in after driving it for three years like the marketers say you’re supposed to, it would have slowed down the house payoff by six months. Had we done the same with my wife’s car, we could make it a year.

Frankly I’d rather have the house. In fact, if I could turn back the clock to 2003, I wouldn’t buy the same Civic I bought then. I would have been better off buying an older one that I could pay off more quickly. I could have saved an extra $4,000 or even $6,000, and we would have had everything finished a couple of months sooner.

So what about the cars now? Well, what about them? Remember, I was used to paying $3,000 a month on the house, and that obligation is gone. A year from now, there’ll be enough cash piled up in the bank to buy two cars outright if necessary. Not that I expect to need that, since Civics are famous for going 200,000 miles and beyond. The last time I went to the dealer, they told me someone had traded in a Civic with 500,000 miles on it.

As for home improvements, yes, now it’s time to do some. But why do them sooner? The boob tube tells you to do it to increase the value of the house. But why would I want to do that? So I can pay more taxes? Without me doing a thing, the paper value of this house has risen nearly $40,000 since I bought it, at least according to the county assessor. That means I paid $400 more in taxes in 2007 than I did in 2003.

Unless I was planning to move, there’d be no reason whatsoever to be concerned about property value.

On the other hand, at this point in the life of the mortgage, I was paying more than $200 per month in interest. Now that I’m not paying interest, that’s like getting $2,400 per year for free. That’s enough to finance a modest home improvement project.

But then again, if there’s something else my wife and I want that costs $2,400, we’re entirely free to go after that instead.

In what order should you pay off loans?
This is the paralyzing question for some people. Mathematically speaking, you should pay them off in order of interest. If you have a credit card balance at 19%, a car loan at 7%, a mortgage at 5%, and a student loan at 3%, then you should pay them off in that order.

I’m not enough of a math genius to run the figures, but paying them off in the worst-possible order (reverse order), generally only slows you down by a month or two.

We paid ours off somewhat less than optimally because the student loan is less paralyzing than the mortgage. The minimum payment on the student loans is about 1/5 what the mortgage payment was. When I was out of work, the mortgage was a bit of a struggle to make during a couple of those months, whereas the loans are comparable in size to a utility bill.

If nothing changes between now and then, we can have those loans wiped out in another year. If the economy tanks and I lose my job and my income drops to nearly zero, I can nurse those loans along almost indefinitely, since I have numerous options for making the $1,000 per month it would take to cover utilities, groceries, and those loans.

What about retirement?
Some people argue you should give retirement planning priority over your debts, while others say the reverse. My wife and I haven’t done much for our retirement since we got married in 2005. Frankly I can see the arguments both ways. But we’re still in our early 30s, and now we’re in position to contribute the legal limit into Roth IRAs from now until the government starts making us collect. There’s still time for both of us to pile up enough to retire.

The counter argument is that it’s foolish to invest when paying down debt gives you a guaranteed return. In this economy, given the choice between investing or paying down debt at 6 percent, what’s safer?

While there’s room for criticism if you go either way, either way is preferable to doing nothing. Unfortunately there are all too many people who have lots of debt and little or nothing saved for retirement.

Don’t refinance!
This is another big one. I refinanced in 2004. I got a lower interest rate, and I switched from a 30-year mortgage to 15. The interest rate dropped, but I got nailed for a $2,000 closing cost.

I saved $500 in interest the first year, but I didn’t have the loan long enough to recoup the closing costs.

If your mortgage is the last thing you’re going to pay off and if you can drop the rate, or if refinancing will allow you to consolidate some higher-interest debt, it might make sense to do it, but factor in that closing cost. If you can pay off the mortgage in less than five years, it makes more sense to just pay it off rather than go to the expense and hassle of refinancing.

In my case, if I hadn’t refinanced, I may have owned the house a month sooner.

What about the tax deduction?
Short answer: Forget about the tax deduction. The tax deductions for mortgages are more overrated than Derek Jeter.

Let’s say you’re in the 25 percent tax bracket. I’d have to ask my accountant if such an animal exists this year, but the numbers are convenient. If I’m in the 25 percent tax bracket and I paid $1,200 in interest this calendar year, then that means in return for me paying my bank $1,200, the government is giving me back $300.

Every other time you spend $1,200 and get $300 back, it’s called losing $900.

For the past five years, I’ve been paying a lot more in interest than I ever got back as a tax refund. Eliminating the mortgage won’t completely eliminate my tax refund, but it did eliminate that interest. In effect, by paying off the house, I gave myself a $1,200 raise this year.

So there’s no sense in keeping a mortgage solely for tax purposes. If you need tax deductions, take your tax return to a good accountant. The accountant’s fee is tax deductible, and the accountant will probably find you additional deductions you didn’t think of.

If you’re in a higher or lower tax bracket, it can make a little more or a little less sense, but you’re still trading dollars for small change in any case.

In conclusion?
There are any number of things we could have done differently. But the important thing is we now own our home and two cars outright. It’s possible that doing a few more things might have made it happen a month or two sooner. But if I’d done everything the traditional way, I wouldn’t own the house outright until age 58 (if I’d kept the original 30-year mortgage) or 44 (since I refinanced to a 15-year mortgage). Compared to 11 additional years of paying interest, what’s an extra month or two if I get a couple of details wrong?

$13.99 a day for three days isn’t $39 total!

On Monday, I had the pleasure of renting a car. The insurance company was paying–the pleasure came courtesy of the 81-year-old woman who rear-ended my wife and son as they sat at a stop sign–but I learned a lot about rental company tactics.The insurance company was paying $24 a day, which would put you in a mid-sized car–roughly the size of a Toyota Camry or Honda Accord. So the rental company tried to upsell me. Enterprise stuck me in a Buick LeSabre once when the Dodge Neon I initially tried to rent had a flat tire. I hated the thing. It was comfortable, but it was huge, I couldn’t park it, the brakes were mushy, and the steering was mushy. I felt like I was stuck in a big bowl of oatmeal.

But they didn’t want to put me in a LeSabre. They wanted to put me in an SUV or a minivan. Completely impractical. Besides, I wanted fuel economy. I pointed to a Ford Focus. “How’s that gas mileage compare to my Honda Civic?” I asked.

“It has to be pretty close,” he said.

“I’ll take one.”

Once inside, he said he also had a Toyota Corolla. I lit up. “I’ll take the Corolla.” He said the last person who rented it got 38 MPG out of it. I like 38 MPG.

Then he took me outside to see the car. It was cleaner than my car, had fewer scratches on my car, when he put the key in the ignition and turned it, the engine started. It promised to cost less per mile to drive than a Civic, and someone else was paying the bill. What’s not to like?

Then he tried to sell me insurance. By then I was getting frustrated because all this upselling was making me even later for work, and I was plenty late enough. They had primo insurance for $23.99 a day, which was more than the daily cost of renting a Corolla. He said it would give me a million dollars in liability. I don’t remember what else. I probably rolled my eyes. I think he sensed there was no way, no how he was going to sell that to me, so he turned to the “cheap” $13.99 insurance.

“I don’t think I need insurance because American Family said they’d cover me since I have full coverage.”

“What’s your deductible?” he asked.

“I don’t know. I’ve never had to use it.” (Remember that second sentence.)

“It’s probably $500. So for $13.99 a day, we can save you the hassle of having to deal with American Family if anything happens.” Then he went over the things it would cover.

I started to get antsy, knowing how late for work I was getting. I tuned him out, which was the best thing to do. Otherwise I’d get even more irritated.

“So for just $39, we can take care of you for three days.”

I ignored the mathematical fact that $13.99 times 3 is $41.97, not $39. Any sixth grader should know that.

“$39 is a lot of money,” I said. That’s true, isn’t it? That’s about how much it costs to fill a Corolla’s gas tank in Missouri right now.

He laughed. “So’s $500!”

“Yeah, but I’ve never had to use that deductible, so the chances of me having to use any insurance this week on this car are about zero. So it really doesn’t make any sense to pay $39 for something I’m not going to use.”

“Suit yourself,” he said.

It suited me fine. The car was in our possession from roughly 9 AM on Monday until about 5 PM today (Wednesday). I guess that’s about 56 hours. My wife ran errands for a couple of hours each day and went to the doctor on Wednesday, but I think it’s safe to say that the car spent at least 41.97 hours sitting in our driveway.

Nothing bad happened in our driveway. I’m sure the dog sniffed it a few times.

I’m guessing the salesman who was helping me was probably 24 or 25, and in all fairness, when I was his age I didn’t think $39 was a lot of money either, even if it was really $41.97. Let’s face it. When I was 19, I was making about six bucks an hour. When I was 24, I was making a shade over $12 an hour, and after $6 per hour, that seemed like a lot of money. That was 9 years ago. Let’s guess this whippersnapper makes $15 an hour and made $8 an hour selling dishwashers at Best Buy five years ago. When you go from making $160 a week to $2400 a month, $41.97 seems like nothing. I’m sure he’ll spend more than that on dinner and drinks on Friday.

And I’m sure he and thousands of others like him manage to convince a lot of people every day that $41.97 is really $39, and $39 is nothing, so they sign on the line. All those nothings pile up really quick, and the next thing you know, you’ve got a $9 billion company.

Slick.

But that “only” tactic doesn’t work on me anymore. Quote me $41.97, and I can tell you it takes me an hour and a half to make that, pre-tax. Factor in taxes, and it takes me more than two hours to make that. That’s a quarter of my day! If I’m going to waste $41.97, I can think of a number of things I’d much rather waste $41.97 on. Maybe a full tank of gas. Or half a week’s worth of groceries. Or 288 diapers, if I shop at Dollar General. That might last my son a month.

But I spared him the Dr. Walter Johnson Economics 51 lesson on Opportunity Cost ($101 per credit hour in 1994 at Mizzou). Like I said, I was already late for work. I’d probably already blown $28 worth of vacation time and I didn’t want to make it $41.97.

A couple more ideas for saving gas

Chrysler criticized oil companies a couple of weeks back for padding their profits and not trying to do anything to help gas prices. There were some fallacies in their arguments; I’m not even going to try to touch it. I’d rather try to solve the problem: Figure out how to burn less gas. So here are some tricks for saving gas.

I’ve got two cheap tricks that seem to work.You can try the first one the next time you get your oil changed. The last time I changed my oil, the guy at the quick-lube place said my oil looked awfully dark and that I ought to have them flush the oil reservoir (at a price, of course–$15, if I remember right). I said OK. I had the same treatment done on my wife’s car when I had hers changed later the same day.

All I can say is that since having that done, my car gets better gas mileage. Right when I first got it, it could occasionally get 39 miles per gallon on the highway. Gradually, my highway mileage declined. Well, after that treatment, I’m back up in the 39 MPG neighborhood again in my 2002 Honda Civic.

I’m sure that having it done every time is overkill, but it’s not a terribly expensive experiment. I have a 12-gallon tank. If it saves me two miles per gallon (which is about right), that saves me a gallon roughly every second tank of gas ($3). Since I get about 400 miles per tank of gas, that’s 10 fillups between oil changes. So the maintenance will pay for itself if gas prices hold.

I’ve heard about another trick, where people are putting a couple of ounces of acetone into a full tank of gas and reporting better gas mileage and better engine performance. I don’t really want to mess around with acetone. But one of the advocates said something interesting: He claimed that the main ingredient in most fuel treatments is acetone.

Well, I’m pretty sure fuel treatment won’t void my warranty, although I’m not sure about acetone.

I used to giggle at the “Use every tank!” sticker on gas treatment. When gas cost $1.09 a gallon, it didn’t make much sense to spend $1.50 to try to squeeze out another mile or two per gallon. But at $3 a gallon, it makes sense to use at least every other tank.

Here’s a tip: Don’t buy it at the gas station if you can avoid it. It’s cheaper at discount stores. Sometimes I even see it at dollar stores. When the goal is to save money by burning less gas, it doesn’t make sense to overpay for gas treatment.

I think both of these things are worth doing, even if they prove only to be break-even propositions. If everyone did them, it would reduce usage, and when demand falls, price usually goes along with it.

I noticed one other thing yesterday. At my sister-in-law’s, 89 octane gas is actually cheaper than 87, at some stations, because the 87 octane gas is 100% gasoline, while the 89 is 10% ethanol. When there’s a price difference, buy the cheaper one.

Gas-saving sites miss the obvious

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.

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