Saturday, March 24, 2018

Personal Finance and Egoistic Altruism: Improving Your Situation Versus Improving the World

For me, one of the hardest parts of personal finance is figuring out a balance between helping myself and improving the world. I want to do both, as do most people, but quite often those two options are in opposition to each other.

If I improve my personal situation or that of my immediate family, I’m devoting time and resources to them and not devoting it to things like charity or service to others. The reverse is also true – if I devote time and resources to charity and service to others, I’m generally not helping my own future or that of my immediate family.

I think I’ve figured out how to solve this problem, for me at least. Bear with me for a while.

For a long time, finding a balance of helping myself and my family versus helping others troubled me quite a bit. Part of the reason I started The Simple Dollar, for example, was trying to navigate this problem. I was seeking a way in which I was obviously helping other people (the content on The Simple Dollar, which helps people navigate the knot of their own personal finances) while also improving my personal situation and that of my family (the advertisements on The Simple Dollar). It was a balance that I didn’t really see in my previous job – I felt like I was really stretching to feel like I was helping anyone other than myself with the work I was doing. (The thing to remember is that The Simple Dollar was a hobby at first, with the ads initially put in place just to pay for the cost of hosting the site; I didn’t anticipate how successful it would be.)

In the last few years, though, I’ve started looking at this problem a little differently, and I recently found a brilliant explanation of this new direction in this wonderful video on egoistic altruism entitled “A Selfish Argument for Making the World a Better Place” (just watch, this video explains it simply and beautifully):

The core argument of this video is that in the modern world, acting in a way that makes the world a better place almost always has a net benefit for you and your descendants. You can really apply “the world” however you’d like – it can refer to other people in your community, people you interact with online, or people who use the things you make that you might never directly interact with at all.

The video makes the point that, in humankind’s past, we mostly existed in small communities that utilized the land around them for food without any real innovation for tens of thousands of years. The limitation on the size of that community was the amount of land you controlled, so it made sense to be kind and charitable within your community and warlike and unkind to people in other communities. This is why you’d go help your neighbor put up a new barn (because that kind of shared work was far more efficient than trying to build a barn alone, and that neighbor was likely to help you when you wanted to build a new barn), but you wouldn’t be helpful at all to an outsider to the community (outside of very careful trading).

Over time, this changed, particularly in the last few hundred years. Now, the valuable commodity is knowledge and technology, and it’s almost always worthwhile to exchange those things with each other because it allows both of us to get more value out of what we have. The gasoline powered engine, for example, made it much easier to grow food and to transport goods everywhere, and we’re far better off sharing and trading the idea of a gasoline powered engine because it makes it cheaper for people elsewhere to transport goods to us. We all benefit without any real cost. Think of all of the huge technological leaps of the last 150 years that made daily lives easier – electricity, internal combustion engines, construction equipment, automobiles, planes, radio, television, the internet, phones, cell phones, and so on. Those kinds of things make the pie bigger – it makes every one of us more efficient in the things that we do and thus able to produce more for our time and effort, which helps literally everyone else.

In other words, in the distant past, being kind to others outside of our tight immediate family and community didn’t have much of a real benefit for you because there was no way to make the overall pie bigger. The only way to ensure your future and the future of your family was to grab a bigger piece of the pie for yourself. Today, most of the ways we interact with others offer the ability to make the overall pie bigger, and when you do that, you make your own portion of the pie bigger, too.

What this all means in the end is that any time I take an action that benefits someone besides myself, regardless if it’s my next door neighbor or someone halfway around the world, it eventually helps out me or my descendants because it makes the overall pie bigger. It is no different than the reason that communities got together for barn raisings in older times, except that because of the ease of exchange of information, that community is now the world.

So, where does all of this lead in terms of what we can actually do to improve our own situation? I’ve come to a few conclusions out of all of this.

Be Kind – Engage in Low Effort, High Return Behavior

One of the most valuable principles that all of this points to is that when you have opportunities to put forth a small amount of effort for a big benefit for someone else, you should virtually always do it, almost instinctively.

For example, it costs you virtually nothing to be kind to someone else, to speak positively to them, to raise them up a little, but it can make a huge positive impact on that person. That person then goes off in their life and is likely to be more productive and more kind to others that they meet, and eventually that will bounce around back to you in some indirect way. So, simply be kind to others when it’s almost entirely cost free to you. It doesn’t matter who the other person is, because the community is now global because of the value of exchanging information. Doing this costs you nothing in terms of the size of your slice of the pie and slightly grows the size of the overall pie, which means that you slightly benefit, too.

Even more than this, jump on board with low effort things that offer a high return for others. Talk to the new person who looks nervous and you’ll lift their spirits and likely build a new positive relationship. Help an acquaintance get their foot in the door for a job interview. Help the guy across the street load his couch into the truck. Answer someone’s question kindly and honestly rather than sarcastically and you improve their knowledge and faith in other people.

In each of those cases, you send those people out in the world with a more positive perspective and much more willing to help others when the time comes. They’re also much more likely to help you in the moment – not that it’s a guarantee that they will, but that it’s much more likely.

Spend Free Time and Energy on Things That Benefit Others

For a long time, I served on the executive council of a local charity. The work itself was drudgery – most of it was looking at expense reports and planning budgets.

When I step back and look at the big picture, though, I can see how valuable that time was, not just for me, but for the broader community.

The charity I helped manage directly helped people. Among other things, it provided food and clothing for disadvantaged people in the local community. Those things directly benefited families that I know and a lot of families that I don’t happen to know but are still a part of my local community. There are a lot of kids who went to school with full bellies and with school supplies in their backpacks and well-fitting clothes on their bodies because of the group I worked for. There were families that were able to have nutritional family dinners together thanks to the organization. People’s lives in our community were made better, and those better lives made life better for everyone around them, and so on and so forth. That eventually reflected back on me.

I built a ton of good relationships with people. My time in this organization helped me build several very strong relationships with people in the community and at least a couple of dozen very positive acquaintances. The closer relationships have brought several very positive impacts directly into my life – socializing, help in challenging situations, relaying of information that’s actually been valuable to us, and so on. The acquaintances have been valuable, too – a positive face or two at almost every social gathering in my community, for starters, but lots of other little benefits as well.

So, what does this mean for you? Consider volunteering a portion of your spare time to help a local charity. Look for something you can do in your local community that taps into some skill that you naturally have, whether it’s patience or communication skills or willingness to evaluate budgets. As you do this, use the opportunity to build relationships with others who are working for that same cause and remind yourself that the effort you’re putting forth raises the tide in your community and that a rising tide lifts all boats.

Such efforts usually cost you nothing financially, but they do reward you with strong relationships and a better community to live in. A community with thriving and healthy charities and public services tends to be safer and more pleasant to live in for everyone, which tends to attract more residents and increased property values. So, help out in your community a little with your spare time and you’ll gain far more than you expect.

Helping People You’ll Never Know

While it’s easy to see how helping people in your own community is beneficial, it can be hard to see how your efforts toward people you don’t even know can be of benefit to you.

From my perspective, the value in “zooming out” to include the problems of everyone is that there are a lot more problems to solve, many of which benefit you greatly in the process of solving them.

Take The Simple Dollar, for example. Virtually every article I write for The Simple Dollar helps me in the process of writing it (beyond the income-related factors). I get to think about the challenges of personal finance in my own life and then figure out how to translate what I’ve found into something that’s readable and useful (which actually helps me understand it far better). I end up with better ideas on how to manage my own finances and better communication skills, both of which help me in whatever career path I might venture into in the future.

In other words, when you look at things on a broader scale, you can find problems that need solving and questions that need answering that help you greatly in the process of solving the problem and answering the question effectively. You can find problems and questions that line up very well with the skills you already have. Naturally, you’re also helping others along the way, but there is real, tangible benefit for yourself if for nothing else than it builds up your ability to solve problems and communicate clearly.

No matter your area of expertise, you can find ways to help others online in that area. Just seek out well-moderated places where people who share your interests and skills congregate and look for ways to answer questions and help others.

How does this help you? One, thinking about how to solve a problem or answer a question helps refine your own skill set both in terms of the subject matter and your ability to communicate. Two, answering the question or solving the problem not only helps out the person asking the question, but it helps anyone who might read it going forward. Three, you’re establishing a reputation which will encourage many others to answer your questions later when you have them.

So, seek out opportunities online where you can share your knowledge and skills and participate in those communities in a positive way. Answer questions and help solve problems in a positive way, and then when you need questions answered or problems solved or require some kind of help, you’ll have a place to ask for that help, which can be both a personal and a professional boon. You’ll also build up your own understanding and your own communication skills as you help.

Speaking of reputation…

Hidden Ripple Effects of Reputation

All of these things collectively offer an additional benefit in the form of building your positive reputation. A positive reputation is a valuable thing, as it often opens doors for you and creates opportunities for you, both in ways that you can directly see and ways that you can’t.

Most of the jobs I’ve had in my life were offered to me or built up by the establishment of positive reputation. I built a great reputation with some of my earliest mentors and that reputation was quietly used to open my first real career door, when I was in college. My reliability and effort opened more doors for me later on, helping me to get my first post-college job because my reputation preceded me (even though I didn’t really see it at the time), and it also led into my next job after that.

Reputation helped me build quick relationships. Reputation helped me to have my voice heard when I wanted to speak out. Reputation has made people listen and respond when I’ve asked for help.

The thing is, when you do the things mentioned above – helping people without expecting help in return, being kind and pleasant and positive in public, constantly giving of yourself particularly when the benefits for others are far bigger than the cost for you – you build a positive reputation for yourself, one that often precedes you, and one that opens doors for you even if you don’t see it.

Practicing altruism and kindness builds reputation, and reputation is valuable. It will help with your career. It will help you in moments of crisis. It will help you with friendships and relationships.

A Rising Tide Lifts All Boats

As we wind down, I want to circle back to one key part of the benefits of altruism: a rising tide lifts all boats.

Let’s say you invest your time and effort into these things. You consciously choose to be kind and helpful. You regularly talk to that new person. You help people out all the time. You stay positive and friendly almost all of the time. You constantly help people out. And you’re rewarded for those efforts, as described above.

Still, there’s another big benefit that you often don’t see because it’s practically invisible: the rising tide.

When you make things better for other people, they tend to go on to do better things than they otherwise would have. When you’re kind to someone, they’re more likely to be kind to someone else, and that person is more likely to be kind to someone else, and so on. When you help someone, they’re more likely to help someone else, and so on. None of these are guarantees, of course, but your effort is raising the odds just a little.

Over time, with enough events, you’ve definitely become the source of a lot of positive events throughout the community and the world. At some point, you’ve likely altered the path of a few people in a significant way, but in a way that’s completely invisible to you. You helped someone with a little effort at just the right moment and that really changed their path, not just making their day a little better.

Those better paths make your world better – they make everyone’s world better. Someone ends up going to school in part because of a little impact you have, and that person ends up being part of a big discovery or helps a business develop and distribute a great product or learns how to better manage a crisis center. Someone reflects on a kind word you said and uses that as part of a spark to turn their life around and they become a better parent, lifting a child from a mediocre outcome to a pretty good outcome, and that person ends up really being a positive force in the community when you’re older.

The vast, vast majority of kind things you do won’t have that kind of tide-raising effect, the kind of effect that benefits you and everyone else, but a few of them will, and you’ll never know which ones. Never forget the rising tide when you do something helpful or altruistic.

Making the Lives of Others Better Is Reason Enough, But the Extra Benefits Are Great, Too

Throughout this article, I’ve extolled a ton of the value in being kind, being altruistic, and helping others without seeing an immediate benefit for yourself. You build positive relationships. You build skills. You build reputation. You make the community better as a whole.

The thing is, there really doesn’t need to be a benefit for being kind or altruistic – helping others is a reward unto itself. Simply making things better for someone else going through this up-and-down journey we call life has value… but, unfortunately, it’s not always enough value, which is why it can be useful to point out the many real and tangible benefits to being altruistic.

The reality is that there are a huge number of benefits to simply being kind and helpful as often as possible, and given that the modern world is one that is constantly growing in terms of opportunity and efficiency, many of those benefits literally help everyone involved. The benefits go to the person you helped, sure, but they also spread out to people you’ll never see, and some of those benefits come right back to you. When we work together, we all get more efficient.

Yes, there are always going to be people who do accept your help and kindness and offer nothing in return, but the relatively small amount that you lose in such situations is small compared to what you gain from the vast majority of people out there who are lifted up by the helpfulness of others and will act accordingly.

In short, be kind. Be helpful. Treat others as you would ideally like to be treated. Not only is it the right way to act in the world, the principle of egoistic altruism reveals a ton of personal, professional, and financial benefit for doing so as much as possible.

The post Personal Finance and Egoistic Altruism: Improving Your Situation Versus Improving the World appeared first on The Simple Dollar.

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Friday, March 23, 2018

Personal Finance and the 80/20 Principle

Several years ago, I had a brief period where I looked at my life through the “80/20 principle,” which culminated on The Simple Dollar with this brief article and a review of a still-excellent book on the topic. Eventually, the 80/20 principle became one of many arrows in my quiver of understanding the world and being as successful in it as I could be.

Before we get going, what exactly is the 80/20 principle?

The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.

Here are a few examples of this in everyday life, in things I’ve observed recently in my own life.

80% of the enjoyment I get from reading books comes from about 20% of the books I read. (The problem, of course, is that it’s hard to tell whether a given book is in that 20% of “really good books” or 80% of “mediocre and forgettable books” until I’ve read most of it.)

80% of the value I get out of my smartphone comes from about 20% of the time I spend on it. Much of the time I spend on my phone really isn’t very valuable time.

I wear the same clothes over and over; 80% of the time, I’m wearing clothes that come from only 20% of my wardrobe. I honestly wear the same handful of shirts and pants almost all of the time.

The vast majority of the wear on the carpet in our house is in only a small portion of the area which, according to my calculation, is pretty close to 80% of the wear being on 20% of the carpet.

You’re getting the idea by now, I’m sure. 80% of the effect of something comes from 20% of the cause. 80% of book-reading joy comes from 20% of books. 80% of the value of smartphone use comes from only 20% of total smartphone use. 80% of my time is spent wearing only 20% of my total wardrobe. 80% of the wear on our carpet shows up on only 20% of our total carpet. Over and over again, it shows up.

Here’s a nice little corollary for that 80/20 principle: Quite often, when you realize that you’re getting 80% of the value from 20% of the item, you can figure out ways to get rid of that remaining 80% that doesn’t provide much value. At the very least, you can drastically cut the amount of time or money you invest in that unproductive 80%.

Let’s jump back to the observation I made about books. “80% of the enjoyment I get from reading books comes from about 20% of the books I read.” Given that I observed this, it makes the act of purchasing a book I haven’t read seem like a less than sensible gesture. There’s a 4 in 5 chance that I won’t deeply enjoy it and I’m unlikely to ever read it again. If that’s the case, why am I buying it? The 80/20 principle says, “Borrow books unless you know you love that book, because there’s a very good chance you just read a book once and forget about it.” For a avid book reader, that’s a pretty big money saving principle.

Let’s apply that to eating out. If 80% of my food-eating pleasure comes from just 20% of the meals I eat, it makes sense to eat really minimal most of the time, consuming low cost, simple, and healthy stuff at home – forgettable things, basically – and just enjoy the occasional really good meal without worry. The 80/20 principle says, “Eat simple, healthy meals most of the time and eat a really nice meal that you truly enjoy perhaps once a week or so.” Again, that’s a pretty big money saving principle.

You can apply it to things like ordinary treats. If 80% of the overall pleasure you get from, say, getting coffee at coffee shops comes from just 20% of the visits, what that means is that a lot of the visits to the coffee shop are done on impulse and without strong desire or anticipation. The visits that follow a pattern of, “Oh, I’m right here by that coffee shop, might as well grab a treat” are ones that don’t bring much pleasure for the cost, so they should be dropped. Save your coffee shop visits for your biggest cravings, or for when you’ve planned ahead a little for it. The 80/20 principle says, “Save treats for the moments when your cravings are especially big or when you’ve planned ahead for it, and ignore little cravings.” Once again, it’s a pretty big saver, as you’ve eliminated roughly 80% of your splurges, but you’ve only lost 20% of the pleasure.

If you watch for it, it pops up over and over again.

The 80/20 principle is why I switched to using a soap pump in the shower, since 80% of the cleaning comes from 20% of the soap use. All I really need is a single squirt from a pump to really get myself clean, but if I dump soap everywhere, I end up wasting most of it. A pump container lets me get just the right amount – say, 20% of what I would otherwise use – and it gets me 80% of the cleaning that dumping tons of soap would get me. A second pump, if needed, finishes the job, and I’m still using way less soap than before to get just as clean.

The 80/20 principle is why I’ve cut my hobbies down to basically three things – reading books, hiking/walking/biking, and playing board games. I don’t watch television or movies any more unless it’s part of a “date night” with my wife (i.e., marital bonding) or a “family movie night” (i.e., parental bonding). I still engage in a lot of food preparation tactics, but it’s merely in an effort to simply make nutritious meals efficiently and cheaply (i.e., household tasks, personal health). If I’m lamenting the amount of time I have for a hobby, it means I need to cut out other leisure time uses. Someday, I might change those hobbies, but right now, I finally feel like I have adequate time to devote to those hobbies.

The 80/20 principle is why I’m currently rapidly downsizing my board game collection. 80% of the joy I get from playing games comes from 20% of my collection, which is an indication that I really can downsize my collection. If my collection is sufficiently large and 80% of my joy comes from 20% of my collection, that means there’s a large set of games that produces a relatively small portion of my joy, so I might as well trade off and sell those games, right? That money could be used to eventually buy other games or to invest in other things in life.

In the end, there’s a simple principle underlying all of this: In almost everything in life, 80% of the value comes from 20% of the cost. It is extremely worthwhile to look at every situation in your life where you’re spending time or money or energy to seek out where that 80% of the value is coming from and to see whether it makes sense to figure out how to cut back seriously on the time and energy and money investment without touching that 80%.

So, here’s an obvious question: If you keep repeatedly applying this principle, don’t you eventually end up deleting everything? I mean, if I keep applying it over and over to my board game collection, don’t I eventually end up just having one game – the single game that’s my favorite – and ditching everything else? The same is true for almost every application – if you keep applying it over and over, you eventually cut to virtually nothing.

Here’s the thing: Once you realize that you’re making deep, meaningful, painful cuts, it’s time to let things breathe a little. If I apply the principle to my book collection, for example, the first pass through will be easy. It’s easy to see which books I’ll probably never re-read again and so it’s easy to box them up to put into local Little Libraries or to donate them to the local library for a book sale. It’s when those decisions get seriously hard and painful that indicates that I should stop. Often, if I’m being really honest with myself, that first pass ends up eliminating a healthy majority of that collection – the less-used 80% or so.

Now, even with that remaining 20% of my games, I’m still probably getting most of my joy from a small handful of what remains, but the remaining numbers still bring me enough joy that it hurts to cut them.

In other words, the 80/20 principle is mostly just good for removing “dead weight.” Use it when you perceive that you just have way too much of something or you’re spending way too much money or something. Use it when you see bloat, or when you are struggling to balance things.

When you find that it’s telling you to cut things that are really important to you, it’s time to stop. You’ve cut the bloat, which is really the reason to consider the 80/20 principle. It’s a guideline, really, telling you that most of what you’re considering for the first time is probably bloat that isn’t bringing you much value.

In the end, it’s a really good idea to take the 80/20 principle through the areas in your life that feel bloated, where you have a sense that there’s just “too much,” or where you feel like you’re trying to jam too much into boundaries of time and money. You’ll find, almost every time, that 80% of the value you’re getting from this comes from 20% of the stuff, and that realization makes it much easier to start making big cuts and building a life that makes personal and financial sense.

Good luck.

Related Reading: 

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Thursday, March 22, 2018

Trent’s Frugal Picks: 12 Low-Cost Options I Seriously Like

Quite often, I’ll get messages from readers asking for a good “bang for the buck” or low cost recommendation for a particular type of product. Often, it’s hard for me to give a strict recommendation, as I’m usually just using a store brand or something I happened to find on sale once and I can’t say based on my experience that this is really good value; I just know that it does the job for the price.

Having said that, there are some products for which I have actually tried lots of variations at lots of different price points and discovered that they provide a lot of value for their low price. Here are twelve of those specific recommendations. If you’re looking for an item of that type, consider the items listed below to be my personal recommendation for a very good value for the price.

The prices listed are the normal prices on these items. I’ll buy them at normal prices, but if they’re ever on sale below that level, I’ll stock up.

Automobiles: Toyota

My starting spot for any automobile purchase is to carefully examine the Toyota model in the type of car I would be purchasing. There are several reasons for this, the big one being that Toyota is consistently #1 in terms of reliability among all car brands, even higher-cost brands like Lexus and BMW and Infiniti. Toyotas tend to hold their value and tend to last a very long time, so they’re the brand I look to first when shopping around.

In my own experience, Toyotas in particular (and Hondas to a somewhat lesser extent, but far better than most other companies) are simply reliable vehicles, and that’s my primary concern when buying a car. A reliable vehicle simply means that, on average, it’s going to work when I want it to for more miles than other vehicles assuming I keep up with the regular maintenance, and that’s really all you can ask for. Our experience with Toyota reliability in terms of bang for the buck is unparalleled, and the Consumer Reports data matches up well with our own observations.

I have had positive experiences, or have close friends with positive experiences, with automobiles made by Honda, Kia, and Subaru as well, brands which also rank well on the Consumer Reports data shared above. Those are the brands I look to next if I can’t find a late model used Toyota available in the model that I’m looking for.

Batteries: IKEA ALKALISK alkaline battery ($1.99 per 10 pack for AA), available at IKEA

These are tremendously good batteries for $0.20 a pop, almost unbelievably good. They seem to last and last and last in almost any device that you put them in, and although they’re not rechargeable, it is rather easy these days to recycle them if you’re environmentally conscious, as many stores and recycling centers have places to deposit batteries for recycling. I’ll often buy these as the batteries I use in items that might leave our home, such as grabbing a few batteries for someone’s device that they might take home with them or for a gift-related occasion.

If you do wish to use recyclable batteries, I give a nod to Sanyo eneloop rechargeable batteries. They’re not the cheapest, but they hold charge so well that they’re almost indistinguishable from single-use batteries, and if you just leave the charger in a wall outlet, the process for swapping them out is easy. Just pull a few fully-charged batteries out of a drawer, put them in the device that needs batteries, then put any used-up batteries right into the charger until the light turns green, and when you notice a green light, toss those batteries in the “battery” drawer. The initial cost is high, but the cost per use after that is nice and low.

Dishwasher Detergent: Kirkland Signature Premium Dishwasher Pacs ($0.10 per load, from Costco) or Member’s Mark Ultimate Clean Automatic Dishwasher Pacs ($0.10 per load, from Sam’s Club)

We are Sam’s Club members (because there isn’t a Costco reasonably close to our house, so the choice is kind of made for us), and my hands-down preferred dishwashing soap is the large tub of Member’s Mark Ultimate Automatic Dishwasher Pacs. At a little less than $0.10 per load, these are about the cheapest pacs I’ve found anywhere and they do a stellar job, better than virtually anything else I’ve tried.

The only ones I’ve tried that are comparable are the ones from Costco (specifically, Kirkland Signature Premium Dishwasher Pacs) that I’ve used when visiting friends, which are basically identical in terms of function and cost. They’re just as good as the Member’s Mark ones, as far as I can tell, and come in right at $0.10 per load.

Honestly, I’ve tried and I can’t make decent homemade dishwashing soap that cheap. I can make some batches that are notably cheaper per load, but they do not work as well. I’ve also made homemade batches that work just as well, but they’re not any cheaper per load.

This is one of those cases where the best deal really is found at a warehouse club, whether you’re a Sam’s Club member or a Costco member. This is an automatic buy for me from Sam’s Club whenever I visit, because it just doesn’t get better or cheaper per dishwasher load.

Disposable Razors: Dorco

I’m not going to get into the debate over disposable razors versus double-edged safety razors versus straight edged razors versus just growing a beard. There are advantages and disadvantages of both, mostly oriented around safety and time and other factors. I am personally partial to a Merkur double-edged safety razor when I have time to shave well and really want to look and smell good, but I use a cartridge/disposable razor for my daily quick shave when I’m just going to be at home working or doing only light things outside the house.

Dorco is the best “bang for the buck” option I’ve found in terms of quality disposable razors. They’re the cartridge manufacturer for Dollar Shave Club, but it’s cheaper if you just buy a pile of cartridges straight from them instead of subscribing to the shave club, because you can decide for yourself when to get more and you can make a big bulk purchase. They offer razors designed for men and women with several different variations.

Over the years, I’ve figured out how to get a lot of uses out of a single cartridge. My favorite tactic is to shave in the shower using a wet shaving technique with a bit of soap (my face is very wet and mostly under the water when I shave). When I’m done, I rinse out the razor, then run the razor in reverse direction up my arm with a bit of soap on it, literally the opposite of how I would move it if I were shaving, which is a simple way to gently re-hone the blade, and after the shower I take a few seconds to dry it off with my towel. This enables me to get dozens of uses out of a single cartridge. By now, I can feel when it’s time to replace the cartridge, as it starts to get a little rougher when shaving, though it doesn’t nick me or anything – it just feels rougher on the skin.

So, this is the system I use. Most days, I use a cartridge razor and quickly wet-shave in the shower, honing the razor on my arm and then drying it off as described above. On special occasions, I’ll take my time and shave with a safety razor, which gets a bit closer shave and definitely has a nice smell without being very costly, either.

Dry Pasta: Barilla, Ronzoni, or store brand, whichever is cheapest

I’ve tried lots of different kinds of pastas over the years, including even making it myself (honestly, I like homemade the best, but unless you have an automatic pasta maker, it’s pretty time intensive). What I’ve found is this: if you cook it according to package directions, add a healthy dash of salt to the water, leave it just a little underdone, and accompany it with some sort of tasty sauce or other ingredients, almost every dry store-bought pasta is perfectly good. The cheapest store brand dry pasta is about 80% as good as any other brand – they’re all really pretty close.

So, I honestly often choose Barilla, because it’s a low-cost type of pasta and there’s a Barilla factory not too far from where I live, so I like to believe it’s a form of “buying local,” at least for me. Usually, Barilla’s price is at least comparable with the store brand.

For people not in my area, I encourage you to just choose the least expensive option, which in my experience is usually either Barilla, Ronzoni, or store brand, depending on the store and the situation. All of them are perfectly good pasta, though none are as good as homemade.

Laundry Soap: 1 cup of washing soda, 1 cup of borax, and 1 cup of soap flakes (48 loads, roughly $0.03 per load)

My preferred laundry soap – which costs about 10% as much as buying Tide at the store – is simply a cup of washing soda powder, a cup of borax, and a cup of soap flakes in a plastic container, tossed around until thoroughly mixed, with a measuring teaspoon in there. Whenever a load of laundry needs to be done, just toss in a teaspoon of that powder mix and it’ll get nice and clean.

While the prices aren’t as good as what I can find locally, you can buy washing soda, borax, and soap flakes on Amazon. Together, these ingredients add up to a cost of about $0.05 per laundry load by my quick back-of-the-envelope math. You can cut that price by buying bars of soap and grating them.

This mix does a stellar job cleaning laundry, leaving it comparable to smell and coloration to most detergents I’ve used. The only time I’ve found a use for detergent is when you’re dealing with an actual stain, in which case I rub a few drops of detergent straight into the stain, which takes care of the problem. For normal dirty laundry, this laundry soap mix does the job perfectly and far cheaper than anything I’ve found on store shelves.

Pasta Sauce: The least expensive without high fructose corn syrup, usually Classico, or tomato sauce and diced tomatoes mixed with herbs

There are really two routes to go when it comes to pasta sauce. One route is to make it yourself, which I’ll do sometimes by adding herbs to a can of tomato sauce and a can of diced tomatoes. This is usually the cheapest route, but not always, as the total cost hovers somewhere a little north of $2.50 (assuming I’m using dried herbs at home or fresh ones out of our garden). You can also do this easily with your own tomatoes from your garden, which takes more work but tastes amazing. I don’t really have a strict recipe other than mixing a can of sauce, a can of diced tomatoes, and some herbs and other ingredients together until it tastes good – usually dashes of basil and oregano and ground black pepper.

The other route is to buy a prepared pasta sauce, but so many of the low cost pasta sauces add high fructose corn syrup to the sauce, and that’s just something I strive to avoid. The health cost of just adding a bunch of needless sugar or corn syrup to your diet isn’t worth the little bit of savings one might get from a cheap pasta sauce, so I glance at the inexpensive ones and buy one that doesn’t have HFCS or added sugar in it. Often, the one that ends up in the cart is Classico brand, as many of the less expensive options (like store brand, Ragu, and many of Prego’s offerings) include high fructose corn syrup or sugar as an ingredient. The modern American diet already has too much sugar in it which is leading to a diabetes epidemic; why have a bunch more in a food item that doesn’t even need it to taste delicious?

Pens: Uniball Signo 207 ($0.50 each, Amazon)

All I really want from a pen is that it doesn’t leak, it writes when I pick it up so I can actually use all of the ink in the pen, and it doesn’t leave big ink globs all over the paper. A lot of super-cheap pens do at least one of these things, and many do more than one of these things.

The Uniball Signo 207 doesn’t; it’s the cheapest pen I’ve found that doesn’t leak ink everywhere, writes virtually every time when I pick it up, and doesn’t leave big ink globs on the paper. For me, that’s worth paying $0.60 for a pen that’ll write for several weeks.

The worst problem I’ve ever found with these pens is that every once in a while, you’ll get one that skips when you write, and you can fix that by simply taking another one that works and swapping the heads on them, which takes about five seconds.

There are similar pens that you can sometimes find for this price, like the Pilot G2, but this one is consistently the lowest priced “good” pen out there, and thus I use it all the time.

Shampoo: Whatever’s on sale

For me, the solution to inexpensive hair care is to keep a short, simple cut that simply doesn’t require much care. I keep my hair quite short so that I never have to use much shampoo or conditioner to clean it and there are minimal ill effects from using the “wrong” shampoo or conditioner.

So, my solution is to simply buy whatever’s cheap or on sale, put it in a pump bottle, and use a single pump to wash my hair. I often end up buying brands like Pert or Suave or whatever the store brand is.

When my hair was longer, I frequently had dandruff issues if I used the wrong shampoo. Now that it’s short, I just use very little shampoo or conditioner on it – in fact, sometimes I don’t even use any at all – and it seems to never matter what shampoo or conditioner I use. Nothing really causes dandruff, and I think it’s because I don’t use much hair care product. Because my hair is short, oil levels in the hair tend to be a minimal issue, too.

The secret is just keeping it short by getting it cut regularly, which I usually do myself.

Toilet Paper: White Cloud Ultra ($6.27 for 12 rolls of 231 sheets per roll, or roughly a cent per five sheets)

For me, the threshold of good toilet paper is that it doesn’t disintegrate and doesn’t feel like sandpaper. Once we pass that threshold, I go for cheap, and the best bargain I’ve found that clearly passes that threshold is White Cloud Ultra.

It’s cheaper per sheet than a lot of store brand scratchy toilet paper, but it’s soft and absorbent and doesn’t fall apart at a single touch like cheap toilet paper often does. It’s everything I need, and it’s cheap enough that even sale prices on other toilet papers that aren’t scratchy don’t come close to this price.

Warehouse Clubs: The most convenient one for you

As I mentioned earlier, Sarah and I are Sam’s Club members, simply because there isn’t a Costco or BJ’s close enough to our home to warrant a membership. I can drive about 15 minutes to one Sam’s Club and about 20 minutes to another one, while the nearest Costco is an hour away.

Having said that, I’ve shopped at Costco and BJ’s in the past and… honestly… the differences between the three warehouse clubs in terms of the shopping experience and prices is pretty minimal, enough so that if I lived near all three of them, I’d probably choose one out of pure convenience and use that for most bulk buys.

What if they were exactly equal in terms of convenience? I’d slightly lean toward Costco because of their employment practices, but factors like large crowds at one versus small crowds at another would be enough to sway me in a different direction, as I prefer not to wait in checkout lanes or have to wait to go down crowded aisles.

All warehouse clubs, in the end, offer the same thing: they offer strong prices on bulk buys of many product types, though the prices aren’t constantly better than your local discount grocery store. You have to shop at both and watch the prices.

Wines: Charles Shaw Blend Cabernet Sauvignon (red, $2.99 per bottle) or Charles Shaw Pinot Grigio (white, $2.99 per bottle), both available from Trader Joe’s

Colloquially known as “two-buck Chuck” or “three-buck Chuck,” the Charles Shaw store brand of wine from Trader Joe’s is what I call good to very good wine at a spectacularly low price, with the blend cabernet being the best red wine option and the pinot grigio being the best white option to my taste buds. I would have no hesitation serving these wines at dinner parties if there were no other options (meaning a guest didn’t bring a bottle), and I’m happy to have them on hand for family meals, as Sarah and I will often enjoy a glass of wine with dinner. With these bottles, it reduces the cost of a glass of wine well below a dollar.

Now, are these the best wines in the world? Absolutely not. Are they pretty good wines that are very consistent and pair well with lots of meals? Absolutely.

If there is interest, I might make this into a semi-regular feature on The Simple Dollar. If there’s a particular product type you’d like me to look at, please follow me on Facebook and send a quick message, which is the most effective way to reach me.

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Wednesday, March 21, 2018

Financial Freedom and Comfort

Which option is better: is it better to have maximum freedom over how one uses their time, or is it better to give up some of that freedom in order to have more life comforts?

Or, to put that question in a more tangible form, would you rather not have to work for a living (but you can if you choose to, and you can freely quit whenever you like) but have a worn-down car and a fixer-upper house, or would you rather have to work for a living but have a nice car and a nice house?

I think that my financial journey really involved a change in my answer to that question. Right now, I’d prefer maximum freedom over my time; at an earlier stage in my life, I would have preferred the nice home and nice car. At some point around a decade ago, my answer switched, and that change in that answer triggered a very different approach to finances.

The thing to remember here is that this isn’t an either-or question – it’s much more like a spectrum of options, much like the spectrum of personal finance that I recently discussed. You can choose an extreme approach toward freedom and live a life that’s extremely minimalist, but which gives you almost complete freedom over how you use your time and energy. On the other hand, you can choose an extreme approach toward momentary comfort and make all choices oriented toward what will make your average moment as comfortable and pleasurable as possible, which requires a great deal of money, which thus requires giving up a lot of freedom over your time choices.

Most of us will find some spot somewhere in the middle, between the two extremes. We’ll make some frugal choices and go without some of the less important comforts, but we’ll still have a lot of perks and comforts in our life. At the same time, most of us still have to work, but we don’t have to work constantly or at a career path that will kill us young, and we have some free time each day and some additional time on the weekends to do whatever we want.

What I’ve found, based on my own experience, is that most people who start to think about their personal finances are those who find that they’re closer to the “comfort” end of the spectrum than they’d like to be, and they want to nudge things closer to the “freedom” end of the spectrum. They’re stressed out by the financial requirements and professional requirements in their life, which is restricting their personal freedom in ways that they don’t like, but they’re currently at a level of comfort that they might struggle to dial down from.

The challenge, of course, is that most people want to see significant change quickly, and they achieve this by moving rapidly down the spectrum toward the “freedom” end. They become highly frugal and very diligent about their finances. They give up a lot of creature comforts and start building an emergency fund and paying down debt (which improves their personal freedom).

However, people often realize that they’ve dialed too far the other way and end up moving themselves back toward the “comfort” end of the spectrum, often right back to where they were at before.

Another problem is that comfort can have a “dulling” effect in that it can persuade you to avoid taking any kind of risk and to stop working hard. If you’re truly comfortable, you stop pushing toward your full potential in life. Often, the only thing that shakes people out of that sense of comfort is the idea that the comfort is truly at risk – in other words, they see that they actually have little freedom and that shocks them into action.

For me, the best personal finance strategy is to keep tinkering with things and figure out the exact place you should be on that spectrum between freedom and comfort. This, of course, relies on the idea that you have at least enough financial freedom to keep your head above water – you can keep your bills paid – and that your basic needs are met.

How do you do that, though? How do you find the right balance between freedom and comfort for you in practical terms? How do you find the right spot for you on the spectrum of personal finance without jumping way too far in the wrong direction? Here are some of the strategies I use.

First, I do a lot of thirty day challenges, trying out specific techniques and strategies. There’s almost no change that I can’t easily hold to for thirty days, and thirty days is long enough to figure out for myself whether that particular change is right for me.

A “thirty day challenge” is simply a commitment to try a specific life change for thirty days. For example, I might decide to make only meals at home for thirty days, or I might decide to eat vegan for thirty days, or I might decide to devote an hour a day to a particular activity for thirty days. It can be almost anything you imagine, but it’s a great way to give a trial run to new lifestyle features.

In a given month, I’m usually running two or three thirty day challenges in different areas of my life. At the end of the month, I usually decide that one or maybe two of them is worth keeping on a permanent basis and the rest are discarded or modified for a future thirty day challenge.

What I have found is that repeated challenges are slowly guiding me toward the best life I can have for myself. I’m never staying in the same exact place because of those challenges, but as I retain the ones that click and discard the ones that don’t, I’m slowly inching toward my perfect place on that spectrum.

Second, I have an “automatic” emergency fund, and it’s pretty healthy. Each week, a surprisingly healthy amount is transferred out of my primary checking account into a savings account automatically, and that money serves as an “emergency fund” of sorts. It does serve as protection against true emergencies, such as a car breakdown, but it also serves as protection against the risk of making adventurous life choices in the moment.

For example, knowing that I have plenty of cash to pay for the consequences of downsides emboldens me to try doing things for myself (more freedom) that I might otherwise just pay someone else to do out of fear of messing it up (more comfort). I’ll try an audacious home repair, for example, or I’ll invest in an opportunity that presents itself in the moment. I used my “emergency fund” recently to buy a person’s entire trading card collection, which I knew I could flip for a substantial profit with several hours of time invested. That’s an opportunity that comes with financial freedom, one that’s denied to me if I’m too far down the “comfort” end of the spectrum.

At the same time, having a healthy emergency fund is a comfort in times of trial. I don’t freak out if the car doesn’t start, which is a real comfort, for example.

Having that emergency fund, then, actually gives me some leeway in the moment to decide whether I want to be a little further down the “freedom” part of the spectrum (doing a challenging and potentially damaging home repair, investing in something on the spur of the moment) or I can enjoy some comfort (having cash in hand to deal with an abrupt emergency, taking advantage of an opportunity for a meaningful splurge). I achieve this by having a very healthy emergency fund and contributing to it constantly and automatically.

Finally, I use my spare time to figure out avenues of personal comfort and joy that don’t require sacrifice of personal freedom. In other words, I spend quite a bit of spare time dabbling in new interests with minimal expense, seeking out things that will excite me and draw my passion without drawing down my bank account.

Each and every day, I set aside some time for leisure, which is often filled up by already-existing hobbies, but when those don’t scratch an itch for me, I use that time to explore new things that I haven’t tried before. For example, I recently got into lettering and calligraphy in an effort to make inspirational handmade wall hangings for my home office, so I spent quite a bit of time with just some papers and some colored ballpoint and gel pens practicing lettering and faux calligraphy. The cost was minimal and I got to really dig into a new area of interest to see if it was a good fit for me (I think I don’t have adequate hand-eye coordination to do it well) while also bonding with my daughter as she spends two or three hours after school most days engaged in drawing (I often sat right next to her as I worked on faux calligraphy and lettering).

I’ve found that finding new areas of interest that excite me is a powerful avenue to personal comfort, because the maximum level of personal comfort I’ve ever found is simply being able to get in the “flow” of working on something. Being in the “flow” simply means that you’re so engaged with the thing you’re doing that you genuinely lose track of time, and to me, getting into that state as often as possible is the best source of personal contentment and happiness and comfort.

Finding ways to get in the “flow” without spending money is perhaps the most powerful tool I have in terms of finding the perfect spot for me on the spectrum between freedom and comfort. Such states, to me, are the embodiment of comfort in life, and finding a way to get in the “flow” without spending much money is incredibly powerful, because it allows high levels of comfort without sacrificing any personal freedom.

Try experimenting with these strategies to see what works for you. Try out some thirty day challenges and explore some life changes. Automate your emergency fund so that you have cash for both emergencies and opportunities. Set aside time to explore new things in life, particularly low-cost ways to dip into a “flow” state. You’ll find that doing such things is a powerful way to find the perfect balance between freedom and comfort in your life, keeping money in your pocket while finding a joyful way to live.

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10 Things We Used to Pay a Lot Less for (and Still Could)

With few exceptions, goods and services cost more than they used to. But they don’t always have to.

One of the most stereotyped marks of aging is repeated complaints about things costing more than they once did. Unfortunately, it’s impossible to stop the march of time and it’s similarly difficult to halt inflation. According to the Bureau of Labor Statistics, it would take $7.28 to purchase what you could with a dollar in 1968. Meanwhile, it would require more than twice as much money — an extra $22.93 — to buy what you could purchase with just $20 in 1988.

However, even when prices rise over time, there are still ways to avoid the added premium placed on items by cultural trends or the tendency to buy out what we once prepared at home. Here are just 10 items that consumers are paying far more for now than they did a few years ago. If you’re willing to do away with those goods in their more opulent forms, that price can be a choice rather than an unavoidable burden.


The nearest $4 or $5 latte at Starbucks will illustrate just how costly a coffee away from home or the office has become. But even the $1.85 average price of a 12-ounce cup of their basic fresh-brewed coffee exceeds the inflation adjusted cost ($1.65) of the 25-cent coffee on offer at the Maryland Inn in 1970.

However, the 3-cent cost of a ca. 1970 cup of coffee brewed at home — based on the 27 cups that a 93-cent, one-pound container of ground coffee could brew — would add up to 20 cents today, adjusted for inflation. Even with a pound of coffee costing $4.27 on average in February, according to the Bureau of Labor Statistics, the modern cost of a cup of coffee brewed at home is 16 cents.

Not only can you save money by avoiding the coffeeshop and brewing at home, but you can spend less on coffee than your parents or grandparents did if you do.


In 2017, the average cost of a movie ticket was $8.97  — including the easily-avoidable $20 to $30 3D, IMAX and Dolby Cinema showings. Even going back to 1977, however, the $2.23 average cost of a movie ticket would be $9.49 today,

Movies have never been incredibly cheap, but you have a lot of cheaper options for enjoying them now than you did 40 years ago. We have mentioned both second-run theaters and online rentals as cheaper movie options, but staying home and streaming older movies through services like Netflix, Amazon, and Hulu (with monthly subscription prices similar to that of one movie in 1977) is yet another option. If you want to avoid the extra $40 to $60 a month (or more in rural areas) required for a high-speed internet connection, RedBox still rents DVD and Blu-ray versions of movies for $1.50 to $2, while most public libraries will let folks with library cards check them out for free.

Drinking Water

Unless you live in an area where the water is tainted beyond drinkability, when you buy bottled water you are paying for a packaged version of something that is already a utility. The International Bottled Water Association puts the cost of a gallon of bottled water at $1.11. Purchasing bottled water in 16.9-ounce single servings drives the cost up to about $7.50 a gallon.

According to the American Water Works Association, the average price of tap water is roughly $0.004 per gallon. Considering the American public didn’t start drinking bottled water in singles servings until the late 1970s — 350 million gallons a year during that decade, compared to more than 10 billion now — we’ve only recently started fooling ourselves into paying for pallets of water bottles when we already pay for countless gallons of water to come into our homes each month.


As automotive site Kelley Blue Book points out, the average price of a mid-sized car in February was $25,857. While the average $3,450 cost of a car in 1970 makes that look awful, the $22,725 that car would cost when adjusted for inflation is a bit closer to the mark.

However, some recent work by automotive site Edmunds suggests that buying used, rather than buying new or leasing, is the most frugal approach. According to their findings, the average price of a new compact SUV (like a Toyota RAV4 or Chevrolet Equinox) is roughly $30,000. The average price of three- to four-year-old version of the same compact SUV is about $21,000. In some cases, you may get either the tail end of the original warranty coverage or an extended warranty, making a slightly used car far more cost-efficient.


An increase in beer choices hasn’t led to a decrease in prices. In 1978, according to the Brewers Association, the number of breweries in the U.S. dropped to a post-Prohibition low of 89 thanks to beer-industry consolidation and tight brewing laws. This year, the U.S. brewery count hit 6,000.

However, though a handful of craft brewers existed in 1978, the $2.82 paid for a six-pack in the U.S. in 1978 mostly bought you pale lager. Today, that $2.82 would be worth $11.23 after inflation.

We cruised Total Wine’s inventory in Vancouver, Wash., and found a four-pack of Founders Breakfast Stout and Modern Times City of the Sun IPA, and six packs of Dogfish Head India Brown Ale and Deschutes Sage Fight Imperial IPA, for less than that mark. Yet that price will now also buy you 12-packs of Bud Light, Pabst Blue Ribbon, Coors Light, and Miller High Life.

Beer can cost you $60 for rare releases, or as little as $5 a six-pack if you’re willing (or allowed by state law) to hit the blowout bin at your local liquor or grocery store. It can also cost $1 a bottle or less if you buy brands like Sierra Nevada, Rogue, or any of the big lager brewers by the case at a warehouse store like Costco or Sam’s Club (without factoring in the cost of membership). It’s just a matter of taste and motivation.

Grilled Cheese

Grilled cheese was the comfort food U.S. parents made their children for decades, which is why it’s typically the first item that crops up when a city or town starts embracing food trucks or carts. A chain of grilled-cheese carts in Portland, Ore., sells its most basic grilled-cheese sandwich for $6.25. It’s Tillamook cheddar, Swiss, and mozzarella on French white bread.

Meanwhile, over at the local Safeway, a whole loaf of Franz brioche bread ($5.59), 11 slices of Tillamook Swiss ($4.49), 11 slices of Tillamook cheddar ($4.49), and 10 slices of Lucerne mozzarella ($3.29 — they didn’t have Tillamook in stock) comes out to $17.76. Even if we spring for a pound of Tillamook butter ($4.49), that $22.25 divided by 10 sandwiches is just $2.25 a sandwich.

And that’s springing for the pricey ingredients. Settling for a loaf of store-brand white bread ($1.50), 16 Lucerne processed cheese slices ($3.29), and some Land O’Lakes half sticks of butter ($3.29), would cost you just $1.01 per sandwich if you made just eight sandwiches… and it would still leave you plenty of bread and butter for morning toast. Speaking of which…

Avocado Toast

One of the more unfortunate byproducts of Silicon Valley’s recent success is avocado toast and folks from Oakland writing long treatises about why it costs $10. We get it: Restaurants have to pay for labor, rent, utilities, and other business expenses in some of the costliest cities in the country. But this, by no means, requires consumers to like it or even go along with it.

When we go back to Safeway and consider the costs, a medium Haas avocado goes for $1.89. If you want a crusty, multi-grain bread to go with it, Dave’s Killer Bread sells for $6.29 a loaf (less at a warehouse store like Costco, where two loaves go for $9.49). At 17 slices of bread per bag, Dave’s Killer Bread is 37 cents per slice at the Safeway price and 28 cents per slice at the Costco price. At most, that’s $2.26 for ungarnished avocado toast.

When avocados get somewhat cheaper during the season, that cost will only fall.

Macaroni and Cheese

Yet another comfort food that restaurants now sell for far more than it is worth. We aren’t talking about boxes of macaroni and cheese mixes with powdered cheese packets, though those certainly have their merits, but the home-baked varieties. For example, my wife and I grew to love a macaroni-and-cheese from a restaurant in Brookline, Mass. It was made with Gruyere cheese, cavatappi pasta, truffle oil, and a Ritz cracker crust. It was also $12 a serving.

Seeking her own, similar take on that dish, my wife asked the waitstaff for the basic ingredients and went about securing them. We’ll admit to you right now that the core ingredient, truffle oil, is not cheap ($20.19 at Safeway for just 3.4 ounces, or $12.19 for 250 ml at Costco). Nor is Gruyere cheese, at $8.99 per half-pound. However, Google Express will send us cavatappi at $2.50 for a 16-ounce box while a roughly 14-ounce box of Ritz crackers cost $2.99 at Safeway.

Though it turned out we still needed cheddar cheese ($3 for 8 ounces), milk ($2.19 per half gallon), half-and-half ($1 per pint), chives (grown in our backyard), and some flour and paprika from the kitchen, we still ended up making out on the deal. The cost of the entire recipe, which serves up to 10, but I’d put it closer to 8, was roughly $4 per serving on the low end and $5 on the high end.

Cafe Baked Goods

Starbucks offers several items in its bakery case as upsells to hungry customers (apple fritters, banana bread, pound cake, scones) but none are more dangerous than the $1.95 chocolate chip cookie. It stares up at you and says “C’mon, I’m only two bucks.” Starbucks didn’t invent this game, but it’s certainly mastered it.

How bad is $1.95 really? Well, if you were the laziest baker alive and went into Safeway and bought a pound of either Pillsbury or Nestle Toll House cookie dough — enough to make 16 cookies — you’d only spend $2.99 to $3.99 (the generic Signature Kitchens brand goes for $3.09). At that price, you’re looking at 19 to 25 cents per cookie.

Springing for Annie’s Organic Chocolate Chunk cookies at $5.99 per 12 ounces only gets you to 50 cents a cookie, or what you’d pay if you made cafe-sized Toll House cookies. But when you actually get some flour, brown sugar, chocolate chips, salt, baking soda, and butter, it comes out to less than a dime a cookie, even if you get liberal with the sizing and upsize to chocolate chunks.

Also, just never buy Rice Krispies treats out in the wild. A taproom and restaurant in Portland, Ore., sells them for $3, which seems reasonable about two beers in, but is less logical when a 12-ounce box or Rice Krispies ($2.50), a 10-ounce bag of mini marshmallows ($1), and four sticks of Land O’Lakes butter ($3.29) come out to $6.79 at Safeway. Considering that one batch makes about 24 two-inch squares, or roughly six to eight of the large squares sold by the taproom, you’re paying a substantial markup on a simple cereal treat.

You can wrap these treats in plastic wrap just as easily as Starbucks or the place around the corner. If you need a portable snack to go with coffee or beer, make your own.

Phone Chargers

Pity the Apple iPhone user. If they lose a power cable and want a new one from the company itself, it’s $19 at a minimum to replace it. However, it’s far less to replace it at Overstock.com ($7.22) or Monoprice ($5.99). Meanwhile, if you have a Google Android phone, the replacement price can be as little as $5 at Best Buy or Amazon.

Speaking of things that cost more than they used to, if the thought of paying more than $40 a month just for the right to hold an Apple iPhone X or Samsung Galaxy makes you cringe a bit, you can always go back to basics. Verizon, while not the cheapest option for either mobile phones or plans, still offers the basic Kyocera Cadence LTE — a flip phone with talk, text, and a small camera — for $120 or $5 a month. While basic smartphones like the ASUS ZenFone V and LG Stylo 2 V cost roughly the same, the Kyocera won’t soak up data and won’t come anywhere near the $500 to $1,000 price of the most updated smartphones.

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Tuesday, March 20, 2018

Some Thoughts on Parenting and Personal Finance Success from an Experienced Parent

Sarah and I welcomed our first child into the world in 2005, not too long before the launch of The Simple Dollar. Since then, we’ve been on this shared journey called “parenting,” and as our firstborn has grown older and we’ve added two more children to the mix, the challenges have grown and changed.

In the past, I’ve written a lot about how to be an effective parent in terms of teaching financial lessons and setting the stage for financial success for your kids, but today I want to write about something a little different. Rather than looking at the kids, I want to look at the parents.

Being a parent is hard. I’m not going to pull any punches with you. It is incredibly rewarding, but it is also incredibly challenging. For most of us who can’t afford to hire a set of full time nannies to actually do the parenting for us, parenting means devoting a ton of time and energy and money to the raising of children, and that cost must be paid.

The time has to come from somewhere. The money has to come from somewhere. The energy has to come from somewhere.

This is particularly difficult when both parents have careers that put demands on them. There’s only so much time and energy in the day, and there’s only so much money to go around.

What follows are some of my own thoughts on how to balance all of this as a parent. My focus isn’t on how to impart the most value onto your children, but how to make the financial and time demands of modern parenting work for the parents to be able to plan for their own future, be good employees and good parents, and still maintain their sanity.

Focused Time and Life Skills

One of the most powerful revelations I’ve ever had as a parent is that most of the “adult” tasks I do tend to work out better for all involved if I multitask them as parenting tasks as well.

If I’m making supper, I turn it into quality time spent with the kids. We work on making supper together while we talk about our day, and along the way, I teach them how to do some sort of kitchen task properly.

If I’m clearing the bathroom drain, I don’t just do the task. I’ll grab one or two of the kids and show them how it’s done. I’ll show them the drain “snake,” talk about how it works, demonstrate how it’s used, and then let them try it.

If I’m working in the garden, I’ll have the kids come out and work alongside me, putting plants in the ground or pulling weeds or something like that.

Yes, sometimes they’re distracted or bored or don’t want to do it, and there are times when it would definitely be “easier” to just do it myself.

However, this type of “quality time” hits a lot of things on the head simultaneously.

First of all, it’s time spent together actually doing something together. That’s the embodiment of the idea of “quality time.”

Second, they’re learning some life skills from the process. Each of my children can make passable meals for themselves or for the family as a whole. They can clean up after a meal. The oldest one (and maybe our middle child) can do his own laundry. They can all budget their own money. The oldest two (and maybe all three of them) could start a passable garden. The oldest two can clear a clogged drain. All three of them can clean a room fairly well. They can all do the dishes. They can all clear the driveway of snow and get a car ready to drive on an icy day. I know they can do these things, and so sometimes we’ll do them together and sometimes I’ll just tell them to do those things for themselves.

This is going to result in kids who can handle most of life on their own the day they leave our house, which means that there’s a lower likelihood of them returning to the nest, which is going to be a big financial benefit to all of us.

Third, because of these burgeoning skills, all of us have more free time. We’ve now reached a point where if all five of us bear down on a task, it gets done pretty quickly. We can clean up the kitchen and dining room quite fast. We can knock out a long checklist of household tasks really quickly. This leaves us all with time for fun things, which we often do together.

Fourth, it’s “quality time” that doesn’t cost money. You’re not taking them to an activity which costs money and takes time away from actually getting things done at home. You’re not taking them to a babysitter while you “get stuff done.” You’re doing it together, and it’s not costing you anything.

My sincere recommendation for all parents is, as early as possible, make some of your “quality time” oriented around teaching them life skills as you practice them. Have them help with laundry and dishes and meal preparation and cleaning as early as possible and make it clearly understood that these are normal tasks that they take equal part in as part of the household. Show them how to do things properly by doing them together until they can handle them on their own.

Considering an “Ideal” Childhood

Many of the families around us seem to have their children wrapped up in tons and tons of activities. They’re constantly traveling for sports or academic or cultural events, which brings about a ton of additional expenses, and they seem to have very little unscheduled free time.

We’re intentionally trying to take a different approach with our children. Basically, the only activities they’re involved with are ones that they expressed a strong interest for on their own and seem to be actively engaged with it in their own self-directed free time. We try to maximize their self-directed free time and try to not get them into organized activities unless it matches an interest they’ve cultivated on their own and really want to be in that activity.

At the same time, when they do have an interest that cultivates on their own, we tend to be as supportive of it as possible at home. We encourage their efforts, give them lots of space to work at it, and talk often about the value of deliberate practice. Sometimes, this ends up leading to an organized activity, as my oldest son’s passion for soccer has (he cannot get enough of soccer).

We view this as being a light form of “free range parenting,” which is a parenting style with known psychological benefits for both parents and children.

This approach has several benefits for us as parents beyond the benefits to the children.

For starters, it’s a lot less expensive. We don’t spend a whole lot on activity fees, travel for activities, and so on. Our children are in a few organized things, but they’re not incredibly expensive.

It also lends itself to time flexibility. With a lot of our children’s activities being self-directed, we can move around that time quite easily. This means it’s much less likely to find ourselves with time conflicts or to find ourselves in situations where we can’t have a home-cooked meal, which also saves us money.

Another plus: it gives us as parents the benefit of some true leisure time as well to engage in our own hobbies or share in theirs. I tend to use a lot of deliberate practice principles when I’m trying to learn something new, so this gives me a chance to be an example in that way. A simple example of this comes from my son’s recent attempts to get into speed solving the Rubik’s Cube, which I also started doing along with him. Because of our free time flexibility, he had the time and space to really get into this hobby (and build some incredibly solid spatial reasoning in his head), and I had the time to practice it as well and demonstrate some good practices for learning a new skill.

Parenting Causes Decision Fatigue… and What to Do About It

Decision fatigue is a topic I’ve written about extensively in the past; here’s a quick summary of the topic:

In its simplest terms, decision fatigue refers to the idea that people tend to make worse decisions after having made a lot of decisions. Much like muscle fatigue, if you flex your “decision” muscle too much, it will fail you.

I went on to discuss how decision fatigue has a major impact on a person’s financial habits because decision fatigue causes you to make really poor short term decisions, such as impulse buying and rash financial moves.

Here’s the problem: parenting causes serious decision fatigue. I’m far from alone in noticing this phenomenon.

On a given day, my children end up requiring me to make dozens of decisions on their behalf that simply wouldn’t happen if they weren’t present. They’ll ask for something or request attention or need some help and I end up having to make some kind of a choice as a result.

The idea of decision fatigue is that you really only have the capacity to make a certain number of good decisions in a day before that “decision muscle” gets tired and stops performing well. So, with all of the normal decisions of everyday adult life and everyday professional life, adding a big dollop of everyday parenting decisions means that you’re likely to hit decision fatigue much more frequently.

What happens when you hit decision fatigue? You start making bad choices. You start buying things impulsively. You make really poor financial decisions. You choose not to save for the future. In short, it becomes really hard to build a financially successful lifestyle if you find yourself frequently in the pit of decision fatigue.

What’s the solution, then, for parents who often find themselves just completely burnt out after long days of work, personal life, and parenting and all of the decisions required by those roles?

First and foremost, start automating a lot of your choices. The more things you automate in your life, the better. If you want to save for retirement, set up automatic retirement contributions. If you want to build up an emergency fund, set up a small regular automatic transfer into a savings account. Automate every aspect of your financial life that you can.

Another strong tip: re-evaluate your hobbies and consciously drop all but one or two of them. This might seem like strange advice when talking about decision fatigue, but what I’ve found is that when you have a bunch of potential options for every moment of your free time, you end up with your free time contributing to decision fatigue. Reducing my hobby count and then consciously planning out my free time a little drastically reduced my decision fatigue. Most days, I typically wall off an hour for focused reading and an hour or two for board gaming and that’s the sum of my hobby time. I don’t watch television, for example – it’s a hobby I’ve given up aside from date nights with my wife where we’ll watch a movie or partially binge-watch a mutually-chosen television series. I just cut my hobby time down to the ones I care most about and then literally plan for time for each of those hobbies each day.

Another strategy: put yourself in positions where you might spend money or make financial decisions early in the day, and avoid them like the plague later in the day. In fact, I generally stay off the internet entirely later in the day to avoid e-commerce temptations. I don’t want to have to make the “buy or not buy” decision on anything less than a perfectly clear mind.

Be the Person You Want Your Kids to Be

As with some of the other tips here, this is just solid parenting strategy that happens to align well with personal finance health.

This one’s straightforward. Think about the type of adult you want your children to be. What attributes do you want them to present to the world? How do you want them to interact with others in their personal lives and professional lives and community lives? Remember, you’re not trying to control their destiny, but define what kind of people you’d like them to be in the world should they turn out “right.”

See that list of traits and principles you just came up with? That’s how you should behave as much as you possibly can. Those traits should govern your actions, not your words. If you can’t live up to those principles and traits, how can you possibly expect them to?

If you want them to be an active part of your life as adults, then you should be an active part of the lives of your parents. If you want them to be financially responsible and not teetering on the edge of financial ruin, then you should be financially responsible and not be teetering on the edge of financial ruin. If you want them to be honest, then you should be honest. If you want them to be frugal, then you should be frugal. If you want them to make sensible spending choices, then you should be making sensible spending choices.

In short, if you want your kids to have a better life than you, then you should live your life according to the principles of those who actually do have better lives.

Obviously, no one is perfect and no one will do this perfectly all the time. The thing to remember is that this is your ideal. Allow yourself to regularly think about how you will actually embody those values and principles in your everyday life, whether you think your kids are watching or not. Aim to live by them.

I found that the book The Millionaire Next Door by Thomas Stanley and William Danko is not only a great batch of personal finance advice, but it actually addresses this challenge of being a good parent and a good example to your children in terms of healthy financial behavior. If you want your children to be financially independent of you and be an accumulator of wealth, then you yourself shouldn’t be financially dependent on your parents and you should be an accumulator of wealth, and that takes a particular approach to daily living. The book is full of principles that apply very well to parents who want to set an example of healthy financial behavior through action for their children.

If I’ve learned anything about parenting, it’s that action speaks louder than words. Words only serve to explain the reasoning behind actions. If you’re acting in one way and your words point in another direction, your actions will be the far better example. If you rant at your children not to spend money foolishly while you spend money foolishly, they’re going to spend money foolishly. If you tell your child to not be unhealthy but then exhibit unhealthy behaviors yourself, you can’t expect them to not exhibit unhealthy behaviors. If you demand honesty but then are dishonest yourself, you can’t expect them to not be dishonest.

Be the person you want your kids to be. If you want them to be financially responsible, start by being financially responsible yourself. You’ll end up in a better place while also setting a tremendous example for them.

Final Thoughts

The financial and personal impact on parents from their parenting decisions is tremendous. Parenting can warp our financial choices, devour our free time, eat every spare dollar, and keep us from ever getting ahead financially, and even worse, all of that can end up setting some really bad patterns for the children to emulate, too.

First and foremost, as a parent, you have to consider what is going to both shape your children into functional independent people as well as what choices are going to ensure that you have a successful post-parenting life, too, while staying sane through all of it so that you can be there through thick and thin. That’s not an easy thing to balance.

My honest advice boils down to a few simple things, but the core principle is to be the adult you want your children to be when they’re adults. If you strive for that in every action, you’ll be in good shape. Alongside that, give your children room to breathe and discover who they are. Mold them through example and through gentle guidance and give their interests room to grow and room to shrink; don’t engage in big financial and time and energy commitments unless the child is already invested.

Also, recognize what parenting pulls out of you and compensate for that. Parenting is difficult for everyone; respect that the challenge puts you in positions to make suboptimal choices and find ways around that by protecting your financial decisions. Don’t let parenting wear you into oblivion; if you find that it is, you’re doing both yourself and your child a disservice and you need to work toward better practices for both your sake and your child’s sake.

You’ll find that by following these principles, you end up with a happier and healthier and more well rounded child and a happier and healthier and more well rounded you, and both of you have a far better chance at financial success in life.

The post Some Thoughts on Parenting and Personal Finance Success from an Experienced Parent appeared first on The Simple Dollar.

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Why You Should Work on Your Credit (Even if You Never Plan to Buy a House)

While home ownership used to be a mainstay of the “American Dream,” rising housing prices and changing priorities mean not everyone wants to own a home these days. Many people prefer to have flexibility to move when they want, and just as many would prefer to let their landlord handle pricey upgrades and repairs.

Plus, housing in some areas has become prohibitively expensive— especially in coastal regions and the nation’s big cities. And, if you don’t like the idea of going broke to buy a home or saving up for a down payment for the next five to 10 years, then renting may seem like a much better deal.

Six Reasons You Shouldn’t Ignore Your Credit Score – Even if You Never Plan to Buy a Home

With all this in mind, it’s easy to understand why some people don’t bother worrying about their credit scores. If you’re not going to buy a house, why spend the time building credit or taking steps to boost a credit score you’ll never use?

Unfortunately, ignoring your credit because you don’t plan to buy a home is a mistake. Like it or not, your credit score impacts many areas of your financial life  — and that’s true whether you choose to buy a home or not. Here are six reasons you should pay attention to and nurture your credit score no matter where you plan to live:

#1: You need a good credit score to rent your own place.

If you want to be a renter forever, that’s fine. Still, you’ll likely need decent credit if you want to rent a place on your own.

Most individual and corporate landlords run your credit report before they let you sign a lease, and poor credit or no credit may not bode well for your application.

To have the best shot at the rental home or apartment you want, you should absolutely take steps to build credit before you’re ready to rent. Without a credit score, it’s fairly likely you’ll need a co-signer to rent a place.

#2: You may need to borrow money for other big purchases, such as a car.

Buying a home is the biggest financial purchase most of us make, but it’s not the only one. If you ever want to purchase a car or borrow money to start a business, you will need a solid credit score and positive credit history.

If you skip building credit, you may not be able to borrow the money you need for these big purchases and others. Or, you’ll likely need a co-signer to do so – which comes with its own risks and headaches.

#3: You might want to buy a home later on.

It’s easy to believe you’ll never want to own a home when you’re young, but life has a way of turning what you think you know upside down. Renting may be ideal for the time being, but you could find yourself yearning for home ownership once you settle down, get married, or decide to start a family.

If you fail to build credit because you believe you’ll never buy a home, you could regret it if you change your mind later on. Your best bet is building credit early. You may think you won’t need it, but it’s hard for any of us to know what we’ll want out of life five, 10, or 20 years from now.

#4: Employers can check a modified version of your credit report before they hire you.

Here’s an interesting reason to build good credit: When you apply for a job, employers can check a modified version of your credit report with your permission.

If you have great credit and a solid history of repayment, letting a potential employer get a glimpse of your report could give you a better chance at landing a job. If your credit is poor or nonexistent, on the other hand, it could hurt your job search or limit your career potential with employers who bother to check.

#5: You may want to earn cash-back or travel rewards.

You could be missing out on some pretty lucrative rewards if you don’t bother building credit. The top cash-back and travel rewards cards make it possible to earn 1% to 5% percent back for every dollar you spend. However, you’ll only be able to take advantage if your credit score is good enough to qualify for one of these cards in the first place.

Also remember that credit cards offer additional perks that can make using them advantageous. Not only do you get zero percent fraud liability with most cards, but you can score added benefits like trip cancellation/interruption insurance, extended warranties, price protection, and more. None of the benefits are available if you can’t qualify for a credit card, however, which is yet another reason you shouldn’t ignore your score.

#6: You could pay more for insurance without a good credit score.

Last but not least, your credit score (or lack of a credit score) could cause you to pay higher rates for insurance. Many insurance agencies look at your credit score to determine how risky you are to insure, and a poor credit score or no score may not give them much confidence.

To score the lowest insurance rates possible, make sure your credit score is in the best shape possible.

Building Credit: How to Get Started

If you’re not buying a home but ready to build credit anyway, there are plenty of ways to get started — including signing up for a credit card. Ideally, you’ll start off with an unsecured credit card that offers a low interest rate, rewards, or other perks. If you can’t qualify for an unsecured credit card, you could also apply for a secured credit card that affords you a small credit limit after you put down a cash deposit as collateral.

Once you have an unsecured or secured card of your own, you can start building credit by using your card for small purchases you can pay off right away. Make sure you only charge what you can afford to pay back, and that you keep your balance as low as possible. Also make sure you don’t apply for too many new cards at once, and that you pay your credit card bill early or on time every month. Paying your bills on time, every time is the single best thing you can do to improve your credit score.

With enough time and plenty of on-time payments under your belt, you’ll begin building a credit history with the three credit reporting agencies – Experian, Equifax, and TransUnion. Your score should increase slowly over time if you use credit wisely, pay your bills on time, and stay the course.

You may never want to buy a home, but your credit score still has a role to play in your life and your goals. By nurturing your credit score and treating it with care, you can ensure your good credit is there when you need it.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.


Are you focusing on building a good credit score? Why or why not?

The post Why You Should Work on Your Credit (Even if You Never Plan to Buy a House) appeared first on The Simple Dollar.

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