Start Your Own Micro-Business With Shared Coworking and Fabrication Spaces

Posted on July 12, 2012 // 5 Comments

Do you dream of working for yourself instead of “The Man”? Indeed, early retirement and/or financial independence is often achieved by successful small business owners. In addition, any retirement plan will be more robust if you can earn some extra money on your own as needed. As such, I definitely support the growth of freelancers doing their own thing. However, you may hit roadblocks like loneliness, distractions at home, or lack of resources.

The good news is that there are a growing number of places for those with the entrepreneurial spirit to share and collaborate with others for mutual gain. Live in a studio apartment? No problem.

  1. Coworking, or shared working environments. These are basically large community office spaces where you can get a desk, couches, and fast internet connection so you can work around others doing the same thing. No more coffee shops! They tend to be informal, where you can work alone or network/chat with others. It can also serve as a very cheap office where you can hold meetings with clients, or places to meet up in strange cities. You can usually just search for “coworking [your city]” but here is a directory.
  2. Techshops / Cooperative Fabrication Shops. Are you thinking of selling something physical, like iPhone cases, custom skateboards, crafts on Etsy, or wood furniture? Wouldn’t it be great if you had your own CNC machine, commercial-grade sewing machines, or professional woodworking equipment? Techshops are a growing chain of membership-based workshops that provide quality tools and equipment that most individuals don’t have access to. You’ll also find classes and lots of knowledgeable people willing to help you learn to use the machines. Not too shabby for as little as $99 a month.

    Besides Techshop, you may find independent locations like Knowhow Shop LA or Maker Place in San Diego. Many more are trying to start themselves up and looking for members.

  3. Fab Labs. These are “digital fabrication facilities”, initially started at MIT but now found around the world, where you can make higher-tech finished products using 3-D milling machines for circuit boards and laser cutters for press-fit construction of parts. (Directory)
  4. Tool Lending Libraries. If your needs are more modest, see if your community has a tool library where you can borrow tools. You can find landscaping gear, table saws, power tools, etc. (Directory)

Most of these places have membership fees, but they are usually flexible to account for the regular or occasional user. Look into them and you may be surprised at what is available near you. Even if you’re just a frugal person that likes to DIY, these are also great places for makers and tinkerers.

Filed Under: Entrepreneurial, Frugal Living //

Which Fuel-Efficient Cars Are Worth The Extra Money?

Posted on June 21, 2012 // 28 Comments

Recently, the NY Times had an article about how many models of fuel-efficient cars may take years to justify the extra cost. Here’s a graphic from the article with data from TrueCar:

(I note that the NY Times compares the Prius with the Camry. I still think the Corolla is closer in size. You can see from this side-by-side comparison that in terms of length, width, interior passenger volume, shoulder room, and leg room, the Prius is closer to the Corolla than Camry. Also, does the Lincoln MKZ hybrid really only cost $1,400 more than the regular model and is 15+ mpg better??)

Consumer Reports also had a similar article which discussed how the ultra-efficient “40 mpg” models which were upgrades to the normal versions. The Ford Focus SFE, Honda Civic HF, and Chevrolet Cruze Eco all cost between $495 and $800 more, but the breakeven time when using real-life mpg varied widely between 3 and 38 years.
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Filed Under: Budgeting, Frugal Living //

Haggle To Lower Your Cable or Direct TV Satellite Bill

Posted on June 13, 2012 // 190 Comments

directv_newlogoI’ve written several times about the significant savings you can achieve if you haggle with your media providers like DirecTV, be it broadband internet, telephone, or cable/satellite TV. A simple phone call can save you hundreds of dollars per year. This is as true today as in past years, and below is a collection of all related tips as well as some new information.

Why does it work?
Media service is like banking. People tend to stick with who they have, and the companies make tons of money from it because they can raise prices and most people just accept it. As a result, competing companies have to offer rather juicy deals to make people switch. But since customer acquisition is so expensive, if you let your existing company know that you’re shopping around, they will gladly give you a temporary incentive to stay. Media is so profitable that they can give you a discount of $20-$40 a month and still make money.

Of course, they don’t offer this to everyone because your neighbor is probably paying full price without complaint. In behavioral finance terms, this is called price targeting.

Negotiating Tips
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Filed Under: Frugal Living //

Why Asset Allocation Doesn’t Matter Very Much

Posted on May 31, 2012 // 8 Comments

A helpful reader sent me a WSJ article with the provocative theme that all this investment advice about asset allocation doesn’t matter for most people. Why?

For the vast majority of savers, improved investment returns won’t materially extend how long retirement money lasts. That’s, in large part, because few investors have enough money in their retirement account to tilt the balance.

Far more important, says the paper from the Center for Retirement Research at Boston College, are three variables that don’t require a brokerage account: how long you work, controlling spending and tapping the value of your home.

Briefly, the study found that 47% of households would fall short of their income needs in retirement at age 67, when Social Security kicks in for those born after 1960. However, even if investors were able to theoretically earn a guaranteed 6.5% above inflation annually in a riskless investment, 44% would still be short.

How little are people saving? The WSJ article notes that having $500,000 in financial assets by retirement age would put in you in the top 10% of savers. The CRR working paper itself mentions that “the typical 401(k)/IRA balance of households approaching retirement is less than $100,000” but I didn’t see a source.

The Employee Benefit Research Institute (EBRI) found that in 2010 the average IRA individual balance (all accounts from the same person combined) was $91,864, while the median balance was $25,296. EBRI also found that at year-end 2010, the average 401(k) account balance was $60,329 and the median account balance was $17,686. But that’s for all folks, not just people of retirement age.

This shouldn’t be too surprising. Your savings rate is the most important factor in determining if you can retire comfortably. Working longer is the same as saving more and spending less (for a while). Getting used to spending less now would aallows you to need less in retirement. Doing a reverse mortgage is just another word for cashing in your savings, isn’t it?

Why asset allocation is still important. The paper concludes that financial advisors should focus more on savings rates and less about the complex ETF portfolio they just designed for you. Probably true. However, asset allocation has always been something that we did to help our situation without actually doing the hard work of having to save more. Imagine a pill that we could take to lose weight, while not actually eating less or exercising more.

I suppose we should view designing an asset allocation more as a potential “boost” to our nest egg than the driving force, and realize that earning an extra 1% or 2% a year won’t help if you’re just compounding a small chunk of your income. How much is enough? Studies have found that a savings rate of 16.62% would have worked out well historically.

Filed Under: Frugal Living, Investing, Retirement //

Consumer Reports Ratings: Best Value in… Toilet Paper?

Posted on May 18, 2012 // 15 Comments

I know, not exactly hard-hitting consumer news. 🙂 But actually toilet paper is important to me, and ever since I got a “real” job I’ve been buying Charmin Ultra Soft toilet paper. I don’t even check the price, I just buy it in bulk and revel in the luxurious softness compared to the industrial-grade junk I used to buy.

In the May 2012 issue, Consumer Reports ran their scientific lab tests on 25 different varieties of toilet paper (subscription required for full article) to find the best combination of price, softness, strength, disintegration, and tearing ease.

The findings? First, the hidden shrinkage by retail brands that we’ve seen in various products like orange juice cartons (59 oz. instead of 64 oz.) has spread to toilet paper. Sheets have been made smaller, and rolls are smaller as well. The right way to calculate value is by square feet, but who does that?

The top overall pick was the White Cloud 3-Ply Ultra Soft and Thick brand sold at Wal-mart, which performed well in all categories while maintaining a good price of 25 cents per 100 sheets. The cheapest Scott brand (1,000 sheets per roll!) performed poorly and cost 8 cents per sheet. But if you’re having to use three times the sheets, who cares?

The top green pick was the Seventh Generation brand, which is made from recycled content and did alright in most areas except strength but still had a good price of 22 cents per 100 sheets.

My beloved Charmin Ultra Soft came in 6th, done in by a poor showing in disintegration tests and higher-than-average cost. But wait. The 30-roll megapack at Costco is usually $17.99. Every few months the coupon packet has a $2 off coupon, which is the only time I buy it. Each “Jumbo” roll has 231 double-ply sheets, which works out to after-coupon cost of only 23 cents per 100 sheets. The quoted retail price in Consumer Reports is 41 cents per 100 sheets. I rarely shop at Wal-mart, so it seems that my toilet paper buying habits are still within acceptable frugal parameters.

Filed Under: Frugal Living //

Simplisafe Alarm Review: Cheap, Effective DIY Home Security

Posted on May 14, 2012 // 55 Comments

Old security system vs. New security system

I’ve never had a security system until now, other than our dogs which are all bark and no bite. I suppose the main reason for that is that I didn’t own enough property to be worth protecting. Burglars could take everything and it would perhaps fetch $600 total on Craigslist, which is less than what a year of ADT monitoring fees might cost.

Combine the baby nesting instinct with a rash of recent break-ins in our quiet neighborhood, and my mindset has changed. I wanted a home security system, but I didn’t want to pay $60 or even $30 a month for monitoring. The monthly bill is where companies make most of their profit. $60 a month = $720 a year = $7,200 over a decade.

After some research, we settled on a company called Simplisafe. Here’s a list of reasons why we chose it:

  • Wireless. Simplisafe uses GSM cellular technology, which means you don’t need a landline (which can also easily be cut by a criminal). Wireless monitoring was a requirement for me, and usually costs extra with other brands.
  • Affordable up-front cost. The total cost of equipment was about $400 to completely cover my 2,000 sq. ft. house. You could probably cover an apartment or condo for $200-$300.
  • DIY Installation. You order it, and install it yourself using the included 3M sticky tape. No drilling holes. Installation literally took less than half an hour. (Their YouTube video has it done in one minute.) If I moved, I just remove the sensors and buy some new sticky pads for $10.
  • Affordable monitoring fee with no contract. Again, the monthly fee is where your cost over time adds up, and you’re usually stuck in a 2 or 3-year contract. Simplisafe 24/7 monitoring is only $15 a month with no contract. You can add instant text message alerts for an optional $5 a month. That’s is pretty much as cheap as UL-listed monitoring will cost. If you prefer, you don’t have to buy monitoring at all and you’ll just have a loud audible alarm (you can also buy extra sirens) which may be adequate for condos and apartments.
  • Battery-powered. The base station has a rechargeable battery that will last up to 8 hours in a power outage. All the rest of the sensors use their own individual lithium battery. This means the entire system will work in a power outage or if the power is cut on purpose.
  • Expandable. Everything is a la carte on the website, so you buy just as many sensors as you need. They recommend a contact sensor for each entry into the house, and motion sensors to cover important areas.
  • UL-listed 24/7 Monitoring. On a cheap system, I imagined the monitoring system to be two minimum-wage employees taking turns in an apartment. But Simplisafe is certified by United Laboratories just like ADT and commercial fire alarm systems. Central station monitoring is provided by AMCEST Corporation (UL #S2299). This may also make you eligible for a discount on your homeowners or renters insurance.

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Filed Under: Deals & Offers, Frugal Living //

Use Multiple Motivations For Frugality: Environmental, Simplicity, Health, Spiritual, Philanthropy

Posted on May 10, 2012 // 11 Comments

Scrooge McDuckReaching financial independence faster boils down to either increasing your income or decreasing your expenses. This is why so many books and blogs focus on frugality and saving money. However, too often the term frugality conjurs up the image of an old woman eating gruel while separating her double-ply toilet paper into single-ply.

After an interesting conversation about how vegetarians often have different motivations (religious, ethical, environmental, amongst others), I thought about the many driving forces that can result in frugality.

Purely Financial
Let’s start hypothetically, and say that all you care about is money and you cut expenses purely because you would rather invest that dollar and have it produce income for you. You could move into a smaller house, buy a fuel-efficient car, walk or use public transportation instead of driving when possible, make dinner from scratch at home instead of ordering dinner at the restaurant, and cancel the cable TV service. But if you won the lottery tomorrow, you’d drive your Hummer everywhere, eat at Morton’s Steakhouse once a week, and subscribe to everything from ESPN to HBO and add in the 5-DVD Netflix plan to top it all off.

Environmental / Green
But wait, you are rather concerned about preserving natural resources, so perhaps you’d still walk a little more and buy a fuel-efficient car. A smaller house would probably use up less electricity and heating oil as well. Using raw ingredients to cook uses less wasteful packaging made of plastic and styrofoam.

Simplicity / Minimalism
If you want to reduce chaos and clutter in your life, then you may still have a reason to move into a smaller home since that’ll force you to get rid of some extra things. Do you really need a big car, or is a hatchback or station wagon enough? Hey, the Europeans make do, as gas costs $10 a gallon there.

Physical Health
Walking or biking is much healthier than driving, so you won’t need that Hummer as much. Medical studies have shown that the more time you spend sitting, the shorter your lifespan, so you don’t want to be that TV-watching couch potato.

Self-Empowerment
Sure, you could pay someone to cook your food, but wouldn’t you feel great if you knew how to brine a turkey, make your own beer, or grow your own vegetables? This might also apply to whatever other skills you want to pick up. Home repair, appliance repair, auto repair, landscaping, investing…

Religious / Philanthropic
The sooner you reach financial independence, the sooner you can start giving more back to society and serving others instead of trying to make money.

So in the end, you could be the same person, with or without a big pile of money. (Maybe not. I’d get some cool toys.) A more practical idea would be to use these other motivations to make saving money more appealing. You’re not buying a compact car because you’re cheap, you’re being minimalistic and environmentally conscious. You’re not skipping Olive Garden because you’re broke, you’re doing it because you know how to can make your own risotto at home that’s even better. Find a different (higher?) cause. (The extra thousands of dollars growing in your brokerage account won’t hurt either.)

Filed Under: Frugal Living //

Best BPA-Free Food Storage Containers For Baby Food and More

Posted on May 4, 2012 // 16 Comments

If you’re like me, you have a cabinet in your kitchen stuffed with a scratched and stained mess of Gladware, Ziploc, or Tupperware food containers and an even larger stack of lids that never seem to fit. I even remember telling myself to stick with one brand and three sizes, but after years of dinner parties, brown-bag lunches, and outdoor potlucks, entropy has kicked my butt. Add in the baby on the way, and I wanted to reset and replace with BPA-free (linked to cancer and hormonal disorders) containers and perhaps buy additional ones for storing baby food.

The creators of America’s Test Kitchen ran another test (like with the knives) of the major brands of plastic food containers including Gladware, Ziploc, Rubbermaid, Sterilite, OXO, and more. All were BPA-free and they used the rectangular/square 8-cup sizes. They froze them, put stinky food in them, microwaved them with chili, washed them repeatedly, submerged them in water to test for leaks, and more. Being frugal doesn’t mean just buying the cheapest thing out there, it’s about finding the best value for the price.

The winner? For plastic food containers, the winner was Snapware MODS (update: now “Snapware Airtight”) which featured good performance across all categories. However, the reviews on this 38-piece set of Snapware Airtight for $40 shipped at Amazon.com seem to be worsening over time, and look at the pictures the constructions does look slightly less “beefy”. I did find a cheaper 20-piece set for $15 shipped at Wal-mart that may be worth trying out. It may be better to recognize that most of the better performing containers use the kind of seal that Snapware uses with snap-down “wing” flap, silicone gaskets, and a lid with full wraparound ridges.

For glass containers, the winner was Kinetic Go Green Glasslock, which is also sold under Glasslock by Snapware. Made of microwave-safe tempered glass, this type of container seems to be enjoying a comeback due to all the concerns about microwaving plastic. I have to say, it does sound like a great idea as long as you don’t drop things a lot (like me). Freezer safe. Add in that airtight lid, and I’m sold.

The main drawback beside fragility is the additional cost. You can buy their 16-piece set for $70 at Amazon.com including free shipping, although I’d rather buy a six-piece set of a medium-size for about $30-$40. All seem to have overall good reviews, and I also noticed that people seem to really love these cute Wean Green Wean Cubes Baby Food Glass Containers, which are also made by Glasslock (Snapware). Hopefully these can last a long time. Besides, there’s always that baby registry…

Filed Under: Frugal Living //

Obihai + Google Voice = Free VoIP Phone Until End of 2012

Posted on May 2, 2012 // 12 Comments

Update 12/26/12: Now good until the end of 2013. 🙂

Are you still looking for a home phone solution that’s cheaper than a landline? A new startup called Obihai has started making ATA VoIP boxes that are actually easy to set up. You buy their box, add in Google Voice (GV) service, plug in a normal landline phone, and it will use GV to make and receive phone calls. No computer required.

Now, Google Voice/Gmail has promised free long distance within the US and Canada for the rest of 2011 2012. Past that, it’s unknown so I wouldn’t want to commit too much money upfront, even though the box is compatible with other VoIP providers.

They also offer number porting from cell phones now for $20. If you have a landline phone number you wish to port over, you’ll have to port it over to a cell phone first, and then port it over to GV. (Don’t ask me why.)

Available at Amazon, the OBi100 model is currently $43.99 with free shipping, and all you need to get yourself set up. They also have a slightly more expensive OBi110 model that allows you to bridge a traditional POTS landline with your new VoIP gadgetry, which I figure most people won’t need if the point is to save money by ditching your landline in the first place.

Filed Under: Deals & Offers, Frugal Living //

First Baby New Expenses? One Family’s Experience

Posted on April 4, 2012 // 32 Comments

The following is a guest post is from Elle at Couple Money. They live on one income, and have fun with the second!

When I read MMB’s questions about baby expenses, I shared a bit of our own experience with him. We are just a year ahead of him last summer we had our first baby, a little girl. It has been a wonderfully fun ride so far, with everyday bringing new milestones and challenges.

During the pregnancy my husband and I decided to track the baby expenses on Couple Money as we’re going through this process. We’re not the first parents to have questions about the finances of raising children, so I share our expenses and have asked others to give their input. Some wonderful bloggers have decided to join in the fun and share their own stories, tips, and advice on what works, what doesn’t, and what’s not worth stressing over.

Are Kids Really That Expensive?

For us, most of the expenses are just small bumps in our monthly budget. I think the main reason is that we made some financial decisions before we became parents that lent itself to reducing baby bills. For one thing, when we first were married we made it a family goal to keep all necessary expenses on 1 income. That allowed us to use the second income to pay down debts, save for goals, and invest for later.

Health Insurance and Doctor Visits
During the first trimester I was dehydrated enough that I needed to go to the ER to replenish; that was about $150 out of pocket. For the most part, though, my pregnancy had been uneventful. The health insurance policy we had when I was pregnant had a $2,500 deductible, so we saved a bit in our general funds to cover the deductible when our baby girl was delivered. Saving up to pay the bill in full allowed us to also get a 15% discount with the hospital.

Once our daughter arrived we quickly added her to my husband’s health insurance policy. That’s been the biggest change to our family budget – our premiums went up about $200/month for the family option.

Housing
No change in our housing bills. We bought our townhouse before we had our daughter. It had 3 bedrooms, so we converted the guest room into her nursery. We don’t have any plans on changing our location, right now we’re focusing on paying down the mortgage.

Daycare
I know that for many parents daycare is a huge expense. From what I saw last year it was about $1,200/month for an infant. Right now I work from home and our daughter stays with me. While it has cut back on the hours I work, the savings from not having her in daycare offsets it.

Food
Since we’re breastfeeding our food bill has increased just a bit to accommodate the extra calories I need to keep up. Since becoming pregnant, we changed our eating habits a bit. We’re focusing on making more meals at home and we a part of a CSA program with weekly deliveries during the part of the year. It’s been helping to keep groceries manageable and we’ve also discovered new recipes and dishes. Our daughter has baby food and some of what we’re eating in addition to breast milk.

Transportation
Even before we found out we were going to have a baby my husband and I were saving up for the vehicle as we’re trying to avoiding taking out a car loan. However we saving up a bit more to purchase a family sized sedan, like a Sonata. Our budget is $10k for the next car. We have the money saved and we’re currently searching for a deal. It’s not an immediate need (tight fit in my Jetta, but fine), so we’re going to make sure we look around a bit before securing the next car.

Clothing/Baby Gear
The first 2 months our bills were higher than normal as we bought a few items we didn’t receive from the baby registry. We waited until our daughter arrived to see if we really needed them or if they were nice to have items. Fortunately most of the necessary stuff was already bought. After the first 8 weeks, our expenses have smoothed out.

We have received gifts from family and friends – both new stuff and gently used. We didn’t have to buy a baby swing, since a buddy’s son didn’t seem to like it. It was practically new and our daughter loved it.

Right now diapers are about $20/month give or take through Amazon Mom and they are delivered right to our door. We get her wipes through Costco where a huge box costs about $20 as well (lasts a couple of months). Any clothes that she needs we pick at Target, Old Navy, or the consignment store around the corner. That’s about $30/month.

Thoughts on Having Kids

This is just a snapshot of our family’s baby expenses. As our little one gets older we know things will change. I’d like to hear from you – what expenses to you have to cover for your little one? What has been the biggest unexpected expense? What’s been the best surprise?

Filed Under: Budgeting, Family, Frugal Living //

Compare Your Budget With Other US Consumers and the World

Posted on April 3, 2012 // 10 Comments

The NYT Economix blog and a new BLS report had some nice graphics comparing how the average consumer spends their money in the US, Canada, United Kingdom, and Japan. The data is from 2009.


Source: BLS.gov

 

Compared with the other countries, Americans spent more of their budgets on housing and health care, and less on recreation and entertainment. The Japanese spent the largest share on food, with a higher percentage spent on food than even housing. This is somewhat surprising, given the stereotype of small living spaces in Japan and large living spaces in the US. But remember, these are percentages and not absolute numbers.

You might think that out-of-pocket healthcare costs are lower in the other countries due to government-subsidized universal health care, but the Economix article points out that the total healthcare expenditures per capita in the US are also much higher (around double) those of other countries. I can’t believe they spend more on clothing than healthcare! Of course, my wardrobe turnover rate has been described as “glacial”.

Our spending breakdown still has a much, much bigger slice going towards housing, and a much smaller slice going towards transportation and food. We are lucky to have nice employer-sponsored health insurance.

Filed Under: Budgeting, Frugal Living //

Warren Buffett Was Nearly Content With Early Retirement At 25

Posted on April 2, 2012 // 9 Comments

snowball_bookHere is an insightful ForbesLife interview by Warren Buffett in their “When I was 25” series. The article is primarily about how he ended up starting the investing partnership that eventually became Berkshire Hathaway. But what I didn’t know was that before that happened, he actually was ready to settle down in early retirement when he was 25 years old, content to invest just his own money:

The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot—I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, “Compound interest guarantees I’m going to get rich.” […]

I had no plans to start a partnership, or even have a job. I had no worries as long as I could operate on my own. I certainly did not want to sell securities to other people again.

Adjusting for inflation using CPI, $127,000 in 1955 would be about $1,100,000 in 2012 dollars. Spending $12,000 a year in 1955 would be just about $100,000 a year today. A 9% portfolio withdrawal rate is pretty high, but then again he’s Warren Buffett.

If he had gone the early retirement route, I’m sure he’d still be a comfortably rich Nebraska family man today, but given his quiet lifestyle we probably wouldn’t know anything about him. In fact, Buffett had already turned down an offer to be a partner in the hedge fund that Benjamin Graham founded. But events conspired to let him manage other people’s money without the pressures of salesmanship or marketing, and $50 billion later he’s one of the richest people alive.

I already knew from reading his biography The Snowball that he was quite the young entrepreneur and by 16 years old he had already accumulated over $58,000 in 2012 dollars ($5,000 in 1946). This was from many different micro-businesses including delivering newspapers, selling everything from gum to car washes, and owning pinball machines. He already knew that the faster he earned that money, the more time he would have to let compound interest do its thing. After moving back to Omaha, he even rented a house at first instead of buying so he wouldn’t have to commit any of his precious capital.

In any case, interesting that his initial goal was early retirement and career freedom, not necessarily doing whatever he could to accumulate more money. I look forward to the other articles in this series.

Filed Under: Frugal Living, Investing //
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