Lazy Man and Money

Five Causes of Overspending

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We’re still in the summer hole where the kids are out of school, but camp hasn’t started. My wife is still working and finishing up the finals on her last class in her pharmaceutical regulation MBA*. She’s spending dozens of hours running a raffle fundraiser for the state’s pharmacists**.

For the last couple of days, it has just been me and the boys. The good news is that we’ve been able to spend some real quality time together. We’ve gone to the beach. We started a pizza company.

One thing that I haven’t done? Thinking or writing about money (other than our virtual pizza customers). That’s a good thing, like the next evolution of money is not worrying about it much.

Today, I wanted to dig into old notes that I had from a online chat with a friend. Again, since I haven’t thought about this much, it may be best to get the ball rolling and have a community effort filling more ideas in the comments.

Because the conversation with the friend was so long ago, I don’t remember the background or context, and my notes are shoddy to say the least. The gyst of the conversation was that there are five reasons why people overspend. (There may be more, but these are the ones that we identified.)

1. Keeping up with the Jones

My friend is excellent at reigning in his spending on “stuff.” I’m just very good. I have a weakness for children’s STEM toys (as you can tell from above). I don’t feel the need to have the biggest house or nicest car. In fact, with the amount of dogs, kids, and beach my car goes through, it’s not worth having a nice car.

Personally, this can be a bit of a trap because our kids go to a private school where most of the people are wealthy. The average “Jones” there has a lot of money to flaunt.

2. Advertising

Robert Palmer sang it best, “you like to think that you’re immune to the stuff, oh yeah.” Yes, I do like to think that advertising doesn’t effect me. I’m pretty analytical with my purchases and planning. However, it would be foolish for me to pretend that I am immune to it.

3. YOLO Mentality

I used to laugh at the Yolo Only Live Once (YOLO) Mentality. It can almost be literally used to justify any action. At the same time, there’s a kernel of truth to that idea.

In fact, in the past we used to say, “You can’t take it with you”, meaning that money isn’t going to do you a lot of good when you die. I personally have a lot of trouble of with this balance. I almost always go with the option that involves not spending money. However, there are a few times when I missed out some really great experiences. For example, Weezer went on a short tour playing only stuff from the blue album and Pinkerton (my favorites) and I cheaped out.

4. Self-Licensing

Self-Licensing is a little like the YOLO mentality above. However, in this case you aren’t spending because “you only live once.” Instead, you are spending because “you deserve it.” For example, you might impress the boss with a great presentation, to celebrate you go out and spend $50 in drinks at a bar.

I’ve been doing a little self-licensing myself lately. When I get through a tough day and it more or less went okay, I’ve been having a Chipwich knock-off ice cream sandwich from Aldi. It’s not very expensive (about $0.75 each), but it isn’t healthy at over 300 calories.

5. Convenience

Spending for convenience may be one of the reasons we can relate to most. Have a tough day and don’t want to make dinner? There’s a Chipotle app for that. Don’t feel like making your own coffee in the morning? There’s a place for that as well.

My big convenience spending comes in home maintenance. I don’t like to do yard work and I’m not very handy with a lot of other stuff. Fortunately, I find it relatively convenient to make some slow cooker meals that can save us from going to restaurants.

Final Thoughts

What are your overspending urges? Can you find any new categories that I missed? Let me know in the comments.

* I think it’s notable that we’ve made healthcare so complicated in the US, that pharmacists like my wife are pushed to get an advanced degree on what seems to amount to man-made political problems. This isn’t my area of expertise and maybe all other countries have this issue.

** You’d think that selling raffle tickets wouldn’t be time consuming. Coordinating the paper trail of people selling (and losing) paper tickets is a mess. I thought that an online system would be easier, but it currently goes against Rhode Island law.

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How Much Should I Spend on a Cell Phone?

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For the first in forever, I’m at a loss on how much I should spend on a phone. In the past it was an easy decision.

My smart phone history started with a Handspring Treo 180 around 2002. I continued to upgrade to a new Treo whenever they came out, because carrying the internet in your pocket was awesome. (So was SD storage cards to hold videos, which some iCompanies still can’t figure out.) Sprint had a really cheap plan, so everything was great.

Things changed in 2009. That’s when the Palm Pre came out. I continued with various Palm Pre’s even getting an unreleased Pre 3.*

The best part about this upgrade cycle is that you could always sell the old phone on Ebay for around 70-75% of the new phone.

After 4 years with the Pre, I had to finally move on. Since Hewlett-Packard wasn’t going to support it, I had to make the choice that most people do: iOS or Android.

I voted with my wallet. Android won. Apple phones were way too expensive.

In October 2013 I went bought a Google Nexus 5. When that screen broke (Feb 2017), I moved to my current phone Moto X Pure.

I know what you are thinking, “Cool story, bro.”

cell phone spending

While it’s not exciting, I can use this to look at a history of purchase prices of phones per year. The cost of new hardware for Treo era (7 years) was about $350… or $50 a year. The Palm Pre was $200 (after $100 mail-in rebate), which got me through another 4 years… or $50 a year. The Nexus 5 at $399 made me sick to my stomach, but I got 3.5 years or around $115 a year. My $300 Moto X Pure is more than 2 years old, so we’re approaching around $120 a year.

Recently my phone started feeling slow, very slow. My first thought that was it was time to upgrade. After all, the phone came out in 2015 which is old nowadays. However, I realized that the lethargy was likely due to the 100+ Chrome tabs or the pile of apps on it that I rarely use. I deleted a bunch of stuff and now manage just a few browser tabs. That seemed to buy me some time, but doesn’t have the same life it had when I first got it.

I can’t push off the decision forever. I want to have control how I use my phone… not have my phone control how I use it. I’m going to have upgrade at some point.

That’s when there’s that looming question:

How Much Should I Spend on a Cell Phone?

There are a few reasons why it is more difficult this time. First, there are more phones out there. My current phone was the only phone where I had to actually think about what I wanted and compare specifications and pricing.

The second reason is that phone prices are going up. The introduction of the $1000 iPhone and the $2000 Samsung folding phone disaster creates a lot of room for mid-range phones to charge $500.

However, by far the biggest reason why this is a difficult choice is an odd phenomenon. The choice is between a very good product at a very cheap price and an excellent product that is a lot more money. At first it seems obvious to me that I should go with the cheap option. However, because of how often a cell phone is used, that small difference between very good and excellent is greatly amplified.

For me, the choice is likely between three phones:

  1. Moto G6 – At $140 on Amazon, the Moto G6 is only a year old. Moving my phone up from a higher-end in 2015 technology to a mid-range 2018 is a good upgrade.
  2. Moto X4 – For only $120 on Amazon, the Moto X4 is a little older than the G6, but it’s higher-end phone. I think it’s a better phone for $20 less, but it could be up to personal preference.
  3. Google Pixel 3a – This phone is supposed to be announced and launched today so I don’t have a link. It’s a “lite” version of Google Pixel expensive flagship Pixel 3. It’s rumored to be priced at $399 – half the price of its big brother. With the same camera, it doesn’t compromise too much in other areas. I think it’s a happy medium between the very good at a very cheap price and the excellent at a very expensive price.

While the Pixel 3a is tempting, I have soured on it. It doesn’t feel like a bargain. The Pixel 3 was on sale a couple of weeks ago for $399 and I didn’t bite then. It’s hard to justify spending the same money for the light version today. The good news is that the Pixel 3a may be on sale when I upgrade my phone down the line.

If I had to make a choice today, I’d go with the Moto X4. I’m confident that I could be happy for a couple of years with it. At a price of $60 a year, it would be a very good value compared to some of my other phones. It would also be easy to justify giving it to one of the kids when it’s time to upgrade.

How Much Should You Spend on a Cell Phone?

Exactly $424.42… not a penny more or less. (Joking, of course.)

If you were expecting me to tell you want to do about anything, you’ve come to the wrong place. You know yourself best.

However, I can give you a couple of tips that have helped me. The first I’ve already written about. Looking at a phone as a cost per year may be helpful in making your choice. Some people may feel that $2 a day ($700+ a year) is a reasonable price for all the value they get out of their phone. I think I prefer to save the $500 and put it towards hiring a cleaning service.

The second tip is to consider the purchase in the context of your overall technology budget. I’m a big tech geek (hence the smartphone back in 2002), so I usually spend more than most people. My wife doesn’t care that much, so the low-end laptops and cell phones work for her. If I know that I’m going to spend half my internet on my cell phone, I might spend more on it. However, I am usually around my laptop, so that’s my priority.

Final Thoughts on Cell Phone Spending

We live in an era where cell phones aren’t advancing that much. They continue to get faster, more efficient chips, more memory, and better cameras. There aren’t a lot of new featuers. Some of the more recent phones have embraced wireless charging pioneered by my beloved Palm Pre (celebrating it’s 10-year birthday next month).

For us as consumers, there’s almost no wrong choice. It’s great to have very good phones available for less than $150. That’s the right choice for me, but for the first time in a long time, I understand why people spend a lot more.

* I started up the Palm Pre 3 last year and it still works great. The replaceable battery I bought very cheaply on Ebay allowed me to get all my pictures.

Four Years of Solar Power Reviewed

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Funny Solar Panel

Happy Earth Day! It’s hard to believe, but this month is exactly four years since we got solar panels installed and activated.

I was nervous about taking the plunge. We got a $16,000 Home Equity Line of Credit (HELOC) to pay for the panels. That’s a lot of money. And though I thought I understood everything about solar panels, you never truly know what you don’t know. Finally, I never know if I can trust local contractors that I’ll save money – they are interested in getting the job and it would be impossible to hold them accountable if they stretched the truth.

Fortunately, everything went according to plan and we’ve been extremely happy. (Knock on wood.)

One very important thing to note is that government funding via state grants and federal tax credits paid for another $16,000. Obviously state grants are going to depend where you live. I did very quick/rough research and it seems like the 30% federal tax credit is still around for 2019, but then it starts to become less in 2020 and 2021 before disappearing for residences/homes.

In short, if you are thinking about solar power, now may be the last chance to get the best price.

Before I get into our personal financial experience with solar power, the benefits to the environment have to be mentioned. Even if it financially break-even, why not do something that helps the environment? To date, our dashboard says that our panels have accomplished the equivalent of planting 686 trees. Using metrics from the EPA, planting one tree offsets the same amount of CO2 as 55.3 kilowatt-hours of clean energy production.

Put another way, our panels have generated the equivalent of 12,640,541 AA batteries. My math could be off, but I think that’s around 668,822 pounds of batteries. It’s a good thing our house doesn’t run on AA batteries.

Calculating the Value of our Solar Power

You can call it 686 trees or 12.6 million batteries, but scientists would say we’ve generated 37.9 megawatt-hours in 4 years. Thanks to the wonders of the metric system, we can say it’s 37,900 kilowatt-hours or kWh.

The reason why we care about the kilowatt-hours measurement is because that’s the unit your electric bill uses. In Rhode Island it costs 11 cents to create one kWh and 10 cents to deliver it. The costs are broken down into more excruciating detail, but I’ll spare you. So overall, using a kWh costs $0.21.

That’s actually the most expensive electricity in the continental United States. (For some reason their numbers are 22.67 cents, which is different than my bill, but it’s close enough.) The average bill in Rhode Island is $203.35. Ouch!

The 37,900 kWh that we’ve generated in 4 years would have cost us $7,985.53. We can round up that last nearly $15 and call it $8000… exactly half of $16,000 we financed. Roughly speaking we’ll have recouped our $16,000 in 4 more years. However to account for interest and inflation, let’s call it 5 years.

Thus after a total of 9 years, we’ll save roughly $2000 a year. (That’s based on easy math of the $8000 we saved already over 4 years.) It will be more as electricity prices rise over time due to inflation.

Our panels are guaranteed to be ~95% efficient for 25 years. It doesn’t mean that they won’t last longer, but that’s just the guarantee. By the time that guarantee is up we’ll have 16 years of free electricity. With inflation our electricity would likely cost around $3200 by the end. I’ll conservatively estimate that the savings come out to around $2500 a year over those 16 years.

That’s $40,000 in savings! If the system keeps working well, it could be more than $50,000.

For a handful of days of research and another few for doing the work, that’s quite the return on investment. It’s a year’s worth of income for many people. While your state will likely be less of a savings, it doesn’t mean you shouldn’t do it.

If you are thinking about getting solar power yourself, here’s a quick guide I wrote. It’s hard to get too specific because each state has its own tax credits as well as it’s own costs of power. If energy is cheap in your state, it could be a poor financial decision to get solar power. That’s why it can still save us money even though Rhode Island is not known for being sunny.

Have you explored solar power? Let me know what you think in the comments.

How Much Should I Spend on a Car?

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Everyone has tried to figure out how much they should spend on a car at one point or another. We bought our last car around 5 years ago. We’re hoping to keep it another 8 to 10 more years, so hopefully, I won’t have to ask about it again for awhile.

We bought a Subaru Forester because it was cheap and perfect for a growing family, New England snow, a muddy dog, and the beach sand. We bought an Acura MDX, because the family grew bigger, my wife’s commute is longer, and the luxury makes a difficult day bit better.

However, yesterday, I came across a Tweet that made me think:

Now obviously it makes sense that people with negative net worth still need to have a car. However, I had never thought about tying the amount of car to net worth. It didn’t seem to make sense at first.

Then I thought about it in terms of my own money journey. It seemed to fit, but maybe it was a little low. Here are some examples:

Net WorthCar Price (5%)
$300,000$15,000
$500,000$25,000
$800,000$40,000
$1,200,000$60,000
$1,500,000$75,000

What I like about this is that it seems to curb lifestyle inflation. I think that was intention of the advice, but I don’t know where it originated. Besides the error, for low/negative net worths, it was too strongly worded for me. I rarely like to give advice by telling people what to do. Instead, I like to just explain what I’m doing and why I’m doing it. Your situation may be different, but maybe by following along with my thinking, you’ll be able to adapt it to your own.

So let’s pretend that I feel like buying a $75,000 luxury car. I look at the chart and see that it matches up with a $1.5M net worth. I’m not a fan of buying expensive cars, but if you have a 1.5M net worth, a $75,000 car is probably going to work out.

I decided I’d try to make the advice a little better by eliminating the negative/low net worth problem and making it more flexible (removing the “never” language). So I went with:

It was kind of a quick thought and while it is better, it’s not all that great. I think it keeps the flavor of the original advice which is all I was trying to do.

However, what if I tried to do more? What if I tried to come up with a very good answer for…

How Much Should I Spend on a Car? (Formula 1)

I think any formula is going to be doomed to failure. Nothing is going to work for everyone. People value things differently. For some, like my wife, a car could be one of the few luxury they car to spend money on. For others, like myself, a car is a convenient way to get from point A to point B.

It’s very hard to find “universally accepted” advice in personal finance. At the same time, if we can help a bunch of people with a rule of thumb, why not give it a shot?

With that in mind, I came up with three concepts that I wanted to be part of a rule of thumb:

Net Worth

As I mentioned above, I like the idea of incorporating net worth. It can be used to give license to people who have done a great job saving. It can also be used as a check to stop you from buying too much car.

Negative/Low Net Worth

We have to incorporate something that allows everyone to buy transportation. It might not be great transportation, but we can’t say, “Sorry, you can’t have a car to make money.”

Income

If you are making a lot of money, but just starting out a career with low net worth, you should be able to get a more expensive car. If you are low income, a lower priced car is going to be a better fit.

I fired up my spreadsheet program and created my first formula. It was:

$5000 + (10% of income) + (4% of net worth (0 if negative)) = Max Spending

Since I’m still trying to figure out how to write a calculator for WordPress here’s a table of what that formula might look like:

IncomeNet WorthFormula
$25,000$0$7,500
$50,000$0$10,000
$75,000$0$12,500
$100,000$0$15,000
$125,000$0$17,500
$25,000$25,000$8,500
$50,000$25,000$11,000
$75,000$25,000$13,500
$100,000$25,000$16,000
$125,000$25,000$18,500
$25,000$50,000$9,500
$50,000$50,000$12,000
$75,000$50,000$14,500
$100,000$50,000$17,000
$125,000$50,000$19,500
$25,000$100,000$11,500
$50,000$100,000$14,000
$75,000$100,000$16,500
$100,000$100,000$19,000
$125,000$100,000$21,500
$25,000$250,000$17,500
$50,000$250,000$20,000
$75,000$250,000$22,500
$100,000$250,000$25,000
$125,000$250,000$27,500
$25,000$500,000$27,500
$50,000$500,000$30,000
$75,000$500,000$32,500
$100,000$500,000$35,000
$125,000$500,000$37,500
$25,000$750,000$37,500
$50,000$750,000$40,000
$75,000$750,000$42,500
$100,000$750,000$45,000
$125,000$750,000$47,500
$25,000$1,000,000$47,500
$50,000$1,000,000$50,000
$75,000$1,000,000$52,500
$100,000$1,000,000$55,000
$125,000$1,000,000$57,500

That’s a long table, but hopefully you can find some numbers close to your own to get a quick estimate. If you need more rows at the end, that’s a good “problem” to have.

As you can see, everyone can buy a car of some kind. If you make more money, you can buy more car. If you’ve had a history of saving and growing your net worth, you can buy even more car. We can play around with the numbers some, but I’m thinking that income should possible be a bigger factor. Since these numbers are estimates, I’ll let you experiment on your own. Please let me know in the comments if this produces a good estimate for your own financial situation.

How Much Should I Spend on a Car? (Formula 2)

Something doesn’t sit well with me on that first formula. It doesn’t factor in other expenses.

If you make $125,000 a year, but spend almost all of it on housing, child care, student loans, etc. you aren’t going to have much left over for a car. On the other hand, if don’t have any of those expenses (limited property tax on a house already paid off), you are going to be able to afford more car.

So rather than just use income by itself, I decided to come up with numbers of income – necessary expenses. My working formula is:

$5000 + (50% of (income – necessary expenses)) + (4% of net worth (0 if negative)) = Max Spending

Here’s another rough table using several income minus necessary expenses numbers:

Income - ExpensesNet WorthFormula
$0$0$0
$4,000$0$800
$8,000$0$1,600
$12,000$0$2,400
$16,000$0$3,200
$0$25,000$1,250
$4,000$25,000$2,050
$8,000$25,000$2,850
$12,000$25,000$3,650
$16,000$25,000$4,450
$0$50,000$2,500
$4,000$50,000$3,300
$8,000$50,000$4,100
$12,000$50,000$4,900
$16,000$50,000$5,700
$0$100,000$5,000
$4,000$100,000$5,800
$8,000$100,000$6,600
$12,000$100,000$7,400
$16,000$100,000$8,200
$0$250,000$12,500
$4,000$250,000$13,300
$8,000$250,000$14,100
$12,000$250,000$14,900
$16,000$250,000$15,700
$0$500,000$25,000
$4,000$500,000$25,800
$8,000$500,000$26,600
$12,000$500,000$27,400
$16,000$500,000$28,200
$0$750,000$37,500
$4,000$750,000$38,300
$8,000$750,000$39,100
$12,000$750,000$39,900
$16,000$750,000$40,700
$0$1,000,000$50,000
$4,000$1,000,000$50,800
$8,000$1,000,000$51,600
$12,000$1,000,000$52,400
$16,000$1,000,000$53,200

Is this calculation any better? It’s certainly a little more complex. I’m not so sure because it’s harder for me to test. I don’t have a good set of numbers to plug in. This is where I could really use your help. If you could let me know in the comments I’d appreciate it.

Final Thoughts on Car Spending

Just before publishing this, I decided to do a little reading to see what the experts say. Many suggested using a debt percentage and limiting your debt overall. I didn’t like getting into that because sometimes there’s good debt and bad debt. It’s reasonable to consider it though. You’ll also have to think about all the extra costs associated with a car, from insurance to storage with Auto Vault, they all add up.

At the end of the day, the estimate is just that… an estimate. There are things you can do to get more value for your dollar when spending on cars. Here are some tips to save money on cars and how to save money on gas.

Let’s Discuss $800 Candles

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I’ve been extremely busy lately, hence the tumbleweeds on this blog.

One of the great things about blogging about money is that there are always new stories to write about. Money isn’t going away and people are always going to do interesting stuff to get it.

For example, 5 years ago I wrote about Kanye West’s $120 Plain White T-Shirt. I guess he needed that money to buy his private jet.

I’d rather buy very cheap T-shirts. They do the job and I can move on with life.

So what about an $800 candle? I didn’t know this was a thing, but the luxury candle market is booming.

No matter how hard I try, I can never wrap my head around “the lifestyle space—specifically by the beauty, wellness, and fashion industries.”

When I read news about $800 candles, it motivates me to teach my kids how to make candles. They won’t be “luxury” by any measure, but it will still perform its primary function… light and heat. And of course there’s the pedagogical benefit. (That’s my attempt to sound smart by using big words. Did it work?)

I’m going to make this short and sweet. I don’t understand this crazy pricing. Yankee Candle has a deal for around $13 a jar this holiday season. That’s the premium brand. There are knock-offs at a fraction of the price. If it was like DoTerra’s Essential Oils, I’d get it. However, it’s not wrapped in a pyramid.

What do you think? Let me know in the comments.

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