Lazy Man and Money

Frugality and FIRE Friends

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It’s still a very busy summer for dog sitting, so rather than be 80% blogger and 20% dog sitter, it’s close to 95% dog sitter and 5% blogger. I expect that to change when kids go back to school in September and families stop traveling.

Last week this Tweet caught my attention:

It’s simple and straight to the point. However, I read it and think of it from a historical perspective. My blogging mentality is still stuck in 2006 and 2007 when I started.

Frugality Bashing Over Time

There were bloggers in 2006 who were into extreme frugality. I remember reading an article where the person calculated that opening the refrigerator costs four cents. So before opening the fridge, he planned his attack to grab all the items as quick as possible. There were also jokes that if you by 2-ply toilet paper, you can just pull one ply apart and “BAM!” double your toilet paper. Some of the extreme frugality got a little weird.

In general, though, people were just doing common sense things to save money. Make coffee at home, bring lunch to work, that kind of thing. However, people have started attacking those kinds of frugal suggestions. Their argument is, “No one got rich making coffee at home.” That may be true, but brewing coffee at home makes sense.

One decision repeated many times over a long time can make a significant difference. However, it’s more than that one decision. That one decision can grow into creating many mindful and frugal spending habits. When I developed these habits, I had more money left over to max out my 401k at a fairly young age (the maximum allowable contribution was lower then). This 45-year-old is thanking his younger self for doing that.

You have to have money to invest money. Not everyone can have a high-paying career (I did, fortunately), so frugality can be the path to having that money.

If you read a money guru and they are against frugality, it’s probably a good idea to shop for a new guru. They have not walked a mile in your shoes. I haven’t either. However, I’m not going to shut the door and bash an idea that mathematically is proven to help so many people.

Bashing of the FIRE Community

When I read “FIRE community”, my 2006 dinosaur brain interprets it as “personal finance community.” For all practical purposes, they are synonyms. FIRE is a better marketing term and “Financial Independence, Retire Early” evokes a sense of freedom to do whatever you want in life. There are no new money tips and tricks in FIRE that weren’t already in the personal finance community. We could call it all a “money community” and everyone would know what we are talking about.

The thing about defining a money community is that it’s nebulous. There are money communities in website forums (Bogleheads for example), blogs (this one for example), Twitter, Facebook, and Reddit. Sometimes the people in one community don’t know who I am, but in another community, they know me quite well. Finding the community that supports you as you work towards your money goals is what’s important.

I don’t understand why anyone would bash a supportive group. I suppose I can imagine a person with enough hate in their hearts to do that. I imagine the bashing happens mostly on social media where people may just be trying to get attention (even negative attention) or entertain themselves. That used to get me going and angrily responding. Now, I just feel a little sad for that person, because he/she does not seem to have a focus and/or a community to help themselves move forward.

Final Thoughts

Frugality and FIRE communities are tremendously useful money tools. They’ve worked for countless people for decades. It makes no more sense to bash them than it does to bash being in a high-paying career or investing. My 8th-grade math teacher used to say, “There’s more than one way to Moody Street” (a big street in my hometown). There are many money tools that can get you to financial independence. Use the ones that work for you.

The More It Costs, The More You Should Research It

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My friend Jim from WalletHacks asked me a question last week. It was along the lines of, “What is your best personal finance tip?”

I’ve been asked this about a dozen times. There’s the obvious money golden rule of “Spend Less Than You Earn”. That’s too easy though. Every personal finance writer would likely say the same thing.

Rather than give that answer, I’ve always responded with “the more a purchase costs, the more you should research it.”

money pile

Then I realized that I never wrote an article about it. I’ve been giving this information to everyone else except my readers. What an epic fail! (Is describing something as an epic fail in 2015, an epic fail itself?)

I think the concept is fairly self explanatory, but let’s dig into anyway.

There are some things that are going to matter greatly in your personal finance life. They are usually big purchases such as houses, cars, weddings, even having kids. (Yes, I know kids aren’t a purchase, but that decision spawns a lot of other purchases.) Then there are things that aren’t going to matter so much, such as adding some gum at the grocery checkout line.

If it’s a big purchase that’s going to be part of your life for some time, it’s worth putting a lot of thought into it. I had a friend who thought about a purchase of a car for a couple of years. That’s an extreme example. If we were discussing a $700 coffee table book, I’d probably have to think about it for 4-6 months. Okay, I’d simply reject it on the grounds that it is a $700 coffee table book, but if it were something a little more practical I’d put some time into it.

When I take this time, I usually find that I don’t need it at all. Sometimes I realize that I don’t even want it. I’m not immune to impulse buying, but having this policy in place substantially curbs it.

I realize there’s a difference between researching and thinking about a large purchase. However, I’m going to lump them together. I often tell myself that I’m “researching the best option”, when I’m really debating whether or not I need something new. For example, I’ve been researching the best television for a few years now, because (and don’t tell my wife I wrote this), our current generic 55″ television does the job. (For those wondering, this is the best television.)

The biggest exception to this rule is subscriptions. They can be large purchases, you just pay for them over time. I bet some people pay more for their cable bill than other people pay for their cars (on a monthly basis). It’s definitely worth spending some time to think about those as well. I put daily coffee and lunches are in the same category of subscriptions, they are a lot of the same small purchases that add up. If you can change your habit to do other things that may be more frugal, you’ll save a lot of money there too.

If you did nothing else but follow these two bits of advice, you’d have solved about 80% of money’s golden rule of spending less than you save.

P.S.

I couldn’t think of a good image for such an abstract concept… but I enjoyed this image of a pile of money from Breaking Bad.

Cheapest Cars to Own

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I was reading an article the other day, how the proposed California bullet train would be a bargain in travel. The price to go 438 miles would be $86 or around 20 cents a mile. Other cheap trains are usually around 25 cents a mile, but a mid-range one can be 50 cents a mile (Amtrak’s Acela is a good example).

I don’t take a train to many places, but this got me thinking, “How much does a car cost per mile?” The IRS makes it clear that you can deduct 57.5 cents per mile for business use. That’s a rough starting point, but we know that car prices and gas mileage varies widely.

What I really want to know is what is the cheapest car to own. Pretend I wanted to be as frugal as possible and didn’t care about anything else, what should I get? The easy answer is some used piece of junk that will hopefully last a couple of years from someone who just wants to get rid of it. I had an old school teacher who would do that. He’d never get an oil change, because it simply wasn’t worth it. I’m not going to take the easy answer, because finding a used car cheap and reliable is going to depend on the gems in your local area.

I really like the cost-per-mile metric as it gives you a way to compare to the bullet train and other forms of transportation. I did some searching on the web and of course one of my favorite personal finance gurus Clark Howard has it covered. He points out research in 2014 from Consumer Reports that says the Toyota Prius and the Honda Fit were the cheapest cars at around 40 cents a mile. The most expensive was a Ford F-250 which was a $1.16 per mile to run.

Think about driving 15,000 miles in each. Would you rather pay $6,000 a year for your car or $17,400? Obviously they are completely different cars, but unless you have a lot of truck-stuff to do, you can give yourself the equivalent of a before tax raise of $15,000 by going with the cheaper option. That’s not only serious cash, but it is “fund your early retirement” kind of cash.

If you drive a lot, there’s some great math on Green Car Reports. They take the cheapest cars with very, very good gas mileage and create a “Cost per MPG” to give you something would certainly be extremely frugal. The winner was the 2015 Mitsubishi Mirage CVT which costs $14,805 and gives you 40 MPG. I worked up a little spreadsheet on that and it will cost you around 27 cents a mile for the car and gas… assuming you drive 15,000 a year. That’s using a 5-year average. If you hold on to it for 10 years it gets down to 17 cents a mile. None of this includes insurance, but that would presumably be cheap on such a cheap car.

Car and Driver has a nice list of cheapest cars to own as well. Their top bargain is the Nissan Versa 1.6 Base which costs around $10,000 and gets 29 MPG. Using the same assumptions as I did with the Mitsubishi Mirage above, the Nissan would be around 24 cents per mile. The initial low cost saves you more than you’d save on gas unless you drive more than the 15000 miles a year.

There really should be an easy calculator that allows you to enter your driving habits and gas prices in your area to give you some kind of real cost of operation. I have to believe it exists on the internet, but I couldn’t find it. In any case, that bullet train looks like a pretty good deal, but a car becomes the better option if you have multiple people to transport.

Aereo TV: Why Waste the Supreme Court’s Time?

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[Editor’s Note: I wrote this article a couple of days ago before news of how the trial had occurred. I deemed it more important to go with the Solar power article on Earth Day. So I’m publishing this today, with an update at the end.]

There was an interesting article on CNET yesterday that I think leads to an interesting thought exercise: Why the Aereo Supreme Court case over TV’s future is too tough to call? I encourage you to click that link which will open up in a new tab/window, read it or follow along. Ms. Solsman makes the big bucks explaining the issue and does a wonderful job. I don’t want to take up the space here to do what she has done so well. Instead, I intend to continue making the little bucks for flexing my large logical cortex and solving the problem.

This is more of a legal/technology debate than a personal finance one, but if you stick me for a bit, I promise you some definite personal finance thoughts. Why would I tackle this on a site about personal finance? I simply have a natural interest in the role of legal nuances play. That’s why I write about how MLMs attempt to blur the lines of pyramid schemes to remain legal. It’s why I’ve written about promotions and seemingly illegal lotteries here, promotions vs. lotteries, and here.

Have you read the article? Good. Here’s a very basic rundown of the conflict, because I know a few people won’t click over and read the article.

Aereo TV runs a subscription service were people can stream and record broadcast television (CBS, ABC, NBC, Fox, etc.) over the Internet. They pay these broadcast companies nothing. Currently these broadcast companies charge cable and satellite providers billions for access to these channels. The companies either want Aereo to pay the same fees or have it declared illegal. They fear that cable and satellite will construct similar services (or even subcontract Aereo) to avoid paying billions for access to the channels. Broadcast companies are protecting their revenue stream and you can’t fault them for that.

Aereo gets around paying for access to the broadcast channels by having individual antennas for each subscriber. The company argues that they are simply conveniently harnessing the free over-the-air broadcast signal for its customers. From a technology perspective, it isn’t much different than a company setting up a bunch of solar panels at its facility and selling me the energy from them.

Create Your Own Aereo at Home

One of the important things to note is that consumers can create their own Aereo service with currently available technology. For under $10, you can get a Mediasonic HomeWorx Indoor HDTV Antenna that is highly rated. Got around $50 and you can get RCA Compact Outdoor Antenna that is almost flawlessly rated. For another $65 or so you can bring that signal through this Hauppauge WinTV Tuner Stick into a computer such as the SEXY Intel NUC. Pair that with some simple DVR software/program guides (MythTV, Windows Media Center, etc.) and use the HDMI output to view on your television. Add the Remote Potato application to stream it all over the home and on the road.

A set-up like this is tempting because there are no subscription fees. If you watch broadcast television most of the time (as most people do), this solution is a one-time charge of around $600 for television for life. Of course you can get more bells and whistles, but that’s an article for another day. In fact, the details are probably best suited for websites specializing on such set-ups.

If all that got confusing and sounded like a lot of work, welcome to the club. Fortunately, devices like Simple.tv’s Network Tuner DVR combine the computer, streaming, and conversion into one box. With that you need to add an antenna and a hard drive. Same goes for this highly rated Channel Master DVR+ (though there are few reviews). A company called Tablo is making another device that you can buy directly from its website (but I would wait for the four tuner model myself).

Aereo’s subscription service does all this at its facility very efficiently for you. You don’t have to have an antenna or install one. From a frugal perspective, it doesn’t really compete with the above in the long run, because over time the subscription fees add up. However, it does help those who want to cut the cable do it a lot more cheaply and efficiently.

Public and Private Performance Confuse the Issue

Let’s get back to the debate of Aereo’s legality. The issue gets a little more complicated when viewed under the Copyright Act of 1976. That makes a distinction between public performances and private performances. Private performances aren’t subject to copyright rules, while public ones are. For some reason it was decided that watching broadcast television in your living room was a private performance. However, a “cable or satellite company funneling channels to its customers en masse” (a quote from that CNET article), is considered a public performance.

I don’t understand the basis of this distinction and why it exists. With the exception of NFL Sunday Ticket and some Pay Per View fighting events at bars, almost all the performances are indeed private, people watching television in their living rooms.

In fact, one could easily argue that a local NBC affiliate that funnels the channel via an over-the-air antenna en masse to its customers is just as much a public performance.

Such a distinction is arbitrary at best. At worst, I’d say it is completely unnecessary.

Most importantly, I’d go as far as to say that it is the cause of the issue here. If such a distinction was never made, broadcast channels wouldn’t have been able to charge cable and satellite companies fees. This was a completely new revenue stream that came from technology changes. NBC didn’t create cable or satellite companies but they benefited from being able to charge them fees. They no longer was as dependent on advertising as they were in the days of “rabbit ears.”

So now the broadcast companies are upset that their benefit may get taken away from them. I say, “tough break. Go back to supporting your business on advertising revenues as you did the past. You still have the vast majority of Americans watching your shows, so it shouldn’t be difficult.”

Aereo’s Side of the Story

Aereo has put up a website Protect My Antenna, which tells their side of the story. Essentially, it’s a story of how they make the Create Your Own Aereo at Home paragraph above easier by doing most of it at their facility.

The website has one line that I think sums up the whole case, “Broadcasters should not be able to use the Courts to drive forward what they believe are their most lucrative business models.”

The way I see it, it doesn’t make any more sense for Aereo to pay fees to the broadcast companies any more than it makes sense for individuals to pay monthly fees to use an antenna on their own roof. And if you start make Aereo pay the fees you get into the dangerous territory of making Simple.tv and Tablo charge monthly fees with its product when they simply make using an antenna with DVR technology easier. If you make Aereo pay fees and not Simple.tv, you are essentially saying that putting an antenna in a remote location requires paying broadcasters fees. This not only doesn’t make sense, it doesn’t keep with the public and private performance guidelines of The Copyright Act of 1976.

Save the University of California Berkeley Law Students!

To bring this full circle, let’s get back to the beginning of the article:

“On a final exam, University of California Berkeley law professor Pamela Samuelson asked her copyright class to answer whether Aereo is, essentially, a true technological innovation or just a legal one… ‘”My poor students were suffering enormously.’ Samuelson said, after they complained about the difficulty of the Aereo question.”

I feel terrible for what these law students at a top university have had to endure by trying to answer this question. I hope that I never have to hire them, because I certainly wouldn’t want to trust them with even a tiny amount of my money or freedom.

Here’s the simple answer: It is both. It is a minor technological innovation that disrupts the current legal precedents. It essentially points a finger at the nonsensical division between public and private performances in the legal system that simply shouldn’t have existed in the first place.

So there you go… In under 1500 words I’ve:

  1. saved the Supreme Court a ton of time
  2. solved a problem that baffled law students at the University of Berkeley
  3. showed you a few solutions on how to save money cutting the cord

Since I’ve got nearly 100 words left, I humbly suggest that the Supreme Court use this saved to time to turn their attention to preventing million of people from getting scammed by unregulated pyramid schemes pretending to legitimate multi-level marketing businesses. Fair?

Update

Well it looks like I was wrong. Aereo looks like it is going to get railroaded by big business. Forbes had a pretty neutral article which included some of the questions that the justices asked and statements that they made. Here’s a sampling:

“Justice Breyer still appeared unconvinced that the court could disentangle the Aereo verdict from the larger cloud-computing industry. ‘I don’t see how to get out of it,’ he lamented.”

“Chief Justice Roberts didn’t appear to buy it. ‘I mean, there’s no technological reason for you to have 10,000 dime-sized antenna, other than to get around copyright laws.'” (I would have loved for the lawyer to respond with, “This is what happens when you make nonsensical, arbitrary laws.”)

“Justice Breyer continued to display anxiety. ‘What disturbs me is I don’t understand what the decision for you or against you, when I write it is going to do to all kinds of other technologies. I’ve read the briefs fairly carefully, and I’m still uncertain that I understand it well enough.'” (This is always an encouraging sign for a lawyer. Gotta love when your fate is in the hands of someone who admits ignorance.)

“‘That isn’t [Aereo’s] problem,’ [Justice Breyer] continued. ‘But it might turn out to be.'” (Just when you thought Breyer embarrassed himself enough, he finds a new level of embarrassment.)

There’s more from CNN Money’s coverage:

“‘This is really hard for me,’ Justice Sonia Sotomayor remarked early on in the hour-long hearing.” (Not that you want it to be easy, but it’s not comforting to know that the Justices themselves are admitting difficulty.)

“Justice Antonin Scalia, on the other hand, seemed not to understand the difference between television networks that are beamed over the public airwaves, like ABC, and those that are only available through cable subscriptions, like HBO.

Scallia’s hypothetical question to Frederick — in the future, ‘you could take HBO, right?’ — earned him some ribbing on blogs after the court session.” (I’ll pile it on. Clearly HBO is not broadcast television and available with an antenna. Can we recuse Scallia and get someone like Mark Cuban to sub in?)

It gets worse when you read the NY Times coverage:

“‘Your technological model,’ Chief Justice John G. Roberts Jr. told Aereo’s lawyer, ‘is based solely on circumventing legal prohibitions that you don’t want to comply with.'” (So if they’ve circumvented the legal prohibitions why are they even in court? Isn’t that admitting that no law has been broken?)

“Justice Ruth Bader Ginsburg said Aereo’s business was built on taking content without paying for it. ‘You are the only player so far that doesn’t pay any royalties at any stage,’ she told Mr. Frederick.” (I don’t believe this to be true. I doubt that Simple.TV, Tablo, and ChannelMaster pay any royalties on broadcast content at any stage either.)

“‘I’m hearing everybody having the same problem,’ [Justice Breyer] said of his fellow justices. ‘I will be absolutely prepared, at least for argument’s sake, to assume’ that Aereo’s service is unlawful.

‘But then the problem is in the words that do that,’ he said, referring to the decision the court will issue, probably in June. Justice Breyer went on to express concern that a ruling against Aereo might limit other innovations ‘that will really change life,’ such as the cloud.”

(So the assumption is that it is illegal, but they really don’t know why or how to word something clever enough to only impact Aereo’s business. This is some kind of weird dream, right? It can’t be real life, can it?)

A Dream Wedding for Under $500?!?! Believe it!

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I’ve got a new hero. It’s Abigail Martin. You’ve probably never heard of her. After this article, you probably will never hear of her again. That’s okay, because it’s her story that I want to share.

Mrs. Martin planned (and executed!) her dream wedding for under $500. Yes, under $500.

The other day I was flipping through the Fall edition of USAA Magazine. I usually don’t find too many articles that interest me. However, this article caught my eye. (Sorry that you have to settle for a less than perfect scan of the article. Hopefully your browser autosizes the large image and makes it readable. I wish I could have linked you to a version on USAA’s website, but I couldn’t find it there.)

It’s a very well written article, especially from someone who is just a couple of years out of high school. Maybe the USAA Magazine editors helped, because I’m not sure I’m at that level after 7 years of blogging my behind off.

Maybe it’s me, but it seem rare for people to make this mature decision, “We started our life together on the right foot: with no debt or stress that comes with it.” Contrast that with the personal finance blogger frivolously throwing his money away on a wedding (I’m kidding Kevin, just an interesting contrast that I had to point out).

Enough with the brown-nosing of Mrs. Martin here. How did she manage to have her dream wedding for under $500? The short answer is that she enlisted (military pun intended) the help of people she knew and put to use some sweat equity. All the decorations were made by her with help from family and friends. Cheaper artificial flowers substitute the real thing. They were married by a friend. The lunch was prepared by her parents (this is stretching the $500 price I think) and her friend made the cake. Martin found that the “personal touches that went into every detail were part of what made it so memorable.”

My wife and I spent around $23,000 on our wedding. (See Kevin, I’m with you.) That may sound like an outrageous number, it took a lot of creativity to get it that low for 175 people. We had it on a military base where we saved on taxes. We made our own centerpieces as well. We used a military florist and had minimal flowers, which kept that aspect to around $200 (which I hear is really, really good). We splurged in a few other places (open bar of course).

Wedding expenditures are a complicated topic and it is hard to say what’s right and wrong, because people have very different financial situation and family dynamics. I think the important thing is that you work within those boundaries and try to get the most for your money at every point rather than buying into the “You Only Live Once” (YOLO) trap.

I’m reminded of a great quote from the HBO documentary Weight of the Nation:

“I’m just an ordinary person, who does a bunch of tiny, ordinary things, that together are extraordinary.”

Abigail Martin in planning her wedding was just an ordinary person, who did a bunch of tiny, ordinary things, that together added up to something extraordinary.