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Podcast 6: Frugality and 397 Ways to Save Money

by Flexo on May 31, 2009

in Podcast

Kerry K. Taylor, author of 397 Ways to Save Money and creator of financial blog Squawkfox joins Tom Dziubek today to discuss her book, currently available from Amazon.ca. Kerry explains how she paid off $17,000 of debt in six months and how to make drastic life changes. She also shares some of her favorite tips from 397 Ways to Save Money.

 

To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.

[00:00] Introduction from Flexo
[00:39] Interview with Kerry K. Taylor of Squawkfox
[01:33] — Paying off $17,000 of debt in six months
[03:34] — Negotiating your first salary offer
[04:47] — Maintaining a student lifestyle and standard of living
[05:57] — Using any available tax credits and saving for retirement
[08:18] — Moving to an organic farm and making other drastic life changes
[11:36] — 397 Ways to Save Money
[13:55] — How renting an apartment can make you rich
[17:00] — How management fees deplete returns from your investments
[18:07] — Other surprising tips from 397 Ways to Save Money
[19:06] — Is the recent popularity of frugality just a fad?
[25:20] End

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The Unownership Society

by Flexo on May 6, 2009

in Consumer

Seven years ago, when people I knew were buying houses they couldn’t afford with the philosophy that real estate prices always go up, and the go up fast, I was sitting on the sidelines. I had no money, no desire to settle down, and no belief that real estate in the form of home ownership was such a sure thing. Years later, I had a chance to see the real numbers behind the true cost of owning a house for 30 years, and I was not impressed. For all that people say about real estate appreciation, there is a lot you don’t hear about often.

To truly determine how much you earn on a house from the moment of purchase to the moment of sale, you can’t ignore all the maintenance costs and other fees you are required to pay in order to live in that home. Buying a house for $500,000 and selling for $600,000 two years later is not a real 20% return when you consider you spent $30,000 in taxes, $15,000 for a new patio, $10,000 for a remodeled kitchen, your closing costs when you purchased the house, and the Realtor’s commission when you sell. The home you live in barely beats inflation over the long term when you factor in all costs, unlike long-term investing in a broad selection of stocks like an S&P 500 index fund.

MP Dunleavey mentioned that more people are beginning to think the same way I have been thinking, and taking this approach much farther than I have. These “transumers” eschew ownership wherever possible in favor of a more transient existence, supported when necessary by renting and leasing. “Rather than spending your money on individual things, which you then have to keep (suddenly an old-fashioned idea), you purchase access to an array of objects and experiences. It can save time as well as cash: The more you own, the more you have to worry about, maintain and upgrade.”

Renting is often cheaper than owning, even over the long term.

When you count gas, maintenance, insurance, repairs, loan payments and depreciation, the average cost of car ownership is $8,095 a year, according to AAA. Yet the majority of cars in North America are driven only 66 minutes a day, according to a 2008 study by Susan Shaheen of the University of California, Berkeley. That works out to about $20 an hour, two to three times the hourly cost of car sharing.

I don’t think a service like Zipcar would work for me because most of my driving is my daily commute, but the transient lifestyle lends itself to leasing a car. Leasing usually includes a contract that is not favorable to the consumer, and most related financial advice warns to avoid leasing a car. But in cases where leasing is more expensive in the long run than buying, or you have no asset at the end of the contract, you could consider the increased cost the price you pay for not needing to deal with the pains, headaches, and expenses of owning the car.

Every time you add to your possessions, you add to your responsibility and in many cases your expenses. Rather than being tied down to material objects, you can spend your money on experiences or save for the future.

Why Own When You Can Rent?, MP Dunleavey, MSN Money, May 6, 2009

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A Home of My Own: Why We Buy

by Flexo on April 13, 2009

in People

About the author: This is a guest article by Matt Wallaert, a behavioral psychologist and the Lead Scientist at Thrive, a free financial advisory website that helps people organize their finances and plan for the future with personalized feedback from its behavioral advisory engine.

I’m an owner. While I rent an apartment in New York City (the average apartment in Manhattan is worth $1.5 million; I won’t be buying soon), I’ve never leased a car or rented my furnishings because, generally speaking, I simply prefer to own than to buy.

But with the mortgage meltdown and the recent issues surrounding overconsumption, home ownership is becoming an active question, rather than the default standard. Rebecca Tuhus-Dubrow wrote a piece for The Boston Globe recently summarizing the debate and the angle was clear: homeownership needs rethinking, and is probably dramatically less good than we think it is.

I liked the article and a number of interesting academics weighed in to contribute, but the focus was on the social impacts of owning, rather than the personal ones, and I think that misses a key part of the equation. How we feel about owning versus renting, and how it changes our behavior, is worth exploring, particularly as owning wins in some unusual ways.

I should be clear that I’m not trying to argue that owning a home is intrinsically better than renting an apartment. As Tuhus-Dubrow points out, many of the disadvantages of a home rental are due to inadequate legal protections, rather than the actual rental procedure itself. Instead, my concern is with the psychological consequences of owning versus renting in general, whether it is an apartment, or a car, or a computer. I’m going to talk about apartments, just because they make a handy example, but feel free to insert “leased car” if it makes you happy.

Consider the typical renting New Yorker in their mid-20s. Few would argue that looking for an apartment is pleasant, and most would label it down around the 5th or 6th circle of hell. You have to find a place you can afford, that you like, that accommodates your lifestyle, that is in the right location, and is decently hard to do, given the actual raw number of rentals available in any given area.

Assuming you manage to actually find a place you like, you then have to actually get it, which can be harder than it sounds when people are going on and off the market at lightning speed. Renters live in a constant state of indecision: should I put a deposit down on this place now? If I take two minutes to talk myself into believing that it is the perfect place for me, will it be snatched away, leaving me with only the certainty that it was the best of all worlds and now I can never have it? Few people enjoy the process and fewer still come out feeling “happy,” and it is no wonder: a home is supposed to make you feel permanent, not dissatisfied.

And yet renters go through the process again and again, year after year. For many, it isn’t a choice: as Tuhus-Dubrow points out, renters don’t enjoy all that many legal protections and many of them get priced out or forced out of their housing, throwing them back onto the market. But even for those that could stay, many of them don’t because of the torture of knowing that you could have something different. Because you can move, you want to – knowing that other options are out there, it is part of our personal psyche and our national culture to want to explore them.

The problem is that psychologists have shown fairly conclusively that this type of comparison is almost certain to make you unhappy. The more options there are to consider, the more time you spend thinking about them, the more difficult the decision, and the more regret you feel when you actually pick one. And renting means always having options: there is always another apartment you could easily take, another car you could easily drive.

Owning alleviates this problem. While you can still compare your home to others (and many people do move several times over the course of their lives), increasing your attachment an object makes it harder to let go of and increases its value in your mind. Psychologists call it the endowment effect and it breaks down simply: there is value to feeling like something is “yours.” And while we can certainly think of our apartments as part of our domain in a psychological way, there are plenty of reminders in daily life that we don’t own them and never will.

And it isn’t just mental. The psychological value of owning translates to real value in your interactions, as almost anyone that has ever rented something intrinsically knows. You scratch the floor and don’t feel particularly bad or try to get it fixed (unless motivated by worry about your damage deposit). You beat the hell out of a computer until the lease runs out and you get a new one. No one puts premium gas in a rental car.

A home is a decision you don’t have to make again, or at least not for awhile. And there is value, sometimes, in less: less comparison, fewer decisions, less movement. Even as renting and leasing allow us to maintain our flexibility, they demand that we give up any number of psychological benefits. Sometimes it is a good trade, but more often than not, our instinct towards ownership is probably a decent one. Especially when it lets us save our time and energy for the decisions that matter; less “where will I live tomorrow?” and more “what will I do today?”.

If you enjoyed this article, please visit Thrive and Thrive’s blog, Good to Grow. You can also subscribe to the blog’s RSS feed. We would appreciate your comments and reactions, so if you would like to contribute to the discussion, add your comment below.

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After Ten Years of Renting, I Finally Have Insurance

by Flexo on March 2, 2009

in Insurance

I don’t know what I was thinking.

I am getting older. I finished my undergraduate education with a graduation ceremony about years ago. Since graduating, I’ve moved from apartment to apartment, first with a $400 per month one-bedroom place near my college, then back to New Jersey, sharing rent with a variety of roommates. I’ve roomed with friends and strangers in a variety of locations, from suburban apartment complexes to an urban railroad apartment above a grocery store. I’ve dealt with absent roommates, compulsive roommates, scary roommates, and even a few roommates with whom I got along well.

Despite making apartment-living my life, in the past ten years, I have never owner renter’s insurance. For some reason, this is one of those things I’ve managed to delay by allowing the part of my personality that prefers procrastination to prosper. Homeowner’s insurance is required in almost all circumstances, but renter’s insurance usually isn’t. In fact, insurance has never been required in any of the eight locations I’ve lived over the past ten years.

There was a snow storm overnight resulting in almost a foot of the white stuff on the ground, surely wreaking havoc in the roads. The facility managers at the office building where I work decided to close the location for the day. My boss and I determined this morning that there was no need for me to work from home, so I used the day to take care of a few personal tasks. One aspect of this plan was to research renter’s insurance. It was much easier than I had anticipated, and cheap.

I decided to work with the same company with which I have automobile insurance, Liberty Mutual. I originally found them after a long search for the most economical policy through some assistance with AAA. It took only ten minutes on the company’s website to answer a few questions about my living situation and decide how much should be covered by the policy. I received a quote right away that was so low I kicked myself for not taking care of this sooner.

If you rent, there’s no reason not to have renter’s insurance. Now that my home and possessions are covered, I can feel even better about my financial choices. I’ll also feel less nervous when leaving the apartment for weeks at a time.

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2007 New Jersey Homestead Rebate: Receive Up to $2,000

by Flexo on July 14, 2008

in Taxes

Homeowners in New Jersey are eligible for a partial rebate of property taxes paid. If you owned and lived in a house in New Jersey on October 1, 2007, you are eligible. Renters like me are eligible for a separate rebate up to $860.

If you haven’t received an application, you should shortly. The state suggests calling the Homestead Rebate Hotline if you haven’t received this application by July 23.

Tenants will not receive an application. The rebate form for tenants was included in the 2007 income tax package. I checked my state tax return, which I filed via TaxAct, and my rebate application was submitted with my income tax form. As I am neither disabled nor over the age of 65, the maximum amount I can receive for this rebate is $80, a 6.7% increase over last year.

The calculation for the homeowners’ rebate is different. For those under 65 and not disabled, you will receive either 20% of the first $10,000 of property taxes paid (if your income is below $100,000), 10% of your total property taxes paid (if your income is between $100,000 and $150,000), or nothing.

To receive your rebate, you muat file your application by August 15.

2007 Homestead Rebate Program

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