The Little Things

We’re currently spending a month in Orange Beach, Alabama, on the Gulf Coast.  This is our first time here, and we are loving it!

The weather is almost perfect except for a few foggy days, regularly hitting 65 to 70 degrees.  The area is surprisingly uncrowded; mostly just snowbirds escaping the wintry north.

We wanted to share some of the highlights of our stay so far because we truly believe experiences triumph stuff in most ways.  Especially the little things.

to infinity and beyond!

The beaches are wide, white sand.  Even whiter than by home.  We are staying on Perdido Key which is basically a huge sandbar with one main road running the length of it.

The view from the front of the condo is the gulf coast right across the road.  The patio has a view of Ono Island’s multi-million dollar beach homes about 100 yards across the Old River.  Ono Island and the surrounding area is supposedly home to several country stars, celebrities, sports figures, and other rich and famous people.  Sorry, no celebrity sightings to report yet!

One of many sunsets we watched from the beach

 

Glass blowing shop in Orange Beach

The area has a pretty robust arts community, especially the city of Foley, which is nearby.  We watched a neat glass blowing demonstration at the local park.  Amazing how they can create something beautiful from a molten blob of glass.

The friendliest little pelican ever!

Why is it when you need a fish you never have one handy?  I easily could have taught this little guy a few tricks.

Ahhh…another day at the beach!
“Secret” area of Fort Morgan

We visited Fort Morgan, built to protect Mobile bay.  It must have been a massive undertaking; the brick work is pretty impressive.  It was actually in service for four separate wars.  This is the spot where the battle was fought that spawned the famous “Damn the torpedos” phrase.

As we explored the fort, we came across two “secret areas” which we had all to ourselves.  For some reason, this fact makes me proud.  One was a twisting, pitch black corridor which ended in a small room that was super creepy and nearly required a change of undergarments.

Mardi Gras statue in Mobile

While in Mobile, we visited the historic Richards-DAR house near downtown.  We rang the doorbell and were greeted by the sweetest southern lady who started our tour.  Living in the South, we thought we knew what Southern hospitality was.  This lady took it to a whole new level! After showing us around the first floor, she handed us to another equally sweet lady for the second floor tour, while she went to prepare us hot spiced tea and a slice a king cake.

We had never heard of king cake (being rather sheltered), which tastes sort of like a cinnamon bun with a cream cheese filling.  It’s a Mardi Gras tradition; and comes with a surprise.  A small plastic baby Jesus baked inside! Whoever gets the baby Jesus in their piece is supposed to provide the cake the next year.

We sat and enjoyed the conversation for a while learning about the local Mardi Gras traditions.  Fun fact: Mardi Gras actually started in Mobile, NOT New Orleans as is commonly thought.  We can’t wait for the many parades and celebrations coming up.

We visited Hank Aaron stadium on our day trip to Mobile. We really just stopped to snap a few pictures and go on our way, but the front gate was wide open.  We walked in, asked the first guy we saw if we could take a look around, and he said…”sure!”.  We went in, walked around and had the whole place to ourselves.  It was kinda cool walking around the empty stadium named in honor of one of the greatest baseball players ever.

We love all things tea, and were delighted to find this little gem in Foley, Ala. while we were visiting the local train museum.  We looked across the park from the museum and saw…a small building with an outdoor area set up with tables like a Paris street corner,

visions of Paris

AND it had a hobbit door front entrance!

we all know hobbits love tea

We definitely had to check this out! We’ve already been back 3 more times and will probably visit several more before we leave.

Other things we’ve done here:

  • watched the lunar eclipse and comet 45P.  The eclipse could be seen with the naked eye.  Admittedly, we watched the comet thru a awesome website called live.slooh.com as we didn’t have a telescope.  Definitely worth a look, they have some really interesting stuff going on.

The night sky here is pretty clear for being on the coast. The stars are easy to spot making for some great night viewing.

  • watched the international space station overhead another night.  Looked like a super bright star (would have been cool to have a telescope or binoculars handy).
  • biked the Gulf State park and Backcountry trail multiple times
  • just randomly looked up one day and saw a bi-plane practicing aerial stunts…our own private stunt show!
  • visited with the wifes parents who came to visit for a few days.
  • at dusk, for at least a week, we listened to an elderly gentleman practice the bagpipes on the beach for about 30 minutes at a time.  Some people might be slightly annoyed by this; but not us…we’re just weird like that.
  • discovered gelati (not gelato) which is flavored italian ice topped with soft serve ice cream.  Nooo!…why didn’t we know about this before???  All the wasted years!!!
  • found our new motto hanging in the Copper Kettle tea shop (the one with the hobbit door)
    you should always be yourself, unless you can be a mermaid. then you should always be a mermaid

    These are just some of the small experiences we have had so far here.  The folks here are some of the friendliest people we have met.  It’s been a great time and we still have about 10 days to go.  Who knows what else is in store?

What small experiences have you had that truly moved you?

Is Now A Good Time To Invest In The Stock Market?

The stock market just finished off 2016 with a solid yearly gain.  Beginning the year at a level of 17,405; and ending at 19,762, the Dow Jones rewarded long-term investors with a very satisfactory gain of +13.42%.  At its highest point, the market was up +14.63%; and at its lowest point was down -10.13%

Note the range between the low and high points which is quite common.  Looking at the very long-term record, the market has risen consistently.  However, looking at shorter time frames, the swings can be dramatic and jarring.  The market has been characterized by great years (a bull market), interspersed with lousy years (bear markets), with long periods of neutral performance thrown in for good measure.

When considering whether the stock market is suitable for our investment today, we should consider several assumptions.

  • You need a long time horizon.  While the past trend is up; which we’ll look at later, there’s no guarantee it will continue rising short-term.  Short time frames show considerable volatility, both up and down.  Attempting to invest short-term is usually a recipe for disaster.  This eliminates in one fell swoop, such activities as: daytrading, options trading, market timing and futures. Institutions and money managers use these to hedge risk in their massive portfolios, but they should be off-limits for the individual investor.
  • Individual stocks are riskier than indexing.  Companies change all the time.  Sometimes for the worse.  Their customers change purchasing habits, advances in technology make their products obsolete, and aggressive new competition all conspire to ruin an individual company.  There are just a small handful of companies which enjoy the same favorable business conditions decade after decade.
  • Excessive costs drain an investors potential return. Fund managers and plan administrators all charge fees. Your goal should be to keep fees as low as possible, while receiving reasonable performance.  I have personally seen accounts where individuals were being charged over 2% in administrative and management fees.  That amount devours nearly a third of the long-term return available from the market: in a wordridiculous!
  • Dividends should be reinvested, especially when starting out.  Your returns are much greater over long periods with the dividends you receive compounding on your behalf. Almost all fund companies and many individual stocks offer the option to reinvest.

Now, lets look and see what kind of long-term return we can expect from the stock market.  Going back over 100 years, the long-term return is about 10% before inflation. The inflation rate has averaged about 3% over the same time frame.  So, the after inflation rate of return is roughly 7% yearly.  This is the measure we like to use, as it takes into account the loss of purchasing power from inflation.

This 7% after inflation return from stocks leaves every other asset class in the dust.  Nothing, not real estate, bonds, government debt, diamonds or antiques can offer the same long-term return stocks do.

So far, so good…

Now for the ice-cold shower part.  The stock market has had some incredible swings in the past followed by long periods, sometimes decades long, where it has done…almost nothing.

The best year ever was way back in 1915 when it leapt an unbelievable +86.5%.  Obviously, this is an outlier example and not too relatable to someone alive today. More recently, the years 2009 thru 2014 were a very good period for stocks.

There were also a few absolutely terrible years thrown in there. The year 1931 saw the Dow drop -52.7%.  Once again, maybe not too relatable to this day and age.  More recent, 2007 to 2008, around the time of the banking crisis, saw a -54% drop.  (Crap! sometimes history does repeat!)

Oddly? we remember this time with great fondness.  I purchased many individual stocks at incredible, once-in-a-lifetime prices.  I told anyone who asked, if you were going to buy, do it now!  Yes, it was hard watching everything plummet like a stone dropped from an airplane.  It got so bad, the wife couldn’t open her quarterly statements.  Yes, my 401K barely budged for 2 and 1/2 years despite funneling $1,400 per month into it (it dropped, not quite as much as the market, but close). But, it was a great time to invest.  It pays to look at market drops as an opportunity.

Then came periods where not much at all happened. These periods could be difficult times to be invested. Inflation was always in the background, ever so slowly gnawing away at your purchasing power.  Sometimes inflation was quite high, providing the worst of both worlds.  Loss of significant purchasing power and losses in the market.

What can you expect future returns to be?

Over the very long-term, history shows you can expect about a 7% return after inflation.  Of course, it may take many years of Methuselah-like patience to realize a 7% return.  Much depends on the price you must pay to invest.  Benjamin Graham, author of The Intelligent Investor, postulated you could pay up to 30X earnings for a stock guaranteed to grow earnings 8% yearly for eternity.  Using this formula as a guide, you can come to some interesting conclusions.  First, nobody lives forever and no company can grow at such a rate eternally.  It’s mathematically impossible; one stock would be the whole market.  Second, the market historically has grown at 7%, not 8%, so another adjustment must be made.  I would reduce the price you could pay by at least 30% based on the above factors.  So, maybe 20X earnings.  Not saying this is where I would be comfortable investing.  Just maybe a friendly reminder not to overpay.

The historical PE (price-earnings) average has hovered around slightly less than 17. The Dow Jones currently sells at around a 22 PE ratio. That’s about 29% over the historical average.  PE’s may have reached a higher, permanent plateau, with low interest rates and productivity gains and deserve such a high premium, but I doubt it.

That being said, I’m a little worried about future returns. Our portfolio has done very well the last few years.  I hope(!) the current run continues for a very long time. I’m very happy (mostly) with the individual stocks and funds we own.  The question I ask myself is, “if I were a brand new investor, would I purchase the stocks I own today at their current price?”.  In a word: NO.  Most of the stocks we own hit multi-year highs last year.

My frugal mindset extends to investing, and I experience great discomfort buying something for more than 15X earnings, much less at all time highs.

I enjoy sifting thru the market looking for attractive new companies to invest in, and frankly, I can’t find any. There are a few good companies I would like to own, but the price just isn’t right.  I could make exceptions; lower my standards a bit, but that could lead to avoidable mistakes.

Based on these reasons, I would expect lower returns in the near future, maybe in the 3%-5% range.

Disclaimer: In no way, should you let my opinions influence your decisions to invest or not invest.

The investor is then faced with a major dilemma.  Do they invest and risk a long period of underperformance or even major losses?  Or do they try to wait for a more opportune time to enter the market?  (hint: market timing rarely works in practice)

I would fall on the side of investing with several important caveats.  If I was young, time is on my side.  I would be invested fully, knowing that in the end things will work out in my favor.  There have been multiple recessions, and scary market drops in my investing career.  Too many to count.  If I would have been constantly cycling in and out of the market, I would have nowhere near the result I’ve received by just staying pat.  For folks who are older (me), I would keep a portion of investable funds in cash, for when conditions are more favorable (lower prices), if you’re sure you have the strength to invest when the market’s going to hell in a handbasket (easier said than done).  I would also focus on low-cost index funds.  Much as I love individual stocks, and overall they have performed much better than the index funds in our portfolios, too much risk is involved at current levels. The ‘Nifty Fifty‘ stocks from the early 70’s, which are faint memories for most investors, took years to even come close to their old highs once they crashed.  Same with the internet stocks from 2000 (those that didn’t go bankrupt…a lot did). Same with banking stocks in 2008.

***Personal note-In 2008 we owned stock in five different banks.  Two went bankrupt and disappeared (rode ’em all the way down, total losses), one was basically at death’s door for years (still is), and 2 have done reasonably well, although it’s been a very long slog.  Almost nine years later, on this particular group of stocks, I have a small gain. Sometimes tortoise-like patience is an investing requirement.

The stock market has provided the best return of any asset class over a long time frame.  Returns are probably going to be somewhat muted in the near future before returning to the historical 7% average.  While I am still invested, and plan on stayed invested until after I’m no longer on this Earth, I’ve prepared myself for what may be a long period of sub-par returns.

I’ll leave you now with one last ironclad prediction that I am willing to unequivocally guarantee 100%.  Sometime in the future, the market will drop 20%…30%…maybe even 50% if things get really bleak.  I just can’t tell you when. When it does happen, it just may be a golden opportunity to put your money to work in the market.

How do you invest and would you invest in the stock market now?

 

Homeownership…Financially Not All It’s Cracked Up To Be

First, let me unequivocally state, we are happy homeowners.  We love our current home, the neighborhood we live in, and the fact we’re less than 10 minutes from the beach.

We have been both renters and homeowners and understand the pluses and minuses, a few of which follow:

Renting pluses

  • Generally, way less expensive than owning
  • Great if you don’t plan on staying in one place long
  • Some of your monthly bills may be included in your rent (water, cable)
  • If something breaks, you call the landlord
  • Amenities may be included (pool, gym)

Renting minuses

  • Less privacy, and you may have rowdy neighbors (one day we’ll tell you about psycho girl who lived beneath us)
  • No equity buildup
  • Rent will generally increase regularly
  • Rent isn’t tax-deductible

Homeowner pluses

  • Tax deductibility of mortgage interest
  • If you’re terrible at saving otherwise, can be used as a sort of forced savings vehicle
  • Greater privacy, usually there’s some space between you and your neighbors
  • Sense of permanence and pride of ownership

Homeowner minuses

  • Usually significantly more expensive than renting
  • More upfront money required (down payment)
  • Illiquidity
  • High transaction costs buying and selling, although you can try For Sale by Owner
  • A never-ending series of cash outlays (property taxes, insurance, maintenance and repairs, HOA fees to mention a few)
  • You may get stuck next to difficult neighbors

We encourage anyone who wants to be a homeowner to go for it.  It gives you a sense of permanence and putting down roots.  The psychic benefits can be significant.

The problem we have is when people assume certain financial characteristics of homeownership which don’t bear out when you examine the numbers.

How many times have you heard the statement that owning a home was the best investment someone ever made?

We’re going to look at some of these assumptions, examine the historical evidence, and look at some examples near and dear to our hearts.

Surprisingly(?) since 1926, the long-term increase in residential housing prices has just about tracked inflation. In real terms, after accounting for inflation, housing has had close to zero growth.  One study pegged the annual increase at +0.2%.  In comparison, stocks over the same period returned +1.6% after inflation.  May not seem like a huge difference, but compounded over 90 years, stocks ended with a five-fold better result.  And that doesn’t include dividends.

Inflation has averaged 3% per year since 1926.  Unless you live in a high cost of living area or along certain regions of both coasts, residential real estate has probably averaged about the same 3% return.

Hold on just a minute!

What about my parent/relative/friend who sold their home and cleared hundreds of thousands of dollars over their purchase price?  We’ve all heard stories about someone who made a fortune selling their long term home. There are some who sold in a hot market or right before the crash or whatever.  We are focusing on the average, which will be the experience of the majority.

We tend to be somewhat skeptical of most stories.  Most of the scenarios just present two numbers: the sale price, and the original purchase price, totally ignoring factors like:

  • the time period involved.  A house bought in the mid 60’s and sold today for 3.5X the purchase price, has grown at an anemic 2.5% annual growth rate.  Less than the average inflation rate.
  • property taxes paid over the  years, which generally rise.
  • maintenance costs and repairs.

Inflation has rightly been called the ultimate destroyer. As long as it’s low, you barely notice the slow crawl upwards. But, year after year, even modest inflation silently compounding away, wreaks havoc on your purchasing power.

Inflation, plus long time periods, distorts the financial returns that are seemingly available from your home.

The Costs of Homeownership

People tend to focus solely on the mortgage expense, while minimizing the laundry list of other significant costs of homeownership.

These include:

  • Mortgage interest-Yes…very low current interest rates help in this category.  The average interest rate is now about 4% on a 30 year mortgage.  Even with such low rates, the amount of interest you will pay over the life of the loan is about 175% of the original amount.  There is the tax deductibility angle which softens the blow somewhat, but it’s still a blow.
  • Property taxes-which tend to rise regularly
  • Insurance premiums-again, tends to rise regularly
  • PMI-Generally, without a 20% down payment, you will pay PMI until you reach a 20% equity level  Amazingly, you are paying for something which provides no benefit to you.  It’s solely for the protection of the bank or mortgage provider.
  • Maintenance and repairs-A rule of thumb is to budget 1% of the purchase price annually.  If you live in a $200,000 house, you should budget about $2,000/year.  Of course, new construction will probably be less at first, older homes may require much more.
  • Remodels-We estimate you have to remodel/update every 10 years.  We’ll call this the Frugalbeach’s rule of remodels.  It will also be more expensive than you imagined possible. (Frugalbeach’s corollary)
  • HOA fees-This is an annual assessment neighborhoods levy on homeowners usually to help with maintenance of common grounds.  Really popular in our area.  The assessments range anywhere from several hundred annually to over a thousand per month in some of the fancier neighborhoods.
  • High transaction costs-A brokers fee to buy and sell your house.  Traditionally 6% but sometimes negotiable.
  • The time you must put into your property.  Half our neighbors spend some time, even in winter, at least every other day working on their yard & landscaping (We’re a little more relaxed…sigh…and it shows).

Near & Dear Examples

Example #1  Our nephew lives in the burbs of Boston.  He just purchased his first home in September of this year. We were visiting Boston around this time and lent a hand as he was preparing the house to move in.  It was shocking to see the prices of homes and what that price got you.

His home is a fairly modest, 2 bedroom, 2 bath that was in so-so condition.  It passed the home inspection with all the major systems okay.  However, it needed a massive amount of work before it was ready for move in day.

The house actually had a higher offer then he paid, but he got it due to a technicality.  This is quite common; most properties get bid up with multiple offers.  After a solid month of nearly daily work, and thousands upon thousands of dollars of repairs and updates, he moved in. Between the down payment and repairs it took all the liquid money he had readily available.

Nephew makes a decent salary for the Boston area, but we wonder if he’ll be able to afford the ongoing costs of the house.  Property taxes are astronomical!  Compared to our area, he got half the house for more than twice the price.

Example #2  Our home sweet home.  We live in a 4 bedroom, 3 bath, 2272 sq. ft. house (what were we thinking?!!) in the coastal area of South Carolina.  We built it in 1994 for the bargain price of $110,000, thanks to the wife’s dad.  Throw in the price of the lot, and the total came to $140,000.

We have remodeled twice already.  The first fairly minor, the second, “more involved” (ohh, ominous), six years ago. The second remodel was originally a six-week project which mushroomed into a six month ordeal that consumed every penny of Mrs. Frugalbeach’s salary over that time period.

We’re already looking at repainting soon, and other small projects.  The roof has been replaced once, so thankfully, that can be put off for a while.  Our next big expense will probably be the looming replacement of two heat pump systems.  They are going on 10 years past their expected lifespan, and will run $6,000 to $10,000 to replace.

A quick Zillow check of our house yields an estimate of about $260,000.  Google also tells us that figure can vary 20% either way.  Twenty percent higher gives us a price of $312,000 which simply seems too high.  Using other recent sale prices on our block, let’s go with $280,000.  This rosy, sunny day, stars align, everything goes right price would yield a 3.2% annual return.  We are barely beating the average inflation rate. Even worse, that paltry return doesn’t account for taxes, insurance and repairs we have paid over the years.  A costly remodel six years ago. Broker fees if we decided to sell.  It doesn’t paint a very pretty financial picture.

Example #3  Mr. Frugalbeach’s parents house.  My parents built their house in the north end of Springfield, Il., where we were raised in the mid 70’s.  It’s a 4 bedroom, 2 bath, tri-level with a detached 2 car garage, and original cost of about $45,000. Sadly, they’re both now in a nursing home due to health issues.

The family is now in the process of preparing the house for sale.  The major mechanical systems are in good shape, now that a $1,200 sewer line repair was just completed in late summer.

The house has been fully remodeled twice, but the last one was 15 to 20 years ago, so it’s somewhat outdated and not up to current tastes.

The Zillow estimate is $150,000 which is probably somewhat high.  When they built the house, the neighborhood was solid middle class with lots of young families.  Now, the population has migrated to smaller towns and suburbs surrounding the city and particularly the southwest part of town.  Their area is much less in demand.

Using the Zillow estimate, which is probably high due to the area and condition of the house, the annual rate of return is 2.9%.  Close to the long-term inflation rate, but again doesn’t include 42 years of taxes, insurance, maintenance, repairs and remodels.

Example #4  Mr. Frugalbeach’s grandfather’s home.

Grandpa’s old house on the front page of home tour- lower left-looking good!

This is a three-story 4 bedroom, 2 bath Queen Anne style home located in the historic Enos Park district in Springfield, Il. Built in the late 1890’s, it was home to three generations of our family.

In its prime, this area was referred to as the “Jewel of Springfield”.  It was the preferred neighborhood of doctors, lawyers, and successful businessmen, and boasted some of the cities nicest homes.  By the time we were young children, the area had aged significantly and was quickly going downhill. By the time most of us were in college, many houses were in disrepair and the streets weren’t safe at night.

At the time of my Grandpa’s death, the home hadn’t been maintained for 20 to 25 years.  The house was in desperate need of repairs and hardly habitable.  My father, who was executor of the estate, spent over a year making repairs, and eventually sold it for around $35,000.

It was purchased by a landlord, split into 2 units, rented for many years, suffered a major fire, and was eventually abandoned.

The house was probably headed for a tear down until it was purchased by Enos Park Development, an organization formed to regentrify the area.  In 2012, it was sold to a family for a nominal price with the agreement they would live there and restore it to historical standards.

We had the pleasure of meeting the new owners in November and they very kindly gave us a tour of the house.  We listened as they told us of four solid years of hard work, repairing, restoring and redoing everything to make it their home.  They listened to our stories about the history and our memories of the house.  We even shared some old pictures to help in their restoration efforts.  I don’t believe there’s a single inch of the house that hasn’t required some attention.  When they replaced the roof, they removed SEVEN layers of shingles.

The Zillow estimate says about $76,000.  I can’t even begin to calculate the return as they have spent more in repairs than $76,000.  And there is much, much more to do.

Even so, it was great to see the old house getting a second life with a loving family.

Conclusions

Imagine a scenario where your primary residence makes up the majority of your net worth.  Most of your money would be tied up in something that’s illiquid, has high transaction costs, mandates regular significant cash outlays and upkeep, and maybe, just maybe, outperforms the inflation rate by the slimmest of margins.

Doesn’t sound like much of an investment, does it?

If this had been our situation, I can guarantee we wouldn’t be FIRE now.  For this reason, when we were calculating whether we could leave our careers, we didn’t include our home in our net worth total.

The actual after inflation returns look very skimpy or non-existent in the four examples I gave.  In the case of my Grandpa’s home, the new owners, even with the bargain price and grants, have little hope of seeing any return at all.

Admittedly, this hasn’t been awfully scientific, and uses a very small sample.  And importantly, this isn’t necessarily an argument for renting.  We have been happy and content owning our home.  It’s cost us a small fortune, and major opportunity costs, but in the end we’re still happy with what we have.

It’s hard to put a price on that.

Has your homeownership experience been different?

 

Destroying The Reasons For Buying A New Car

The American car buying public bought 17.5 million cars and trucks last year.  Let’s think about that for a moment. The average price of a new auto has climbed to over $34,000 dollars.  Multiply that by 17.5 million, and you get a big number; a really big number. $595,000,000,000 to be exact.

It seems like we may be in the midst of a car buying frenzy. The most recent low for the auto industry was 2009 where about 10 million cars were sold.  Last year was about 70% above that level.  Obviously, 2009 was a very bad year (even though 10 million were sold), but what factors account for the meteoric rise?

Has the population soared 70% (bigger pool of buyers) since 2009? Nope.

Were cars built in the last few years extra crappy, and 2016 was the year we bought new to replace said craptastic cars?  Nope, cars are pretty much reliable as ever.

Did the manufacturers slash prices going for volume increases?  No again, the average new car price is over $34,000 an all time high.

Okay…are monthly payments suddenly more affordable?  I think you can guess this one.  The average new car monthly payment is $503; another all time high.

For the buyer, is this money well spent?

This is a curious state of affairs.  None of the logical reasons seem to explain why we would buy so many new cars, and pay such a high price.  We just might not be dealing with logic though.  I personally consider a new car a want, and in dealing with wants, logic frequently fails.

As I’ve declared before, I’m never buying a new car again. But what is the reasoning as to why so many others are purchasing new?

Could buyers be making flawed assumptions influencing their decisions to purchase new cars?  Car manufacturers spent $8.71 billion last year on ads to influence buyers.  It must have some effect or they certainly wouldn’t spend such a mind-boggling amount.

Cars and transportation costs are the second largest expense of the average American household.  Only housing costs are larger.  You can find posts from the financial community (especially the frugal community) everywhere online expressing the opinion that buying a new car is extra damaging to your financial health.

So, we thought we’d look at some of the top reasons people buy new cars; a few counter arguments; and see what conclusions we can come to.

  • New car reliability.  One of the most oft stated reasons for buying a new car is reliability; presumably when compared to an older model which is beginning to have mechanical issues or major breakdowns.  A new car is naturally believed to have better reliability than a used car.  Is this a case of the car buying public making an assumption without actually checking the facts? Possibly.

Recalls due to manufacturer defects are actually rising and hit an all time high in 2015.  Many of the recalls involved cars a few years old.  But it’s important to remember a new car is rarely replaced every year.  On average buyers keep their new cars about 6 years.  With the incredible complexity of new cars there is actually a good chance you will experience a recall due to a defect in the average time you own a new car.

In this instance, it may be better to buy used.  When you purchase a used car you can reasonably expect any current recalls to have been corrected.  May be a good idea to double-check though. You can also better verify the long-term reliability of a specific model that’s a few years old.  Kelley Blue Book, Edmunds and Consumer Reports all regularly rate different models for reliability.

A useful rule given to me by a mechanic friend was to never buy the first two years after a major model redesign.  Gives the manufacturer a few years to work out the kinks, so to speak.

  • Less maintainance and repairs.

 Anyone can buy a Ferrari, but only rich people can maintain it”  (quote from brother-in-law who owned one)

This is linked to reliability.  One could assume that a new car should be more reliable; therefore it should require less maintenance and repairs, at least at first.

I believe this reason comes to the forefront when someone has just been hit with a large repair bill.  The thinking process goes:

“I was just blindsided by a $500 repair bill!”

“This sucks!”

“Stuff is gonna keep breaking.”

“I’m tired of my car anyway.”

“I need to start looking for a new car.”

Indeed, we’ve experienced this faulty reasoning before when mentioning some repair bills on our well used cars.

“Your car is really old, when are you getting a new one?”

“Stuff will keep going wrong, if you get a new car you won’t have to worry about it.”

“Your car has 1XX,XXX miles on it, you’re wasting your money fixing it!”

Our point of view is that maintenance is to be expected with older high mileage cars.  The high cost of new just isn’t worth it for us.  The average payment now stands at over $500/month.  Interestingly, that’s more than my monthly retirement plan deduction when I started my career.  Over the course of a year, that adds up to $6,000 dollars and doesn’t include the higher taxes and insurance that go hand in hand.

For the sake of argument, let’s say I spend $500 each and every year making repairs on our older car for as long as we own it.  I’m coming out ahead by $5,500 every year! Let’s go crazy and say I have two $500 repair bills a year on our car. I’m still ahead by $5,000 a year.

Let’s go totally over the top and use our highest repair bill ever. When our 2004 Nissan XTerra flipped 100,000 miles, it cost almost $2,000 which included a new timing belt, fluids, brakes, a minor oil leak fix, and A/C system repair.  If by some curse of the auto gods, the Nissan required $2,000 worth of work every year, I would still come out over $4,000 ahead each and every year.  And the XTerra’s still going strong 88,000 miles later.

Update: As I was writing this, the old XTerra decided to bluntly remind us that mechanical things do wear out.  It required a $1,000 repair bill to get it back to its old self. We sternly reminded it that we expect it to do better in the future.  Come on, man!  190,000 miles…It’s almost brand new!

  • Safety features.  Fact: all cars are safer than they used to be.

Fact: while systems like forward collision warning, lane departure, automatic emergency braking and backup cameras are impressive, they aren’t foolproof.

Fact: no safety feature will cancel out bad distracted driving habits.

Fact: your most important safety feature is your seat belt which has been around since…forever.

  • New car warranty.  People like the idea of being covered by the manufacturers warranty.  Be aware there are different warranties with different coverages and exclusions which vary by manufacturer.  You must carefully read all the fine print to see what is and isn’t covered.

The first type is a powertrain warranty which covers the drivetrain components of your car.  Engine, tranny, etc. Manufacturer defects are generally covered, but normal wear and tear isn’t. This warranty is void if you abuse your car or don’t follow the recommended service schedule.

Next is a bumper to bumper warranty which covers most systems not included in the powertrain. Again, defects are generally covered, normal wear and tear, no. Neither are parts that normally wear out (brakes, etc.).  And again, obvious abuse isn’t covered.

Sometimes the warranties are transferable on a used car. It’s always good to check, you may be surprised to get that little bonus.  Note that a dealer pre-certified used vehicle may not have a warranty unless specifically spelled out in the purchase agreement

The drivetrain warranty is usually shorter duration than the bumper to bumper warranty.  Buying an extended warranty is a minefield.  Coverages and costs vary widely, and is usually not recommended.

  • Better Fuel Economy.  Intentions here are noble, but aren’t backed up by the data.  While long-term fuel economy is up, it actually fell slightly in certain months of last year. Gas is super cheap in most of the country, so fuel economy is less of a selling point.

If you look at individual model sales, many of the largest gainers were thirsty trucks, crossovers, and large SUV’s. The most fuel-efficient autos: Prius etc., actually had large sale decreases.  In certain parts of the country, electric vehicles are gaining traction, but they have a pretty small sales base right now.

We’ll just point out:

a lot people drive in stop and go traffic, so their fuel efficiency is probably worse than the figure stated on the sticker.

I drove a 21 year old Nissan Sentra that regularly got 34 to 35 MPG.  This is better than the majority of cars sold today.  I filled up once every 4 weeks.

when or if gas ever rises to $4.00 bucks a gallon again, there’s going to be some unbelievable bargains out there on gently used trucks and SUV’s as people drop ’em faster than you can say “…$100 BUCKS FOR A TANK OF GAS IS FREAKIN’ KILLING ME!!”.

  • New technology and electronics.  Buyers tend to want the latest technology and gadgets.    But again, do their actions back up their words?  Sort of.  Surveys found 20% of new car buyers have never used almost one-half of the technology features in their new auto.  One in five buyers either didn’t want, haven’t used, or didn’t even know their car was equipped with a specific feature.  Some of the fancy electronics and gadgets tend to be plagued with defects also, affecting reliability.  Faulty electronics is one of the largest areas of complaints with new cars.

Another concern is the repair bill when electronics are damaged or fail.  A minor bumper blemish suddenly becomes a lot more expensive when it involves a sensor or backup camera.

  • Zero percent financing, 0.9% financing and leasing.  Saving the best for last.  New car buyers love these programs because they seem like great deals…and sometimes they are.  Car dealers love them because it gets buyers in the showroom.

Of course, not everyone qualifies for cheap financing. Usually it requires a pretty good credit score somewhere in the low to mid 700’s.  Also, accepting the financing may cancel out cash back programs offered by the manufacturer, which may be the better deal.  The only way to know is to run the numbers before you get to the dealership.

If you focus on the financing only, you may wind up being penny wise and pound foolish.  The dealerships have many weapons in their arsenal and they aren’t afraid to use them.

Now for leasing…leasing does make sense in some cases. If used mainly for business, business owners may be able to deduct it.

For individuals, it’s a mixed bag.  You are basically renting a car long term, so the payment is much less then actually buying. You can upgrade to a car you wouldn’t be able to afford otherwise (nearly 50% of luxury cars are leased). You can get a new car, with corresponding new car smell about every 3 years or so.

On the down side, constantly leasing is more expensive in the long term than buying a car outright.  If you need to get out of the contract for any reason, it will cost you. There are mileage restrictions that if you exceed will cost you.   There are penalties for excessive wear and tear. And as long as you’re leasing, you’ll have cash payments going out which could be invested instead.

We’ve never leased an auto before, so we don’t have anything to base a judgement on.  We can only state for a fact,  the feeling of paying off an auto is not to be understated. The only thing that could feel better is paying off a house!

For me, I’ve come to realize that most people view their cars very emotionally.  I used to be one of those!  I loved cars, and in my mid-20’s had four* at one time (before marriage).  While I still appreciate cars, my financial take on them has evolved quite a bit.  They are expensive, and take time and money to maintain.  Rarely can they be considered an asset.

It’s not all bad though.  If you are willing to do a little homework; you can find reliable, well maintained, fuel efficient used cars for a fraction of the price of new.

The 20 something me would probably laugh, shaking his head while roaring off in a cloud of blue smoke.

*For those who are interested, they were: a 1974 silver Corvette with a 454 big block engine (11-12Mpg), a 1972 blue Javelin SST (my daily driver and horribly unsafe), a 1985 Nissan 300ZX turbo (bought new for $15,000…damn inflation!), and a Fiat X19 w/targa top (people would regularly roll their windows down at stops and ask what I was driving). (I had another Javelin SST which was used for parts.  I don’t really count that since it wasn’t driveable).

Lets hear it!  Do you believe in buying new or used? Have you ever leased a car, and what was your experience?

How To Be Happier

We love to people watch.  One of our favorite pastimes is watching random people go about their normal day and observing their behavior and demeanor.

Our attention is always drawn towards the person exuding a positive, happy attitude.  They are usually smiling, bubbly, and engaging.  They seem to be surrounded by an aura that naturally attracts other people.

So some fortunate people seem to have it dialed in.  How do they do it?  And more importantly, how can you become happier?

Raising your happiness set point.

Scientists and psychologists have done studies on our happiness levels and what you can do to improve them. Research shows your genes play a large part in determining your happiness set point; which is a base level of happiness that’s built into your personality.

Most psychologists believe you can actively pursue happiness to raise your set point permanently.  You do this by intentionally minimizing negative emotions like anger, resentment and pessimism; and fostering positive emotions like gratitude, empathy and compassion.

Lets look at some of the steps you can take to start feeling happier today.

First, 4 easy ones.

  1. Exercise.  Don’t worry, you don’t have to train for an Ironman competition.  Even mild exercise has been shown to have a positive effect on your happiness level. Exercise can help relieve anxiety, it releases endorphins in the brain which improves happiness, and can promote improved body self-image.  Even with little or no actual change in your body composition, your perception of body image still improves.
  2. Smile.  A smile is universally recognized by every person on this planet.  You can even fake it ’til you make it.  Even though you’re hungry, tired and rushed…try smiling. You’ll probably be surprised by the results; an uplift in your mood and the positive reaction of others.  We have a unique feedback loop involving your brain and the smile reflex.  When your brain experiences joy or pleasure, it signals your facial muscles to smile. When you smile, the signal loops back to your brain transmitting feelings of happiness reinforcing the circuit.
  3. Get enough sleep.  Sleep is one of the bodies most important recover and repair processes.  Short-changing yourself on sleep affects mood, and the brain’s ability to recall positive thoughts.  In your brain, negative stimuli are processed by the amygdala.  Positive thoughts are processed by the hippocampus. Sleep deprivation hits both areas: but the hippocampus is hit especially hard. Sleep deprived people have trouble recalling positive memories: no problem recalling negative memories.
  4. Eating properly.  A properly balanced diet is so important. Americans junk food heavy diet wreaks havoc on blood sugar levels.  The constant skyrocketing of your blood sugar followed by the inevitable crash, leaves you feeling irritable, tired and more susceptible to negativity.  Hell hath no fury like a person with low blood sugar!

Other steps to take.

5. Choose to be happy.  What does that even mean?  Can you choose happiness?  Psychologists know that you can reprogram your brain to make yourself happier.  You accomplish this by making a conscious effort to choose attitudes and behaviors that lead to happiness.

You may have heard the old Cherokee parable about the two wolves.  An elder speaks about each person having two wolves inside them: a good wolf which represents joy, light, hope, peace, love, humility and kindness.  And a bad wolf which represents evil, anger, darkness, despair, sorrow, regret, greed, self-pity, and pride.  Every day they battle for dominance.  When asked which wolf will emerge triumphant, the storyteller states, “…the one you feed”.

I would add that the bad wolf is also crafty and devious…a shapeshifter…never appearing in exactly the same form. You must be constantly on guard as it seeks out any advantage to gain the slightest toehold.

6. Practice gratitude every day.  This is such a simple step and only takes a few moments of time.  Everyday pause and focus on something you are grateful for. Boom..Done. You’ll find that once you express gratitude for one thing, another thing will soon appear.  And another.  Soon, the feeling of gratitude will start multiplying like a field of dandelions in springtime.

Just this morning, I contemplated gratitude for having plenty of food to prepare a delicious breakfast, a sunny pleasant day with a possible trip to the beach, and the thought of my beautiful wife sleeping peacefully in the next room while I write this.

I remember reading a great story of gratitude involving Paul ‘Bear’ Bryant, the legendary Alabama football coach. Each year, when the new football recruits arrived at school, the first thing coach Bryant would do is point them towards a bank of phones.  He would tell the sometimes confused recruits that they needed to call and thank someone, be it parent, grandparent, high school coach, teacher or mentor.  He would explain that the recruit couldn’t have arrived at this point in life without the help or kindness of someone else.  This simple act of gratitude was genius.

7. Remember that money can’t buy happiness.  Money can’t buy true friends or love.  Things are just that, things. If you choose to focus on things, rather than the experiences that actually count, your happiness will be short-lived and unsatisfying.

8. Emphasize relationships and friendships with people who care about you.  There’s a saying that you are the average of the five people closest to you.  Inverting this, if you’re always a Debbie Downer, you’ll attract other Debbie Downers.

If a friendship introduces drama and conflict in your life, maybe it’s time to search for a more positive relationship.

Be more engaging, strive to be a better listener.

And resist the urge to gossip when everyone else gossips around you. There’s a nasty little thing called ‘spontaneous gossip transference‘ which is the tendency of someone listening to gossip to assign the same bad traits to the speaker.  Maybe dear ol’ mom was right…if you can’t say something nice about someone, don’t say anything at all.

9. Engage in meaningful activities.  People thrive on meaningful challenges.  Whether that’s a hobby you love, building something, volunteering, training for a marathon or whatever, people are usually happiest when they’re engaged and in the zone.

Unfortunately, the most common leisure time activity is watching TV. The average person watches about 5 hours per day, even though this produces some of the lowest levels of happiness.  Mindless web surfing is probably a close second (oops…guilty).  Get out of your house and get involved! Take a class, volunteer, learn a new skill…your happiness will thank you.

There’s a common thread to all these steps. All the things you can do to increase your happiness don’t really involve money.  You can focus on gratitude, good friendships and learning better habits.  You can exercise, eat better and get the proper amount of sleep.  All these things are free and you can start today.  What are you waiting for?

I’d like to prattle on, but the sun is shining, the wife will be up soon, and the beach is calling…Ciao!

we answered

Over One & One Half Years Of Freedom. Any Regrets?

It’s been over a year and a half since we resigned from our careers. As the time to go got nearer, we were nervous and elated at the same time.  Would we run out of money in 6 months?  Would we have to crawl back to our jobs in sackcloth and ashes begging forgiveness?  Would the Work Until You’re 65 Enforcement Squad (WUYES) compel us like Father Merrin in The Exorcist, to return to work kicking and screaming?

Thankfully, none of our fears came true.  We began our year of travels to Iceland and St. Lucia, while crisscrossing over half the US.  We have both come to the conclusion that our old way of vacationing, four individual weeks taken separately over the year (but never during the holiday season), pales by comparison. We’ve been able to experience exciting new places, reconnect with family and friends, and take time to enjoy life.

One of the questions we’re asked all the time is “do you miss it?”.  It meaning our careers.  Sometimes the person asking phrases it somewhat delicately, like they expect us to break down sobbing, clutching each other…”yes! YES!…we miss it terribly”.

All kidding aside; our answer is always the same.  “We miss some of the people we worked with, but not the jobs”.

This usually elicits a nod, a look of relief and occasionally an expression of hope about them gaining their freedom sometime soon.

Mrs. Frugalbeach seemed to enjoy her job more than me. (correct me if I’m wrong, honey)

Mrs: “I did…now continue”.

She helped run a federal program at the local school district.  There were frequent deadlines, audits, endless reports, meaningless meetings, a long commute, and a few unpleasant people she had to interact with.  But overall, despite frequent bouts of venting, she seemed to mostly enjoy her job.

My job was a different puppy.  Long hours, dealing with sick customers and insurance companies, demands from higher-ups for more responsibilities (I turned down offers of a management position three times…being a manager once before was plenty, thank you very much!), and the worst of all, plain old vanilla boredom.

After 31 years, my career had become boring and mildly depressing.  I witnessed unnecessary surgeries, botched procedures (never, ever, ever submit to back surgery except as a last resort), and misdiagnoses.  There was also endless paperwork, audits (sometimes 3 or 4 a month), uber nit-picky inspections, co-workers calling in sick, computers crashing, and dozens of other small daily annoyances.

My co-workers and I tried to keep it fun and interesting, but everyday was a replay of the one before.  I felt like a replaceable widget inside an uncaring machine inside a smoke belching factory.

Anyway, thanks for that bit of depressing introspection, Mr. Frugalbeach!

Now would be a good time to see if we truly have any regrets since leaving our careers.  And the answer is yes…here they are in no particular order.

  • We probably should have paid the house off.  We have a very small balance left, but it would have been better to pay it off and just be done with it.  Doing so would have cut our monthly expenses by nearly half.  It will be gone by March 2018 unless we bite the bullet and pay it off earlier.  We look forward to being free from all debt soon.
  • We should have padded our savings more.  We essentially booked over a years worth of travel which had to be paid for.  Even though we travel for far less than we ever did when working, a years worth added up.  We both would have been more comfortable with a larger cash cushion.

That’s all I can think of for now.  To be fair, let’s look at what we don’t regret..

  • Having to get up at the butt crack of dawn to muddle thru another day of work.
  • The constant pressures, petty annoyances, and boredom of work.
  • The need to spend money just for the sake of spending money
  • Having to deal with people you don’t really care for
  • Never having the time to do the things you really want to do.
  • Everything else negative that came with working for a bureaucracy/large company.
  • We now have time to do pretty much what we want without running around like crack addicted mice in a maze.
  • We have time to help others with projects.  This fall I spent a few pleasant weeks helping one brother build a large workshop.  In return, I learned some useful carpentry skills.
  • Speaking of skills, we are learning to dance!
  • Getting to spend 3 wonderful weeks with Frugalbeach Jr. in St. Lucia this Christmas season.

I could go on, but I think you get the idea.  We have a few very minor regrets, while having way more things we are grateful for.

UH-OH!…how could I have forgotten this one?

The single biggest regret we have is not waking up to the fact we could have had our freedom years earlier.  A few simple changes would have freed us from the cage we had locked ourselves in.  We always had the key in hand, we just needed to use it.

Do you know of anyone who called it quits early?  Did they have any regrets?

Minimalism Lite

Minimalism is defined as a style, or technique that’s characterized by extreme spareness or simplicity.  When referring to lifestyle, the best definition I can find is, the intentional promotion of the things we most value, and the removal of everything that distracts us from it”.

The things it refers to include, but are not limited to: a rejection of the ‘keeping up with the Joneses’ lifestyle, personal optimization, and focusing on what truly makes you happy…experiences, not material possessions.

Many people have begun following minimalism in the last several years, rejecting a modern lifestyle of excessive materialism and consumerism.  You can see it in the ‘tiny homes’ phenomenon, month-long spend nothing challenges, the refusal to take part in Black Friday shopping or the overcommercialization of the holidays. People want to simplify their lives and focus their time and energy on something other than dying with the most things.

Minimalism can get pretty extreme, with individuals only owning 100 items or less, selling or giving away nearly everything they own.

The minimalists justify their beliefs by reasoning that modern living with a focus on material items causes high levels of stress, wrecks your finances, and drains your time and energy maintaining them.

I believe these are all valid reasons.  Having an excessive number of items doesn’t necessarily increase your general level of happiness much.  Your level of stress does increase though.  Studies suggest people are more stressed with making decisions when a plethora of choices are presented to them.  When you have a hundred or more articles of clothing, it’s more difficult and stressful to choose an outfit to wear.

The expense of purchasing, maintaining, and storing a large number of material items is very real. Uncontrolled spending can lead to debt and the risk of losing control over your finances.

The average home has nearly tripled in size in the last 50 years and contains 300,000 items!  Yet, it’s estimated you never use 80% of these items.  An interesting exercise would be to walk thru your house, with pen and paper in hand, and perform a quick inventory of the contents with a rough guesstimate of the cash you spent to obtain them.

Before we left our jobs, and before we even understood what minimalism really was, we performed a pretty significant downsizing of our possessions.  We went from 4 cars to 2 cars, reduced the number of clothes we owned, and decluttered our house room by room (we had two large rooms which were used mainly for storage!).

Did you ever waste time searching for something in your house, knowing you had seen it, but being unable to locate it because you have a veritable ocean of stuff?  We did…All. The. Time.

It wasn’t easy, it took a great deal of time and effort, but we would gladly do it again.

We enjoyed a three-fold benefit from the effort we expended.  We cut expenses allowing us to increase our savings rate, made some cash with items sold on eBay, and reduced the stress of dealing with all the extra stuff.

An article of clothing you haven’t worn in a year or more? It’s gone, sell or donate it.  A shelf full of knick- knacks or collectibles collecting dust?…Precious Moments, I’m looking at you.  Unless you really enjoy them…gone. Books you haven’t read in years?  Time to let someone else partake of them.  Sell them on Amazon or donate them to your local library. The idea is, you need less than you think.

Are we ready to go whole hog and slash our possessions to 100 items?  In a word…NO.

We are onboard whole heartedly with anyone wanting to get rid of useless or unnecessary stuff.  If that’s everything you own, or cutting down to 100 items, more power to ya.

We still have plenty of stuff to get rid of.  But we won’t set a goal of a specific number we have to reach to be happy. If we reach our comfort zone with 1,000 or 10,000 or even 100,000 items we’ll be thrilled with that.

I guess you can call us minimalists lite.

What do you think?  We’d LOVE to hear your minimalist/decluttering stories.  Was it worth it?  

Tackling The Closet Project…Finally

Before we left on our current round of travel, I finally got around to doing something I’ve been meaning to do for a looong time.

For years now, my closet has needed a new paint job.  The walls were filled with dozens upon dozens of hanger marks.  They were really in rough shape.

Truthfully, I wasn’t too motivated to take on the project at first.  Of course, I was going to have to take everything out to get at the walls, and I had ALOT of stuff.  So much in fact, I kinda had to lean in from the doorway to reach things.  Yep, I couldn’t really stand inside my closet.

I was also hesitant because we have the Closetmaid brand wire shelves in all our closets.  And they are a major pain to paint around.

Why not remove them you ask?  Good question…the answer is that they are held in place by small plastic clips and hangers.  When we repainted another closet a few years back, I broke over half of said clips trying to remove the shelves.  Our home is going on 22 years old, the racks are original, and plastic tends to get sort of brittle with age.  I didn’t want to make the walls worse looking re-drilling over half the holes already in the walls.

In the end, I wimped out and deciding to paint around them even though it took waaay more time.

Getting started…What I Found

First, I got a couple of large trash bags.   In the process of moving everything out, I gave it a quick once over to see if I could toss it.

A bunch, and I do mean a bunch, of my old work clothes, that shall we say were ‘past their prime’, were tossed. They were either fraying or too stained to rescue.  I probable threw out 75% of what I once regularly wore to work.

Just so you don’t think I’m a total slob who didn’t care about my appearance, my work required us to wear lab coats.  The dress code was dress pants, dress shirts & ties, and dress shoes (no tennis shoes).  You were over 50% covered with the lab coat, hence you could get away with wearing something that was slightly less than perfect.

I also had several grungy outfits I wore when doing messy projects.  Several pairs of embarrassingly torn jeans, paint stained shirts, ripped and worn tennis shoes, etc.  I condensed these down to one outfit.  One pair of old jeans, one old shirt, and one pair of junky tennis shoes I didn’t care getting filthy.

Other Fun Things Discovered

  • A pair of gray jeans I hadn’t worn since before our son was born (21 years)…(tossed).
  • Several new dress shirts, still wrapped in plastic with the tags attached.  I know they had to be at least several years old (save).
  • Several items of clothing belonging to Mrs. Frugalbeach (returned to their proper owner).
  • A pair of Clarks dress shoes that disintegrated when I picked them up.  The wife has had this happen to a few pairs of her Clarks, but this was kinda surprising to find in my closet.  Evidently, the soles of certain Clarks shoes deteriorate if you don’t wear them occasionally.  I may have 10 pairs of shoes total, and I thought I wore them all at least once in a while.
  • Ties…lots of ties…that for the life of me, I never remember wearing.
  • Sweatshirts, sweaters and other cold weather apparel that hadn’t seen the light of day for nearly 20 years.  When we married, we moved from central Illinois to the warm, sunny south.  95% of my winter clothes quickly migrated to the back of the closet, there to sit, lonely and neglected.
  • Stretched out sweatpants I couldn’t wear if I wanted to.
  • Boxes and boxes of our son’s grade school papers we had saved.
  • Leftover construction materials?…from a bathroom remodel 6 years ago.
  • Several dead bugs chilling in the corners…Yuck!

Most of this part was pretty easy.  Anything stained, faded, ripped or otherwise unwearable went in the bag designated trash.  Anything I knew I was never gonna wear again and in decent shape went in a donate bag.  It was running about 10 to 1 in favor of the trash bag.

I didn’t keep an exact count, but probably 35% to 40% of the stuff in my closet was gone in one fell swoop.

Somewhat surprisingly(?), it felt really good.  I felt like I was getting a double benefit, improving a small corner of our home and decluttering at the same time.

Once everything was out, I stepped back and took a good long look.  My closet is huge!  Sure, it was dirty and dusty and marked up, but it looked cavernous!

Before starting to paint, it needed a thorough cleaning.  I swept up several years of dust, wiped down the shelves which were sticky (again…yuck!), and washed the walls to try to remove the worst of the marks.

Now, I could finally start painting.  I had an almost full gallon of paint leftover from another small remodel. Sometimes the renovation gods smile upon you: it was a sealer coat paint which should prevent any marks from coming thru, it was about the same color already in the closet, and it was ‘free’.  A frugal triple play!

Once everything was all prettied up, the slightly harder part began.  I went thru the remaining 60%-65% of my clothes which made the first cut, piece by piece before placing them back in the closet.  I really looked them over carefully to determine if they still fit, were in good shape, no fraying edges, or had something I missed the first go around.

If it passed inspection, I asked myself one simple question. What are the chances I’m going to actually wear this in the next year?

I probably cut another 10% to 15% of the items using this technique.

We had a pleasant couple of hours reminiscing, going thru our sons grade school boxes.  We condensed it down to 2 small boxes of papers, letters and projects we just couldn’t throw out.  Strict minimalists would disapprove…our hearts heartily approve.

As I started moving items back in, I didn’t just pile everything haphazardly.  I sorted, matched items as best I could, and tried to organize according to seasons.

When I finished, my closet looked incredible!  I was able to get rid of a ton of hangers.  My clothes were now hung neatly with even space between them.  No more 3 foot high stacks of t-shirts. Everything organized and in its place.  Items were within easy reach and I could actually see what I had.

Best part…I could step into my closet and pirouette freely…what a feeling!

The whole point of this wasn’t only about the closet.  It got a thorough cleaning and a fresh coat of paint which was desperately needed.

But for me, I like to think I finally did something which I was putting off for a long time (jeez…I am a procrastinator).  I improved our house even if it was only one closet (small victories count).  I savagely culled the jungle of stuff that was in my closet of items I didn’t need and was never gonna wear.

When I open the door now, I pause and think ‘daay-yam, that looks good!”

Postscript

At the end of summer we embarked on our latest series of travels.  We are currently renting our house again, which required us to empty our main closets.  So, that was kinda short-lived.  The good news is everything in my closet fit in a small spare room closet and a large Rubbermaid container.  If and when we move back in fulltime, I estimate it will take me less than an hour to get my closet back to its former state of awesomeness!

Then we can start on Mrs. Frugalbeach’s closet!

How about you?  Share a similar project or decluttering frenzy and how you felt.

What We’re Looking Forward To For The New Year

It’s always fun to peek a little into the future this time of year and examine our expectations for the upcoming new year.

I want to go over some of the things we want to accomplish now, AND the steps we will take to complete them.  Because we all know most ‘resolutions’ fail unless they are followed up with sustainable action.

#1 REVIEW AND CONDENSE SOME OF OUR FINANCIAL ACCOUNTS

We’ve been meaning to do this for a while now.  Plain and simple, we just have too many accounts spread all over creation.  I still have 3 accounts with the job I left over a year and a half ago.  We also have multiple personal accounts, 3 or 4 HSA accounts, and others.  Tax time will be here before we know it, and it’s a hassle getting everything together.  We need to decide if we need to move these, where to move them if we do, and if we need to do any rebalancing.

We’ve already started by closing one secondary bank account and combining it with our main account, but need to do much more.  Honestly, it’s been tough since in the year and a half we’ve been traveling, the longest stretch we’ve been home is about 6 weeks.  Other priorities took precedence and this was put on the back burner (whoever said you’d get bored in early retirement was crazy).

We’re planning to gather all of our statements and info when we return on Jan. 28th.  We will need to review and make sure we’re happy with our choices and allocations and that they make financial sense.  If we can combine some accounts, without triggering any tax consequences, all the better.

Less to keep track of, less to gather around tax time, maximizing our finances…winner,winner, chicken dinner!

#2 GETTING IN BETTER SHAPE

I know, I know…oldest cliche ever.  The Mrs. works out more regularly than me.  Truth is, I’m not in the shape I want to be.  I’m not overweight, so no diets or vague promises to try to lose 10lbs.  Don’t worry…keep reading…I promise to post no before and after pictures. Nobody wants to see a half-dressed, 50 some year old guy…especially me.

I need to work on strength training and flexibility which is crucial if I want to live to be 100 (hint…I do).  This hasn’t been the easiest to do whilst traveling.

  • Excuse #1  Gyms and weights aren’t always available
  • Excuse #2  See excuse #1

The solution?

I actually have already got an early start on this.  After a little research, I’ve started a workout involving one armed push ups, one legged squats and lots of burpees.

My first workouts were pretty pathetic and painful to watch.  Eye opening moment; I told myself I was in decent shape because I wasn’t overweight.  My attempts to do the above exercises told me otherwise.  Man, I forgot I had those muscles.

The average person loses about 1% of their muscle mass each year after age 40.  Weight and resistance training helps to maintain and build muscle mass.  Most of the mobility issues of old age are due to muscle loss.  I don’t want to go down that path.

Up to now, I would work out for a period, but then slack off for whatever reason…no gym, too tired, just don’t feel like it, the Walking Dead is getting ready to start…No. More.  Excuses!

I’m not letting myself off the hook this time.  Even though I’ve had to start with just a few reps at a time, I’m actually looking forward to making progress in my fitness level.

#3  EATING BETTER

This one correlates strongly with goal #2.  I give myself props for eating way better than when I was working. Strange thing, if you just listen to your body, you can tell if you’re eating right or not.  When we are driving long distances or flying is when fast food (gasp) sings its siren song the loudest. Unfortunately, when succumbing to the temptation, I can really feel it.  After a day or two of road food, I usually feel pretty awful.

Our  present trip to St. Lucia involved waking up at 4:00AM (thanks to multiple flight changes by American), a not-so-good airport breakfast wrap, sodas (we rarely drink soda) and an ok cheese and cracker plate (expensive), then a pizza and more Cokes when we got to our St. Lucia villa 11 hours after getting up because we were too tired to think straight.  I felt it for the next two days.

We have a Turismo insulated picnic backpack which doubles as a carry-on, and plenty of time to fill it with healthful food and snack choices.  No more junky highway or airport food.  I’m tired of not planning ahead then paying the price.

#4  LEARNING TO DANCE WITH MRS. FRUGALBEACH

This one’s gonna be fun!  Mrs. Frugalbeach is a big fan of Dancing with the Stars, and has been saying we should learn to dance for several years now.  I’m finally calling her out on this one.

We’re not really signing up for official dance lessons. Let’s just say I’m ‘rhythmically challenged’.  With us traveling, it would be nigh impossible to show up with any regularity for dance classes with a formal instructor.

We are starting with the frugal choice, of course, YouTube!  We’re going to learn the Shag, which is the official state dance of South Carolina.  (I don’t know if that’s true, but it sounds good)

If and when we master that, we will try to learn another dance and go from there.  Should be a blast, and I have another excuse to get close to Mrs. Frugalbeach.

Conclusion

So, if everything goes as planned in 2017, we should simplify and tune up our finances, increase our physical fitness, tweak and improve our eating habits, and learn a fun new skill, dancing!  We can’t wait!

2017 should be a great year!

What do you want to accomplish this year, and more importantly, what steps are you taking towards your goals?

 

 

Thank You, Mom & Dad…

The holiday season is upon us, and about this time each year I pause and contemplate the progression of my life.

I’ve lived a pretty fortunate life so far: early independence from mandatory work, okay financially, Frugalbeach Jr. is about ready to start blazing his own path thru life, and I’m married to my best friend.

Gratitude is good for the soul.  So, I want to express a heaping helping of gratitude to two of the people who helped me become the person I am today.

My parents just celebrated their 60th wedding anniversary this November.  It’s time to reminisce about what I remember growing up and the lessons I carry with me to this day.

My Mom and Dad met thru mutual friends in their mid-20’s. Dad had gotten out of the navy and was just starting a new career.  Mom was working and traveling, even spending some time in Hawaii, which was unusual in the early 50’s.

After dating and falling in love, they were married in 1956.  They started a family immediately, with my older sister arriving the next year.  A succession of children followed, eventually growing to six; 4 boys and 2 girls.

Looking back at pictures from this time, it was obvious they were so happy.  Ear to ear smiles and laughter are the highlights of every photo.

Finances were probably pretty tight in the early years with my Mom’s decision to put her career on hold to raise our growing family.  She once told me that my Dad’s salary in the 60’s was around 7 grand a year.  AND she added, they expected him to wear a suit every day!  (hard to believe, but that was middle-class money in the day…about $53.000 to $56,000 in today’s dollars)

With a quickly growing brood, my parents were both frugal before it was “fashionable”.  Mom took the lead, writing down every penny that was spent and keeping a meticulous budget.  Every dollar had to be accounted for.

Lest it sound like penny-pinching, we never really felt deprived in our childhood.  We had plenty of food to eat (at home of course, we rarely went out to eat), adequate clothing (lots of hand me downs), solid education, sports, piano lessons, and so on.

Being a child, I didn’t realize til much later my parents almost never spent money on themselves.  They seemed to be in agreement their money would be spent on raising and educating us.  It would be all too easy to characterize this as ‘sacrifice’ on their part.  But I know they never looked at it that way.  They were just doing what they thought was right and necessary.

This meant:

  • Our first house was a compact 3 bedroom, 1 bath ranch with an unfinished basement.  There was my parents bedroom, 4 boys in a 2nd bedroom, 2 girls in another, one bathroom for 8 people!, kitchen, dining room and small den.  There was also a one car garage Dad built himself to hold the price of the house down.
  • No new automobiles.  As far as I know, my Dad never bought a new car for himself.  He never wanted nor saw the need for a car payment.  Once all the children had left home, they did finally purchase (with cash) a new Buick for my Mom to drive.
  • Anyone remember jean patches on knees?  Clothes for the children included liberal doses of hand me downs.  I shared a closet with my older brother and we split a 4 drawer dresser, 1 drawer for underwear & socks, and 1 drawer for personal effects.  Since Mom stayed at home while we were young, she almost never had new clothes until she went back to work.  Rose colored glasses moment…we recently found a letter I wrote in college (Mom never threw anything away) requesting new socks as mine all had holes in them.
  • We ate out sooo infrequently, it was a real treat when we did.  Mom was a great cook, so we didn’t even miss it.
  • Our furniture was pretty basic and mostly bought second-hand.
  • No Disney trips here.  Our vacations were either staycations, or summer trips to my grandpa’s fishing cabin on the lake (i.e. free).

Even with such a large family, something was always set aside for savings.  Mom especially, was always adamant that you had to save something, no matter how small.  I still remember the fall day I was sick and stayed home from school.  I asked her an innocent seeming question about money and she sat down and talked to me for what seemed like hours, describing the whole process of saving, and more importantly, investing.  She was a careful and conservative investor.  I probably sat there, mouth agape, as she waxed poetic about blue chips, dividends and the stock market.  I couldn’t believe it!!!  You could put your money to work and watch it grow by doing almost nothing.  It seemed too good to be true!  Soon thereafter, I purchased my first stocks at age 18.

As soon as we were a few years old, my parents expected us to contribute towards the household by doing chores. Setting the dinner table nightly, sweeping, dusting, cleaning our rooms and changing our sheets every Saturday morning were normal things on our list.  Mom ran the household like a business and we were the little employees.

My Dad has always been a DIY fix-it guy.  He built garages on both the houses they owned with the help of my grandfather.  He remodeled their second home twice.  He loved working on cars, which worked out well because we always had the oldest cars in the neighborhood. (Sometimes up on jacks or in various stages of disassembly…yes, we were that family)

Without the benefit of YouTube, he taught himself car maintenance and repair eventually reaching the point where he could fix almost anything auto related.  His modus operandi was to purchase a high-milage beater, 10 years or older, on its last leg and squeeze a little more life out of it.  For those of you a little…ahem…older, recall that back in the 70’s a car with 80,000 to 100,000 miles on it was usually one step from the junkyard.  Big difference from today’s autos.

One example I’ll share is a late 70’s Ford Mustang II Dad purchased that had major engine and rust issues for $1 (yes, $1). After several weekends of work, I drove that car for 2 years while away at college, after which Dad sold it for $1,000.

A lot of weekends would be spent in the driveway, underneath a car, tinkering away.  We would take turns passing tools to his outstretched hand (and learning interesting new words when things weren’t going well!)

After he retired, (twice) he refurbished vintage and antique light fixtures and refinished furniture for fun.

Education was always important to my parents.  They encouraged each of us to attend college and learn a profession.  Although several of us went different paths at first, every one of the children eventually received a degree.

Once we were all middle school age, Mom decided she wanted to go back to work to help with the upcoming college tuition bills for six children and to speed their retirement savings.  She cold called a local hospital lab and received a job offer on the spot (she was a medical technologist when they married).  She would get up at 5:00AM, fix us breakfast, pack our school lunches, be to work at 6:30AM, all so she could be back when we got home from school at 3:30.  Then she would start dinner, and prepare for the next day.

They had always been active volunteers, but when they retired, they cranked it up a notch or two.  They served on committees of different clubs, volunteered at a local grade school, babysat the growing horde of grandkids, were active in the fundraising and preservation of a historic mansion, Dad was active in Boy Scouts and Mom was a tour guide at a Frank Lloyd Wright designed house.

Now, for the gratitude.

  • It wasn’t always the Brady Bunch, but a big Thank You for providing us a loving, nurturing environment to grow up in. I didn’t always appreciate what we had at the time
  • You instilled a love of books, reading and learning which I hope never fades.
  • You encouraged me to be curious, which will keep me forever young.
  • Mom, you showed me how to save and what you could accomplish by putting your savings to work.
  • Dad, you showed me with the right tool, and a will to learn, you can fix nearly anything.
  • You taught me not to take myself too seriously and how to laugh at myself.
  • For giving me an appreciation of nature…Mom used to tell us to go outside and play and not come back til dinner.
  • For not giving up on me even when I made you cry.  (I don’t know how you didn’t beat us daily)
  • For teaching me that you need to work for what you want.
  • And lastly, for showing me that being frugal can help you achieve your financial goals.

MOM & DAD, THANK YOU!

(And Happy 60th!)