Archive for January, 2009

Frugal Ideas – Burn Paper Log Balls

Saturday, January 31st, 2009

If you have a fireplace or woodburning stove, make paper log balls: Keep the little cardboard toilet paper tubes. Save up a supply of waste paper – newspaper is best, black-and-white used printouts from an inkjet printer are OK, I have no idea of the safety of laser printer waste, and certainly avoid plastics and color inks/printouts because the ink may contain poisonous metals or chemicals! Soak the paper in a bucket of water (similar to making paper mache). Wrap the wet paper around the tube until you have a ball about the size of a medium orange, then let it dry (a drying rack on top of your clothes dryer, or rack near the fireplace/stove works). The paper log balls will burn faster than regular wood and generate more ash (good for gardening), so use them in conjunction with regular wood. WARNING: Check your local ordnances and safety precautions for your fireplace/woodburning stove first!!!

Estimated savings: Unable to determine.

Attitude – Responsibility

Thursday, January 29th, 2009

Responsibility is being answerable or accountable for that which is within your authority or control. You may be answerable to other people. You may be answerable to other organizations or businesses. You may be held accountable by the court system. You should be answerable and accountable to yourself.

This is a core attitude for Life of Pookah. I propose that everyone is responsible for their actions and the consequences of those actions… UNLESS they were forced to take those actions.

An example of being forced to take actions is threats of physical violence.

The rule of thumb for responsibility is: Did someone hold a gun to your head and tell you to do it or die? If the answer is No, then you are responsible for your actions and the consequences of those actions.

In the news, we can already see what a lack of responsibility can do. Look at Madoff, AIG, Lehman Brothers, CitiGroup. They wouldn’t have ended up in so much trouble if they had conducted themselves with good responsibility. There were many opportunities along the way where these people, and individuals within these companies, could have exercised a good, responsible attitude towards their lives (INCLUDING THEIR JOBS) and avoided the whole subprime mortgage mess.

Failure to hold this attitude means that, even if you complete Life of Pookah Finances 101 and get out of debt, you will end up back in debt. It may take a few years, but I firmly think that it will happen as inevitably as taxes.

The reverse of this attitude is at least as damaging: Taking on too much responsibility.

Take cancer, for example. If you have taken good care of your health, consumed adequate nutrition, exercised regularly, and taken your annual checkups with a good doctor, you can still get cancer.

In this case, you are not responsible for getting cancer.

You are responsible for taking all necessary steps to care for yourself while you recover. Or if recovery is not an option, taking care of your estate and will settlements to reduce the burden on your heirs.

You are also responsible for taking reasonable steps for your own care if you are unable to take care of yourself. (This is why an emergency fund and insurance are a must!)

Always remember: Life Happens. There will always be unexpected bumps, delays, swerves, and (temporarily) getting lost. So don’t kick yourself when it does happen. Face it. Accept it. Ask for advice. Climb back out. Get back on the road to living life like Pookah.

What To Look For In A Loan

Tuesday, January 27th, 2009

Loans are different from credit.

A loan actually transfers the full amount of money. A mortgage is a common type of loan. Loans usually have a lower interest rate than credit. A good loan has a specified and predictable cost. In many cases the loaner expects to be paid at a set rate (say, $100 a month) that may or may not include interest.

Credit is basically an extension to your available cash – a short-term, high interest loan with a different set of terms and conditions. Credit typically runs in a billing cycle of 30 days or less. Payment outside this billing cycle can result in interest and finance charges that can ruin you.

There are, of course, many exceptions to the above. Things like credit card arbitrage can blur the lines between credit and loan.

Here’s what you want to look for in a good loan:

Good Reputation

There are certain financial institutions that I love doing business with. They have earned a good reputation with me. When I try out a new financial institution, I check with some of their existing customers in good standing. Then, when I go in, I want to truthfully tell the loan officer, “I’m here because Jane Doe and John Customer, both long-standing customers of your company, recommended you. They both spoke very highly of your reasonable terms and excellent customer service.” The reason is simple: If they act like jerks, not only will it cost them me as a customer (see No penalty for early payment below), but I will let Jane Doe and John Customer know how I was treated, and strongly encourage them to take their money elsewhere. I’ll even send the company a letter letting them know that I’m doing this. On the reverse side, if they treat me well (such as waiving a late fee), I’ll send them a thank-you letter, and note on the letter that I’m CC’ing Jane and John.

Low Interest Rate

Good loans have a low interest rate. If the “loan” doesn’t offer a lower interest rate than a credit card for the same amount, it’s not a good loan. If you’ve got good credit and a history of regular payments, the most you should ever pay on a good loan is less than half what your lowest-interest credit card charges (excluding cards that you picked up with special deals). The number that you want to look at for interest rate is APR (Annual Percentage Rate). Do not compromise on this!! If you can’t get a decent interest rate on the loan, then don’t take the loan!

Set Interest Rate

A good loan has a set interest rate. You can look through the news reports for the last 3-6 months and see how many people got burned hard by ARMs (Adjustable Rate Mortgages). You want a loan where the interest rate DOES NOT CHANGE, EVER. If the lending company only offers adjustable rates, walk away. Do not compromise on this!! Uncertainty is the bane of your financial existence. You do not want to end up with an APR that spikes +7%. You must be able to predict your expenses over the life of the loan if you are going to repay it.

No Penalty For Early Payment

A good loan has no penalties, fees, or other problems if you pay all or part of it off early. If you compromise on anything else during the loan process, do NOT compromise on this one. See, this is YOUR fundamental escape clause – your only way out of the loan if things go bad with the financial institution. You do not want to end up in arbitration. You do not want to end up in court. If all else fails, you want to just pay the remaining principal, and walk away.

No Service Fees

A good loan does not have any sort of service, processing, payment, consultation, or other fees. It is straight-forward: You borrow X amount at Y interest for Z years, and pay M money per month. Period. Nothing else.

Accepts Electronic Payments

A good loan will also accept electronic payments, such as automatic bill pay.

Well-Defined Late Payment Policies And Fees

Look, it happens. Everyone screws up eventually. You need to know in advance what will happen, and what to do, when it happens. If the loan does not EXPLICITLY spell out the late payment policies and fees in plain English, with examples, in the contract, it’s not a good loan. The examples are important because they eliminate “wiggle room” in the wording of the contract.

Affordable

If you don’t have a budget, don’t take a loan. If your budget, forecast over the life of the loan, can’t handle at least twice the monthly loan payment, don’t take the loan. Yes, this means you may have to wait on that car or house.

Terms Changes

If the lender can change the terms without giving you at least 30 days (preferrably 60 days) written notice plus an option to pay off the total loan immediately upon your refusal, you don’t want the loan. Period.

Get it for Needs Only

Only get a loan for things you NEED: food, clothing, shelter, health, transportation.

Everything Is Written Down

If it isn’t written down, it doesn’t exist. If the lender just gives you a verbal explanation, but can’t show you EXACTLY where in the loan paperwork that explanation is located, then it’s not valid. You are within your rights to require that the lender show you EXACTLY where in the loan that explanation is, what the words mean, and why it is worded that way. If the lender starts yelling or acting irritated, find a different lender.

Now, in case it isn’t clear:

  • Payday loan companies are a BAD IDEA. Using them will only get you further in debt.
  • Loan sharks are a BAD IDEA, and probably illegal.
  • Loans from family or friends – My advice and experience is that getting a loan from family or friends is a bad idea. But if you do, write up a contract, including a repayment schedule. When you’re starting out with no credit history, it’s really great if you can take a copy of a contract, plus statement, from the friend/family member with you to help persuade the financial institution. Also, your friend/family member is more likely to loan it to you if there is a legally-enforceable contract.
  • If in doubt, contact your State Attorney General’s office and see if they can help. At the very least, they can tell you if they’ve gotten a lot of complaints about the company. You do NOT want to involve yourself with a company that has government lawyers after it. Play it safe – there are plenty of other loan companies out there.
  • Don’t be greedy. If the deal is too good to be true, it means you’re about to get ripped off. If the lender doesn’t have a way to make money off the loan, then you’ve missed something. Start running now.

Frugal Ideas – Spice Expiration Dates

Saturday, January 24th, 2009

Write the expiration date on the front label of your spice bottles. Keep a set of recipes that make heavy use of your spices handy (crock pots are great for this). One month out from the expiration date, use the recipes to clean out the last of your soon-to-expire spices.

Estimated savings: $2.00 – $7.00/month. (It really depends on how fast you use your spices. Fresher spice means you need less to season the food.)

You can get information about shelf life and expiration dates from these sites:
www.spiceadvice.com/faq_index.html
www.mccormick.com/Spices101/HowOldSpices.aspx

Make A Safe Location

Thursday, January 22nd, 2009

This is different from a Safe Room.

A Safe Location is a secure and safe location for important documents. Your Safe Location can be a safety deposit box at a bank, a safe (bolted to the rock pile infrastructure, of course) in your rock pile or a trusted friend’s/family member’s rock pile, or a jar buried in the back yard.

Your Safe Location needs to meet certain minimum criteria:

  1. Accessable within 72-96 hours (3-4 days).
  2. Secure from fire and flood.
  3. Locked.
  4. Immobile without significant effort.
  5. Hidden from the casual two-legged rat.
  6. Big enough to store legal-size envelopes in without folding.

You want to put sensitive documents in your Safe Location. Sensitive documents include, but are not limited to, financial information, tax information, rock pile purchase information, copy of your current will, and the like. DO NOT put items of even remotely questionable legal status in your Safe Location. The reason for that last warning is very simple: The authorities *will* find your Safe Location, even if it is carefully hidden in your pile of rocks.

While I’m on that subject, you might as well go ahead and understand right now that, if it is in your rock pile, A Motivated Two-Legged Rat Will Also Find Your Safe Location. Given enough time and determination, the bad guys WILL find it. The idea is to make it take as much time as possible, and make as much NOISE as possible to get it. Time and noise are a two-legged rat’s two worst enemies. Make them work for you.

Also understand the following principles:

  1. The easier it is to get to your Safe Location, the less safe it is.
  2. The more people who know you have a Safe Location, the less safe it is.
  3. The more people who know where your Safe Location is, the less safe it is.
  4. The more people who have a key/know the combination to your Safe Location, the less safe it is.
  5. Your Safe Location is only slightly more safe than the pile of rocks it is in.

Ideally, you will need access to your Safe Location, at most, once a month. This can make it a hard habit to get into.

Here’s a set of links that may help you pick a Safe Location, as well as other advice on how to make your pile of rocks less attractive to two-legged rats:

If you have a computer, you have both an advantage, and a potential disadvantage. Securing a computer is beyond the scope of this article – and any specific advice that I give would probably be invalid within 9 months. Some of the aforementioned links can help with securing your computer in a general sense. But here are some ways to use a computer to your advantage when it comes to your Safe Location:

  1. The biggest problems with storing documents is that they are big, flammable, and not very water resistant. If you have a scanner and a CD or DVD burner in your computer, you can scan in your sensitive documents, burn them to CD or DVD (and make a backup copy). A CD or DVD is a LOT easier to store (smaller size) and they don’t care about water. (That takes care of 2 of the 3 problems right there!) However, I do not know what the legal requirements in relation to CD/DVD storage are – talk to a lawyer for that. The main thing here is that even if the original documents are stolen, you’ve got this backup copy to help you recover or replace the originals.
  2. Taxes. There are loads of free and commercial software available to help you with your taxes, including filing them with appropriate state and federal governments.
  3. Other official documents. Lots of government branches and corporations are putting their important forms, documents, and information in digital format (images, PDF, and others). A computer can make accessing, reviewing, and keeping track of your important documents faster, easier, and cheaper (those envelopes and stamps can add up).

The above is only a small sampling of the options and advantages that a computer can give you. There are disadvantages. Let me start with the biggest one:

FOR THE LOVE OF (CREATOR-OF-CHOICE), MAKE A BACKUP OF YOUR DATA!!!!

And put that backup in a Safe Location!!

Computers break easy and are relatively easy to steal. A backup of your data helps with both of those — If your computer breaks, the data inside it may very well be unrecoverable. But if you have trained yourself to take backups, you can recover from the breakage. If a two-legged rat wanders off with your computer, a backup can help you recover from that theft.

Pookahs like computers, too. They generate warm spots. They also keep humans’ laps, still so that Pookahs can take nice, purring naps.

Life Of Pookah Finances 301 Page Is Up

Tuesday, January 20th, 2009

If you check the pages to the right, you’ll see a new addition – Life of Pookah Finances 301.

Enjoy!

Frugal Ideas – Grow Your Own Herbs

Saturday, January 17th, 2009

You can cut up a milk carton (cardboard or plastic), load it with cheap soil, poke holes for drainage, make a drainage tray from another container to put under it, set it on a window sill over the kitchen sink, and grow your own herbs. An added plus is that they tend to not go bad as quickly as the cut fresh herbs in the grocery store. Seeds are roughly $1.00 for a year’s worth. Watering is easy – it’s right next to the sink. If the herbs are ripening and you can’t use them, you can dry them out and preserve them yourself – with the plus that you can re-use all those empty spice bottles. If all else fails, chuck them in the crock pot with your leftovers before they go bad and make some potluck stew. You can find more ideas on inexpensive gardening at www.instructables.com.

Estimated savings: $5.00/month

Make A House Manual

Thursday, January 15th, 2009

When the S.O. and I bought our pile of rocks, we found (and are still finding) lots of little and big gotchas. These are things that the home inspector (and we) missed. Things that were not done quite right.

It would have been great if the previous owners had left a list of things they’d done to, or noticed about, the rock pile. We’d have saved a lot of trouble.

A list would also have helped *them* keep track of issues in their rock pile – such as improvements or energy savings that could have tax-writeoff benefits. The long-term project tracking is really nice, also.

So, what do you put in a House Manual?

  • Emergency Contact Information – home owners’ association (HOA), fire department, police/sherrif, plumber, electricity supplier, electrician, city/county water
  • Emergency House Information – location and pictures of the main power switch, location of the main water shutoff, location of the septic/sewer pipes
  • Copies of report from the rock pile instpector
  • Copies of all permits for work requiring such
  • Copies of all rock pile feature additions (HVAC, exhaust fans, etc.)
  • Copies of warranty cards for appliances (water heater, stove, etc.) and repairs
  • Copies of receipts for all of the above, along with the contact information for the company/person who did the repairs.
  • Log of rock pile/primordial scrub changes (Decided to put compost pile *here* and why, plans for hedge, putting vegetable garden *here* and why)
  • Copies of the HOA agreements
  • Copies of neighborhood covenants
  • Pictures of original features that were upgraded.
  • Pictures of upgraded areas, including receipts, warranties, etc.
  • Contact information for the tax assessor’s office, along with date of last assessment and the amount. (Make sure you remove/redact any social security numbers, account numbers, or similar identity theft information.)
  • Copies of your home insurance agreement and contact information for same. (Make sure you remove/redact any social security numbers, account numbers, or similar identity theft information.)

Where do you keep the House Manual?
Keep it next to a phone, with your phone books. You don’t want to spend time looking for it.

If you have a scanner, scan the pages in and keep them on your computer – you can quickly reference them when you’re searching online for information.

Also keep a copy in your Safe Location – fireproof safe, safety deposit box, trusted friend/family member.

How often do you update the House Manual?

Whenever something changes in the rock pile or primordial scrub. If nothing changes, go through it monthly (when you pay your mortgage, cable, phone, or other monthly bills) and check to see if anything needs updated or changed.

How often do you use the House Manual?
Quite often during the year. Water heater breaks – pick up the House Manual. Electricity goes out during storm – pick up the House Manual. Want to do a little landscaping – pick up the House Manual and make sure you aren’t planting a tree too close to buried pipes, and that its allowed in any contracts you have. Two-legged rats move into your neighborhood and start vandalizing your stuff – pick up the House Manual and request that the local law enforcement send a two-legged rat-catcher.

Level of effort: Low, spread out over time. Can easily be merged into general record keeping.

Cost: $7, less if you have a spare binder lying around. Cost includes binder, folders, and sheet protectors. Hole punch not included.

Life of Pookah Finances 201 Page Is Up

Tuesday, January 13th, 2009

If you check the pages to the right, you’ll see a new addition – Life of Pookah Finances 201.

Enjoy!

“I Just Don’t Know What To Do”

Thursday, January 8th, 2009

“I just don’t know what to do.”

“Uh-huh,” I said. I did a quick situational awareness check – you never know who might be listening in at a Wendy’s, possibly marking you as a victim for pick-pocketing or following you home for house burglary. Fortunately, I had chosen our seating arrangement – up against a wall, away from the other customers – so we had a modicum of privacy. However, my friend’s purse was hanging off the back of her chair, and it was unzipped with the wallet sticking up. Definitely a tempting target for the local two-legged rats. I’d better keep an eye out.

Rats are too big for Pookahs to catch easily. Human sharing food with Pookah much easier and safe.

“We’re having a lot of trouble making ends meet,” my friend continued. “Now the bill collectors are calling.”

I chased a bite of food with some coffee. “Did you call the bill collectors back?”

You are not sharing food with Pookah.

“How can I do that?! We don’t have any money! We don’t even have enough money for stamps to send one of your favorite letters.”

I nodded in understanding, and ate some more of my food. My favorite letters are essentially “Drop Dead” letters cribbed from Clark Howard‘s website.

You are still not sharing food with Pookah.

This post is not going where you think it is. I’ve already posted about my little test for helping friends with their finances.

Wendy’s makes good burgers. They’re not the healthiest or the tastiest I’ve ever had, but they definitely do the job. They always remind me of many years ago, when I was younger and stupider. Eating at Wendy’s reminds me that foolish pride and not thinking have a high cost. Combine them, and the cost is even higher.

Pookah wonders what intelligence is required to share cheeseburger with Pookah.

“Okay,” I said after swallowing. “Have you made out a list of your monthly expenses?”

“What good will that do if we don’t have enough money?!”

I set my burger down. “Well, If you keep track of expenses, it’s a lot easier to see where the money is going.”

Pookah is waiting patiently for human to bring cheeseburger home to Pookah.

My friend rolled eyes and said, “I repeat, what good will that do us if we don’t have enough money?”

“You have a lot of little daily expenses that add up over the weeks into big expenses each month. I have them, too. They happen without me consciously noticing them.”

“You. Don’t. Notice. Them???” I had my friend’s undivided attention now. Unfortunately, I also had my friend’s undivided incredulity.

“Look, when I had bills coming out my ears, I didn’t notice those little three and five dollar dailies either. I had bigger problems occupying my attention – the bill collectors.” Another customer, young, male, dressed in casual gangsta, approached my friend from behind carrying his tray. His eyes dropped to her open purse and the fat wallet sticking out of it. I caught his eyes and gave him a polite, tight, Hi-there-I’m-aware-of-you smile. The trick is to make sure other people know you know they’re there without being confrontational or accusatory. Guy was probably minding his own business, but some two-legged rats are more subtle than others. He smiled back and sat at a table a ways off. That response meant he was probably just a regular guy. “Pull your wallet out.” She did. “Now pull out all the receipts and separate out the ones for the last two weeks.” I already knew that my friend had the habit of keeping her receipts. It was part of a never-ending first step towards budgeting. Somehow, she never got around to the budgeting part. Keeping the receipts fed the “collector” habit.

A small, tidy pile of receipts appeared on the table next to her Frosty.

“Now go through them and tell me what you bought the last two weeks.”

Here’s the list:
Eating out – fast food, 1 person: 8 days: $55
Eating out – restaurant, 2 people: 2 days: $40
Books – entertainment: $18
Books – class work: $20
Materials for hobbies: $25
Gas: $30

While she stared at the list, I said, “So, now you know where some of your money has been going. Looks like about $83 for restaurants, fun, and hobbies every two weeks. That would be about $166 a month going for conveniences and fun. How far behind are you on your phone bill?”

“$250,” she answered.

“So in two months, you could pay that off, plus the penalties.” I waited a bit for that to sink in. “You see, budgeting isn’t just about controling expenses or planning for the future, it’s also about noticing the little stuff that sneaks up and steals from your checking account.”

“But what am I supposed to do for fun?! I’d go crazy if I didn’t have something enjoyable to do!”

“Think how much less stressed you’d be if you were actually paying down these debts instead of making them worse. Buying more stuff gives you a lift for a few days, at most. Until the bill comes due. Then you’re worse off than you were before. Wouldn’t it feel better if, instead of working on your hobbies, you spent that time getting your finances in order?”

“If I do that, I’ll end up like you – with no hobbies whatsoever?!? I’d be bored stiff!”

I grinned. “I bought over $150 in books last week, got a new computer game the month before, and learned how to set up the backup features in Microsoft’s Small Business Server 2003 this month. I spent this past weekend playing a network game with some friends all day Saturday and Sunday. That doesn’t even include my gardening or other games.”

“How do you… I mean, how can you…???”

“Early on, it took me hours of study and work to get my finances in order, and start tracking what money was going where. Once I got over that startup hump, it got A LOT easier. It took less time every month that went by. Each time I paid off a debt, I had fewer worries and I could pay off the next one faster. As the debts disappeared, I had more time and money to do the things I wanted to do.” I ate some more cheeseburger.

Pookah wants cheeseburger now!

“All it took was steady effort after that initial hump. It became a habit. I liked it so much, I started training myself to other habits. Even that initial hump would’ve been easier if I hadn’t had to figure it all out by myself. Back then, I didn’t know enough about anything to know what questions to ask, much less what to do.”

“Like those ‘Drop Dead’ letters you told me about?”

“Yeah!” I grinned. “It’s kinda fun frustrating them the way they harrassed me. Balances the karmic scales of justice.” I ate some more cheeseburger. “Wouldn’t you like to give them heartburn the way they do it to you?”

“Yes. I would.”

Pookah. Wants. Cheeseburger. NOW!

“So skip a restaurant visit with your S.O., and use the money to send those letters to the biggest bill collectors. Get them off your back. Keep saving receipts like you are, and write them down in a notebook every day when you get home. Then shred the receipts. No sense in wasting time and effort keeping them clogging up your wallet. Then, on Saturday morning, get up when you usually do and go through the notebook. Start picking out ways to cut those expenses – whether it’s taking lunch to work with you once a week, carpooling with a coworker, or simply cutting back on the hobbies until you use up all the stashed supplies you currently have. Save up that money until you’ve got a few hundred dollars, and call one of the bill collectors to set up a payment schedule using that saved up money.” After that long rush of words, my friend’s eyes were glazing over. I finished off the cheeseburger, and tried again.

NO! CHEESEBURGER!

“Look, let me write it down for you…”

1. Keep receipts.
2. Write receipts down in notebook each day.
3. Trash receipts.
4. Saturday: Look over notebook.
5. Saturday: Use notebook to cut back on unneeded expenses.
6. Use up existing hobby stash for hobbies.
7. Saturday: Make lunches for week to take to work – save money!
8. Save up $200.
9. Send Drop Dead letters to biggest bill collectors.
10. Call smaller bill collectors, use saved money to pay off bill.

“That’s a lot,” she said.

I nodded. “It is at first. But so is picking up any new habit – good or bad. I think you’ll find that, after a couple of weeks, you’ll start doing a lot of this stuff automatically. It won’t be so hard once you’re started. It’s getting started that’s hard.”

“Okay,” she said uncertainly. “I guess I’ll give it a try.”

So, readers, here’s the question: Do you think she will do it or not?

Pookah has eaten lots of cheap, dry, Pookah-food. Will now gift human shoes with cheap, moist Pookah-food. Next time, bring home cheeseburger.