Save and Conquer

A while back I wrote about co-workers’ plans to spend their tax rebates. I was called “boring” when I stated that I would invest it and pretend it never existed. (That’s the same sort of thing that I do with portions of my annual raises and bonuses, as well.)

If it is boring to save more than I earn toward larger goals, such as retirement, then call me boring.

Are you boring? Let’s see:

1. If you read personal finance blogs to get ideas on how to save money, you are somewhat boring. If you use those ideas to actually save money, you are boring.
2. If you check your bank statements, and credit card and utility bills every month for mistakes, you are boring.
3. If you never carry a balance on any credit card, you are boring. If you set goals, save before buying, and never use credit, you are very boring.
4. If you keep a monthly budget, you are boring. If you deprive yourself after going over budget, you are definitely boring.
5. If you get a bonus and put it into the bank without looking at it, you are boring. If you get a raise, but live within your previous salary and save the extra money, you are very boring.
6. If you drive a small car that that’s more than 10 years old, you are boring. If that car has more than 250 thousand miles, you are very boring. If you don’t have a car, you are also very boring.
7. If you have money automatically deducted from every paycheck into savings, you are boring. If you invest it in index ETFs and mutual funds, you are also boring. If you re-balance only once a year, you are very boring. If you consider yourself a Boglehead, you are extremely boring.
8. If you know how to order parts for your household appliances, and fix them yourself (I lump things like leaky faucets and toilet valves in here as well), you are boring.
9. If your TV is not high definition, you are boring. If you do not own a TV, you are very boring.
10. If you look for ways to reduce monthly charges, you are boring. If you actually have reduced your monthly charges by canceling services or by calling providers and threatening to cancel, you are very boring.
11. If you cut coupons and then actually use them, you are boring. If you use double-up coupons you are very boring.
12. If they know you by name at the local library, you are boring.

If you answered yes to 8 questions, you are doing pretty well and are financially boring. If you answered yes to 10 questions, you should have no trouble reaching your financial goals, and are very boring. If you answered yes to all 12 questions, you… are… (snore)…

These days, you can find personal saving statistics everywhere. The majority of the statistics are pointing to unhappy times ahead for many people. The Employee Benefit Research Institute (EBRI) recently completed a survey of people’s confidence of their retirement readiness. It was not pretty:

Retirement worries growing–Americans’ confidence in their ability to afford a comfortable retirement has dropped to its lowest level in seven years, reflecting worries about health costs, the the economy, and home values, according to the 18th annual Retirement Confidence Survey (RCS). Decreases in confidence occurred across all age groups and income levels but were particularly acute among younger workers and those with lower income.

Overall retirement confidence drops sharply–The percentage of workers very confident about having enough money for a comfortable retirement decreased sharply, from 27 percent in 2007 to 18 percent in 2008, a decline of 9 percentage points and the biggest one-year drop in the 18-year history of the survey. Retiree confidence in having a financially secure retirement has also decreased sharply, from 41 percent very confident to 29 percent, down 12 percentage points.

Health care costs have become a big issue for retirees–Among retirees who left the work force earlier than planned, more than half (54 percent) say they did so because of health problems or disability. Almost half of retirees (44 percent) say they have spent more than expected on health care expenses. More than half of retirees (54 percent) say they are now more concerned about their financial future than they were right after they retired, a 14 percentage-point increase from a year ago (40 percent in 2007).

Workers may be waking up to the lack of health insurance in retirement–The RCS finds that 34 percent of all workers now expect to have access to employer-paid health insurance in retirement, down 8 percentage points from last year (42 percent in 2007). Although 41 percent of retirees say they currently have access to health insurance through a former employer, many employers are eliminating health care coverage for future retirees.

Retirement planning up, but still not high–Less than half of workers (47 percent) say they and/or their spouse have tried to calculate how much money they will need for a comfortable retirement, up from the 42 percent measured in 2004-2006 and considerably higher than the low point of 29 percent recorded in 1996. As before, the 2008 RCS finds that doing a retirement savings calculation is particularly effective at changing worker behavior: 44 percent who calculated a goal changed their retirement planning, and of those almost two-thirds (59 percent) started saving or investing more.

Most savings levels are modest–The percentage of workers (72 percent) saying they have saved for retirement has returned to 2001-2006 levels after a slight dip in 2007 (66 percent). Forty-nine percent of workers report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $50,000. Twenty-two percent of workers and 28 percent of retirees say they have no savings of any kind.

I was surprised that more than half of all workers have not calculated how much money they will need in retirement. That is something you should do at least once a year as you examine and re-balance your portfolio. As I wrote in Retirement Planning - Saving, there are lots of brokerages and other web site calculators that will help you to figure out your retirement needs.

The last sentence in the last bullet is particularly troubling. Approximately one fourth of all workers and retirees have no savings of any kind. Due to whatever circumstances, one fourth of us will be living off nothing more than government social services. That is a very difficult way to live.

I doubt most people planned to be in that situation. But, unfortunately, most just did not plan.

Personal responsibility is required. We can only control ourselves. We need to use the tools at our disposal to find out if we are on track for retirement savings. We need to avoid debt, save money, and live within our means. It may mean some sacrifice now, but it will prevent worse sacrifice later. And it will keep us from being a bad statistic.

Related posts on Save and Conquer

• History of Retirement in U.S.
• Grandpa and the Great Depression
• Social Security?
• America’s Negative Savings Rate
• Retirement Planning - Saving

Our article, If You Receive Some Money…, was listed in the Carnival of Personal Finance #152. This is a long-running, very popular carnival.

I enjoyed reading The Personal Financier’s post on The Problem of Accounting and Budgeting For Cash Expenses. As I recently wrote if you get cash back while grocery shopping, it is impossible to keep track of cash expenses using a tool such as Mint.com. You do have to take one of the 4 steps discussed in the post. I prefer to treat cash as a separate expense to all other types.

Some other posts that I found entertaining and informative were

Basicfinancial’s post on How to have fun and stay frugal not only talked about becoming frugal, but also about how receiving a gift fit into the frugal lifestyle.

Wide Open Wallet has some interesting personal stories about some millionaires she’s known at Millionaires drive minivans.

Father Sez has a very interesting post titled, Applying Kaizen, the Japanese science of continual improvement in our daily lives. We learn how we can use the concepts of Total Quality Management to solve problems in our daily lives.

There are many other good reads in the carnival, so please check it out.

Our article, Cinco de Mayo, Celebration and Bar Tabs, was listed in the Festival of Frugality #125 - Save Some Money If You Are Rich Edition. This edition of the Festival has a tongue-in-cheek theme where some of the ways that rich people might try to save money are pointed out. The Festival is worth reading just for the tidbits sprinkled throughout.

Some of the posts I liked were

Moolanomy’s Frugal or Cheap test is a very entertaining post. You really have to take the test. I fall in the Frugal category. What else?

Remodeling This Life mentions some of the benefits of being frugal in Why I Like Being Frugal. She also points out how bogus some people can be in that they treat you differently after they find out you have money.

There are lots of good tips from Saving to Invest about Frugal ways to keep your home safe. I’ve been meaning to put a deadbolt on the back door (we already have one on the front). Now where are my tools…

Frugal Dad has Five Craziest Things I Have Done to Save Money. He says painting the roof of his car by hand was crazy. Hey, my parents paid me to paint their old rusted Ford van! Now that was crazy. I used Rust-O-leum, too, and even masked-off a blue racing strip around the middle. My index fingers and thumbs were pretty tired by the time I finished.

A thought-provoking, and somewhat bizarre article by Saving Advice is Voluntary Poverty and Escaping the Need for Money. The comments are worth reading, as well.

There are loads of other great posts in the Festival. I am still reading some of them. Please stop by and check it out when you can.

Last Sunday my wife, or Mrs. Save and Conquer as she now likes to be called, was very nearly in a high-speed accident on the freeway. She said a car in front of her in the right lane lost control, went across all lanes of the freeway, bounced off the center wall, and back into the lane in front of her. As all this unfolded, she hit the brakes and managed to come to a stop a few feet from the out-of-control car. She then pulled over to the right shoulder and called emergency police.

The dispatcher asked if anyone was injured. My wife said the people in the crashed car did not appear injured, but that gasoline was leaking from the vehicle. The dispatcher said police and fire crews were on their way, and that my wife could leave.

My wife did not leave, but called me because she was a bit shaky and wanted to calm down. I asked pretty much the same as the dispatcher, and was relieved that she had not actually been in the accident. I then recommended that she not leave the scene until a police officer told her to. My thinking was along the lines of liability.

You never know what other people might say or recollect about an accident. She said she heard someone say that the other car had been cut off and that was why they crashed. I did not want it to come back at her that she had anything to do with the accident.

If you drive long enough in a metropolitan area, you will probably have your share of close calls. It is a good idea to sometimes go over what to do if you are witness to an accident or are involved in an accident.

1. Take care of yourself. Make sure you are off the roadway and out of danger. Drive your car to the side of the road, if possible. If your car cannot be driven, stay in the car with seat belt fastened until help arrives. (Obviously, don’t stay in the car if there is fire or leaking gas.)
2. Turn on emergency flashers, determine if there are any injuries, and then call 911.
3. Wait for the first responders (i.e., police) and then do whatever they tell you.

In addition, if you were involved in the accident

1. Get names and addresses of people involved, their drivers license numbers, vehicle make and model, vehicle identification number from their vehicle’s registration, plus insurance company name and telephone numbers.
2. Take pictures of the vehicles involved and of the accident scene. I carry a cheap camera in the glove box. Most cell phones have a built-in camera, so use that as well.
3. Do not admit guilt.
4. File an accident report with the police.
5. Call your auto insurance.
6. File an accident report with the Department of Motor Vehicles.

I recently signed up at mint.com to help me keep track of our monthly expenses. I have long kept a budgetary spreadsheet, which I previously wrote about, in which I keep a pretty good estimate of our expenses.

Mint.com does a good job of differentiating expenses and showing how you are doing in the current month relative to past expenses. As you can expect, mint.com sometimes mislabels various expenses, like it called my monthly payment to term life insurance an investment, but these are easily corrected with a few clicks.

The one thing in our budget that really caught my eye, however, was that mint.com said our typical monthly grocery bill was $790. There are only 3 people in our family, and our tastes are not that expensive. My spreadsheet had only $450 per month allotted for groceries.

What’s the deal? Burrowing into the mint.com numbers, there were transactions to Lucky’s, Safeway, Trader Joe’s, Whole Foods, Costco, and Smart & Final. Nothing too out of the ordinary, although Costco often includes non-grocery items.

I noticed that since my mint.com account was fairly new, it only had data for February, March, and April. For February, the total grocery bill was $520. For March it was $690. And April was $740.

First, I don’t understand how mint.com took these numbers and got an average of $790 per month. Grade school math gives ($520+$690+$740)/3 = $650 per month. I downloaded all the numbers they used, summed the values, and got the same total they display. I even added our total grocery expense so far this month, still divided by 3, and get ($520+$690+$740+$120)/3 = $690 per month. The only thing I can figure is they are using a partial month for February. ($520+$690+$740)/$790 = 2.47 months.

Second, my wife and I tend to use Lucky’s as our ATM withdrawal machine. We normally take out something like $20-$30 per week, each, for miscellaneous carrying cash. Some of this cash goes toward buying junk, like sodas at work, some goes toward doing stuff with kids, some may get used for dining out (although we typically only do that once or twice a month), and some is actually additional groceries at the farmers’ market.

We also sometimes make large cash withdrawals at the supermarket, for things like travel. April had a large debit early in the month that included nearly $300 spending cash for our vacation in Yosemite. Subtracting $300 from the total over 2.47 months gives an average of $668 per month. If I also subtract $25 per week for my wife and myself, plus $5 each week for our son’s allowance, I get a “real” grocery bill over the last three months of $448 per month.

So, actually, we are doing well. There is always some fudging done in a budget like this. Some of that $300 was spent for food in Yosemite, so not all should be subtracted from groceries. But even so, I think we are on our budget of $450 per month for groceries. (And yes, there is room for improvement in our grocery budget.)

The purpose of this exercise was to see if mint.com compared to my spreadsheet. With a little bit of thought, it did.

This is a post from Mrs. Save and Conquer:

As the long days of summer approach, so do endless hours of “Mom! I’m bored! There’s nothing to do!” Some people pay thousands of dollars in expensive activities (camps at $300-$500 per week for 12 weeks! Holy cow- that’s up to $6000!) just to make those words go away.

Now, I know how frustrating those long, seemingly empty hours can be, and I am actually more likely to get cabin fever before the kids do, but I just can’t see paying thousands of dollars to find a little fun when I know it can be had for so much less. Here are some budget activities that we (my self, my son and my two nieces) have done in summers past:

1. Check out the local library. It’s not just about books, folks! Each summer our local library puts on a weekly FREE program for kids. They have had magicians, treasure hunts, animals, musicians, crafts- and it’s no cost, air conditioned and age appropriate for several different ages. Plus, I let the kids pick out their own books (for later quiet time, when we all need a break) and a movie. While you’re there, also check out any message boards for local activities- I have found coupons for $3 admission to the local Tech Museum, announcements for free concerts and ideas for other fun activities.
2. Look at local businesses. Close at hand we have a NASA site that runs a small space museum (free admission!) and farther abroad we have several factories that welcome people to go on free tours (including a Jelly Belly factory). Even if you’re not in a city, is there a local farm you can go visit? A restaurant that might offer the chance for kids to check out the kitchen (a local pizza place here let’s kids make their own pizza, with soda, for $4.95 each Tuesday)? A theatre that might let people come watch a dress rehearsal for free?
3. Go outside. A local park or your own backyard is a great place for kids to run and explore (get some beach balls at the dollar store and you have a ready made game where ever you go), but if you’re looking for something a little different, check out the local parks & recreation websites. Info on activities at local parks (we found weekly free concerts at one local park, free “old fashioned games” days at another), state parks and national parks is right there at your fingertips. For the price of parking, you can have hours of fun.
4. Letterbox. Having a hard time convincing the kids that going on a hike sounds like a good time? Try letterboxing! It’s kind of like a treasure hunt- people all over the world carve these beautiful rubber stamps, then hide them and post the clues (some easy, some very tricky) on how to find them on the internet (www.lbna.net or www.atlasquest.com). You can carve your own “signature” stamp (or, for the kids, make one using foam stickers- that’s what we did) and hit the trail. You stamp your signature stamp into the letterbox’s logbook and stamp the found stamp into your own logbook (ours are little blank pads from the drug store). There’s nothing like finding that first box! (Just a note, if you try this please use stealth! Many letterboxes are stolen or destroyed due to being found by non-letterboxers.)
5. Camps don’t have to cost a fortune. I still remember going to day camp when I was little and loving it. I want my son to have that experience too, but $500 a week?! Don’t think so! Many areas offer community or city run camps at a fraction of the cost. A neighboring area of ours offers weeklong day camps (9-2) for about $160 a week. The counselors are mostly older teenagers (who have each had at least one summer as a counselor-in-training), but there are also paid staff guiding and watching over everything. Plus, because they have so many teenagers, the ratios are really good (one teen or adult per 5 or 6 kids usually). Also, teens are just better at getting messy and being goofy than we are!
6. The “I’m Bored Jar.” Having hit my limit on hearing “I’m Bored” one gorgeous summer day, I came up with the “I’m Bored” jar. It contains little slips of paper with everything from “Take a picnic to the park” or “quiet reading” to “Toybox Diving” (that’s where you dig out those unused toys that haven’t seen the light of day in awhile and give them a little more play time). The rule is you have to do whatever is on the paper drawn. We only used the jar a couple of times, because the kids realized they might end up having to do something they didn’t want to do and they had better come up with their own ideas for activities instead. Once they really start thinking about it, they get creative and I don’t get the whining- it’s a win-win.

Our article, Home Maintenance Tips, was listed in the Festival of Frugality #124 at Frugal for Life. This festival is always large, and it is easy to find some exceptional posts.

Think Your Way to Wealth has a long list of frugal ideas in 30 Ways To Save on Your Grocery Shopping and Food Bill. One of the ways, “go fishing,” reminds me that our son has been asking me to take him. There are other frugal tip lists, as well, such as I’ve Got a Little Space to Fill’s Just Hack it post. My favorite part of her post is actually the opening quote from the Great Depression, “Use It Up, Wear It Out, Make It Do or Do Without.” That’s awesome.

There’s a good post at Lightening Online about buying second-hand clothes at Making Second Hand Clothing “Trendy.” We have been lucky that some really good friends of ours have a son who is six or seven years older than ours. We have gotten boxes and boxes of his stuff. Our son is VERY used to second-hand, and doesn’t seem to notice or care.

I very much liked Cheap Healthy Good’s analytical article titled, “The Ultimate Guide to Understanding the Food Crisis: How it Started, Who it Hurts Most, and How to Solve the Problem.” She has some good suggestions for solving the crisis.

There are many more interesting and frugal posts, so please take some time to visit the Festival when you can.

Our article, Identity Theft - Reducing the Risk - Part 3, was listed in the Carnival of Personal Finance #151 - Bloggers on Surviving the Squeeze. This is another large carnival.

Save to the Future has a post on the never ending story of whether or not to combine finances in Money Management in Marriage. After our first month of marriage, my wife and I have used joint accounts for everything.

I really liked squawkfox’ Ten things you must carry in your purse or wallet as well as her companion piece, Ten things you should never carry in a purse or wallet. I am not certain how I will fit a notepad and pen, or a cell phone in my wallet, though.

The Wastrel Show has an interesting take on the down economy in How Mother Earth Is Solving The Economy. A very true statement from the post is, “The resurgence of Flea Markets (remember those?), swap meets and bartering are making a comeback.” I was reading that this resurgence of swaps and bartering is having a detrimental effect on charities. (In general, a bad economy has that effect.) So please don’t forget to continue to give if you can.

The Personal Financier has a very good post titled, How to Fortify Your Job: 10 valuable (and challenging) Tips. These 10 tips are good advice at any time, but are especially invaluable in an economic downturn.

There are lots of other great posts in the Carnival, so please check it out.

A while back I wrote about the home-made ETF (HMETF) that is an equally weighted group of nine ETFs that make up the sectors of the S&P 500. Since the ETFs have been available, the HMETF has handily beat the S&P 500.

On a lark, when I found out about updown.com, I created an account at the end of February 2008 and “spent” the million dollar allotment on the HMETF. The plot below shows that sure enough, HMETF is up about double the S&P 500. The time sample is short, and you can see the S&P 500 actually passed the HMETF at the end of March. But the comparison is fun to watch.

It appears that much of the performance gain over the S&P 500 is that the HMETF has only 11% in financials, rather than the heavy weighting of the financials in the S&P 500. So far I am liking this.

Performance comparison between HMETF and S&P 500 since February 28, 2008 and May 7, 2008

Related posts on Save and Conquer

• Don’t Fight the Fed, Part 2
• SPY vs. HMETF