Planning on voting tomorrow?

I don’t endorse any particular political views on this blog, but I do think making your voice heard is good. And if that in itself isn’t enough of a reward, the following establishments are handing out free stuff if you bring in your “I Voted” sticker tomorrow:

Starbucks - free 12 oz. coffee

Krispy Kreme - free donut

Ben & Jerry’s - free scoop of ice cream between 5 and 8 PM

Honestly I think you’ll be able to get any of this stuff even without the sticker, since some states actually prohibit this type of giveaway, but come on, if you’re gonna take the free stuff, you might as well get out there and vote!

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So maybe you think I’ve finally gone nuts. “The financial crisis doesn’t matter?” What an outrageous idea! People are suffering, you insist. How can it be that all the money that’s being lost right now, all the fortunes that are spinning down the drain, mean nothing?

Let me clarify. What I’m trying to say is that the financial crisis should not affect your behavior. Or your attitude.

There are all sorts of statistics floating around that prove what a miserable situation we’re in. I won’t bother repeating them here. People are losing hope. It is time to pull out of the market? A lot of people apparently think so, judging by the huge sell-offs that are occurring. Is it time to stash your life savings in treasury bills? It seems there are many who would answer “yes,” judging by the incredibly low interest rates being offered by these things right now (people are snatching them up believing they’re the only investment that’s safe because the US government can always print more money and due to increased demand the interest rates are dipping lower and lower).

Look at it this way: the US is a stable, developed country with a mature financial system and it’s managed to recover from all types of crises. Does that mean it’s going to recover from this one? Well, just because the sun rose yesterday and the day before and the day before, does that mean it’s going to rise today? Nope. Life is full of uncertainty.

I continue to advocate a strategy of lifestyle simplification coupled with long-term investing. This strategy is the best one I’ve found for handling my own personal finances. Over the past year and a half, I’ve watched the balance on my IRA, which is invested mostly in market index funds, dip lower and lower and lower, and it’s depressing. If the entire financial system in this country does collapse, my IRA (and yours) will be worth nothing. But at that point, to paraphrase Jonathan from My Money Blog, I’ll probably be more worried about food and guns than anything else.

My point is, worry about what you can control, and don’t worry about what you have no way of predicting. There’s a time when every type of worrying is called for, and various times in which every type of worrying would be totally inappropriate.

I’ll say this with all the certainty I can muster, which is enough that I’m pretty certain I’m certain: the market is not going to collapse. There may be tough times ahead, but that’s okay if you’re investing for the long term. Of course, this statement is based on past events which may or may not repeat themselves.

If they don’t - if the market really does fail entirely, taking all our savings with it - a lot of people will be in trouble. But we’ll all be in the same boat. We’ll suffer, and then we’ll pick up the pieces together and move on and form new habits that respond to reality in better ways. And we’ll all keep living cheap. Right?

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So if you wanna live cheap, it’s important to get your everyday expenses as low as possible. You’ve got to attack things like transportation, food, etc., wringing them of every last penny. It was in this spirit that I recently sought to lessen my laundry expenses.

I generally do two loads of laundry a week. At my apartment complex, it costs $1 to wash and $1 to dry. That equals $4 a week, or $208 a year.  I thought long and hard about the most efficient way to lessen this expense, and finally I bought a used Wonderwash for $35 on Craig’s List. The Wonderwash is a small, hand-powered, water-saving washing machine that essentially takes one step out of washing clothes by hand. The math is simple: do 35 loads of laundry in it, and I’d break even.

Of course, I needed some way to dry my clothes. I don’t know why it never occurred to me before that I didn’t have to use the dryer at my apartment complex. I bought a $10 collapsible drying rack at Bed Bath and Beyond. After a 20% off coupon, the final price was $8.

So I’d invested $43 in some items that could potentially save me $200 each year. Not bad, right?

Well, I’ve been testing this arrangement out for a few weeks, and I’ve found there are a couple issues with it. For one, the Wonderwash, though it does work fairly well, just doesn’t get clothes as clean as a traditional washing machine. And also, using it takes a lot of time. I’d say it takes just as much time as washing the clothes by hand, though it’s a little less of a pain. Considering the actual amount of money saved each week, and the amount of time it takes to wash clothes in this thing, I have concluded that the Wonderwash is not really a very efficient device - so now I’ve got this hunk of plastic sitting in my bathtub. Does anybody want it??

On the other hand, using a drying rack to dry your clothes is a great idea (if I do say so myself). When I get done with a load of laundry, I hang it on the rack and point a powerful box fan ($11 at WalMart) at the rack for a few hours. This does a really great job of drying the clothes quickly, and it doesn’t cost $1 a load. Though I can only recommend the Wonderwash with great reservation, I’d definitely recommend purchasing a cheap drying rack and a box fan as a great way to save money on laundry if, like me, you live in an apartment and don’t have access to your own washer and dryer.

Any more tips from readers?

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Hi everyone!

It’s been just about three months since my last post, when I announced that this blog was going on hiatus. So what’s the deal?

Well, I’ve found that I simply don’t have the stamina to continue posting regularly. I was generally doing a post a day, and that got to be a bit much. I like the writing, but doing all the other upkeep and promotion you have to do when you run a blog, and doing it each and every day, is not really for me.

So what does that mean? I still feel like I have some things I want to say about money, so basically that means that I’m only going to post when I really, really feel like I have something to say. I think the quality of the posts was suffering a little due to me trying to cram the writing into my overloaded schedule each day, so I’m just not going to force it anymore.

Expect to see a high quality post here from time to time. Expect to see a minimum of filler. There won’t be something new to read each and every day. There might not even be a new post each and every week. But I think it’s a good thing to keep this blog around, and to keep talking about money, because I found that the writing itself was educational and so were the discussions I had and the contacts I made with readers and other bloggers.

I announced three months ago that I was going on a trip overseas. I’d like to talk about it in depth, but I do try to stay private here, so I won’t go into much detail. I’ll just say that if you don’t hold down a 9 to 5 job, and if you save your money, you can travel very cheaply in many parts of the world. Just another reward of living cheap!

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This blog is officially going on hiatus.

I’m headed out of the country for a couple months and I’m just not gonna be able to continue updating during that time period. I’ve burned myself out over the past couple weeks trying to save up tons of posts to publish while I’m away. It was crazy and I’m temporarily just out of energy to work on this blog.

I know the traffic I’ve worked hard to build is going to drop a lot, and that’s okay! This is a sacrifice I feel I can’t avoid making because I’ve gotta get out there and work on some other stuff for a little bit.

I’m going to come back in two months to a blog that’s languished and that’s going to be discouraging. At that time, I’m going to reevaluate my goals for this blog, give it a long look-over. If I do start posting again, I can guarantee this blog will be better than it ever was before.

Thank you to everyone who continues to come here regularly to check out the new posts. Unfortunately, there won’t be any more for a while, but I’m quite thankful to everyone who has commented, offered encouragement, or just stopped by.

See ya!

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So I’ve posted before about how working for somebody else is not a good idea in the long run, no matter how cool your job may be. Working for yourself is ultimately safer and more fulfilling and it allows you to regain control over your time. So if anxiety over your personal finances is causing you to continue to work a job you don’t like, consider spending that effort on finding a way to never work again.

I said “consider” because I do think there are a few reasons you might want to continue working a job. In my mind, there are only three such reasons:

1) Your job is the task you were put on earth to accomplish. Let’s say you were born to be a poet and can make money at it - awesome! Let’s say your life’s mission is to help orphans in Ghana and you’ve started a charity to accomplish this - wonderful! Don’t change anything. Unfortunately, many people spend their lives working jobs they hate because they believe there is no other choice. There is always another choice. Always, always, always. The other choice usually requires you to change your mindset, and most of the time, people too lazy to do that. For instance, I advocate reducing your “wants” and spurning conspicuous consumption. This is one very important step in the journey toward financial freedom, but it takes effort, and if you can’t be bothered, you won’t reap the benefits.

2) Your boss is someone you can respect and you are learning something invaluable at your job. You should never be stuck with the feeling that you are throwing away your time when you are at work. You may feel this way if your boss doesn’t know anything about being a boss and his simply wormed his or her way into that position by playing politics, or if the task you have to do every day offers no long-term benefit to anyone. One example of an individual who worked a job for a good reason is Robert Kiyosaki (at least by his own account). Kiyosaki sold photocopiers for several years, mastered sales, quit his job, and went on to use the techniques he learned to build a huge financial empire. (Wealth alone means nothing, of course; learning is what’s important!)

3) You need a reliable source of cash while you try to escape the rat race. This is perhaps the most depressing of the three reasons, and I hope you don’t have to spend long in your job if this is the main reason you are there. Put very simply, the long-term financial strategy I advocate involves lively cheaply and using the money you save to finance reasonable, simple, long-term, passive investments. Of course, while you’re still in the beginning stages of this process, you need a source of cash. This doesn’t mean you have to work a desk job. For instance, I work as a teacher, writer, and translator, which allows me to set my own hours - but I’m still exchanging my time for pay. I’d ultimately rather spend my time building income-producing assets, and I am in fact doing this on the side. Once I’ve attained some measure of success at this, I won’t take on any work I’m not totally thrilled with.

Maybe there’s a fourth or a fifth reason I’ve missed, but if you’re working a job for any reason other than the three listed above, I think you should take a long, hard look at your decision to stay in your current job. Consider the huge benefits of working for yourself: job security (no one can fire you!), independence, earnings potential that is theoretically unlimited. Quite honestly, whatever path you choose, I wish you the best of luck - but you already know which path I prefer!

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Life is full of unnecessary stuff. I recently posted about the evils of stuff. Stuff costs money but it doesn’t deliver value. Stuff saps your pocketbook and takes you further away from your financial goals. You should strive to eliminate stuff from your life.

Stuff is insidious and it’s ubiquitous. Sometimes, stuff is so obvious we fail to notice it.

With this in mind, I hereby present five types of stuff you can eliminate from your life today. You won’t notice any reduction in your quality of life. You’ll simply have more money in your pocket!

Fabric softener. Try this little experiment. Next time you wash your clothes, do so without the aid of fabric softener, then check to see whether your clothes come out hard. If not, you can quit buying fabric softener! The same thing goes for dryer sheets.

Drano. In almost all cases, one or more of the following remedies will clear up a tough clog: 1) Take a plunger to it. 2) Pour about half a cup of baking soda paste down the drain, then follow up with vinegar. This should create a fun, bubbly mess and will likely dissolve the clog. 3) Dump a potful of boiling water down the drain.

Garbage bags. Get a small garbage can and line it with plastic bags from the grocery store.

Premium gas. Unless your car’s manufacturer says you need it, premium gas offers no benefit. It doesn’t increase your gas mileage, it doesn’t make your engine last longer, and it doesn’t bring you good luck. It’s simply a waste of money!

Bottled water. I know, I know, it tastes better than tap water (in most places I’ve lived, anyway). But you know what tastes about like bottled water? Tap water that’s been run through a filter. I’ve used Brita and Pur filters and both brands have worked great. Tap water is literally about 1000 times cheaper then any kind of bottled water, so if you refuse to drink H2O directly from the tap, you’ll save big bucks by purchasing a filter. I recommend the pitcher type rather than the type that screws onto the faucet.

These are far, far from the only examples of stuff, so don’t stop with these five. Come up with some more, then simply stop buying those things. It’s so easy - you close your wallet and you never notice the absence of the thing you didn’t buy. How satisfying!

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Some of you may be familiar with the idea of credit card arbitrage. It’s been discussed on My Money Blog and on The Consumerist and is a frequent subject of rumination over at the FatWallet forums. Basically, credit card arbitrage involves using a balance transfer check from a credit card with a 0% APR to forward yourself some cash, then placing this cash in a high-yield savings account and raking in wads of interest. I can personally vouch for the viability of this scheme; I myself made nearly $2000 last year by playing the arbitrage game.

I do not recommend that you engage in credit card arbitrage if you have trouble paying off your cards each month. You’ve got to be anally on top of things and read all the fine print and if you don’t trust yourself to sock away the money and not touch it then you’d better keep far away. If you do have the disciple to sock away the cash, credit card arbitrage can be quite profitable.

But this post is not about credit card arbitrage. It’s about a new and exciting credit card game that has the potential to produce great profit for those willing to read the fine print and experiment and take on a little risk (mostly, the risk that you yourself will screw up and the whole house of cards will collapse). I realize that people are going to flame me for suggesting something “risky” to my readers, so if this idea sounds unappealing or dangerous to you, just don’t do it. You’ve gotta trust your instincts.

Nevertheless, I think this scheme is fascinating and it certainly has the potential to make you some serious cash. Feel free to correct me if I’m wrong, but I’ve never before seen a similar scheme discussed on an internet forum or blog.

The Basics

Okay, so here’s the basic idea behind this new credit card scheme. You’re aware of cash back credit cards, right? Y’know, the kind Dave Ramsey warns listeners and readers away from (I happen to disagree with him)? The kind that’ll give you anywhere from 1-5% back on your spending?

Well, you find a way to run tons of purchases through your cash back card and then pay all of them off before the bill comes due. You pocket the cash back. If you can somehow convert those purchases into cold, hard cash, you can put the cash in a savings account and pocket the interest, taking advantage of credit card arbitrage as well. You could literally make thousands of dollars a year this way, but there are, of course, a whole bunch of details you’ll have to attend to…

The Details

Let’s start with the biggie: how exactly do you “run tons of purchases through your cash back card?” You could try to buy something you know you could resell and break even on, but unless you’ve hit on the deal of the century, that’s probably too risky, and you wouldn’t be able to profit by placing the funds in an interest-bearing bank account. Instead, I’d suggest purchasing a cash equivalent as the best way to retrieve the funds from your card.

A money order is one type of cash equivalent. Unfortunately, there aren’t many places that’ll allow you to purchase a money order using a credit card. Western Union won’t do it, nor will most banks, nor will the post office. The reason for this, I think, is that there are costs involved in issuing the money order and there are also costs involved in accepting your credit card. Businesses already make a set amount of money - not very much - on each money order, and the merchant’s credit card acceptance fee would seriously eat into or eliminate that slim profit margin. If you can find a place that will let you purchase a money order with your credit card, there you go! I’ve heard that some grocery stores will do this, but you’ll have to look around. Also, you must ensure that the money order fee does not cancel out the cash back you’ll receive, and I would want to double-check that your purchase will not be counted as a cash advance (which would generally mean you’d be slapped with absurdly high fees, whereas purchases, of course, are fee-free).

Additionally, a My Money Blog reader recently pointed out that you can purchase dollar coins from the US Mint with no fee whatsoever, and free shipping to boot! Feel like annoying your bank by depositing hundreds of dollar coins? There you go! There appears to be a $500 limit on orders, and I’m not sure how the Mint would react if you were to place ten or fifteen such orders, nor what your bank would think. Perhaps they’d suspect your deposits were part of some kind of money laundering scheme. I don’t know. For the sake of science, somebody out there has to try it!

Can anybody else think of a creative way to purchase a cash equivalent using a credit card?

It is important to note that this scheme would carry the same risks as credit card arbitrage. You’d have to have enough discipline to simply toss the money in the bank account and not spend it frivolously on something, and you’d have to watch the due dates for the cards. If you missed a due date, you could be in big trouble. Your interest rate could increase and you’d almost certainly be slapped with a high late fee, plus your credit score would get dinged.

How Much Can You Earn?

This simply depends on which cash back card, or cards, you’re carrying. The best cards are those which impose no limit on the amount of cash back you can earn, such as the Citi Cash Returns card and the Discover More card. Most cash back cards offer just 1% cash back on everyday purchases, so let’s say you get a hold of a couple of cash back cards with no limit on the amount you can earn and that each one gives you access to $10,000 worth of credit. If you use each card to its full capacity each month, you could make $2400 a year - and that’s from cash back alone. I haven’t included the interest you could make by placing the money into a savings account, i.e. engaging in arbitrage. It’s too hard to calculate the potential benefit from this due to changing interest rates and other factors. However, I think you could easily make something like an extra $1000 from the arbitrage aspect of this scheme. All in all, depending on a number of factors, you could make at least a few thousand dollars a year this way. Enough to max out your IRA contribution, say. And that’s nothing to sneeze at.

Am I Actually Gonna Do This?

I think so. The dollar coins are currently on backorder, and I’d like to see that situation remedied before placing too much reliance on the US Mint. I also need to check into the money order situation at stores in my area. Since I’m currently using my cash back credit cards for arbitrage, I’ll at least wait until the 0% APR fun ends before putting this new scheme into motion, but I do plan on at least trying out a small-scale test run. We’ll see what my bank thinks about getting rolls and rolls of quarters at the deposit window. I can just see the faces of those befuddled bank tellers now!

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Did you know that both Citibank and Discover offer disposable “virtual card numbers” you can use to buy stuff securely online? If you use either of these card companies, you should acquaint yourself with this incredibly useful tool. It has a variety of applications beyond just the obvious (protecting your real card number).

Briefly, here’s how virtual card numbers work. You go to your card company’s website. You log in. You get a card number which is attached to your account but not to any actual, physical card. It has its own expiration date and its own security code. You use it to buy stuff online. Even if the merchant leaks your card number or hackers get their hands on it, it doesn’t matter. The card number expires after the purchase is complete.

Citibank lets users customize their virtual cards, specifying expiration dates and credit limits which don’t necessarily have to have any relationship with the expiration date or credit limit of the actual, physical card. This is a really nice service which I only discovered about a year after becoming a Citibank card-holder. I now use it frequently.

I recently used a virtual card number when I signed up for Shoppers Advantage, a discount buying club operated by Trilegiant, a company I now know to be dishonest and generally naughty. I paid $1 to enroll. The purpose was the $20 AMEX gift card I got out of the deal (but only after complaining to the BBB that I didn’t get it despite repeated promises on the phone). I canceled my membership within the 30-day trial period and was not supposed to be charged any monthly fees, but lo and behold, Shoppers Advantage tried to charge on my card to the tune of $15 or so. Since I’d used a virtual card number with a $1 limit, the charge did not go through. True, most major credit cards offer zero liability for unauthorized charges, but this way, I didn’t have to go through the hassle of proving to Citibank or to Shoppers Advantage that I had actually canceled my membership.

In the case above, the merchant attempted to charge me even though I’d already canceled my membership, but even if I’d forgotten to do so, I still would have been protected. The company simply wouldn’t have been able to charge me its monthly fee. If you’ve signed up for some sort of trial membership or when a company is going to try charging you periodically and you don’t want it to happen, consider using a virtual card number.

Here’s another situation in which a virtual card number could be very useful. Let’s say you go to the Papa John’s website and order a pizza and that afterwards you respond to the offer inviting you to sign up for a free Entertainment Weekly trial subscription and get a $10 PJ’s gift card. Of course, if you forget to cancel the trial subscription, you’ll be charged for an annual subscription to the magazine. This way, you don’t have to remember. Create a virtual card number with a $1 limit and forget about it.

Some folks might question the morality of this. I mean, it really is your responsibility to adhere to terms you’ve agreed to and cancel your subscription/membership/whatever. And the company could do something crazy like turn you over to a collections agency (I’ve seen it happen even for tiny debts). Everybody will have to weigh out these factors individually.

Card companies are reporting that usage of virtual card numbers if very low and I think is mostly due to lack of public awareness. If your card company allows you to create a virtual card number, keep this in mind the next time you purchase something from an online merchant you wouldn’t exactly trust with your life. A virtual card number could save your butt, or at least save you a few bucks.

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So everybody knows what conspicuous consumption is, right? Conspicuous consumption is when you consume for the specific purpose of displaying wealth. Basically, you spend money to impress other people.

We all do this to some extent. I mean, I spent a little money on some decent furniture for my room. I could have left everything in boxes, but then my room wouldn’t be very presentable or comfortable. I wouldn’t be happy in it and I wouldn’t want to show it to anybody else. This is a mild version of the impulse that sociologists began to see in the “new rich” of the late 1800s, when the term “conspicuous consumption” was coined. The industrial revolution bought a lot of people a lot of leisure and a lot of people began using that leisure to buy expensive stuff and show it off as a means of displaying social position.

I posted just a couple days ago about the evils of stuff, and if you’ve been reading this blog with any regularity, then you already know that I believe the impulse to accumulate stuff is what leads people to financial ruin. The urge to display your wealth won’t get you anywhere except the poorhouse! If your money is burning a hole in your pocket, you’re gonna end up with no money and burned pants.

So stuff is naughty and conspicuous consumption is bad - right?

Well, there are shades of gray to everything, and I’d say that spending money to impress others really isn’t always bad. You can let yourself do it if you maintain some restraint. Everybody does, and I’m pretty sure that’s not all bad.

When stuff takes over, that’s bad. Likewise, when the urge for tightwaddery takes over, tightwaddery can distract you from more important goals.

Lemme explain.

The whole point of living frugally is to reach your financial goals and your life goals sooner. As I’ve said several times before, “living the cheap life” has a purpose. Financial freedom will help you do what you were put on earth to do. Theoretically, anyway.

But you know what, I think it’s possible to get too caught up in being a cheapskate. It’s possible to worry too much over conserving every last cent.

I’ve noticed this in myself recently when I’m driving. My roommate and I recently got into this informal competition to see who could conserve the most gas. Now, when I drive my car, I’m always worried about saving every last vapor of gasoline and it’s kind of distracting - distracting from what’s going on on the road and distracting from conversations with friends. Distracting from the important things that make life flavorful.

Distracting.

I think I’m gonna call off this competition pretty soon.

Lemme think of a couple other quick examples of conspicuous tightwaddery… I want to make sure the car salesman realizes that I don’t care about the monthly payment, only about the final price of the car and the interest payment; I want to show my friends that I know how to get the best deals on airfare and hotels. I do, on occasion, have the urge to show off how cheap I am.

I think this is fine when you are genuinely trying to teach someone else a better way of doing something - when that person wants to learn. But sometimes, your tightwaddery is better kept private. Showing off your tightwaddery is generally a waste of time. Who cares if anybody acknowledges you or not? You don’t need outside approval. The whole point of being a cheapskate is reaching your life goals and making the world just a tiny bit more pleasant for everybody.

Hopefully, your tightwaddery is not simply intended to impress others. After all, who cares if there are a few extra pennies left in your estate when you kick the bucket? Even if you fool somebody else into believing it matters, that doesn’t mean it’s true!

Hopefully, you always keep your eyes on the prize: the life goals that financial freedom will help you achieve.

Hopefully, you know that being a cheapskate isn’t just about being a cheapskate. That’s the big secret of living the cheap life! Being a cheapskate is about goals.

And as long as you don’t lose sight of that, you oughta be just fine.

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