Respecting Tens By Changing Your Math

I’m not entirely sure how I ended up looking back at Mr. Money Mustache’s old post: A Millionaire is Made Ten Bucks at a Time, but the post struck me recently, and I wanted to expand on his idea here.

People often look at the nest egg necessary for retirement and get easily discouraged. We’re here telling you to shave off relatively small amounts from your spending: A few bucks here, $20 there. That’s great, but don’t I need to end up with millions of dollars to be able to retire? Well, I think there are plenty of resources out there to show you that the numbers that banks and financial advisors give you are inflated quite a bit. (I use ING as my savings account, but they used to run TV ads that showed people carrying around their “number” which always was more than a million dollars). So, I think the issue here is at both ends of the spectrum. People think they need much more than they might actually require to retire; and people underestimate the value of small changes to their expenses.

Why should you respect your tens? Because in the long view, saving $10 actually means shaving $3,000 off of your nest egg!

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Practical Savings: Programmable Thermostats

Want another simple way to cut your expenses? This one is super simple – get a programmable thermostat… And use it!

Before my wife and were married and living together she lived in a 1200 sq. ft. town home built in the 1980’s with a programmable thermostat and updated gas furnace. I lived in a 1600 sq. ft. duplex built in 1905 with no insulation in the walls and an old manual thermostat. Not only that, but I worked remotely from my apartment and she commuted. And yet our heating bills were the same!

The difference was that I adjusted my thermostat by hand down at night and up in the morning. She left her thermostat on manual and kept it in the 70’s day and night. Oh yeah, and her thermostat was busted: it’d keep causing the furnace to shut on and off in very short cycles.

So, while you may already have a programmable thermostat you should make sure you’re using it properly and also that it isn’t malfunctioning.

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Buying vs Renting: Running the Numbers

There’s been a long-standing bias going back generations towards owning your own home. The US tax code has a couple benefits for home owners: mortgage interest deduction and the ability to exclude capital gains of up to $250,000 on the sale of a home. Clearly our lawmakers have decided to try and coax more of us into “home ownership”. The idea being that it tends to force us to be better citizens and more responsible people. While that may or may not be true, it also may be costing the US economy as a whole. (See Why Don’t People Move Anymore?) It may also be forcing people to make poor financial decisions in favor of owning: when they are likely to move, or it’s cheaper to rent. It may also be forcing people into home ownership who are a bad fit personality-wide: they don’t have the ability or personality to do regular maintenance and all that owning a home typically entails. I guess that’s why we have HOAs now, though that obviously skews the numbers back towards renting…

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LED bulbs: Are They Worth It?

A few days back we looked at CFL bulbs and showed how replacing incandescents in your home was a no-brainer for saving a good amount on your electric bill.

Are LED bulbs the next step? They’re highly touted, but how do they compare?

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The Easiest Money You’ll Ever Save: CFLs

I was talking to a relative recently and happened to mention we used some LED under-cabinet lighting when we remodeled our kitchen, and have replaced every incandescent bulb with CFLs. My jaw dropped when they said they still have no CFLs and use incandescents.

I tend to be an early adopter of technology and especially relatively cheap green technology. So when CFLs first came out and they were touting their energy savings, I ran out a bought a handful of them. I used them, but not without quite a bit of complaining from family members who dropped by. They had to warm up, they looked blue and washed out the rooms they were in. Here’s the problem: everyone thought that’s just how CFLs (or compact fluorescent lights) were, and they swore not to use them. I heard every once in a while they had made an advance and now they were just as good as incandescents. Well I can tell you that is definitely the case now. There’s too many advantages not to run out and swap out (virtually) your whole house with them.

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Calculating Your Savings Rate

Ah, savings rates. The pissing contest of the frugal.

People in the financial independence / early retirement community love to compare their numbers and accusations are flung about once people post ridiculously high numbers.

Here’s the issue: I’m not sure people are comparing apples to oranges. Some people use net income, some use gross. In the net income camp, some use “after-tax” income, while others use “take-home”. In some cases people confuse the two, using take home pay but then add their pre-tax savings (like a 401k) to only the savings side of the equation. This can lead to some pretty drastically different numbers. And the latter can lead to rates that are effectively unattainable by a normal human being.

Let’s step through some examples to see what savings rates we end up with using the same income / savings as our base.

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