Small Ball (Finance). . . Earning $160,000/yr. one minute at a time

In past posts, I’ve focused on concepts that will save you thousands of dollars per year.  Today, I’m going to talk about something that is decidedly “small ball”, but nevertheless will help you achieve our goal of “living beyond your means without debt”.

I recently bought a used car for my daughter (something I swore I would never do, but so much for youthful oaths!), which requires 91 octane premium gas.  Now, I hear you saying, “doesn’t that violate the idea of spending less and saving more?”.  Well, the idea is to live better, which isn’t the same as living as cheaply as possible.  So, yes, I bought her a premium car, because it was a much better value than a crappy econo-box that cost more money.

So, when my daughter expressed concern about the cost of gas, I started thinking about to lower that cost.  Of course, I told her about CostCo, where gas is typically 5¢-15¢ cheaper per gallon than neighboring stations.  I also told her about using a credit card that will save her 4% per gallon (CostCo American Express card).  So, right off the bat we are saving 20¢-35¢ per gallon or almost 10% per gallon.  Now, where we live in Florida, premium gas is 93 octane; the car only needs 91 octane.    Essentially, drivers like me are buying octane they don’t need.  The solution: combine 93 octane and 87 octane gas to get a 91 octane blend.  The blend is 2/3 93 octane and 1/3 97 octane (if you are interested, the math is: 93x + 87(1-x) = 91).  If your tank holds 20 gallons and your typical fill-up is 15 gallons, you simply put 10 gallons of 93 premium in your tank and then another 5 gallons of 87 regular and viola, you have made your own 91 octane blend.  Remember, I started talking about “small ball”.  Well, we substituted 5 gallons of 93 octane for 87 octane; in Florida, the average price differential is about 28¢.  I know that in many parts of the country, the difference is about 20¢, so I’ll use that.  Basically, we have saved about $1 . . . for less than one minute of work (I timed it!).  Again, remember “small ball” is today’s theme.  You may be saying, “$1, who cares”.  Well, think about this, $1 dollar a week is $50/year or a free $1,000 over twenty years.  More importantly, saving $1/minute = $60/hour (after-tax), which is the same as earning over $160,000 (pre-tax).  Now, I’ve earned more and I’ve earned less, but I don’t recall a time where I ever turned down an opportunity to earn incremental money at a rate of $160,000 per year.  So, there you have it, nothing dramatic, but an easy way to “make” money, $1 at a time (or, as I like to think about it, $160,000 at a time).

My House Is Robbing Me Blind

I’m embarrassed to say (writing the financedude blog and all) that I never realized that my own house was stealing from me.  The house I lavished so much care (and paint) on was robbing me blind.  For those of you that made it this far, congratulations, you are probably saying get to the point already.  Well, every month it is taking me to the cleaners in the form of high utility bills.  Your probably saying, aren’t you the kind of guy who makes sure the lights are out when he leaves a room.  And you would be correct.  However, lights are penny ante.  The real silent killers are your hot water heaters, your crappy insulation and (though they are not so silent) your air conditioning (really a silly phrase when you think about it, “conditioning”) system.

I was playing poker at a friend’s house a couple of months ago when I noticed a piece of paper taped to his thermostat.  The paper said, “our electric bill was $176 last month (November) . . . no one touch the thermostat upon pain of death”.  Well, I was intrigued, you see, in our best month, our electric bill hasn’t dipped under a whopping $350/ per month (and can top $700 in the summer) and we don’t live in a mansion.  I still haven’t completely figured out why my electric bill is so much higher than my friend’s, but I have made some progress.

Morally, it bothered me that higher utility bills were 100% bad.  I was using some sort of scarce resource for power.  Inefficiency didn’t “get me” anything, it was “Money for Nothing” and not in the good way.  The high bills were an unnecessary source of conflict. “Why is the thermostat down so low” and “why don’t you turn off the light when you leave the room” are a couple of old chestnuts I have said more times than I’d care to remember!

First, as I live in Florida, I fantasized about going solar and selling power to the local utility (kind of a 21st century fantasy of, “sticking it to the man”).  I quickly realized that solar technology i snot very efficient and is very expensive; it has a long way to go and is no anywhere near economically viable without heavy government subsidies (which we don’t have in Florida) and could damage my (older) roof.  I didn’t necessarily want to make a big investment to save money, period.  I don’t know how much longer I’ll live in this house and home improvements with 3+ year paybacks never seem to work out.  Therefore, I wanted to make common-sense changes that would help cut my bill by a noticeable amount.  Here is what I learned:

•    Your hot water heater radiates heat to the outside 24/7, but is only used a couple of hours per day (for showers in the morning and whenever you run your dishwasher).  You can get an insulator (basically a large blanket made of a fiberglass type fabric) and wrap it around your hot water heater.  That should save you about $100/year.  More importantly, you can get a timer, and strategically shut off the hot water heater, except for times before use.  That should you about $250/year (you will likely need a 220 timer and, if you are not handy, an electrician).  I looked into “tankless” water heaters (they “flash” heat your water), but they are significantly more expensive and seem to be highly troublesome and don’t deliver the (hot water) goods in sufficient volume.  Also, cover the pipes that carry hot water (and your a/c) with insulation.  These exposed piples can reduce efficiency/increase costs by 1%-3% (up to $100 per year- that is worth a few bucks for insulation and a few minutes for installation).

• If you have an option, always go for the natural gas-powered appliance.  Gas is currently cheaper than electricity and thanks to tons of new gas that has recently been found, will likely be signficantly cheaper (in percentage and unit terms) for your lifetime.

• Unless you live in a house build in the last 10-15 years, you probably have less-than-optimal insulation.  Depending on where you live, it probably makes sense to add attic and wall insulation.  Windows, which can be hugely inefficient, are too expensive to replace for anything but cosmetic reasons.  I would also suggest having your duct work checked.  Crimped ducts can cost you a lot in comfort and money (imagine blowing through a coffee stirrer vs. a jumbo straw).  One trick I used when I lived “up north”, was to make sure all of my door openings were sealed.  A southern trick is to make sure you have an attic fan that is operational.  The fan pushes the hot air (that accumulates from the sun beating on the roof) out of the house, making the house a little cooler and the air conditioning system a little more efficient.  This helps quite a bit (and makes the house a lot more comfortable).  The various savings initiatives are probably good for $200-$500 per year.  You will have to make an investment.

• Timer for your a/c (and heating) unit.  Though, this can save you big bucks, most people have already figured this one out.  The simple logic is, when you are at work or sleeping let the temperature rise (in the summer; or fall in the winter).  I recommend an “apartment” thermostat, as it can be programmed with minimum and maximum temperatures, thereby avoiding unpleasant exchanges with your spouse or kids about why the thermostat is set to 49 (in the summer) or 90 (in the winter).  Prudent timer use is probably worth $300-$600 per year (depending on where you live and the size of your house).

• Close the door.  I can’t tell you how many people go outside to the pool deck and leave the door open . . . or come in from the garage and leave the door open . . . or let the dog out and leave the door open.  Temperature naturally equalizes, so every time you open the door, the hot air outside will come in, negating hours of your a/c units finest work.

• The green folks love this tip- use mini flourescent bulbs whenever possible.  Yes, they cost about 1/3 as much to operate as incandescents.  A no brainer.

I’m still working on getting my bills down to neighborhood norms, but until I do, at least I will be better off than last year.

Smarter On-line Shopping

Hi and welcome!

I’ve always liked nice things, but never wanted to pay “asking price”. I quickly discovered that there are plenty of merchants willing to make a smaller profit and earn my business. The trick is finding the best deal where merchants want you to buy based on their advertising. No thank you! Well, I have been able to find “deals” for pretty much anything I need. I’m not talking about saving $0.50 cents on cereal- I actually don’t really get into coupons as the return on investment is typically pretty darn small (who wants to make the equivalent of $3/hour clipping coupons), so my efforts were focused on saving real money (or saving a little money everytime I buy a many times a year item, like gas).

I plan to share my tips in a series of posts. I hope you enjoy and save!

With the holiday shopping season officially open, I think it’s a good time to talk about how to shop on-line for less.

First, narrow in on what you want. For example, you may be looking for a computer generically or the Sony Vaio PCG-71314. If you are able to identify the exact model you want, go to a price comparison site like Nextag (www.nextag.com) or Price Grabber (www.pricegrabber.com) and enter the description. Ideally, you will have the UPC code, which is most precise. Often you will be able to compare the prices offered from multiple sellers (when comparing, make sure you take shipping and tax into account). Sometimes it’s as simple as the search and you have found your best seller. However, sometimes, when I am not so set on a specific product, I am able to use my target product to find a great seller and then see if that seller offers a better deal on a comparable product. You would be surprised how many times I’ve started looking for product A, and wound up buying product B (often a more featured product for less money)! If you are buying an electronic product, you may also want to check a consolidator such as ECost (www.ECost.com) for a similar but potentially cheaper product (this works best for “commodity” items like TV’s, monitors, Bluetooth headsets and the like).

That was a long “first”. Your second step is to go to Google and search for a merchant coupon (type, “merchant name” and “coupon code”). Many larger merchants have coupons that will save you anywhere from 10% to $25 on common transactions. Coupons are especially common with clothing, office supply and housewares. Often there are multiple coupon codes. Either write these down or open a new tab on your browser.

Your third step is, prior to making your purchase, to check with a rebate site such as Ebates (www.ebates.com) or Mr. Rebates (www.mrrebates.com) and see if your chosen retailer has an associated rebate. For example, if I want to buy the Vaio at Sony’s site, I could get a 4% rebate (off of the total transaction) at the Mr. Rebate site or 3% from Ebates. What you need to do is register with the rebate site sometimes you will get a sign-on bonus and then click on the merchant link to get your rebate.

Finally you are ready to buy! Click on the rebate site to get to your merchant. Put your product in the electronic shopping cart and look out for the box that says “Promotion Code” or “Coupon Code”. Enter your coupon code here. Sometimes a code may have expired, which is why you should check your list or toggle back to the other open tab. Pay. Congratulations, you have probably saved serious money over going to your favorite store or just buying from an ad!

Good luck and good shopping!