Live Lean

Take Imperfect Action.

How regularly screwing up can help you get stuff done.

By Brad Beckstrom

I’ve always liked taking action. Getting stuff done. A friend once told me, “The best way to fall asleep is to lay in bed and think of each thing that you did that day from beginning to end. Include the little stuff, washing your face, taking the dog out. If you’re like most people you probably do a lot of things even though at times it doesn’t feel like much. By the time you get near the end of the list, you will be asleep.” This trick didn’t work too well for me, sometimes I would lay there and think of the things I forgot to do which was a great way (not) to fall asleep. It’s okay that it failed. I was trying to do something that would help me fall asleep. I’ve learned something by trying this out, it didn’t really work, I’ll try it again, I took imperfect action.

What’s “imperfect action”? My first thought was doing something that didn’t work or trying something like a shortcut that just made the task longer. It could be something that was unproductive but got you 1% closer to reaching your goal. Maybe it wasted a good chunk of your day but you learned something from it.

Taking imperfect action is something that can help both the perfectionist and the procrastinator. [Read more…] about Take Imperfect Action.

Knowing Things Instead of Buying Things.

08/18 by The Frug 1 Comment

By Brad Beckstrom

What if every time you thought of buying something, you decided to know something instead? You’d probably build up a pretty good “store” of knowledge. You’d constantly be refreshing that knowledge whether you’re in a grocery store, online or shopping for a large purchase. I’ve used this strategy on large and small purchases. Something simple like “that health bar has more calories than 2 whole eggplants.” Now whenever you look at those 240 calorie health bars you’ll think about the equivalent of eating two entire eggplants.

Knowing things can impact larger purchases.

I’ve been putting off replacing our old car. We probably should’ve sold it a year ago but that time has not been wasted. Since then we’ve been learning about:

Making 30% more by selling a used car on craigslist instead of to a dealer.
How new cars lose 20% of their value just 6 months after you drive them off the lot.
You can find some really great cars using an app like Carvana once you know what you’re looking for.
Whether an electric car or a hybrid car is a better fit for our daily driving.
All of the benefits of having a car that’s paid for and skipping the commute.

You can even apply this thinking to investments. When you pay high annual fees on your investments, your spending money. Years ago I used to sell off underperforming mutual funds and search for up and comers. I stopped doing this and took a few years to completely revamp my investing strategy. I learned that many funds I had been buying had high fees of around 1% per year. I also came across a study that Fidelity had done about the most successful individual investment accounts. The winners were investors who were dead or had not touched their retirement accounts for years. After some research I decided to buy and hold ultra low-cost index funds with fees less than 0.060% and exchange them only when I needed to rebalance my portfolio. This one change has saved me thousands of dollars every year, and will continue as long as I hold these index funds.

Often when I’m interested in something, I decide to research it and by doing that I delay the purchase. I believe that delaying purchases is one of the best ways to cut your spending. Even a delay of one or two days to do a bit more research (learn something) can make you rethink that impulse purchase. I also have a simple rule of not replacing something until it is completely worn out or, in the case of perishables, gone. When you run out of something and stay out of it for a few days sometimes you realize you don’t really need it. If it was really amazing you’ll remember to replace it. (sorry kale snacks)

Here are some tried-and-true ways of knowing things instead of buying things. [Read more…] about Knowing Things Instead of Buying Things.

It’s An Emergency.

07/18 by The Frug Leave a Comment

For investors, the time is now to put together an emergency fund that’s more than just cash.

Preppers be Prepping

Just before I left the country with the family on vacation I reflected on how fortunate we’ve been, saving and investing during a bull market. Index funds including; S&P 500, International, emerging markets, real estate investment trusts, and bond indexes; have all grown during the second longest bull market in history. 2009-2018

This growth over the past 9 years can make investors complacent. 401K millionaires feel like geniuses, what they’re really experiencing is the power of compound interest during a sustained period of growth. I also realize the market could enter bear territory at any time (a correction of 20% or more), which many believe it’s overdue for. The fact is, no one can predict when these market downturns occur. This always seems to be the case. Past summer holidays have included front row seats for Brexit and the EU debt crisis. It turns out these were both distant, false alarms and the bull just kept on running.

The sky was not falling. Would I be ready if it did?

Through all this I stayed heavily invested in low fee total stock market index funds, letting it ride, reinvesting dividends. Even though I’m financially independent and working less than full-time, I hold only about 20% of my total investment portfolio in bonds and cash. Which is considered aggressive by many common allocation models. I keep a 30% allocation in low fee bond index funds, in my retirement accounts where dividends can be reinvested and compound tax free.

It seems odd that I’d take an aggressive stance at my age (56!) especially since I I’ve lived through several large market declines and recessions including 2001 and 2008. During those periods I stayed fully invested in the market as well, and have benefited. This includes the period some called “the lost decade” in investing 2000 through 2009 when the S&P 500 recorded its worst ever 10 year performance. However, that poor performance only hurt you if you were pulling money out of the market during that period.

For those that stayed fully invested and purchased stocks and bond funds in the market during these years, they’ve done well, but could say they have some battle scars. [Read more…] about It’s An Emergency.

Prestige Syndrome and the Startling Difference between Vertical and Horizontal Wealth.

05/18 by The Frug 4 Comments

By Brad Beckstrom

If you read enough, eventually you come across some big concepts. Whenever I see one, I like to jot a quick note or clip entire articles in Evernote. Sometimes these ideas just sit there and I later come across them accidentally when searching for something else. One of the things I’ve been thinking about for a while is prestige or, more specifically, Prestige Syndrome. A syndrome is defined as “a group of symptoms that consistently occur together or a condition characterized by a set of associated symptoms”. So, just for kicks, let’s take a look at something I like to call “Prestige Syndrome”.

Prestige Syndrome

Prestige Syndrome can be caused by earning more money and then feeling the need to spend that money to exude prestige, to do what rich people do. Continually upgrading your home, transportation, entertainment, and clothing choices to be aligned with that certain level of prestige that comes with your new higher-paying job. Sometimes this lifestyle creep can be very subtle, spending away our discretionary income on luxuries that suddenly seem more affordable to us.

An even larger problem, especially in our country, is spending money you don’t have to exude prestige. This is also more commonly known as “ Keeping up with the Joneses”.

We don’t have to look far to see examples of Prestige Syndrome. McMansions with three extra bedrooms and four extra bathrooms “just in case”. Massively oversized SUVs primarily used to run to the grocery store and sit in traffic. Prestige Syndrome can occur at all income levels.

The interesting thing about Prestige Syndrome is that there is no top. If your friends and business associates own Gulfstream jets than Prestige Syndrome tells you you should own one. You’ve earned it, and you believe people do things differently at this income level. The spending levels simply increase with the career ladder. The McMansions, vacation homes, yachts, limo services, security, valets, and private jets are all just steps on this ladder.

Vertical Wealth

This ladder is what we call vertical wealth. Spending goes up as your income increases, often surpassing your income. This is how debt-fueled spending is created. [Read more…] about Prestige Syndrome and the Startling Difference between Vertical and Horizontal Wealth.

All the stuff we didn’t buy.

04/18 by The Frug 2 Comments

How to save a ton on Amazon without falling into the online consumption spiral.

By Brad Beckstrom

Is Amazon getting too good? We’ve been happy with Amazon Prime, especially the perks of membership like two day delivery, unlimited movies and music, even unlimited photo storage. If you’re going to pay for Amazon Prime membership, make sure you take advantage of all the included services.

Unfortunately, over time we’ve started to see Amazon creep up as a higher percentage of our spending, showing up more frequently on our credit card bills. Usually just as a single line without much information about what we purchased or which Amazon service we purchased it from.

Example
3/20 Amazon.com AMZN.COM/BILL WA 44.27

We use Amazon to price check most purchases, especially any household staples that we have dropped off at our doorstep using Amazon Prime. I usually compare against Costco prices I’ve saved in Evernote or on Google Shopper so we’re not only getting better price on many items, I get to stay out of stores that give me hives. Staying out of stores is a good way to avoid impulse purchases. This was always a problem for my wife at Target, or myself at the hardware store. We’ve dialed back on impulse purchases over the years.

The issue now with Amazon is that they’re making things too easy. They just started offering same-day delivery in our area on many items. They’ve gotten good at making recommendations based on our purchase history. I find myself jumping on the site to do a quick price check, or reordering a case of paper towels etc., and seeing something I remembered we could use.

Stop

There are a lot of these lately. At first Amazon was great, we could quickly reorder household items and simultaneously check the price, online. Amazon would also save all of our purchases so we could go back and remember what kind of furnace filters we used. For example, furnace filters should be replaced every three months. Years ago I remember actually running to the Home Depot and buying three overpriced furnace filters whenever I needed to. By doing some research and ordering a case of these filters on Amazon, I save about 30 to 40% and can switch brands depending on what’s the best deal. I also saved myself a trip to Home Depot. How much is an hour of time worth? Think about that on your way to and from a store for a single item, make sure you include, time to park, gas wasted, time searching for the item, and standing in line to purchase it.

It’s better on Amazon or is it? [Read more…] about All the stuff we didn’t buy.

Beat Last Year.

03/18 by The Frug Leave a Comment

How hacking away at the unessential reveals the path to financial independence.

By Brad Beckstrom

I thought I’d always been good with money, but in 2008, things were starting to hit the shitter. Stock market declines were on their way to a 40% drop. Real estate was headed in the same direction. I was running a small business and weaving my way through the craziness.

Just like I learned in 2000, there’s not much you can do about paper losses. In fact, the more investment moves you make during a correction or bear market, the more damage you can do. It’s far better to be prepared and have a strategy, before a bear market, helping you avoid bad decisions.

Why am I talking about 2000 and 2008 in 2018? Well, we know that recessions and bear markets come along with some regularity. Now is the best time to make sure you’re prepared for the next market decline. The good news is there are only a few very important steps in this process.

Track every dollar that comes into and goes out of your life.
Give yourself a pay cut and invest the difference every month.
Build up a 1 year emergency fund that allows you to ride out the storm, and avoid selling off investments.

I was fortunate enough to stumble across the book “Your Money or Your Life” around 1993. After reading it a couple times, I had a deep understanding of the importance of tracking my expenses and investments with the end goal of financial independence. A few years later, I upgraded my computer and received a demo copy of Quicken. The difference between Quicken and some other home budgeting applications at the time was the availability of downloads from both my bank and my brokerage. This was a game changer for me. I’d been far too lazy to enter transactions in the past and absolutely hated reconciling my checking account. [Read more…] about Beat Last Year.