Frugal

The Secret to Running The Business of You.

By Brad Beckstrom

“Have a small nut; that’s the key to life.”
Graham Parker.

What’s an aging rock ‘n roller to do, the once big recording contracts, the limos, seven-figure tour revenue all start to trickle away? Graham Parker, a British punk rock pioneer, knows exactly what to do: enjoy life, have a great time, and keep making music. Graham’s quote “Have a small nut; that’s the key to life” sums up one of the core principles of financial independence. The small nut he’s referring to is not assets, but monthly expenses. Rock stars, athletes, entrepreneurs, everyday folks all hit the same wall. We hear these stories all the time, from the extreme, like Mike Tyson blowing through $400 million and ending up homeless, to the highflying salesperson that overextended themselves, justifying their current expenses on future income fantasies, only to be chop blocked at the knees by a corporate reorg or downsizing.

Professional athletes know this story all too well. The average career in the NFL is about four years. In major league baseball, it’s a little over five years. Knowing this, it seems crazy when you see young athletes, blowing their entire signing bonus, borrowing against it before they even get a check. The secret is to do the opposite, save the entire bonus along with any windfalls, and keep your monthly expenses to a minimum. [Read more…] about The Secret to Running The Business of You.

The New Frugality

08/19 by The Frug 1 Comment

Does frugality still work? If so has it changed?

By Brad Beckstrom

I learned a lot from my grandmothers. One ran a business with my grandfather and the other invested in dividend stocks. They were both ahead of their time in the 60s and 70s. I remember my grandmother showing me her stock certificates and explaining how dividends worked. She explained how she used dividends to support herself after my grandfather Tom passed away at the age of 58. I remember the railroad and utility stock certificates with their elaborate etchings and visiting her stockbroker to execute a trade well before computers arrived.

I didn’t get to really meet either of my grandfathers since they both died young. I did spend quite a bit of time with both grandmothers, either staying overnight or while visiting cousins nearby. By the time I was a young man, they both had lived through two world wars, the depression, Vietnam, the Womens and Civil Rights movements, the Kennedy assassination, 1973 and 1974 energy crisis, inflation, cold wars, and multiple recessions. As savers and investors they had seen some setbacks.

The Old Frugality

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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.

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.

Life in Spendy Town: Can Living in an Expensive City Sabotage your Dreams of Financial Independence?

01/18 by The Frug Leave a Comment

By Brad Beckstrom

Who knew? That’s what I keep telling myself. When I was in my 20s, I drew a circle around the Washington DC Metro area including Northern Virginia, Baltimore, the Eastern Shore, and surrounding areas. I said, “This is where I will live. This will be my zone of influence.” (I actually said that. Not sure why, maybe it was business related, or I was reading some Dale Carnegie books at the time). Little did I know that red circle I drew encompassed 4 of the 5 richest counties in the United States and 6 of the top 10. Literally, all within a one hour radius of Washington, DC. This area really does make San Francisco and Silicon Valley look like chump change. LA, New York, Honolulu, forget about it. Washington, DC is where (a lot) of the money is. Not convinced? Just take a look at the U.S. Congress and the money machine that supports it.

There are some advantages to living in a wealthy part of the country: jobs, great schools, museums, sports franchises, bays, lakes, rivers, beaches, mountains all nearby. So, it’s a great area to live right? Unfortunately, a lot of people feel that way. So, not only are we beating LA and New York in spendyness, we also regularly beat them with some of the worst traffic in the country. Real estate is equally ridiculous, along with property taxes. High-paying jobs and expensive real estate spillover into everything. Most restaurants are fancier and more expensive. Real dive bars and affordable local spots are getting harder to find, often being priced out of their locations even in the close in suburbs. Everybody, grocery stores, retailers, parking garages, jacks up their prices because they can (or need to.) Good deals become harder to find.

When I start comparing Arlington, Virginia to cities like Raleigh, North Carolina, Tampa, Florida or Boulder, Colorado using online calculators (links below), I start to see a trend. Housing is really driving the majority of cost-of-living differences on these these calculators. I’ve tried to use other online comparison calculators (see list) but once they add housing, it throws everything off. For instance, it might say something like a $100,000 salary in DC is worth $170,000 in Raleigh, but this has very little to do with the price of milk or taxes and everything to do with the fact that house in the DC area will cost you 3X.

Arlington, VA. vs. Raleigh NC. From CNN Money, Cost-of-living calculator.

Real Estate [Read more…] about Life in Spendy Town: Can Living in an Expensive City Sabotage your Dreams of Financial Independence?

How To Prefer What You Have.

09/17 by The Frug 1 Comment

By Brad Beckstrom

Years ago I had a vision for what I’d like my future home to look like. It included stylish mid-century modern furniture, expensive rugs, artwork, and beautiful lighting. It doesn’t look like that and I’m happy about it. Instead of replacing and upgrading furniture over the years, we decided to keep the furniture we had. This included things like our original coffee table that’s been destroyed by kids, dogs, spilled beverages. I kept my furniture from my college dorm room, now in my son’s room and still going strong. We kept various IKEA classics from my various bachelor pads and wife’s early post-college years.The IKEA dressers had to be repaired and in one case reassembled. A few years back, we had a fun day running down to IKEA to dig through the parts bins for pegs, knobs, and brackets. I also grabbed a few Swedish meatballs. We’ve received a few pieces of furniture from relatives over the years, proudly displayed next to the IKEA stuff in the living room that we repurposed as a library.

With all this old furniture populating our home, something interesting began to happen. The furniture began to develop its own personality. Chew marks from pets that are no longer with us, wild rings, marks, and divots in our coffee tables that come along with raising two boys and having pets. I guess you could call them scars, but the good kind. We’ve actually created that distressed, weather battered look the people pay for. I like to think of it as sort of a slow motion destruction. [Read more…] about How To Prefer What You Have.