Lessons from a “Cheapskate”

I recently read “The Ultimate Cheapskate’s Road Map to True Riches” by Jeff Yeager, which made some great points in addition to being very funny.

My favorite line was “guys like me would rather shit their pants in public than suffer the embarrassment of saying something like ‘a grande caffe latte, please.’ ” But this wasn’t so much financial advice as a rant about the distastefulness of fancy latte language.

The points I found more financially interesting were the following:

1. The Fiscal Fast – going for a whole week without spending any money at all. I guess you could stock up on groceries/gas and pay bills in advance, but the author seems to think these moves are for amateurs. The idea is purging your system (of financial transactions to unleash creativity), tapping your reserves (of food etc.), and reflecting (on the impact spending money has on your life).

I think this is interesting because I have often gone for 2-3 days without spending money, and thought it was pretty cool. I also tend to do this at the end of a pay period when I am trying to achieve the financial goal du jour. But I have never thought about carefully planning to keep it up for a week. I bet the sense of accomplishment would multiply! And my old pantry items would deplete. Refreshingly.

2. Under a Dollar a Pound, Year-round – Jeff manages to buy only food that is less than $1/lb!!! Who knows how. But, I have made it a point over the years to buy mostly items that cost $1-2 or less. It occurred to me some time ago that when you buy a single item that costs more than a couple bucks, you are paying for processing, or packaging, or both. So this might equate somewhat to the dollars-per-pound approach. Until it’s time to buy steak anyway.

3. Pay Off your Mortgage ASAP – this is the only convincing argument I have heard for paying down your mortgage in advance. Jeff points out (the now obvious-sounding advice) that a mortgage is just a huge debt that allows you to feel like the roof over your head is really your own. In fact, it made me realize that questionnaires should say “rent/mortgage/own” rather than just “rent/own” – you don’t skip straight to owning really.

Additionally, Jeff notes that every dollar you spend on something else as long as you have a mortgage is just leveraged at the rate of your mortgage interest. Even if you invest money in a 10% interest-bearing account, you are effectively only making 6% on that investment if you are still paying a 4% mortgage. A friend once tried to make the same point by asking, If I had paid off my mortgage, would I ever take a mortgage back out just to fund an investment? And obviously the answer is no, but that version of the logic did not resonate so well with me. But continuing with a mortgage and treating my post-tax dollars as whole dollars is exactly the kind of thing I would do (had I not read this). I had previously thought about adding an addition to my home with a construction loan, but that would be digging myself further into a mortgage pit. Now I am thinking about paying down my mortgage as soon as I settle some other goals.

“Cheapskate” had many other comedic and financial gems but those were a few that really got me thinking. Good book!

New Blog Name Blues

I have been wanting to start a new blog. Also about personal finance, but taking it more seriously than the joke name I pulled out of WordPress after giving up the domain name struggle in 2013. A more professional site, which might even advertise debt coaching services.

But I couldn’t think of a good name that is really me. As well as really available on GoDaddy.

The closest I have come up with is:

http://www.moxymoney.com

Which is a bit too close to the existing

http://www.moneywithmoxie.com

Which is run by a person demographically like me. Could lead to confusion.

For now I guess I will keep blogging here for fun, and might build a new website (using this domain name or otherwise) to fulfill my 2018 goal to refresh on HTML and teach myself JavaScript. At least then either way I will have a new website.

Any suggestions on blog names for a site about saving money the old-fashioned way, by finding new ways to tackle “received wisdom”?

I gave a Money Talk at the library today!

Thanks to Hudson Public Library and the folks who came by to listen to my first (or more likely only) public speaking engagement! I think we all had a good time, but I am not sure the market is there.

Anyway for those who attended, please feel free to drop me a comment if there were any topics you were particularly interested in.

People had a lot of questions and comments about:

• Cheaper cell phones (though I made my case that the plan is where they get you)
• Cheaper internet – good luck to us all! I have no leads on that topic except to brow-beat Verizon salesmen on the phone to offer a lower price
• Supermarket variations in price/quality/variety
• • One gentleman suggested to avoid supermarkets on the first day of the month, as markets push out old produce and jack up the prices timed to coincide with people getting paychecks and government benefits
  • Crazy! If this is true, that is nuts – I will be checking for that

Obviously I learned a lot too and I would call it a success. I will post up the slides tomorrow.

Lending Club Experiment: Done

I think 1/18 is the date I purchased 200 notes through Lending Club in 2015, so today is as good a day as any to pull the plug on that experiment.  Lending Club is not a bad investment in my experience.  And with my roughly 6% return over 2015, LC seems like it was a better investment last year than the stock market.  So here are a few reasons why I am 86ing this investment now:

1. I could use the cash flow for my new investment project (my house)
2. LC interest is taxed as ordinary income whether you reinvest it or withdraw it
3. I am not that good at LC

A little background on LC: LC is a peer-to-peer lending company in which I invested $5000 about a year ago.  This bought me 200 $25 “notes” or loans to individual borrowers.  200 is the minimum investment LC advises to be adequately diversified against risk of borrower default.

The notes are all 36- or 60-month, and the payments made by the borrowers each month are divided among the $25 note-holders.  So after the first month or so, I started receiving $50-60 in interest each month.  I had set up “auto-invest” which automatically picks up a new $25 note as soon as your account has $25 in it.  Since I was getting on average $55 each month, my account would automatically add two new notes, with a few dollars left over.

So where does my Lending Club account stand after a year?

Lending Club snapshot one year out

Basically this snapshot is saying I have probably made $311.46 in interest on my $5000 investment as of today, after adjusting down from $593.94 to account for prior (and likely future) late payments and charge-offs.  The snapshot calls the adjusted ROI 7.72%, but after tax it will be more like 6%.  The snapshot also shows that I have 301 notes, up 101 from my original 200 note investment.  That’s pretty crazy, that my little nest egg generated 50% additional notes in just one year.  So why did I wind up with only 6% ROI, compared to the 8% and 10% tales I have heard from other financial independence and investment enthusiasts?

I am probably not that good at Lending Club.

You will notice I had 7 charge-offs in the one year; I am guessing that is a little above average!  Most charge-offs happen immediately as a scam and mine appear to be no different, so this has cost me just about $175 in losses against my interest earnings.  Without setbacks like charge-offs and missed payments, my true interest earnings of $594 would have achieved a remarkable 12% ROI (or a very decent 8.5% after taxes).

Avoiding charge-offs is the name of the game with p2p lending.  But unfortunately I have neither the time nor the inclination to weed out “bad bets” with the filtering tools LC provides.  I trusted LC’s fairly rigorous screening system to provide moderate protection.  And part of this experiment was to participate in an economy in which less-than-stellar bets would also have a chance to enjoy wiping out debt or paying medical bills.  So while it has been interesting, this is probably not a good long-term fit for me at this pre-financial independence point of my life.

Overall I guess you could say that even an extremely risk-tolerant, and yet carefree and spacey investor like myself could fetch a 6% ROI with LC while paying no attention whatsoever.  That’s not so bad.

But I will still “pull the plug” today.  Even divestment is not so dramatic with LC.  I will just click a button that says “Pause Auto-invest” and $50-60 will stream into my bank account each month rather than into a couple of new notes, until all the remaining notes have been paid off or charged off (but I seriously hope the former).  You can only sell notes on a sad secondary market within LC, so I will just stick it out and enjoy the cash flow.  It will help with my antique house renovation: where the wallpaper is holding the wall together, so it must stay.

Does this post make anyone want to get your LC on, or off?  Or buy an old house?

 

Can’t overlook these assets!

Fixing up a fixer-upper is like peeling an onion… you just cry until it’s over and hope you don’t cut yourself before you’re done.  Am I right??

I had written previously about the kitchen sink in my fixer-upper, asking what folks think it might be worth.

The sink

Turns out I almost seriously overlooked this asset!

I originally assumed I would need to beg $50 for this, or even pay to have it hauled off.  But this assumption proves that even in the most soul-crushing, bone-tiring, anxiety-ridden times of home renovation, it pays to make more coffee and do a little extra curricular homework.

Far from my view of this sink as a chippy, impractical, oversized pile of metal, there are many out there who are actually looking for a vintage drainboard sink.  And dual drainboards are better than a single drainboard on one side!  Many sinks out on the vintage drainboard sink market don’t even have the metal cabinet base!  My item here appears to be some kind of a collectible with an inherent value.  But what is the value?

Obviously, I want to make as much money on things going out the door as I want to save money on things coming in the door.  The obvious options to me are:

Craigslist (local option)*

• Pros: easy/free to post an ad; the buyer hauls the sink away; “quick” cash; I can walk away and feel like I made good money
• Cons: local forums fetch lower prices due to locality of customers

eBay (fancier remote option)

• Pros: I can probably fetch a better price here than Craigslist due to larger audience
• Cons: need to deal with shipping, and remove shipping cost from my price to be competitive; buyer could be dissatisfied with quality and have a case to return sink

*There are other local options like a local brick&mortar antique store, which I discounted because it would have the same low price ceiling as Craigslist and I would need to deal with dealers.

So what are the price ranges for these two options?

Craigslist: based on ads for similar sinks for $995, $300, and $1500, adjusted for size and quality/cleanliness of the sinks, I think I could reasonably post an ad for $800 and expect about $600.  Hey I might not get anything like that, but based on other ads I don’t think this is outrageous.

eBay: found similar sinks listed for $300, $900, and $1000, but these have not sold yet so these are only partial data points.  However my sink is in considerably better shape than all of these, so I would be comfortable putting up an ad for $1200 and see what happens.  I would need to talk to USPS/UPS about shipping costs, which might impact my asking price.  If shipping is more than, say, $300, that would tip the scale back toward Craigslist.

http://www.historichouseparts.com: for reference I checked this famous restoration site and found a couple similar sinks that have already sold for $875 and a whopping $1800 (and check out how ugly that one is).  Most of the vintage sinks on this site did not have the cabinet base, and these were in the $300-$500 range.  Most sink basins were not in great shape by admission (not re-finished), which was reassuring.  It turns out HHP is located in Rochester, NY and operates locally only, so this is not an option for me.  But it is good to see what a professional dealer thinks these are worth.

Bottom line: due to my extreme distaste for dealing with shipping, I think I will put this up on Craigslist first to see what hassle-free price I can get.  If that does not work, I will try eBay. My mom, an antique dealer, attributes price mainly to “luck.”  Thanks Mom!

(PS my mom helped me with my price estimates, not just her ‘luck’ comment.) 🙂

How much do you think this is worth?

Dual drainboard enamel sink, integrated with stand-alone metal cabinetry.  I will give you one piece of information for context to make up for my poor photography skills: it is from the 1940s.

Ready set go!

 

Sweat equity: extra perspiration!

This is what really sweaty sweat equity looks like.  Spoiler alert: it’s not that interesting!  It’s hard to get good photos when everything is getting dusty, your phone is hidden away for protection, and you are wearing gloves.  The flooring guy asked why I am taking up all the carpet myself.  The best reply I could come up with is because I’m cheap.

Here are the dark ages of carpet, the first hour I owned this house, before I promptly ripped up all the first floor carpet that afternoon.

Already brighter even with the pile of carpet.  This is the same afternoon if you can believe it.  This is a different view of the first room shown above.

That streaky stuff is dried and pasty former carpet padding, which is why I was talking to a flooring guy.  Everything I have done so far has been basically free, but the floors will need professional intervention next.

Some portraits of yours truly.  I snagged these coveralls for $37 at Cabelas.  I already owned the sweet hat and respirator mask.  I might just go as a house renovator for Halloween.

Bathroom progress.  I can’t believe they carpeted a bathroom.

More carpet mysteries.  Under the *kitchen carpet* was… yet another carpet.  AND some tile under the 2nd carpet, not shown.  And then more hardwood under that.  Salvageability TBD.  And don’t get me started on the mindset of a person who would glue tiles to perfectly good hardwood.  PS the bathroom also had tile between the wood and carpet.

The Stairway to Heaven… the heaven of not having to work on the stairway anymore.

Consistent with the prevailing theme, I did not get a “finished” picture because I jumped for joy and immediately started drinking beer as soon as this was done.  I calculated that it took me about 30 min to strip a single stair, but after 3 stairs my arms would go all jiggly and I could not do anything else for the rest of the day.  So in effect, stripping 3 stairs took me a whole day.  And there are 12 stairs, as every single flooring guy pointed out in his respective quote.  I now see why they charge extra.  Stairs are terrible.

I couldn’t capture why it is so hard to strip stairs in the photos.  But it has to do with stripping tack strip from vertical surfaces while balancing on stairs with little leverage, followed by carefully pulling stapled padding out without ripping it.  You avoid ripping by basically rolling it over and pushing it over on itself (if you just pull up, the woolen padding will pull away from the staples and make a hole, and you risk having powdered rubber padding flying everywhere).  And you have to do this while pressing your hands on the business end of the staples, because if you did it right the staples came out with the woolen padding.  It’s basically just terrible.

And finally… some oddities.

That pale stuff in the upper left corner is some sort of linoleum paper designed to look like hardwood.  Stapled to actual hardwood.  Don’t ask me.  I don’t know.  And the small black dots represent thousands of staples still left in the floor which I had to pull out with needle-nose pliers one by one.

This is one of two phones left in the house, both rotary, both from a time when Hudson was apparently part of the 617 area code.  I am not sure yet whether they are quaint or creepy.

*************************************************************************************************

So that’s what I’ve got for now; I would estimate that my friends and I have put at least 60 man-hours into reno.  If you were counting, this could be estimated to be worth about $4K.  But I won’t count, since I have not been tracking and because I would basically be doing useless stuff with my time like reading Facebook otherwise.

The Dump: my new favorite place

Several people have made the “joke” (really just the unfriendly, unhelpful, not funny at all comment) that as a new homeowner, “everything will cost more than I think.”  I really can’t stand this kind of remark.  It is like when people pass you in the hall at work and say “having fun yet??”  There is no dignified response to this.  It is just not cool yo.

And I get stressed out when people suggest that something will cost more than I have planned.  Actual high costs of things do not stress me out, but people projecting a higher cost for something that has not happened yet drives me up the wall.  Because I do not like people telling me what to do or acting like they know more than I!

But in one case at least, I surpassed my own super-cheap expectations of frugality.  The heavenly oasis of spending much less than you thought to eliminate horrible problems from your life?  The town dump of course.

Picture it: Tuesday this week, 2:30.  My buddy and I arrive at the dump in his huge, beat-up old pickup, only to become absorbed into a sea of even larger hunter green waste management trucks doing (apparently their usual) Tuesday afternoon business.  Dumping tons (literally) of smelly trash.  But we made our way up the line with predictable New England efficiency, and unloaded half of my houses’s carpet in 11 minutes flat.

Not only that: it cost pennies at the base $35 for this load of trash.  I assumed that the dump’s pricing of $100/ton meant $100 for up to one ton.  But $35 is the cost for up to one ton, which we did not remotely approach at 380#.  And we filled the truck exactly to the brim, just a hair short of having to tie things down to prevent hazardous droppage in the road.  So this entire activity was completely efficient and cheap.

Bottom Line

With the $18 or so I spent on pizza fixins for Pizza Payback Party with my friend, my costs came to $53 for this effort.  Since I assumed $150, this is pretty great.  Also, the dump is a great place to unload up to 1999 lbs of anything non-hazardous/non-electrical without even needing a town sticker (in my town anyway) for $35.  I’m sure this won’t be the last time.

How much do you think it costs to dispose of carpet?

So I bought the Chocolate Cake house (yay!).

Then I got the keys, went inside, and started ripping out all the carpeting.  And I learned that carpet is quite large!!!

(This is just two rooms of carpeting.  Every single room, including the bathroom, has carpet.)

At first I thought I could cut up the carpet into handy 2′ x 2′ squares, shove them in my car, and head down to the town dump claiming it is totally normal trash, nothing to see here.  But with all this I realized once again that I was naive and sadly mistaken.

So I am plunged back into the usual algorithm for taking care of problems frugally:

1. Would anyone want to buy this item off me?
2. What is the next cheapest option?  Is it reasonable?
3. What’s the next option?  And how much would I be willing to spend? (It is interesting to set a limit in advance, to stave off the madness and to see whether your expectations align with reality at all)

Well, I think it is pretty obvious that no one wants to buy this aged, faded, stained carpeting and carpet padding off me.

So I started thinking of the other options, which generally require me to pay.  My friend had mentioned that she rented a dumpster for about $200, which I will admit sounded expensive to me.  So I decided that is the upper limit of what I would pay.  I priced several dumpster rentals to see if I could do better.  But clearly my friend must know something or someone, because the cheapest rental I could find was $274 (it went up to $450 for basic, small dumpsters).  This became my new most expensive option.

Then I called the town dump, into which I was previously going to smuggle squares of carpet disguised as normal consumer trash at $1/bag.  It turns out they take carpeting, and charge $100/ton.  Which prompted me to ask the guy “well how many tons do you think carpet weighs?”  He actually answered “I don’t know, but I doubt you have a ton of carpet.”  The most refreshingly literal description I have heard in a long time.

So dump it is I think!  And I don’t even need to cut up the carpet like I was going to originally.

Only other question is getting it there, and I figured I could borrow my buddy’s truck and take him to a snappy dinner, or rent a truck at Home Depot; both of which probably cost about $50.  My friend turned out to be on board, which wins in the fun category.

So I will see how much carpet actually weighs and costs, but based on the nice dump guy’s evaluation, I would say the best value for getting rid of carpet is about $150 including transportation.

Would you buy a Chocolate Cake House?

I would.  And I am!  Because when I ask myself “do I want an austere, respectable residence, or one that resembles a confection?” I know the answer.

My idea, as I could not simply go live in a house, is to try to fix this fixer-upper and get out of it at least what I put into it.  Much as I would love to disclose all the juicy details and turn Yay Goodies into a house reno brass tacks blog, I would not want a potential buyer to ever access this information and decide that they want to offer less on Abode a la Mode.

But I will say this: I think I got a decent price for it, about $50K lower than the average purchase price of the other similar houses in this neighborhood over the past 5 years.  As well however: the bones are good but the rest is seriously questionable.  Epic amounts of DIY and professional intervention will transpire.  Here is a taste of what I have planned:

Immediate term (0-3 months out)

• Rip out all carpets (immediately); open all windows; light fruity candles
• Gas service installation before winter
• Install gas washer/dryer combo (sellers took the washer/dryer)
• Replace all candelabra-style chandeliers with something from the 21st century
• Add hose extension to faucet on single bathtub in house (seriously how did they wash their hair and rinse shoulders etc.???)
• Take strange cardboard tiling off of bathroom walls and tub
• Install dishwasher
• Start to sort out hardwood flooring

Mid-term (4-6 months out)

• Add gas heating system
• Get architect to plan garage addition options (-bay or 2, and single story or two-story with master suite above, depending on cost and zoning regulations)
• Plan out main house reno options based on most likely addition option
• Keep working on flooring throughout

Long-ish term (6-9 months out)

• Get contractor to add attached garage
• Paint house and addition some exciting new color
• Move current kitchen sink to new mudroom/laundry room

Longer term (9-12 months out)

• Update kitchen a little or a lot with backup sink; take down wall to living room maybe
• Finish updating bathroom based on how much everything else cost

So if you ever wanted to see a real-life house reno in detail, stay tuned.  The nice thing about these updates is that they are modular, and for the most part vary in price directly with time.  I could probably stop at any point and still be in good shape.  The main cost items here of course are the gas conversion and garage addition, but I think gas and garages are highly desirable.

So I guess stick around, and I will show you honestly what a cake can turn into.