When it Comes to Coffee, Twenty is Plenty

1024px-A_small_cup_of_coffeeTwenty bucks. That’s all I’ve got in my coffee budget, meaning all coffee consumed out of the house. It includes hangouts with fellow authors, meetings with clients, and visits with friends. Twenty bucks.

It took a bit of training and practice to let go of the vanilla latte habit. But see, when one can get eight cups of drip coffee for the price of four lattes, well, you understand at a glance how much richer one’s social life can be.

Another sad fact? I used to be unable to enjoy a coffee without a little snack to go with it. Usually I liked a muffin or a scone. But I found my coffee budget didn’t go half as far. So I took it in baby steps, swapping the $3 scone for a $1.50 biscotti. And then one day, I just…ate beforehand, so I wasn’t running on empty when I got to the coffee shop. And I found I could be completely happy with just a coffee and some good company.

It was a very Buddhist moment. Simplicity and contentment and all.

Sometimes I get lucky and a client treats me. And every so often I’ll have a good run on a gift card that someone has given me in exchange for doing a presentation on writing. All of this generous goodness means I can squeeze a few more coffee dates into a given month. And I do love that.

But generally speaking, twenty is plenty.

And I have to admit: part of the fun of being a YNABer is seeing just . . . how . . . far . . . you can get your money to s t r e t c h. I see it as a challenge now, rather than a restriction.

It’s addictive, isn’t it?

Use Your iPhone with Ting!

Woohoo! After a few months with the world’s most basic, junky Android smartphone*, I’m back on my iPhone. Apparently Ting and Sprint struck a deal to allow iPhone 4 and 4s users to move to Ting. My wife nearly cried with joy when I told her (she’d been such a good sport about the junky Android).

*No dig on Android. I know there are amazing Android devices; I just happened to get the cheapest model Ting offered; it came with a pretty spartan feature set. 

In more good news, yesterday Ting reduced data rates (big win for bigger data users):

ting-data-rates

And in even more good news, they’ve just launched an iOS app so I can keep track of usage on my phone:

ting-minutesting-messagesting-megabytesting-usage

Ting’s been a winner for me and Kate, and now I’ve converted Jesse and Chance. I’m sure commenters will chime in with other non-traditional smartphone plans, and I’m all for it. Whether you go with Ting or another option doesn’t matter much to me – I just hate the thought of YNABers losing money on over-priced phone plans.

*If you sign up for Ting through this link, YNAB receives a referral commission and you receive $25 in account credit. If you’re still under contract, they’ll give you account credit for up to 25% of your current provider’s early cancellation fee, up to $75 per device. I love these guys. 

Hyper-Frugality is NOT Official YNAB Doctrine (It just happens to be fun.)

speech_bubble

“Can’t imagine what it must be like to live at Mark’s house. Scrutinizing every financial detail must be exhausting. On the other hand, it is for a good cause. (eliminating debt, and material for writing a blog)
Keep up the good work and thanks for presenting new perspectives.”

A week or so ago we agreed that choosing to finance anything is choosing to finance everything. After reading the post, our old friend Bill (remember Bill?) left the comment I shared above.

I read it to my wife and she cracked up. Probably because she’s the one who has to deal with my current ban on the use of recessed can lights, not to mention my insistence that we line dry all our clothes in the basement (gotta love that dry Utah climate).

You might wonder why my wife laughed off Bill’s comment, rather than having it stir up some kind of argument between us.

A couple reasons:

First, she and I share the same goals: freedom from debt followed by financial independence. I may be a little more aggressive about cost-cutting, but she’s thrilled with the positive momentum we’re building.

Second, she sees I’m the happiest I’ve been, maybe ever. When I was making more, spending (a lot) more, and borrowing, I was irritable, tired, stressed out. In my pursuit of a higher savings rate, I’m happier, relaxed, and energized.

So, I’m feeling great, but I want to speak to the last part of Bill’s comment:

“…thanks for presenting new perspectives.”

I appreciate Bill’s gratitude, and I want to make sure we’re clear on one thing:

Hyper-frugality isn’t official YNAB doctrine. YNAB is just a tool to increase awareness while reducing money-related stress and conflict. My blog posts only serve, as Bill put it, to offer a different perspective than what most people are used to.

I may come across as hyper-frugal or anti-consumption. I’m really neither of those. (I’m all for consumption. It’s 1 degree outside, and my bike ride to work would have been much less comfortable without the ski goggles I bought ten years ago.) I’m just putting every outflow under the microscope to try to understand its cost and benefit.

That’s why nothing I say on the blog should make you feel judged, criticized, or unsuccessful.

Ideally, what I write would intrigue, maybe occasionally inspire, and hopefully not bore you. But you’re pursuing your own goals in your own way, just as you should.

So, keep my posts in their proper place. Your job is to spend mindfully, with an eye on your most important goals. If I say anything that helps, great. Use those nuggets and discard the rest.

How to Flush Half a Million Credit Card Points Down the Toilet

Small business owners may have a similar problem.

I run virtually all of our business expenses through a single credit card (well, now two cards, but you’ll see why in a moment).  YNAB has run-of-the-mill expenses for everything from servers, to remote Mac hosting, to our customer support and emailing system.  We also run ads on various networks that contribute positively to the bottom line.

This single credit card ends up with tens of thousands of dollars of spending on it each month.  That spend is paid in full, the cycle continues, and points are accumulated. Lots of points.

When I first set up the card years ago, I elected to go with a Chase Amazon Business Visa.  It gives me three points for dollars spent at Amazon, two points for dining and eating out, and one point for everything else.  Or something close to that at least.

These points aren’t cash. They aren’t on the budget. They’re “free,” and recently I came to the realization that I was not “stress testing” these points purchases much at all.

Amazon, those sneaky devils, makes it very easy to spend my points. When I’m checking out, they’ll ask me, “Want to just use your points, you savvy shopper?!” And I would respond something to the effect of: “Hrm…then this doesn’t hit the budget! Free baby!!”

(Not having it hit the budget meant it wasn’t subjected to the Julie Test of Reasonableness, where Julie basically susses out in a few seconds how reasonable my purchases are.)

To give you an idea of how I spent my credit card points in 2013, I present to you this unfiltered list:

  • Two Trident HP Headlamps
  • Four Kiddie Two-Story Fire Escape Ladders
  • 100 feet of Paracord
  • 50 Bic Lighters
  • 12 candle holders
  • A water filter replacement kit
  • “Be Expert with Map and Compass”
  • A water filter replacement cartridge
  • 72 10-hour candles
  • 4 100-hour candles
  • A shortwave radio
  • A Goalzero solar backpacking kit
  • A Goalzero AAA rechargable 4-pack
  • 2 Buffs
  • A military tritium compass
  • 24 bandanas
  • Some high-calorie energy bars
  • A BlastMatch fire starter
  • Needle-nose pliers
  • Tactical gloves
  • Wetfire tinder tubes
  • A first aid kit
  • Knee pads
  • 150 yards of 20-pound fishing line
  • A 24-inch pocket chain saw
  • Three “prepping” books (had you noticed the pattern?)
  • A UV water purifier
  • Women’s hiking boots
  • Two pairs of smartwool socks
  • Heirloom seeds
  • Potassium Iodide tablets

That was all before January 15th of this year.  I had set a goal to ready 72-hour kits for my family. Check.

Oh, what, were you getting bored?  The list continues:

  • LeapFrog Learn & Groove Musical table
  • BlastZone Magic Castle Inflatable Bouncer
  • Spot It and Blink card games
  • 200 pit balls
  • A tournament chess clock
  • Trace mineral drops
  • Moisturizer
  • Lunchboxes, with 3-compartment tupperware containers
  • iSi Gourmet Whip Brushed Stainless Steel Cream Whipper

That last purchase took place on September 17, 2013.  About the time I had my epiphany:

I guard cash like a hawk, but spend points like I’m Paris Hilton.

I didn’t price-shop, I didn’t scrutinize to near the degree of a normal purchase, I didn’t sanity-check it with Julie…I didn’t maximize the value of those points.

So I converted the points to cold, hard cash, deposited that cash into the bank account, and let Julie have full control of it (here’s the podcast where I talk about giving her full reins on the family budget).

It’s being put to good use.

I also signed up for a Fidelity 2% Cashback card and am running about half our monthly (non-payroll) business expenses through there. The awards are deposited directly into a Fidelity brokerage account, where I’ll invest the funds accordingly.guarantee I won’t withdraw from that account.

My hope is that the vast majority of you do not run that kind of spend through your credit card; at least not for your household! But if you’re a small business owner, and you find yourself accumulating an unholy amount of points on your cards, are you guilty of similar thinking? Where the points can be flushed down the proverbial toilet, and avoid the normal checks and balances of an equivalent purchase?

For those with a significant amount of points racking up, I think you’d be well-served to convert to a cashback card, where the cash can be accounted for and managed…more appropriately.

Short on cash? Sell your stuff.

piggy bank copyKate and I have come to love CrossFit-style workouts over the last few months. We’ve had an in-kind membership at the local “box”, but the owner of the gym has decided not to do trades for memberships anymore (which I don’t begrudge him; I think it’s a wise move).

Problem is, Kate and I find ourselves irritable and a little depressed if we don’t start our mornings by picking heavy things up off the ground. So, we’re looking to get our own little CrossFit gym set up in the garage.

Yes, you can do some things on the cheap. These sandbags actually work really well, and I’ll be making a couple heavier ones to integrate into our workouts.

But most CrossFit gear is pricey. You can find it used if you’re very patient. We’ve decided we don’t want to miss a couple of months of exercise while we watch the local classifieds for used gear, so we’re going to buy much of our our CrossFit starter kit new. Our “getting started” list totals about $800.

But where will the money come from? Selling stuff.

Kate and I have never been buyers or sellers of used stuff (ie we’ve wasted a lot of money), and we’re excited to leverage our junk into useful equipment.

Here’s what we found we could sell:

*Suddenly it seems like I’m trying to sell you my stuff. I’m not; I just throw this list out in hopes of inspiring your own list of stuff you could sell. 

Treadmill: $500

We bought this for $2,500 6 years ago, and used it a ton, but our interests have shifted toward weight-based exercise. Yes, I find it hilarious that we bought a $2,500 treadmill, but it is a really nice one.

TV: $300

Bought for $500 about 10 months ago (after my daughter smashed the old TV with a sippy cup). We’re only using the TV about 3 hours per week right now, and we can use a computer monitor instead.

“Bob” jogging stroller: $100

Bought for $350 six years ago. Nobody in our family is willing to ride in it anymore. Well, I’m willing, but no one seems up for the job of pushing me around in the thing on our Sunday afternoon walks.

Down comforter: $40

I think Kate paid $100 for this a few months back, and we never use it (even now that the thermostat is set to 64 at night). Interesting sidenote: did you know the cover of the comforter is considered a totally different thing? Fascinating. Apparently we’re only selling the comforter, and not the cover thing.

“Insanity” workout DVDs: $30

Already sold them. I felt so entrepreneurial and savvy turning my stuff into cash.

Surround sound system: $50

I bought this for $200 seven years ago and have barely used it.

Mark’s Android Phone: $40

Exciting developments here: I no longer need my Android phone. I think that’s all I can say for now. :)

Total (hoped for) Profit: $1,060

Two questions for those of you who’ve sold your stuff before:

1. What were some of your most profitable items? Any tips for getting top dollar for your stuff?

2. What do you think of my prices? Think I’ll get what I’m asking for this stuff?

Here’s to emptying out the basement and storage unit for fun and profit.

The Mont Blanc Effect: Your Fancy Purchase is Costing You More than You Realize

A boss of mine gave me a very nice gift about 11 years ago: a Mont Blanc pen.  Excuse me, I should have said writing instrument.

My 21-year old self was impressed. There are a few reasons a gift like that is so exciting:

1) I’d never buy myself one and

2) People would wonder how I ever afforded such a pen. It would add to my pre-married, still in the dating-market mystique.  That guy Jesse? I don’t really want to go out with him…but did you see his pen? My my…

I love that boss of mine–still stay in contact with him to this day–but he gave me a debt.

A month of using the pen, and I had to buy a refill.  A few months later, I had to buy another refill.  I didn’t know they even made pens that required refills. I was used to Bics, and Pilot Precise Point, Extra-Fine tipped pens that seemed to last years, and which you bought in packs of dozens.

This is the Mont Blanc Effect.  It’s the maintenance cost of that expensive item you bought.

And it can sometimes fly in the face of the “Buy Nice, or Buy Twice” adage. At least a little bit.

Mark, Chance and I all discussed the Mont Blanc effect, and came up with a few more examples, to get your gears turning.Remember the weight room, where I spent lavishly on mirrors from floor to ceiling, and had the walls all done with real brick? We had our hot water line to the kitchen spring a link, it soaked the ceiling of the weight room, and soaked the north wall where half of our mirrors were hung.  So we had to break the mirrors, tear down the wall, and weight room entry.  The entry way was the part done with a lot of brick, and that brick made the demolition a lot more difficult (costly).  Lesson: the mirrors and brick cost more to build, and cost more to demolish.

I used to want a BMW. So silly.  At any rate, you buy one of those and you’re committed to premium gasoline, lower miles per gallon, an increased likelihood of speeding tickets (I know I’d speed more…) and higher repair costs.

Just today, Julie sent me an email mentioning a cutting board that is highly recommended by one of her favorite cooking blogs.  Mark said, “You’re going to get that cutting board for her.” And yes, I likely will, because the woman wants nary a thing, so when she does, I get pretty excited about getting it for her for Christmas.  Anyway, on Amazon this fancy cutting board costs $158.  (Of course, using a service like CamelCamelCamel, probably named in a rush, just like this site, and you find out the average price is $132…I’ve placed a price watch on it.)  I digress.  What does Amazon suggest as a purchase alongside this fancy cutting board? Fourteen dollar mystery oil.

That fancy cutting board demands some fancy maintenance.

Update: Based on some reader comments, I could get very cheap mineral oil from my local hardware store and the maintenance costs on the fancy cutting board would be minimal.

TOYS are a classic on this.  Boats, snowmobiles, four-wheelers, etc. They’re costly to winterize, maintain, store, repair and operate.  The excited about-to-be-a-boat-owner has a tough time considering the ongoing costs.  A sudden windfall has provided the opportunity of a lavish purchase, but the sudden windfall will be suddenly gone, and the maintenance costs will remain.

What about you? What are some luxury items you’ve acquired that have come with their share of hidden maintenance costs? Where have you been bit by the Mont Blanc effect?

P.S. In my head is a post about Buy Nice, or Buy Twice. I LOVE the idea of purchasing something and having it last, instead of landing in a landfill.  This idea of maintenance may seem to go against this idea, but I think as long as maintenance costs are weighed as part of the purchase, everything works out :)

4 Painless Changes to My Budget that Freed Up $104.82 per Month for Debt Reduction

piggy bank copySmall wins add up to big wins. A few times per month I ask myself: “I wonder how I could squeeze and extra hundred bucks out of the budget to throw at the debt?”

I’ll have ideas here and there, but other than the obvious stuff (dropping cable TV, getting a cheaper cell phone plan, riding my bike all over the place to save gas, eating out less), I rarely have a solid $100 plan come together in my mind.

For some reason a $100 plan came together at 4:45am today. Now, don’t get me wrong – I’m not trying to hype this all as cost-reduction: 60% of this plan was a reallocation. But I still call it a win because I shifted resources to my most important current financial goal (getting out of debt).

1. Canceled Netflix and Hulu Plus: $16.52 per month.

We haven’t watched Netflix in three weeks, and we can still veg out with shows on the networks’ websites, so why pay for these services? We’re wondering if it’s time to sell the TV and be done with it.

Side benefit: the less TV I watch, the earlier I go to bed, the better I feel.

2. Cut my automatic 401k contribution. $58.33 per month toward my highest interest debt.

YNAB makes an automatic contribution to my 401k, but it’s not a matching program. Because I can’t earn the automatic 100% “ROI” from an employer match, it makes more sense to apply the ~$60 per month that was going to the 401k to my highest interest loan (the residential lot at ~10%).

3. Contacted a new local internet provider about connecting to his service. $20 per month.

Apparently there’s a new internet reseller who’s setting up shop in my neighborhood and two others in our city. I have a couple neighbors already on the service, and they say it handles streaming fine for $30 per month. Saves me $20 and feels low risk given our reduced streaming habits.

4. Cut another $10 per month from my fuel budget.

Kate and I have targeted two areas where we can further reduce our car usage: I’ll ride our daughter to her preschool in the bike trailer, and we’ll be driving to the gym less often. Monthly gas savings will come in around 3-4 gallons, or $10 to $12 per month.

This change isn’t stricly about the money: I like the time on the bike and the opportunity to take my little girl to school. The money is a bonus.

Final score:

$16.52 + 58.33 + $20 + $10 = $104.85 per month.

It seems a little trite when people say “Every little bit counts,” but when you can make savings and adjustments to funnel an extra $100 per month to your big goal, it feels like a big win.

How I’m Saving $1,828 Per Year on My Cellphone Bill

I gave up everything, and lost nothing.

Step One: Admit That You Were Just as Happy Prior to Being Shackled by Your Large Smartphone Bill.

ball-and-chainBefore I dive into what will be an extremely-detailed, tactical post for saving you well north of $1,000 per year, let’s take a step back and look at the big picture. If you’re at all like me (handsome, witty, but otherwise quite normal), you 1) have a smartphone and 2) pay through the nose for it.

And if you’re at all like me, you didn’t have a smartphone…say…10 years ago.

Our first step is to admit that ten short years ago, we all at least barely survived without smartphones.

I can’t say I’m any happier now, with my fancy iPhone, than I was without it.

That being said, this post will not be about giving up convenience, but about finding an exact or near equivalent alternative to save you serious money.

One more thing: convenience and happiness are not the same. Gardening, exercise, pursuing higher education, and raising children are inconvenient, but doing all four of those things makes me happy :) You likely have similarly inconvenient pursuits in your life, and are happier for it.

A Step One Sidenote

Some of you are actually less happy since you adopted the lifestyle of the smartphone owner. Your device owns you. For the rest of us, it’s probably just a mild, to moderate addiction.

Step Two: Examine Your Current Cellphone Bill

Background: Julie and I are were with Verizon Wireless on a shared plan of unlimited talk and text, and 2GB of data each month.

Divide your examination into three components: talk, messaging, and data.

Talk

We average 675 minutes per month.

Our top twenty phone numbers that we call account for 94 percent of our total minute usage each month. It gets better when I examine our top five uses:

  • Julie and I calling each other accounts for 40 percent of our minutes.
  • Julie chatting with her mom that lives across the country accounts for another 25 percent of minutes.
  • Add Julie’s sister and two good friends, and that’s another nine percent.
  • Basically, 74 percent of our minutes are from talking with each other, and four other people.

Messages

Texting is my preferred vehicle of communication between friends. It doesn’t demand they respond immediately and it keeps things short.

Between the two of us, we send about 650 messages per month.

This does not include iMessaging between other iPhone users. Since Julie and I are both iPhone users, we iMessage a lot, and those aren’t channeled through Verizon’s system.

I don’t know where we fall in the spectrum of text usage, but we’ve proven that we use it regularly, and that it would be an adjustment to go without it.

Data

This is the expensive part. I think across the board, data is the most expensive aspect of everyone’s smartphone plans.

Our data usage is about 1GB per month. We’re “lazy” about our data consumption, in that we don’t ever throttle our usage, wait to be in a wifi area, or generally maintain awareness of its consumption at all. Why would we maintain awareness when we rarely cross the 50 percent usage threshold (more on that later)?

Data is the carrot the carriers dangle so tantalizingly in front of us. It’s the reason some of you will resist the remainder of this post. You can’t imagine your life without a data plan, and instant, everywhere-access to whatever addiction you’re currently nursing on your smartphone ;)

I have an answer for you, where you’ll give up almost nothing, and gain a whole lot of money, and quality of life in return.

Step Three: Mentally Walk Through Your Day, and Locate Wireless Internet Around You.

Short Analysis:

My time not in a wifi-available area is limited to:

  • Going to the gym
  • Walking the dog
  • Riding my bike (80%, it’s a new habit I’m loving), or driving (20%) to and from work (12 minutes on bike, five minutes in the car).

Long Analysis that You Can Skip If You’d Like:

I wake up at 4:30 AM, in an overflowing bath of virtual wifi data, for which I’m paying $50/month—whether I use it or not. As I put on my gym clothes, drink my protein, and eat my apple, the Wifi access just floats around me. Plenty of it. More than I could ever use.

I leave for the gym at 5:05 and about fifty feet from my house, the wifi signals fade away. The gym does not broadcast wifi, and I wouldn’t need it if they did. I’m there to work out.

Home at 6:45, I’m back in a wifi area that I’m paying for.

At 8:00 the kids are sent off to school, and I walk the dog. There is no wifi during the walking of the dog, but that’s okay because it’s My Time to Think.

At 9:00 I’m back home, back where the wifi is plentiful (that I’m paying for, but rarely using—notice a pattern here?).

Here’s where I practice the piano, basically wasting the available wifi, since I don’t use it while practicing. Or showering for work.

By 10 AM, I’m off to work, with a 12-minute bike ride to the office. There is no wifi during the ride, and if there were, I couldn’t use it anyway. I survive.

Once in the office, wifi is available. Readily available. There for my consumption, and I greedily eat it up as I manage whatever needs to be managed for YNAB.

The 12-minute ride home at 5:15 PM is still wifi-less. Survivable.

Once home in the evenings, my home wifi is waiting, readily available, and stays that way until I go to sleep at 9:00 PM (You would too if you got up at 4:30 AM).

Wifi Availability Conclusion

If you’re anything like me, it’s probably all around you, for a very large chunk of your day. Based on some quick time analysis I did, I have available wifi during 88 percent of my normal day.

What does this mean for the expensive data plan I’m on? It means I’m paying through the nose to use half of the data (one nostril’s worth), where that convenience can be employed for maybe 12 percent of my day. I’d be stupid to use the data while I’m riding my bike, or driving, so I could only really use the data during the walk with the dog (again, that would ruin my Time to Think), or other exceptional uses. So without riding or driving, those data use cases are really only available to me about eight percent of my day.

What a ripoff.  WE ARE BEING RIPPED OFF.

I’m paying two times more than I should (because I only use half of my available data), to use a benefit that’s available for one tenth of my day.

Let’s start using the wifi readily available to us, shall we?

Step Four: Ditch Your Cell Minutes, and Chat over Wifi

A Quick iOS-specific Aside

Going back to my cellphone minute usage, Julie and I combined are the top chatters. I know her schedule, and know that she’s also bathed in wifi that we’re paying for and not always using. We’re both on iPhones, we’ve both updated to iOS 7, and now we’re both recognizing the benefits of the new FaceTime Audio feature (there may be an Android equivalent, I didn’t dig deep there).

FaceTime audio is a lower-bandwidth option than FaceTime video (because there’s no video), but limited to Apple devices. It’s only available over wifi, but we’ll talk about how to get wifi anywhere further on this post, so no worries there.

Bonus though:

“FaceTime Audio also provides a sharper, higher quality sound than traditional phone calls by utilizing the technology known as “Wideband Audio.” The difference is as clear as comparing a 1970′s television set to a IMAX screen. Once you hear the difference, you’re unlikely to want to go back to regular cell phone calls. Plus, the service is free.” (source)

I snagged Julie’s phone and swapped out my mobile number for my FaceTime Audio option as a Favorite in her phone. We’ve chatted over Facetime Audio for the past two weeks and the sound quality is stellar. It sounds like she’s in the office with me.

And Now for the Non-iOS-to-iOS Use Case, Which is Much Larger:

We want to chat over wifi, not cellphone towers.

Step Four (A): Sign up for Google Voice

Google Voice is not a mobile phone service provider. It’s a fancy router for your phone number, so you can do fancy things with it. You can learn about the specific features here, if you’d like, but I’ll just speak specifically to how I’m using it to save a bundle.

(Optional): Port Your Cellphone Number to Google Voice

The port cost $20, and is totally optional, but I wanted to do it so if I ever change my cellphone setup, I’ll just tell Google Voice to forward calls to whatever new cellphone I get (or any other contact point). Having your number with Google Voice gives you the flexibility to basically never have to port your number again :)

Just as a quick example, let’s say you’re at your employer’s for eight hours Monday-Friday, instead of having personal calls go to your cellphone, you’d have Google Voice route the calls to your work office number, but would have that happen Monday-Friday, from 9:00AM-12PM and 1PM-5PM (lunch break). People calling you wouldn’t know you picked up on the office phone of course, but you’d be saving minutes. This suggestion only applies if your employer is cool with it.

The port took 22.5 hours, so their estimate of 24 hours was pretty spot on. Also, Google was very clear on the ramifications of porting my number. Read those carefully.

To be clear, when Google Voice is forwarding, you’re still paying for minutes. And as I mentioned before, we don’t want to be using minutes. We want to be using the bounteous wifi available all around us to make and receive calls like everyone else. Let’s leave Google Voice for a moment, and talk about Talkatone.

Step Four (B): Install Talkatone on your Phone

The Talkatone app is a bit kludgy, it has ads (you can pay to have them removed but, honestly, they’re not that big of a deal), and the workflow could be a bit nicer.

BUT, it integrates seamlessly with Google Voice, where setup takes just a minute or so. And then you’re making calls over wifi, with your Google Voice account.

I originally set this all up using Skype, which cost me a bit of money, because I was certain that was the way I wanted to go. I was wrong. Talkatone was just as good as Skype in my testing, and costs nothing.

When setting up Talkatone, make sure you turn on the appropriate notifications for it, as an app, on your phone. For instance, on my iPhone I have it set to alert me, and make a sound—equivalent to what my phone would do if it were ringing through the native phone app.

A Few Nice Features

1) Call Screening
Google Voice has this great feature where you can basically have people report who they are, then Google Voice calls you and let’s you hear the recording. You can then decline or accept the call.

For me, this is awesome. I seem to receive business solicitations more than ever, and declining those will feel so good.

You can set up groups for your contacts, where specific groups always bypass the screening. For instance, I wouldn’t necessarily screen my wife’s calls (she’d be using FaceTime Audio anyway…but you get the drift).

2) Targeted Voicemail
With your contacts in groups, you can prepare specific voicemail messages. For instance, if you’re a small business owner, you’d want to default to having a “business-like” greeting for your voicemail, and a personal one for family. You could reserve a special one for your mother-in-law calling from Alabama…maybe you could say something like:

“Mom?…Mom?…You there? It sounds like you’re breaking up. Hang up and try and call me again…Go on and hang up…just call me right back.”

Hilarity ensues.

We’ve handled minutes usage. We’ll only make and receive calls when we’re in a wifi-plentiful area. Need for “normal” cellphone minutes: zero.

Step Four (Righteous Indignation): Breaking Down on the Side of the Road

I’ve mentioned my plan to lots of people over the past two weeks, and EVERY SINGLE ONE has asked me, “What if you break down on the side of the road?”

Originally, I entertained the idea of an emergency cellphone (or two, one for each car) for this scenario. However, the monthly maintenance cost, and thought overhead required, is too high. I looked at Tracfone, with two $10 phones, and 30 minutes of prepaid minutes that would last a year for each phone, and we’re already at $20 per month. Unacceptable.

So I looked harder for a cheaper option. No dice.

Whereupon I convinced myself that an emergency cellphone is unnecessary. This internal struggle reminded of the late comedian Mitch Hedberg’s bit:

“I sit at my hotel at night, I think of something that’s funny, then I go get a pen and I write it down. Or if the pen’s too far away, I have to convince myself that what I thought of ain’t funny.”

Now, you certainly can accept the cost of an emergency cellphone, but consider the fact that ALL of these things would need to happen, in order for you to require one:

  1. An emergency would need to take place that was NOT worthy of 911 (you can dial 911 on any cellphone, whether or not it’s attached to a cellphone plan), AND
  2. There would be NOBODY around, whose phone you could borrow (remember, it’s a non-911 emergency, so the time sensitivity of this emergency would likely drop, making this even less likely, AND
  3. There would be no wifi available (likely, if #2 is happening), AND
  4. Plan B from an upcoming Step Six would fail.

From my recent podcast #94 – “Cellphone, Unshackled” (where I work this written plan through verbally, and was less accurate as a result), I had a podcast listener write in with the following firsthand observation. David gave up his Android smartphone last year and this is what he had to say about pre-paid backup phones. Read this slowly, then re-read it, and let it really sink in:

“For a brief while, I had a pre-paid backup phone. I ditched it when my minutes expired. Almost everyone else these days has a cell phone and every business has a land-line. If you look like you need help or you ask nicely in a safe space, many people will gladly lend you their phone for a moment or two. When I had a flat tire last Thanksgiving, a police officer offered to make a call for me.

As you said on the podcast, people got by just fine not all that long ago without cell phones.

Needing to rely on myself and strangers rather than just calling my nearest friend or family member for help has been a salutatory experience. It’s made me prepare ahead a little bit more and to pay closer attention to what resources are available just for the asking (both of which I think are excellent skills for a budgeter to practice).

When that police officer offered to make a call for me, I didn’t need it—I had everything necessary to fix the flat on my own. When I started looking around, I discovered that payphones hadn’t really disappeared from suburban America—they’d just moved inside supermarkets and Wal-Marts where vandals can’t easily damage them.”

This from a guy that’s been living sans ANY phone for the last year. I’m hoping others will chime in on the comments and relate similar stories.

If you’re still feeling your stomach turn knots over the idea of not having an emergency phone, the BEST solution I’ve found came after I’d given up the idea, courtesy of the Mr. Money Mustache forums:

“As a less extreme emergency phone only secondary option that still lets you call home or a tow truck or something while on the road if needed, obtain any Verizon or Sprint phone (might work with other regional CDMA carriers, not 100% certain on this yet – it is important that it’s a CDMA phone with a clean ESN, though – most people who do this seem to favor using Verizon handsets) take it into the store and have them deactivate it as before for the 911 only option and get the MIN/NAM set to identify the phone number as 123-456-7890 (the universal deactivated handset identification number). From this point, you should be able to try making a call and getting a woman’s voice talking about making a collect or credit card charged phone call. Congratulations! In addition to making 911 calls, you now have access to the American Roaming Network (ARN) and can make outgoing calls to the US and Canada. Although horrible expensive doing collect or credit card based calls, you can buy a 60 minute PIN card for $20 that will last a year and you can recharge the PIN account at a 25¢ a minute rate afterward. This is the perfect, lowest-cost non-911 exclusive emergency phone for the glove box option available. As before, this is also a great option to keep in mind if you’re going to try the ultra-extreme WiFi/VoIP only with no wireless carrier option with your smartphone (still not recommended). If you go this route or the 911 only route, just keep that phone turned off with about a 2/3rds battery charge in the glove box and with a car charger, and you should be covered. For safety sake, be cautious of really hot lithium ion batteries during usage in the summer, though.”

Let’s move on to Step Five, and talk about texting. This part’s easy.

Step Five: Free Texting Through Google Voice, Through Talkatone

And…that’s pretty much it. You can send and receive free SMS texts. At this point, with my testing, you cannot send pictures via text, but hey…maybe just email the picture.

A few things to note:

  1. There is currently no MMS support from Google Voice (boo), so we’ll live without it. You will not receive group texts from iPhone users unless they send it to you as an iMessage.
  2. You can’t send group texts with Talkatone. You can send group texts from within your Google Voice account on your browser, and I’ve used that as a workaround once when I had to text a half dozen people. Small price to pay for free texting, in my opinion.

Texting has been taken care of. It’s free, people. Never pay for it again (and yes, unlimited texting plans still cost money…because the unused capacity of other features pump the costs up…)

Let’s get to the biggest catch of all. Data.

Step Six (A): Go on a 24-hour Data Fast.

Every one of your smartphones lets you turn off your data. Grab your phone (if you’re not already holding it as you read this, you addict! ;)), go to the settings, and turn off the data connection.

Do not turn it back on for 24 hours.

What happened?

I’ll report my own experience, which is now going on two weeks: Nothing has happened. Except when I was at the drive-thru of Jimmy John’s (hey Jimmy John’s, could I get a truckload of coupons for mentioning you guys specifically? I could use ‘em), and found out they’re not as lightning-fast with your sub if you opt for the lettuce-wrapped Unwhich. Once I realized I’d be waiting in the drive-thru longer than 25 seconds, like an addict, I went for my phone:

“I wonder what’s going on with Twitter?! Who’s updated their Facebook status? Is there some random information I should be consuming right now? Has the President of the United States invited me to dinner tonight?! I’d better check my email to see…”

Those kinds of thoughts. In the space of waiting 45 seconds for my Unwhich to arrive.

Then I realized my data was turned off, and tossed the phone back on the other seat, thinking one thing: “I am such a sucker.”

So turn off your data. You’ll be surprised how little you need it. DON’T TURN IT BACK ON.

Step Six (B): Analyze Your 24 Hours Without Data

Here’s what you’ll realize. You’ve been had.

The vast, VAST majority of you have no real need for data. It’s a big distraction in your life, masquerading as a time-saving convenience.

And yet, this wolf in sheep’s clothing is why your cellphone bill is astronomically expensive. It’s the allure of the data…floating available everywhere you DON’T have wifi. And remember your wifi analysis? You probably could only consume data for about 10 percent of your day.

You’re fundamentally NOT getting what you’re paying through the nose for.

Step Six (C): Keep Your Data Turned Off.

And once you’ve gone a few days without it, change your cellphone plan.

Step Six (The Alternative)

If you’re worried about never having data, and being in a tight spot where you need it (Google Maps directions (which can be covered with a one-time $30 app for offline maps called Sygic, checking email for a legitimately time-sensitive item, watching YouTube videos during your lunch break off-site…), I introduce you to Karma.

Karma is a remarkably small device that could easily fit into your pocket (not conveniently, because I hate having full pockets). This little device is a mobile hotspot, and will take 4G cell data and give your phone, computer, or other wireless device a wireless connection.

The device costs $99 and comes with 1GB of data use. For every additional gigabyte of data, you pay $14. You pay the $14 up front, and Karma warns you when you’re approaching your limit. Fourteen dollars per gigabyte is much cheaper than you’d pay any major carrier.

Everything about Karma I like. Their design is spiffy (and we here at YNAB appreciate that), their communication is clear, and you get the feel that they genuinely want to make the whole process easy for you.

This is in comparison to their competitor, FreedomPop (not worth a link), that claims you get FREE data all over their website, until you go to sign up, where they then (in very small print) let you know that they’ll charge you some monthly amount thereafter. That, and the fact that their Amazon reviews reeked.

Anyway, back to Karma, you only pay for what you use, there is no monthly plan which, by definition, eliminates that thing about YOUR data plan that you should be hating right now–the fact that you will ALWAYS pay for something you aren’t completely using.

In my field testing, it worked great. Check their coverage map to see if it will work for you. However…

Now that I’ve bought the Karma device, I’m sure I’ll bring it with me when I travel, but would I recommend it for you right out of the gate? Nope. Go for a while relying on just wifi for your data. You’ll be pleasantly surprised at how LITTLE you need that data after all. In two weeks, I haven’t used Karma once, except to test it for this blog post.

An Option For Those of You Scared Out of Your Minds

First, don’t let the contract “out” fee scare you. The savings you amass from switching away from a big carrier pays back most contract cancellation fees in a matter of months. The carriers want you to fear that contract cancellation fee. Fear not.

Second, you don’t HAVE to go wifi-only, as I have, in order to amass some significant savings. Mark switched to Ting, and I’ll likely be easier on Julie’s workflow, and switch her to Page Plus (a Verizon-based small carrier), where they have a $12/month plan with 250 minutes, 250 texts, and 10MB of data.

Julie will need to have her phone tweaked just slightly:

- Call me with FaceTime Audio when she’s bathing in wifi (done).
- Call her mom with Skype when at home.
- Call her sister with FaceTime Audio.
- Call (most of) her friends with FaceTime Audio.

This would cut her minutes from around 400, to about 100. So she’d be well under the 250 minute cap.

The texting would be easy for her to stay under as well, because 1) I wouldn’t be texting and 2) she’d be using iMessage for most of her friends (we tallied them up, most have iPhones).

The data will need to be turned off on her phone, so she won’t use up the 10MB in a heartbeat. If she does have a “data need” emergency, she can turn data on and use some of it.

If I wanted to take the VERY soft approach, I’d move Julie to the $30/month plan, and she wouldn’t notice a thing had changed–except for the fact that we’d be paying $70 less per month. I like going for the phone bill’s jugular on this though: $12 plan it is.

Look for the prepaid, no contract providers that are already working with your phone’s underlying network. Here’s a fantastic list to get you started.

A Conclusion Full of Options

In the end, the main takeaway is this: Don’t be a sheep and follow all of the other sheep over the cliff (as they grab their phones and Google “how to levitate in a pinch.”). Consider your options and be INTENTIONAL about what’s bringing you happiness—not just convenience.

You can:

1) Ditch your phone completely
2) Go wifi only, as I have
3) Switch to an MVNO (mobile virtual network operator) for big savings, and no disruption at all to your “flow” (what I’m starting Julie on) or
4) Keep doing what you’re doing, and make me sad.

Your call, but we’re now saving ~$145/month, and that’s nothing to sneeze at.

A 50% Savings Rate is Impossible…Isn’t it?

piggy bank copyI may never achieve a 50% savings rate (as Mr. Money Mustache encourages). But it’s such a compelling ideal that I’ve resolved to start generally wandering in that direction. How’s that for commitment?

Here’s the thing: I realize people typically seek a high savings rate because they want to leave the employed world. That’s great; I support it wholeheartedly.

But what if your working life isn’t awful? If you have low-cost income that improves your happiness, there’s no need to hurry up and retire.

So if my current (and future) employment contribute to my happiness without imposing excess costs on my life, why would I think about accelerating my savings rate? Why not just continue earning while setting aside the traditional 15% of gross income* for my eventual traditional retirement?

Two words come to mind: intentional and optimal.

By setting a target savings rate of 50%, I know I’ll have to adjust my life. I’ll have to spend less and earn more. Both carry costs and benefits. Somewhere in the exploration I hope to find a highly-optimized, perfectly intentional life.

Let’s get “optimal and intentional” out of the abstract. Below is a table showing my six-month average expenditures in descending order. Next to the averages, I’ve guessed at what could be “possible” for that category, and shown the corresponding savings.

Interesting side note: compare my six-month average to the amounts from my shiny new budget (from three months back). See how my average expenditures exceed my budget? Looks like I still have some head-in-sandness to resolve in my life, but things are heading in the right direction. Several of these categories are already moving toward my “possible” number. 

Expenses My 6-month Avg “Possible” Change
Mortgage 1,710.48 1,710.48 0
Tithing 725 725 0
Groceries 625 525 -100
Health Insurance 611.7 611.7 0
Household Needs 350 250 -100
Fuel 235 150 -85
Restaurants 160 100 -60
City Utilities 150 125 -25
Residential Lot 163 163 0
Car Repairs 150 150 0
Life Insurance 144 144 0
Dental 110 110 0
Student Loan 97 97 0
Clothing 85 50 -35
Preschool 75 0 -75
Natural Gas 69 49 -20
Internet 53 30 -23
Car Registration 30 30 0
Other Medical 45 45 0
Home Exterior/Interior 50 50 0
Entertainment/Kids’ Activities 40 40 0
His/Her Fun Money 40 40 0
Birthdays/Gifts 25 25 0
TV 16.52 16.52 0
Total Expenses 5,759.7 5,236.7 -523

It’s a little tough to calculate my current savings rate because my side income is variable. I know I’m no longer spending more than I earn, so for the sake of setting a baseline, I”ll use my average expenditures as my take-home income.

Factoring 401k contributions and principle paid on property loans, my current savings rate is 13.25%.

Savings Rate = (Retirement Account Contributions + Principle Paid on Loans with Underlying Assets) / Take-home Income. In a previous post on calculating savings rate I included principle paid on unsecured loans, and was set straight by commenters. Principle paid on property loans is fair game because those dollars can recruit more dollars as the asset appreciates.

Adding in the “possible” $523 from expense reduction would give me a savings rate of 22.3%.

That’s pretty solid, but Mr. Money Mustache would tell me I’m still a slacker (I believe he sets 30% as the minimum savings rate for those who hope to be financially free in any reasonable time frame).

Assuming my expenses (with the $523 in new savings built in) are as optimized as they can reasonably be, it’s time to make more money if I want to jack up the savings rate.

It turns out I’d need around $4,300 in extra monthly income (allowing for Taxes and Tithing) to crack the 50% savings barrier. $4,300 represents a 60% increase over my current income.

This is the part where people shake their fists in outrage and say “Well, sure – but YOU CAN’T JUST RAISE YOUR INCOME BY 60% OVERNIGHT!!”

Right. But you can raise your income 60% in five years by increasing 12% per year. Or you could spend the next two years developing marketable skills, then increase your income 20% per year for the following three years.

“We greatly overestimate what we can accomplish in one year. But we greatly underestimate what we can accomplish in five years.” – Peter Drucker

I can’t jump from 13.25% to 50% savings rate in a day or a month. But I wonder if I could do it in two years. Three? Who knows – and really, who cares? Remember – the savings rate is just a metric that steers me toward a more optimal, intentional life.

Here’s how: I’ll start at the top of my list of expenses, then do a “deep dive” on every category. A deep dive looks at a category’s costs, benefits and alternatives at a level that goes beyond the numbers.

This is the beauty of pursuing a 50% savings rate. It’s a standard so high that it requires me to go deep on my assumptions of what adds value to my life – deeper than I’ve gone in the past examinations of my basic financial structures and expenses. It’s intimidating, but only good can come of it.

Our first “deep dive” will be on the costs and benefits of your job, and we’ll lean heavily on Your Money or Your Life to guide the discussion. Stay tuned.

Jesse Interviews Mr. Money Mustache: The Full Transcript

mmm

A second interview, where we dive into some other topics, is available here as Podcast Episode 96.

Jesse: Okay, I’m here with Mr. Money Mustache, from MrMoneyMustache.com and today we’re going to focus mainly on the savings rate, and I want to have everyone approach this with an open mind, so open your minds, and then let’s dive in.

*Full transcript available for download at the end of the post.

Welcome to the podcast,

Mr. Money Mustache: Thanks a lot Jesse, it is a pleasure to be here.

J: So you and I just finished up a business trip down in Ecuador.

M: Yes it was very serious, very business like.

J: Very business like. Powerpoints were flying. There was lots of downtime and conversation and we got to know each other pretty well. I wanted to basically have you come on and introduce you to YNABers who don’t already know about you, which there are probably a good bit. For those that are fans of both of us, then you know, double bonus.

I want to talk about the savings rate today, and I guess first, let me have you give a little bit of background on who you are, and why you’re an authority–the authority–we talked about how absolute truth flows from your website. So, why you’re THE authority on all things you decide to write about, and then I’ll start asking you questions–I might even play devil’s advocate.

M: Sounds like trouble. Okay well, the story is that I came to this United States country from another one, one called Canada, and I just found, without studying up on the cultural norms here, I found that by earning a reasonable professional salary and spending a reasonable amount of money, you end up saving a reasonable of money so I had enough to retire just before turning 31–my wife and I did. So I quit working in 2005 in order to start a family, and here we are eight years later.

A couple of years ago I found that none of the other coworkers in this industry–engineering–did the same thing. They’re all living paycheck to paycheck. I became exasperated with their financial behavior, and started this blog explaining how you can actually not spend all the money you earn, and how it builds up and gives you financial freedom sooner than you realize.

J: Much, much sooner than what is the norm out there. So you retired at almost 31, and you and your wife were both working, I guess, and you were an engineer, correct?

M: Correct, we both worked in a high-tech industry, sort of engineering things. She was a project manager for a while, and while we had higher than average salaries, they weren’t like wall street or lawyer salaries. So it’s entirely within the possiblity of a lot of the type of people I see YNAB customers as…most white collar…well the biggest thing is just understanding savings rate, and undersatnding happiness, and how often is that really connected to spending–less than we think.

J: Yeah, they’re not really connected much at all.

M: Right.

J: That is a good point. I guess that’s one way to approach it is from the angle of what makes people truly happy, but we’ll do a little bit–we might get into that, but that’s a fairly deep topic–but we’ll definitely talk about maybe some ways that you question the cultural norms that you didn’t study up on, and maybe how people could do that as well.

You’re well known for a post, I can’t remember the exact name…

M: Yeah, the Shockingly Simple Math Behind Early Retirement.

J: Give me, walk me through a hypothetical scenario…someone saves x%, what their retirement horizon looks like.

M: That post was all about how retirement saving is simpler than they think. Everyone thinks in terms of million dollars needed, or how many hundreds of years do I have to work to retire. Really if you do the math it kind of cancels itself out and you end up with some neat stuff.

So if you’re saving 10% of your income, and investing to get stock market returns, it’ll take about 51 years of saving that much, until you have a big enough stash of investments that you can live off, replace that 90% of your take-home pay that you were spending. But then as you slide up the savings rate, that makes a huge difference, so just going from 10 to 15 percent you’re down to working only 43 years, so you just cut eight years off your mandatory working career just by going from 10 to 15 percent.

Here’s where things get crazy. I talk about people saving 50% of their take-home pay, which sounds crazy but it’s not difficult at all once you get into practice, so if you do that, it’s a 17-year working career. If you start at 20, you’re retired at 37. It can go even further. A lot of people who read my blog, have more like 65 to 75% savings rates and that actually. That translates into about a 7-year working career. Mine was somewhere in between, where I worked about nine years before I had enough to retire.

J: You mentioned in that same post that it’s a two-edged sword, a double-win, if you lower what it takes to live happily, then you lower the amount you need to save in perpetuity.

M: Yeah, that’s right. So imagine somebody who’s gotten used to a lifestyle that costs them maybe $65,000 per year, which is maybe what a 2-income family would be living on nowadays, with pretty good jobs. And they’re locked into that, because they can’t imagine spending any less, which means they’ll need $65,000 per year, with inflation, which takes well lover a million dollars, a lot of money, to have that type of passive income.

On the other hand, it’s possible to live on a lot less. My family, with the exception–the only cheating we do is that we have a paid off house and the property taxes are fairly reasonable, but anyway on top of that it only costs us about $25-30,000 to live, so you can retire with much less than a million dollars, or even less if you’re a landlord or rental house guru, so you can income out of even less savings with that.

J: Building up a little stream of income, if you were to build up, just to give people some math, if you were to build up a stream of income that paid you $1,000 per month, that’s $12,000 per year, and ignoring taxes for a little bit, then you’d say, to nest egg that amount you’d need $12,000 times 25.

M: We didn’t mention that in this interview so far, but to figure out how much money you need to save thinking about dollars, take annual spending and multiply it by about 25, and that’s about how much you need saved. So if you have $10,000 of spending, you’d need $250,000 saved to live on that the rest of your life. You may make an adjustment if we were to go through some giant economic depression or something comes along.

It’s called the 4% rule, and you can basically think of it as 25x your spending.

J: So if you LOWER your spending by $1,000 per month, it’s the same as finding an income stream of $1,000. They work the same way–well no they don’t. The nice thing about cutting your spending is that you’re not taxed on that $1,000 that it took to earn. Although if we’re talking about spending levels, and income levels where you’re at, then taxes become almost a non issue.

M: You’re totally right. I made another post about this called The Lovely Low Taxes of Early Retirement and while the typical golf-at-the-hilton [person] needs to plan for a $250,000 a year retirement, which means a lot of that money is going to taxes out of your retirement income, in my case, living as a family with a young child, on $30,000 or less there’s pretty much no income tax due on that, because the government takes pity on you and says “Oh! It must be so hard living on only that amount! We’re going to put you in the lowest bracket and give you credits and stuff like that!” So if you’re really only drawing that amount, you’re pretty much immune from taxes in the US anyway.

Now I’ve been having a higher income so we’re still paying lots of taxes, but it’s sort of like an unexpected thing that happened in retirement, and it doens’t matter because our needs are still the same, because we only need that 25-30,000 so if that income ever went away then the taxes would go away too.

J: The income’s kind of gravy, the taxes you shrug your shoulders at, because it doesn’t approach your needs at all.

Now, you have thousands and thousands of people right now, that heard you say well, we live on $30,000 or something…

M: Yeah it’s 25-30 depending on the year. Last year it was in the 25 range, but we’re trying to spend more.

J: Trying, as hard as you can.

M: It’s hard to do, but once your needs and your wants kind of fade away, then you feel that you’re living this crazy expensive life, then you add up the bills at the end of the year and it’s still 25,000. It’s kind of a nice problem.

J: Yeah, that is. So tell me, let’s do a little bit of lifestyle analysis. I’m sitting here questining even the remotest possibility on living on such a–I would adjust mine up because I have more kids–but I would still say No, that’s too low. I can’t do that. So a big area for people is housing, tell me how you would approach that from a Mustachian point of view.

M: Well, I’m not the most mustachian person when it comes to housing because I have a fairly big house right now. But property tax is a big thing, so a lot of people live in NJ or CN, so your property taxes are $10-20k a year, you’re never going to have a $25,000 annual expense with that. So you have to question where you live, or you just have to save more, if you live in this high-home priced areas. Or you could be a renter.

But one of the biggest things you could do with any house is to figure out your energy consumption and make it lower. For example, our natural gas bill is less than $40/month year round. A lot of people spend a lot more. Our electricity is about $20. Just standard stuff, like what kind of lightbulbs you use, how much air conditioning you use, considering line-drying your clothes if you live in a dry climate like you and I do. It’s really, actually huge changes–thousands of dollars per year and people just aren’t thinking about them.

So you look at each of your expenses separately, don’t think “25% I can’t get there!” You think about each of these things, sliced down individually instead of the total, and it ends up being small.

J: I’m working on an epic cell phone post and that’s one thing, my business pays for the cellphone and so I suffer from this small business owner mentality where the expense, if it’s through the business is somehow not as important.

M: I do the same thing.

J: A lot of people do that, so it’s like play money until it actually hits your personal account. But I’ve been saying, no, even though the business pays for it, I still want to get it down. Inspired by your post about just cutting your plan, I think from my analysis, and I maybe wasn’t as aggressive as you in your post, I can’t remember the details, but I’m jumping from $170 a month for me and my wife, with fancy iphones, down to $20 per month, if I’m okay with only making calls in a wifi area, or grabbing an emergency phone out of the glovebox of my car. So, people will always say, “What if you’re stranded on the side of the road?” As if we weren’t for the prior 50 years before cellphones–and nobody died.

Anyway, I was looking at that, $165 down to $20 per month, a savings of $140 a month, about, and thinking about how much I would have in my nest egg for that. 140 x 25…

M: Actually, 140 x 12 to get your annual, and then times 25. That’s a great way for the readers.

J: 42 grand. That’s what I got.

M: I got the same thing.

J: So you’re thinking about saving that much money for somebody…that would take a long time.

M: So there you go, you think about slicing your expenses by $140 per month, that’s $42,000 closer that you are to retirement. A lot of people spend more than that just on coffee per month. Let alone, you know, important stuff like communications. And the same thing goes with cars, people are, financial beginners are still financing cars. They might have $150 to $300 payments, and then they realize later, “Oh I don’t have to do that. I can buy a used car.” And if you choose your housing to be relatively close to work, then you never use that used car, so it may last you 15 years instead of a new car lasting you five years if you live out in the sticks. So these things can make a much bigger difference than $140.

I hear from people every day that have cut their expenses by $3,000 per month. they went from $6,000 for a family, down to $3,000, just by changing stuff like cars, cellphones, cable TV, groceries, restaurants, so $3,000 times 12 times 25.

J: This is the best math to do.

M: Yeah, so those people are $900,000 closer to retirement.

(Laughing/Coughing)

M: A million bucks richer, by just cutting this typical high-income lifestyle in half. And they’re still just as happy because they still have their friends, eating healthy food, and didn’t even have to move to a smaller house. If you do that, it’s an even bigger change.

J: Our blogger Mark, who really likes your stuff, he started walking to the office, which is I think two miles away from his house, he and I live in the same neighborhood, and he’s dropped his gas needs on a monthly basis down from, I think they were maybe $250 per month, and now they’re $100 per month. So it’s the same thing as the cellphone bill, you look at a $50,000 nest egg bonus AND he’s lost I don’t remember how many pounds, and inches he’s lost, but you know that it’s meditation for him, to and from work.

M: So now you’re talking, because this is what my blog is all about: you’re not making sacrifices; you’re making improvements in your life that happen to make you wealthier. For example, I would say, nobody should ever start their work day without getting some exercise first. You gotta do something outside, so you don’t want to just get out of your bed, into your car, have coffee then go to the office because you won’t be productive, and you’ll be getting creeky and old at the age of 30 if you maintain that kind of lifestyle. So your blogger, Mark, has made a positive change, and made a ton of money in the process. That’s kind of what I push for in all areas of life. Nobody is making their life worse to save money, you’re making it better. I never compromise on life quality.

J: And that is the ticket. You’ll have people that, you know, I’m one of them, I still will push against things I’m sure, you just have to ask yourself, what do I care about? When we were in Ecuador, when JD Roth gave his presentation about what you care about, you know if you’re financially free, what would you do? I think the next was if you had a year to live, or five years… but you didn’t know when exactly, what would you do…and then if you had a day to live. 24 hours. And it was amazing how my answers changed from being financially independent and thinking what would I do, versus having 24 hours to live…what would I do. Then it was all about my family, spending time with my kids, enjoying them, and if we could adjust our thinking more toward what we REALLY care about, at our core, all the spending just plummets.

M: It’s really nice when that happens. I’m kind of living my life, not on a 24-hour plan, but on some kind of “make the most out of every day” plan. So what I do is that I spend what I can with my son, who’s 7 1/2 years old, and I’m with that guy when he wakes up I’m making him and my wife breakfast, and then he goes to school, and then after school we’re doing things together. So if he’s not playing with his friends, which he loves to do, but when he’s with his parents then we’re with him too. We’re not just watching TV or doing work while he watches, we’re actually with him, at the park, or making stuff, or writing books together, so that stuff doesn’t really cost any money. You don’t have to take him to Cirque du Solei every night and spend $300. Kids don’t care whether you’re making legos with them, or messing up the kitchen table with paint, or going for a bike ride. So if you have a limit to the amount of wealth, a billionaire already, you just choose the cheaper stuff with your kids, which is good for them, and then surprisingly it doesn’t cost $100,000 a year per kid, to raise a child.

We actually added it up and we’re around $300 per month, for the total cost of childhood stuff if the 7 1/2 year range.

J: You said $300 a month for your son?

M: Yeah, we spend $300 a month on our son-related stuff since he was born.

J: The norm is that 100 grand or something per kid.

M: Sometimes it’s $250,000, it all depends on the income. People will sign up their kids for ballet lessons 2.5 hours away, so then they’ll drive the Chevy suburban 5 hour round trip three times a week, for ballet lessons. Things like that, “I’m doing it for my kid, because she’s the most important.” They don’t realize that you can separate importance from incredibly expensive and still win in both ways.

J: Yeah, and that is the double-win. It’s the quality going up, spending going down, and when spending goes down, there’s another layer of psychology there, that we get a bonus from, that we haven’t mentioned. When you’re living within your means, WELL within your means, you feel, I mean, there’s this stress that just melts away. So not only area you spending less and your quality life is improving from these hacks that we’re doing, and lifestyle design scenarios–moving closer to work, or walking or riding a bike to work, eating healthier, which means less eating out–all of these things that are paying us dividends in other aspects of our life, on top of THAT our stress drops. Which means we lose more weight if we’re overweight, our sleep improves, we don’t snap at our kids, we’re happier parents.

M: Yeah, you get better at your job, which means you’re more likely to be promoted, and the mental energy to try new stuff. If you’re totally stressed out, you might think you can’t give up cable TV because it’s all you’ve got, but when you have the cushion you have more energy, “Hey, I’m going to try and get ride of TV and see what happens!” Suddenly that’s another change, and you have even more mental power. “You know what? I’m going to bike to work even though it’s 8 miles each way because I’m feeling pretty strong, and am not stressed about work.” These things build on each other.

J: And then you reach the penultimate of where you have a grocery trailer.

M: Yes, that’s right. Then you stop taking your car to the grocery store.

J: I’m not there yet, I would need two trailers for our Costco runs. They’re fairly substantial. It would be a good experience.

M: There’s bigger trailers for people like you. Company called BikesAtWork, I’m getting one myself, because I use my trailer for construction materials, so anyway, you can get a trailer that’s like 8′ long. You can carry appliances on it.

J: And you’re on a bike.

M: Of course.

J: You’ve piqued my interest. Mark wrote about, inspired by you, he decided to make a Costco run on foot. It’s about 2.5 miles from our house, or three miles. It’s close, which is nice, and he did it on foot and then was carrying–(laughing)–the box on his shoulder for miles. He said it was poorly planned.

M: Yeah, I believe he complained about it. “In this case MMM, isn’t too smart.” I felt like mailing him a boxing glove with a spring in it to punlch him in the face. Dude, even I don’t carry boxes home from Costco. Put it on a dolly man. There’s a difference between being financially savvy just being…just being…dumb.

J: That was dumb, for sure. It made for a good blog post I suppose.

M: Yeah, it got a comment out of me, so that was worth it.

J: We’ve talked about a lot of different things, Mustachians don’t finance cars, they don’t buy gas guzzling cars, because why would you? It doesn’t make any sense. They don’t use their car if they don’t have to. And they kind of question the norm there. They probably don’t have cable, I’m guessing..

M: We’re too busy to be watching other people broadcast stuff. We’re busy learning and stuff.

j: Learning, creating, you don’t eat out a ton, we ate out a lot on our trip and didn’t you get kind of tired of it?

M: Well, I enjoy luxury as much as anybody else, but you know eating out all the time takes more time, and it’s nice to be able to control your own food intake, because another thing of Mustachianism is that you kind of want to eat as healthy as possible, and most restaurants aren’t going to provide that for you. You need to be able to control your vegetables. You don’t want to be eating a bunch of white flour, or the cheapest oils, whatever the chef could find on sale.

J: The benefits, financial benefits, that come from eating healthier are huge. One of the biggest costs that the US has on our health system is obesity. So it naturally follows that if people were healthier, they’d be spending less fighting that fight, the sickness that they experience a lot.

Everything’s connected, and when you make an iprovement in one area like I did, you mentioned bulbs a while ago, I didn’t really believe..I’m naïve when it comes to electricity consumption..I mean I just figured out what a killowatt hour was a year ago. I looked at my bill and thought, “oh $.11 per KWh” which I guess is a pretty good rate. I got one of those meters where I could measure the usage of different appliances and someone said..an electrician came to fix something, and he said the biggest drain is bulbs. I thought for sure he would say dryers, you know, the big clothes dryer, but he said no, bulbs. You’re using 60 watts all over your house, all the time, pumping, so you switch them out– so I did with CFLs. I couldn’t believe how much my bill dropped.

It cost me a little bit to get them all, and we had like 100 bulbs in our house, which blew my mind as well. I went and counted them all and couldn’t believe how many bulbs the house has. But, we have a large house, so I bought all of the bulbs, put them in, and my bill just plummeted. It was so simple, and very satisfying. It’s paying dividends daily for me. Which is fun.

M: Yep, that’s one of things I tell people. Especially if you have a modern house, modern houses have a lot of those recessed lights, and so the builders just put those in, in a grid, you know just all over the house so you can actually add up to a huge amount. Someone in a smaller house where you’re using lamps, then your clothes dryer or AC is the biggest draw. Either one, you just look at it and if you think about–I have a 2,600 square foot house– and my electirc bill is about $20 per month. So if you’re anywhere near 10x that, or much higher, then it’s worth looking at. It makes a big difference in your savings rate.

J: The LED bulbs are looking even cooler.

M: Yeah, I’m switching CFLs, I’m upgrading those to LEDs in the important rooms of my house, because the LED gives a much nicer kind of light, more classy like boutique look to it, and then also you’re using less power. They cost more, so you don’t put them everywhere, for now you just put them where you care about the light quality.

J: And in fiveyears, they’ll be cheap and we’ll be enjoying that luxury.

M: Exactly.

J: So you live a luxurious life, you really do.

M: Yeah, it’s hard to convince people, except for the ones that know me in person, occasionally I put articles describing the stuff, but then new people come along, “Oh! $25k per year. It must be such a terrible lifestyle.” So it’s an ongoing battle, but I’d say that pretty much anybody with the right mentality could have a similar lifestyle with similar cost, and you just have to add in any unique stuff. So if you have some healthcare stuff, sure you add that on, or if you have more kids, you can add in $3-4k per year per kid if you wanted to just compare yourself to the Mustache Family. Certainly it’s not a minimal lifestyle. A lot of peoplle do much better than us. It makes the savings rate pretty easy, the high savings rate pretty easy.

J: YNABers make pretty good money. I did a survey a while ago and they make good money. They’re learning how to manage it better, and be aware, and align their spending with what they care about, and I guess the point of this podcast here is to really ask yourself what you REALLY, really care about. So when..something trite..going to a movie, you really care about the in-theatre experience, with all of the people around you? Or WHAT exactly are you going for? Are you going for the family time? At its essence, could you get that family time back at home? So asking yourself what your core motivation is for taking whatever action it is. Going out to eat, for instance, “I love the social aspect.” I love that too. That’s way more fun than the food. But having people at my home is social, and healthier, and less expensive, and all of those things. I think at the core, when we question our values, and I’m always telling people when your money aligns with your values you start to feel content, but you really need to get to the base values, adn then ask yourself, okay I’m doing these things, what do I really care about?

M: So true. There’s a great little trick you can play on yourself, because people always think, “I’m happy when my spending aligns with my values.” The trick is to convert saving into one of your values, and give it a different name. I call it freedom. Every dollar you save is actually becoming an employee that works for you for life. Because you’re going to have it invested. When you’re deciding on the $100 dinner out for the third time in the week, you think would I rather spend on this? Or would I rather buy a little bit more of my freedom. Freedom is a pretty nice sounding thing to buy, and that’s really what you’re doing. You’re not depriving yourself–your’e buying freedom. As soon as you put it that way, people get a little more excited. I’m going to put 50k into my freedom this year, instead of saying I’m going to deprive myself of $50,000 of luxury cars this year. That sounds sad.

J: Reframing is a good idea. You’re investing in your freedom. You’re purchasing your freedom.

And you stay busy? You’re still making money and I know the blog has been an unexpected success for you because it resonates with millions of people. I know you do rentals, and love construction, so retirement is not the martini-sipping hammock situation that we all think it would maybe be. That would be boring.

M: Not every day anyway. Especially if you’re doing an earlier retirement, like the younger you retire the more energy you’ll have left over and you won’t have been destroyed by a 40-year corporate career. I find that everyone that I know who retired early, ends up doing a lot of interesting stuff. Sometimes it makes money, usually it does, other people are really charitably-oriented, so they just donate all their time and surplus money, either way it’s a pretty happy existence. It’s certainly not..it’s more energetic than your working life usually.

J: That actually makes a lot of sense. You kind of wander through the cubicles and there’s not always a lot of positive energy. Some people love their jobs and I think they should keep doing what they love, but there are many many more that would love to invest more in their freedom and get there a little sooner.

M: I can’t recommend it highly enough.

J: So YNABers savings rate..a lot of us are sitting at 10-15% and were feeling really good 32 minutes ago. And now we’re not. We’ve got a little bit of a challenge but I think everyone should start with squeezing out five percent, take a month to do that, to analyze and then take another month to look for another five percent. Since I started reading your blog in…February…I think I was a latecomer, I bumped my savings rate from 15 to 35 percent.

M: That’s a huge difference.

J: I’ve got more work to do yet. It is quite fun.

M: Your biggest enemy is the mainstream media because they’re the ones telling you about this five, ten, even fifteen percent savings rate. “yeah, it’s just compounding so magically! If you just save a dollar a day for 500 years, you’ll have hundreds of millions of dollars!” We don’t have decades and decades that we want to be working. Why not just increase that, with shockingly simple math we’re told that small increases make a huge difference in your freedom coming up sooner. So ten percent is really not a useful goal, unless you’re living right on the edge, you know if you’re in a poverty situation–a single parent with multiple kids then that might be all you can do. But for anybody with the gift of a professional job, university degrees, and all of this other stuff, you’re wealthy enough to own a car, then you can do way better than ten percent. You’ll thank yourself for that.

J: So YNABers, let’s step it up. I’m right there with you all. And Mr. Money Mustache, thanks for coming on and helping us question our norms. Because that’s exactly what we’re going to do. Hopefully we can have you on again and we can keep spreading the word. It’s an awesome message. So, MrMoneyMustache.com for those that haven’t been there yet. I should warn, because we have a somewhat…um…let’s see…if you are not used to colorful language then MMM will maybe get you a little used to it. Because we didn’t have any color on the podcast, but I can’t say anything for the writing. But, that’s your style and truth flows either way. Just want to give a few of the…I don’t know what word I should use there…but a few of those that are maybe sensitive to colorful language, to be forewarned. But I love reading it. I don’t subscribe to any personal finance blogs, except yours, where I get an email whenever a new post comes up. I enjoy every one of them thoroughly. My highest endorsement for everyone to check it out.

Thanks again for coming on. It was 9AM when we started this, which means for a retiree that’s like, you know, ripping your eyelids open I would imagine!

M: I had already biked my son to school this morning, so I was wide awake.

J: So you did the exercise thing, just as you preached. Thanks so much and hopefully we’ll talk to you again. I’ll see you at Fincon and that’ll be fun. So we’ll catch you there.

M: Sounds good.

J: Talk to you later.

This post is 5,479 words, which is why I’ve made it available as a PDF download. It’s not pretty, but the links are intact. Enjoy. Click to download the full transcript. - Mark