Young and Frugal

My wife and I have essentially been living as if we were making mortgage payments on our new house for the last 6 months, but instead of paying a mortgage (and taxes and insurance and Homeowners Association) it’s all been going into savings for our down payment.

We admit that we are stretching ourselves to buy our first house (I think that’s something that most people do), but as we are re-evaluating our budget (less than a month until we move in!) we have found ourselves looking forward to our raises in the fall (even if it just equates to a cost of living raise) because let’s face it…as much as budgeting is important, no one likes sticking to a strict budget, so we look towards the future at what we will be making and what we can spend (or save) at that point in time

I think our problem is that we are always looking to acquire more. We want more and don’t want to make sacrifices to get more.

As Mary and I caught ourselves looking forward at what we will be earning and what will increase in our budget I thought to myself, why not look backwards?

Why not live on last years salary? Say your salary was X last year and it increased to Y this year. If you live on last years salary and budget you inadvertently save Y-X all year. Then when your salary increases to Z you can live on Y and save Z-Y.

This concept allows you to save more and forces you to permanently (ideally) live below your means. It’s simple, but a great and easy way to save!

As gas passes $3.50 per gallon and rapidly approaches $4.00 per gallon (or it’s already there…sorry CA), Mary and I can’t wait to move into our new house and cut our commute from 32 miles to 15. However in the meantime, we have taken measures to get the most out of our tanks of gas. So here are 10 tips that could help you increase those MPGs and decrease those gas bills!

1. Carpool. Mary and I are lucky enough to work at the same company, so it makes sense for us to carpool. By our calculation, we are saving at least $200 per month by this little step. Sure, it sucks sometimes when one of us has to work later, leaving the other with nothing to do, but we always remind each other how much money and time (Carpool lane) carpooling saves us.

2. Change the oil on time. Staying up to date on engine oil changes helps your car run better and get the most out of your gas. I make sure to change the oil in our Acura every 5,000 miles (Oil Co’s recommend 3,000 miles, car makers say 5,000), and every 7500 miles in our Volvo (synthetic oil).

3. Get a high performance air filter. K&N air filters are expensive, but they pay for themselves in the long run. They come with a 1 million mile warranty because you clean them instead of replace them, plus you can get up to 10% better gas mileage because they allow your engine to breathe better and give you better performance. I received 10% better gas mileage in my old Jeep when I put in a K&N filter. Note: Mr. Dave points out in the comments, that high performance filters are not recommended for some engines like the VW TDi engine.  Though if you have that engine you’re beating all of us on MPG anyway.

4. Inflate the tires. Making sure your tires are inflated to the recommended PSI will increase your gas mileage because a fully inflated tire offers less resistance when you are coasting.

5. Coast. If you have an onboard computer, have you ever set it to give you the instantaneous MPG? You will probably notice that when your foot is off the gas your MPG skyrockets. So if you see a read light ahead let off the gas, there is no need to speed to a stop, it’s just a waste of gas and you’ll have to replace your brakes sooner.

6. A/C or Windows Down? It’s summer, it’s hot, so what do you do? This all depends on what you are doing. If you are driving at highway speeds, roll the windows up and use the A/C, because the drag of the windows being down really hurts the gas mileage. Driving around town? Roll ‘em down!

7. Don’t carry around extra crap! Weight directly affects your gas mileage. The more stuff you have weighing down your car the worse MPG you get. So lose the golf clubs, toolbox, and other random stuff unless you need it.

8. Plan your routes. UPS saved millions of dollars a year in gas by rerouting their trucks to limit the number of left turns, and you can save money too! Plan your routes in the most efficient way possible. Generally right turns are faster and they use less gas waiting at lights than left turns, so why not try it out!

9. Get a gas card! Many credit card companies offer cash back on gas purchases, so why not!? You’re going to be spending the money anyway, so you might as well earn up to 5% cash back. Or even better get a gas company card, brand loyalty pays you in savings!

10. Don’t use E85. What? But the government said it’s going to be our saving grace and I want to help save the environment! I’m all for saving the environment when it is in my financial interest (like compact florescent lights that will pay for themselves), but if it will cost me more money, I’m less likely to do it. E85 is cheaper, and your car may run on it, but according to AutoTrader it contains 27% less energy than 87 Octane (the cheap stuff). That means you get 25% less MPG using E85. The only time it’s in your financial interest is when E85 is less than 73% of the cost of 87 Octane. At my local station, E85 is about 30-40 cents cheaper per gallon than 87 Octane. $3.20 / $3.50 is 91%… not in your financial interest.

I hope you can put these ideas to good use, and if you’ve got any more, feel free to leave them in the comments!

Tonight Mary and I had the chance to eat at a very wealthy person’s house in Dallas.  This house is AMAZING.  This house is probably 10,000 square feet, and they had a “mile of wood trim” throughout their game room.  It was very impressive, and it sits on one of the most visible places in North Dallas, on the corner of a busy intersection.  The house is designed like a castle, and sits far enough back where you hear no road noise and you can’t see any of the streetlights because of the size of the lot and how the house is situated.  I could probably tell most people in Dallas what house it was and they would know exactly what I’m talking about.

The couple who own it are definitely a “power couple,” he’s a doctor, she’s a lawyer.  As I walked through I was thinking about the ridiculous mortgage payment they must have for their $2+million house, until I heard the most amazing thing all night… THEY PAID CASH!    

They built what they could when they could afford it, and while this isn’t for everyone, I applaud them for being debt free and staying together for what I’m sure was a hectic process.  They started the house on January 1, 1990, they moved in to the garage apartment 3 years later, and the house was under continual construction since then.  They just recently finished about 5 years ago, and they really did a great job with it.

Note: At the suggestion of a reader I am splitting the post into two separate pieces.  Stay tuned for 10 Steps to Haggling!

When I was younger I had very low self esteem, there was no reason for me to be shy and scared to talk to girls, but I was.  I was scared of them saying no, or even worse, laughing at me.  I’m not a bad looking guy, but this fear was very real.  My older brothers would try to help me with this by bribing me to go up to girls and ask them out, but I only successfully did this once…and by successfully I mean I actually asked the girl out; she said no.

The only reason I met my wife is because she had a mutual friend set us up on a blind date after seeing me in a picture.  I would have never “sacked up” and asked her out on my own, but considering I was put in a situation where it would have been very awkward, and quite frankly rude, for me not to, I asked for her number and waited the obligatory 3 days to call her.  Ladies- for an insight into a guys mind during this “waiting period” watch the movie Swingers.

When I first started to haggle I would get the same knots in my stomach as I would when I would be scared to ask a girl out or tell her that I liked her.  I was scared, scared that the salesman or manager might think less of me, scared they would say know, scared they would be offended.  Why was I scared?  I really don’t know, I never had a situation that scarred me, but I think it all stems from my historically low self esteem (now practically gone thanks to my wife!).

Today when I was haggling for a new pair of over-priced running shoes, I happen to be haggling with a cute woman, and it all clicked!  The nervous feeling I would get when wanting to ask a girl out is the same nervous feeling I get when haggling…except haggling is way easier.  Haggling is a confidence builder!

I rarely get turned down when I haggle, and when I do it’s never a big deal, I leave with my pride, and confidence still in tact that I tried, so I have no regrets.  This has built my confidence up greatly.  That is confidence that I could easily turn around into “technique” and confidence for picking up women (not that I ever would, I am very happily married).  I will have to find someone to try this technique on, but I’m positive it will work.  Haggling is the best confidence builder I’ve had…besides getting married.

I implore you all to at least try haggling, whether you get a discount or not it ends up being a rush so it feels good afterwards, but when it does work and you save some money, it builds your confidence, and you get that rush.  Also, as an added bonus, if the salesperson is a member of the opposite sex you can subtly flirt and complement the person to help you haggle!  Pretty soon, haggling will be no big deal, and you can turn that confidence and flirting into picking up members of the opposite sex!

Note: I sincerely apologize for the lack of posts over the last week.  It has been a very hectic week for Mary, Myself, and My family.

For the first time in my adult life I experienced positive peer pressure, and it made me glad to have the friends I have.  The other night I called one of my former roommates, who is a very good friend of mine and I caught him in the middle of a beer pong game with a fraternity brother of ours.  We all graduated at the same time, all with double degrees, all with finance as one of them.  We spoke about how things are going in life and our conversation came around to finances. 

My former roommate told me that he decided to splurge his tax refund on a new set of golf clubs to celebrate his year in the workforce and a recent promotion.  The conversation went something like this, I will use R for the roomate and G for my other friend (They have me I’m on speakerphone… mid beer pong game):

Me - Nice!  Congratulations…that’s a pretty big purchase!

R - I know, but I’ve already funded my 401(k) and started funding a Roth IRA for the year and I wanted to splurge on something nice as a reward.  Are you and Mary funding your 401(k)’s?

Me- Unfortunately we don’t get 401(k)’s until we have been at the company for a year because of high turnover in our industry.

R & G- THAT SUCKS!

Me- I know, BUT we have both fully funded our Roth IRA’s for 2007.

G- Very good.  So you’ve each got your 4 grand sacked away… that’s impressive.

Me- Thanks.  Have you been funding yours?

G- Absolutely, and I’m saving all the rest of my money for an engagement Ring…

Towards the end of our conversation we all agreed to peer pressure another friend into making sure he is saving and on a good track.

Maybe it’s just my circle of friends, but I’m starting to think that we might be getting it!  We have seen family members want to retire but not be able to, we have seen friends and family get in way over their heads in debt, and we don’t want it to happen to us!  The credit crunch/recession/whatever you want to call it may end up being a good thing for our generation because we are seeing first hand what can happen when your priorities are not in line, and we are learning from it!  We are learning from other people’s mistakes and enriching our own lives because of it. 

I am very proud of my friends for having their priorities in line by not getting caught up with excess, splurging when everthing else is taken care of, and still making time for fun by enjoying a good game of beer pong on a weeknight.  Way to go guys!

On second thought I may have gotten ahead of myself, I need to call them back and make sure they have emergency funds as well… I will update.

Update:  I checked back with R.  And I am pleased to say that he has quite a few separate funds set up.  He says that he has an Oh Shit fund (read: emergency fund), 401(k), Roth IRA, and a mid-life crisis fund (which apparently could double as a house down payment fund as well).  Wow…good job R!