Maximize ROI & Saving Tips

Great news for the FG ROI clan this week… my brother and his wife had their first baby!  Big ups to the proud new parents!! 😉

So their new bundle of joy got me thinking about what kind of life I want to have when I have young one/s running around.  I would like to be able to retire by the time my kids start grade school so that I can be an attentive and involved parent, but quitting work in 6 or 7 years is basically out of the question given our current trajectory (more on the math of early retirement here).

However, we should have a decent-sized nest egg by that point, and a second-best option would be to transition to a part-time career where it would be much easier to balance work and family life.  The pay would be lower, but it would hopefully still be enough to cover our living expenses.  It would also mean slowing down or completely stopping retirement contributions, but on the bright side, we wouldn’t have to touch our existing savings, which would continue to grow in the background.

To be clear, the obvious trade-off of retirement would be a longer waiting period until full retirement, but we’ll get to that below.

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Regular readers will know I’m always discussing and incorporating time costs into my ROI Analyses.  The idea is that nobody’s time is really free.  We all trade time for money and money for the time at some point in our lives (think: work).

To use an example, say that your favorite band/musician is coming to town to play a concert, and the local radio station is giving away free tickets to the first 20 guests that show up to the concert.  Knowing that there will be a line to claim the free tickets, how long would you be willing to wait in line for the free tickets (how early would you be willing to arrive at the concert)?

At what point do the tickets stop being free?  At what point does the cost of waiting to surpass the cost of purchasing the tickets at retail value?  2 hours?  4 hours?  24 hours!?  Everyone draws the line somewhere.  This post should help make that decision easier.

For a comedic illustration of a similar time/value conundrum, the Portlandia “Brunch Village” episode is pretty funny.

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Intro

This is the third and final post on buying a car.  The first post showed that buying a mid-size sedan instead of an SUV can save $25,000 over 10 years.  The next post showed that buying an economy car saves nearly $50,000 per decade versus buying an entry-level luxury car.  And now this post is going to show that buying a 4-year-old used car can save $15,000 per decade versus buying a new one.

The trade-offs with buying used are a) it isn’t as sexy – no new car smell or shiny new technology, and b) the maintenance costs are higher for older cars.  For this example, I compared a used 2010 Honda Accord to a new 2014 Honda Accord.  The reason I chose a four-year-old car is that four years is long enough that the vehicle has had adequate time to depreciate but young-enough not to just be a headache of repairs.

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As attractive as it sounds, investing with a bleeding heart only leads to a bleeding portfolio. Socially responsible investing costs both you and the causes you care about a lot of money and goodwill.  There are better ways to both invest your money and affect positive change in the world.

Specifically, over 10 years of investing $25,000 per year (about the max you can invest in tax-advantaged accounts), a socially responsible stock portfolio will be worth almost $30,000 less than a normal indexed stock portfolio (over 1 year of work wasted per 10 years). To make things worse, most of the money “lost” isn’t actually going to the companies doing good, nor is it leaving the companies doing bad.  It’s just providing slightly better deals to all the other more opportunistic stock investors out there.

On top of that, you would need twice as much money in a socially responsible portfolio (50x average annual spending) versus a traditional one (25x average annual spending) to retire early.

Invest to make money and donate to do the most good.   Don’t confuse these goals; when it comes to investing and social responsibility, half measures don’t get the job done.

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Abstract

Cowpooling, the process of pooling money with other individuals to buy portions of a cow for meat, can save people a lot of money or cost them a lot of money.  For the household that already buys a lot of beef at a natural/ethical market like Whole Foods, there is the potential to save around $5,400 every 10 years.

However, for the household that buys a lot of conventional beef at a normal supermarket, cowpooling is a more dubious proposition and could, worst-case scenario, end up costing the cowpooler more than $4,500 over a decade.

Intro

What is cowpooling?  Much like it sounds, cowpooling is when a group of people pools their money together to buy a cow for meat.  Why would people buy cows instead of just getting beef at the grocery store?  There are a few reasons:

1. Likely healthier (grass-fed, fewer antibiotics)
2. More humane (pasture-raised vs. factory farmed)
3. Cheaper (sometimes)
4. More convenient (fewer trips to the grocery)
5. Local

I’m sure there are other reasons, but those are the ones with the strongest draw for me, roughly in order of importance.

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Abstract

If you don’t include time costs, raising chickens might be barely profitable, depending on a whole host of factors.  Include time costs on the other hand, and it is way better to just get your eggs at the store… better to the tune of about $1,000 per year.

Intro

My friend asked me to post the ROI for raising egg chickens in the backyard, so here’s what I found out.  An informal google search shows that most people have hard time-saving money by raising their own chickens, and this is even before time costs are included.  There are some people that claim to save money by raising their own egg chickens, but they seem to be the exception to the rule.

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Hold on to the edge of your seats, because if the title is any indication, this is sure to be a pretty exhilarating post! But to be honest, sometimes this is how the blog is gonna work.

Here’s the deal.  My electric toothbrush died the other day, and I wanted to figure out if it was worth investing in a new one.  It might not be the most earth-shattering, money-saving analysis in the history of civilization, but that’s life.  One day you might get a post that has the potential to save you $30,000 over 10 years and the next day you might get one that only saves you a little over $600 (true story with manual toothbrushes by the way).  As info, I have a lot of potentially high impact posts lined up, but I don’t want to front-load.  Gotta spread it out to keep things interesting.

But here is my way of justifying these kinds of posts.  One, we’re still dropping knowledge, even if it is a little inconsequential.  And two, life is the summation of a bunch of small decisions.  A little frugal cost optimization on the margins never hurt anyone.  We’re not talking about rationing toilet paper or anything here.

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*Update: As a commenter, Cal Cho mentioned below, there is evidence the LED lifespans can also be shorter than what the manufacturers claim.  This means that LED’s, at least how they are currently priced, are not necessarily better investments than CFL’s.  See this article for more information.

Abstract

LED light bulbs are a better investment than CFL bulbs starting in year 6, although they will probably continue to get more competitive as technology improves.  Over the course of 10 years, the average house will probably save about $200 with LED bulbs vs. CFL bulbs.

Intro

Welcome to my second official reader request.  The question at hand today is which kind of light bulb saves more money, a CFL (compact fluorescent light – the spiral bulbs) or a LED (light-emitting diode).  Both of these kinds of light bulbs are newer-generation light bulbs and are way more efficient than the old school incandescent bulb.

From a financial perspective, the major tradeoff between the two kinds of bulbs is lifespan vs. cost.  LED bulbs last longer but cost more, while CFL bulbs cost less but don’t last as long.  So, I’m going to look at the lighting requirements for an average house over 10 years to figure out which one is more cost-effective, but first, I’ll take a quick look at some of the main differences between CFL and LED lighting.

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Before we get too far ahead of ourselves, let’s talk about some of the core concepts of early retirement and financial independence (FIRE). First, a loose definition:

• Financial independence – you no longer need an active income because you have enough passive income to sustainably provide for yourself through the future.
• Early retirement – you are financially independent (no longer need to work), and you decided to pursue a new kind of life in the wake of said financial independence.

Okay, sounds great, but is the view worth the climb?  I was skeptical when I first heard about early retirement…  Don’t the sacrifices required to retire early outweigh the benefits?  After thinking about it, doing some research, and trying the shoe on for size, I can emphatically say, NO!  My life is much better now and continues to improve as we make progress towards our goals.  We trimmed a lot of waste from our life, getting rid of distractions, and focusing on sustainable sources of happiness.

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Abstract

Buying an existing 1,000-square-foot home saves $17,500 over the first ten years of ownership compared to building a new one.

Intro

I’ve often wondered: would the energy and maintenance savings on new home be worth the added construction costs versus buying an existing house?  Financially speaking, the answer turns out to be no.  On average, a 1000 square foot new home will cost $17,500 more over the first ten years of ownership than an existing home of the same size.

Of course, housing is usually a bad investment, and thinking of a home as an investment rather than an expense might not be the way to go.  We eat more than just rice and beans at my house because food isn’t strictly a financial decision.  It is more complex, just like housing (how to put a value on that new car house smell).

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