Being a frugality veteran, I already do much of what you mention. Don't think there is any crime in taking home the little soaps/shampoos, etc. at a hotel - they are there for your use - My grandmother used to take home extra sugar cubes when we took her out to dinner, and as I child I thought she was mad - but now I get it.
I also save extra condiments from take out - soy sauce, ketchup - for when we run out.
I have always loved hand me down and vintage clothes from when I was a kid and got lovely party dresses from my cousins! Nowadays I do most of my shopping at thrift stores and get my brand name and designer merchandise there.
Lately, I have been getting into being a serious freebie queen and sending in for freebies on the net - and I get something in the mail almost daily. That ranges from detergent to magazines to vitamins to makeup to skin care. I also enter contests. I just won some expensive designer dandruff shampoo for my hubby and a $25 Macy's gift card for me. Also have gotten fancy mousse I couldn't afford otherwise.
I make a point of frequenting the health food store that always has samples - as I might as well give them my business - Every little bit helps.
And I am always on the lookout for oddities - like samples at my local Walgrens!
I have always done survery research of one kind or another - and have been doing online surveys for petty cash.
These gambits in no way harm my life style - oddly, they end up enhancing it! (Ditto getting good deals at dollar stores - and they ARE out there.)
While the bottom line may look more or less the same - the everyday quality of my life isn't pinched at all. And that easing of monetary pressure does had to my quality of life.
The Dollar Tree has items similar to the 99 Cent Store - but in the past few months they have had GREAT deals in hair goods. I have bought fantastic hair bands that would cost $5 elsewhere for 99 cents. They have had special ones and even sequined ones for the holidays! As with all dollar stores you have to pick & choose - as some are over the top - but what a deal! Also have gotten vitamins (?) by Bayer - and lavendar spray (I am looking for more of that) and lotions for my hubby. And reading and sunglasses -
Some staples - but mostly goodies I can treat myself with - like little angel figurines - around Xmas I also got some cards - but watch it - dollar stores can be addictive - I knew a woman who called them "$30 stores" because no matter what, she spent at least $30 on a visit. When I am broke, I restrict my visits to when we have run out of paper towels, bottles of salad dressing, cleaning supplies and the like.
Word of warning, do not take young children to the Frye Art Museum.... They have some paintings there that are inappropriate for young children to see.... Believe me, it is not worth the questions you may hear...
Good for you, Lisa! That's a cool score. I definitely like some of their pharmacy items there. They have some items there that are seriously cha-ching in other places.
I paid off my mortgage couple of years back. If I had invested the money in stocks instead paying the mortgage, which I would have done normally, I would have lost 30-40%. Prepaying helped me to diversify and reduce my losses.
Great post Philip! It's nice to see an article about the wonderful U of I extension programs. As an Illinois resident, I have become familiar over the years with their nutrition programs and their horticulture/master gardener programs. They have nutritionists and master gardeners who give excellent presentations to groups through out the state on a variety of topics. I'm pleased to see that they also have financial programs too.
This is a good site/program to check out, non Illinois residents included.
My favorite thing at the dollar stores is their "fake" Woolite. It's absolutely the same thing! I love it! Try it once and you'll never buy the "real" version again.
It would be nice if the politicians would actually think about the people that elected them, before jumping the gun and passing laws that haven't been thought through. Yes, the phthalates should, and need, to be controlled better than we have bothered to do before. But, there are so many items that don't have phthalates in them. A blanket law like this only causes confusion, not peace of mind. Not to mention that, more than likely, there's very little likelihood that a law like this would even be possible to enforce. Law enforcement officers would have to comb every garage sale, craft fair, children's internet toy sales site, and grandmother's craft bag in the country. I really have to wonder what our government was thinking when they came up with this. Protecting children is of course a good cause, but not when the consequences haven't actually been thought out, and it hurts nearly everyone who sells used toys and clothing, or makes children's crafts. Are they forcing children's book producers to test the trees that their paper pages are made from?
What's next? They decide not to arrest drunk drivers, but take away everyone's car? They decide they're not going to arrest anymore drug dealers, so they they take away everyone's medications? Careful; if they notice someone littering, then instead of fining the litter-bug, they might just decide to take away your garbage pails :-O
Why don't they go after the people responsible for allowing the contaminants and toxins in the toys, and leave everyone else alone?
And I have to say there is nothing more depressing than watching Senior Citizens combing through the aisles made of stacked pallets to pick out their seven dollars of discresionary spending for the week from overpriced third world delicassees. I was in line and some old lady bought 235 dollars woth of stuff at the dollar store. Everything looked about three months away from a tag sale. That said, I'm going to the dollar store tommorrow, I need a 2009 calender.
We made a lot of extra payments in the first couple years of our mortgage, at no much opportunity cost - we don't spend much, and we were both at our risk/safety boundaries with savings and stock investing already. It was intenstly rewarding to pay an extra $1200/mo and know that it was worth something like $8k over the life of the 30 year mortgage.
Then we had a kid, and I didn't work for a few years, and for the last four years we've just been paying $100-$200 extra a month, mostly out of habit. Aside from being in the situation you describe, where the alternative is investment and both the housing market & the stock market aren't that much fun to be in, it's also just less exciting, 6 years in, because the multiplying factor is less.
Thanks to a few thoughtful personal finance blog articles about pre-paying one's mortgage, I realized that was the only personal finance "thing" I had left to do. No debt otherwise, maxed out 401(k), HSA, investing extra into regular taxable investments, etc.
I decided to do it! I sold some stock that was bought through my employee stock purchase plan. (Too much of a percentage was still in it, IMO.) I took some cash. I cut my living expenses by quite a bit. I was so motivated to be frugal! With some help from my husband (we have separate finances), we got every penny of that loan paid off about a year ago.
I have to say it IS the best feeling to put loads more money into the stock market now. It also ended up being excellent timing. I got guaranteed 5.5% returns when otherwise a lot of that money today would have been worth half of what it was back then. Wow!
Today it may not be the best choice given the "sale" on the stock market, but in general, I think it's a fantastic idea assuming everything else is in line.
I think today you have to buy a house with the assumption that you'll move in a few years. (Job/life changes, need more space, downsizing, moving to be closer to aging/ailing family etc. etc.) Given that, one major advantage to owning a house free and clear is that come moving time, you're not stuck with 2 house payments, or forced to take a lower offer on your house or even prevented from making an important move.
We rented for years and finally took the plunge into home ownership only once we found a house we could afford in cash. (And we moved to a smaller town to do it, but that's another story.) We did this specifically for the security of low fixed expenses and the knowledge that if our circumstances changed, the house wouldn't be a burden.
Even though we could have paid cash, we took out a 5 year mortgage (it was a small, inexpensive house). I think it was partly because of the chump factor you mention, and also out of fear of plunking down that much of our savings. But, after 2 years it just seemed to be more of a hassle and mental drain to have these small, recurring monthly payments so we just paid it off in full.
We've since bought several more residential properties to rent out, and we've always paid cash for them because it just doesn't seem worth it to come out a just few bucks ahead of the game after mortgage payments. But, renting a few houses you've already paid for -- that's how you can quit your day job! ;)
When it comes time to sell any of these properties, we know we won't be in a financial crunch and can hold out for the right offer. Similarly, if our situation changes and we do decide to move somewhere that doesn't have such cheap real estate and where we would actually need a mortgage, we don't have to worry about paying for two houses at the same time.
My take is that spread between tax-deferred investments and mortgage prepayments is so great, it's worth it despite all these gotchas, _as long as you still have a steady wage income_.
When you retire and start living off investment returns, an unpaid mortgage is a severe liability because it's a large, fixed bill (generally), and your income fluctuates with the markets.
A mortgage balance is effectively a bond you owe, and could be counted as a negative-valued holding. Suppose a couple has $800k retirement savings, and follow the "age in bonds" rule to get 35%/65% stock/bond, or $280k/$520k. All well and good.
Now add in a 400k mortgage; then effectively they have 520k-400k=120k bonds and 280k stocks, or 70%/30% stock/bond, which is a rather aggressive growth kind of allocation that will be WAY more volatile than they were bargaining for.
I read another artical from a PHd and essentially the very simple way to look at a 30 year fixed loan is actaully 360 individual loans where you pay X worth of interest on the remaining amount of the amount borrowed and it is completely up to the borrower to prepay the pricipal. This artical was very helpful and all the comments as well.
Don't let the peaches scare you away. My grandma makes a mean variation using chocolate cake mix and cherry pie filling. It's a chocolate-covered cherry dream. So yummy! Thanks so visiting, and I hope you find our other articles to be enjoyable, as well!
I agree that you are considered a chump by most investment professionals and tax accountants if you decide to pay off you mortgage early.
But, I think way too much is made of the 30 year; invest money in other things along the way, will do better in the market over time..way of thinking..and it leads people down the wrong road for them and their situation.
I really think it depends on the person, their life situation, risk tolerance and their ability to handle money. It really takes a lot of discipline to have several things going at once [multi-taskers] and as much as people like to say their good at it, truth is, for many people, they are not (i.e. regular contribution to 401K; 529; emergency fund; health savings accounts, roths). And that is okay in my book.
Just because you choose to pay down your house first, its not really that bad in my opinion. It does not mean you cannot invest after your done with that. And for people with unique situations, for example, there is a 9 year difference between my husband and I. We married much later in life, we had a wonderful surprise, a daughter at me at 44; my husband at 53. We took out a 30 year mortgage, but it will help us a great deal if we pay it off sooner, so we are looking to refinance to a 20 or even a 15 year mortgage, because we may have tuition payments and other stuff.
So attention all financial people, be careful what you preach!
It would be nice to put a measure on risk -- as I mentioned that getting an 8% return in the market could be viewed as 6.8% after taxes (capital gains), which doesn't seem to compensate much for the risk taken. Just for the record, my mortgage will be paid off this year also and I do have investments -- timing is everything and we can't really predict what will happen next. For example, I wouldn't necessarily want to be five years away from paying the mortgage but with lots of money tied up in the house and little in investments or savings right now. I think it makes sense to pay attention to all areas, taking some risk but keeping a level of safety also.
The main farmer's market here are run by the city. The city just wants a full lot so they allow anyone in as long as you pay up Over 75% of the vendors don't even sell food.
Ironically the others are run by a local grocery store. They have all farmers but they require that the prices be equal or higher to what the store is selling at. The only advantage is that you know it is local and fresh.
The interest savings vs. the potential investment growth does look skewed, partly because the $1,000 is in home equity rather than an investment account. And once you pay off the house, you can then have money to invest, save, or spend, possibly using that money you used to have to use to make the mortgage payment, or you can pursue some sort of work or leisure that is not dependent on a steady income.
Many were so concerned with the "spread" that they didn't consider the absolute costs of owning a home (all that interest). Not only is that spread not guaranteed (the fixed rate part is but the investment returns aren't), which I think we see now, but the spread is also skewed by taxes. So, even when the S&P was returning an average of 10%, the invest advantage, depending on the tax set-up and individual returns as well as your loan rate, wasn't quite as good as it seemed to be.
Being a frugality veteran, I already do much of what you mention. Don't think there is any crime in taking home the little soaps/shampoos, etc. at a hotel - they are there for your use - My grandmother used to take home extra sugar cubes when we took her out to dinner, and as I child I thought she was mad - but now I get it.
I also save extra condiments from take out - soy sauce, ketchup - for when we run out.
I have always loved hand me down and vintage clothes from when I was a kid and got lovely party dresses from my cousins! Nowadays I do most of my shopping at thrift stores and get my brand name and designer merchandise there.
Lately, I have been getting into being a serious freebie queen and sending in for freebies on the net - and I get something in the mail almost daily. That ranges from detergent to magazines to vitamins to makeup to skin care. I also enter contests. I just won some expensive designer dandruff shampoo for my hubby and a $25 Macy's gift card for me. Also have gotten fancy mousse I couldn't afford otherwise.
I make a point of frequenting the health food store that always has samples - as I might as well give them my business - Every little bit helps.
And I am always on the lookout for oddities - like samples at my local Walgrens!
I have always done survery research of one kind or another - and have been doing online surveys for petty cash.
These gambits in no way harm my life style - oddly, they end up enhancing it! (Ditto getting good deals at dollar stores - and they ARE out there.)
While the bottom line may look more or less the same - the everyday quality of my life isn't pinched at all. And that easing of monetary pressure does had to my quality of life.
The Dollar Tree has items similar to the 99 Cent Store - but in the past few months they have had GREAT deals in hair goods. I have bought fantastic hair bands that would cost $5 elsewhere for 99 cents. They have had special ones and even sequined ones for the holidays! As with all dollar stores you have to pick & choose - as some are over the top - but what a deal! Also have gotten vitamins (?) by Bayer - and lavendar spray (I am looking for more of that) and lotions for my hubby. And reading and sunglasses -
Some staples - but mostly goodies I can treat myself with - like little angel figurines - around Xmas I also got some cards - but watch it - dollar stores can be addictive - I knew a woman who called them "$30 stores" because no matter what, she spent at least $30 on a visit. When I am broke, I restrict my visits to when we have run out of paper towels, bottles of salad dressing, cleaning supplies and the like.
http://www.myfrugallife.com/blog_pamphyila.html
Word of warning, do not take young children to the Frye Art Museum.... They have some paintings there that are inappropriate for young children to see.... Believe me, it is not worth the questions you may hear...
Thanks for the post. Very thorough. I wish our state had something like it. The seminars look wonderful.
Good for you, Lisa! That's a cool score. I definitely like some of their pharmacy items there. They have some items there that are seriously cha-ching in other places.
Thanks for the wonderful post.
I paid off my mortgage couple of years back. If I had invested the money in stocks instead paying the mortgage, which I would have done normally, I would have lost 30-40%. Prepaying helped me to diversify and reduce my losses.
Nice guy there!
Hi! I get the tooth gel for toothaches, same as Oragel, but only $1 instead of $7 at other stores.
Great post Philip! It's nice to see an article about the wonderful U of I extension programs. As an Illinois resident, I have become familiar over the years with their nutrition programs and their horticulture/master gardener programs. They have nutritionists and master gardeners who give excellent presentations to groups through out the state on a variety of topics. I'm pleased to see that they also have financial programs too.
This is a good site/program to check out, non Illinois residents included.
My favorite thing at the dollar stores is their "fake" Woolite. It's absolutely the same thing! I love it! Try it once and you'll never buy the "real" version again.
It would be nice if the politicians would actually think about the people that elected them, before jumping the gun and passing laws that haven't been thought through. Yes, the phthalates should, and need, to be controlled better than we have bothered to do before. But, there are so many items that don't have phthalates in them. A blanket law like this only causes confusion, not peace of mind. Not to mention that, more than likely, there's very little likelihood that a law like this would even be possible to enforce. Law enforcement officers would have to comb every garage sale, craft fair, children's internet toy sales site, and grandmother's craft bag in the country. I really have to wonder what our government was thinking when they came up with this. Protecting children is of course a good cause, but not when the consequences haven't actually been thought out, and it hurts nearly everyone who sells used toys and clothing, or makes children's crafts. Are they forcing children's book producers to test the trees that their paper pages are made from?
What's next? They decide not to arrest drunk drivers, but take away everyone's car? They decide they're not going to arrest anymore drug dealers, so they they take away everyone's medications? Careful; if they notice someone littering, then instead of fining the litter-bug, they might just decide to take away your garbage pails :-O
Why don't they go after the people responsible for allowing the contaminants and toxins in the toys, and leave everyone else alone?
Too bad I am really not a drinker, looks like a fun time! Wonder if I can find some soda or juice to play with.
I love to read biographies, this is one I have yet to read. I am off to Amazon to get a copy and take a look.
And I have to say there is nothing more depressing than watching Senior Citizens combing through the aisles made of stacked pallets to pick out their seven dollars of discresionary spending for the week from overpriced third world delicassees. I was in line and some old lady bought 235 dollars woth of stuff at the dollar store. Everything looked about three months away from a tag sale. That said, I'm going to the dollar store tommorrow, I need a 2009 calender.
We made a lot of extra payments in the first couple years of our mortgage, at no much opportunity cost - we don't spend much, and we were both at our risk/safety boundaries with savings and stock investing already. It was intenstly rewarding to pay an extra $1200/mo and know that it was worth something like $8k over the life of the 30 year mortgage.
Then we had a kid, and I didn't work for a few years, and for the last four years we've just been paying $100-$200 extra a month, mostly out of habit. Aside from being in the situation you describe, where the alternative is investment and both the housing market & the stock market aren't that much fun to be in, it's also just less exciting, 6 years in, because the multiplying factor is less.
Thanks to a few thoughtful personal finance blog articles about pre-paying one's mortgage, I realized that was the only personal finance "thing" I had left to do. No debt otherwise, maxed out 401(k), HSA, investing extra into regular taxable investments, etc.
I decided to do it! I sold some stock that was bought through my employee stock purchase plan. (Too much of a percentage was still in it, IMO.) I took some cash. I cut my living expenses by quite a bit. I was so motivated to be frugal! With some help from my husband (we have separate finances), we got every penny of that loan paid off about a year ago.
I have to say it IS the best feeling to put loads more money into the stock market now. It also ended up being excellent timing. I got guaranteed 5.5% returns when otherwise a lot of that money today would have been worth half of what it was back then. Wow!
Today it may not be the best choice given the "sale" on the stock market, but in general, I think it's a fantastic idea assuming everything else is in line.
I think today you have to buy a house with the assumption that you'll move in a few years. (Job/life changes, need more space, downsizing, moving to be closer to aging/ailing family etc. etc.) Given that, one major advantage to owning a house free and clear is that come moving time, you're not stuck with 2 house payments, or forced to take a lower offer on your house or even prevented from making an important move.
We rented for years and finally took the plunge into home ownership only once we found a house we could afford in cash. (And we moved to a smaller town to do it, but that's another story.) We did this specifically for the security of low fixed expenses and the knowledge that if our circumstances changed, the house wouldn't be a burden.
Even though we could have paid cash, we took out a 5 year mortgage (it was a small, inexpensive house). I think it was partly because of the chump factor you mention, and also out of fear of plunking down that much of our savings. But, after 2 years it just seemed to be more of a hassle and mental drain to have these small, recurring monthly payments so we just paid it off in full.
We've since bought several more residential properties to rent out, and we've always paid cash for them because it just doesn't seem worth it to come out a just few bucks ahead of the game after mortgage payments. But, renting a few houses you've already paid for -- that's how you can quit your day job! ;)
When it comes time to sell any of these properties, we know we won't be in a financial crunch and can hold out for the right offer. Similarly, if our situation changes and we do decide to move somewhere that doesn't have such cheap real estate and where we would actually need a mortgage, we don't have to worry about paying for two houses at the same time.
My take is that spread between tax-deferred investments and mortgage prepayments is so great, it's worth it despite all these gotchas, _as long as you still have a steady wage income_.
When you retire and start living off investment returns, an unpaid mortgage is a severe liability because it's a large, fixed bill (generally), and your income fluctuates with the markets.
A mortgage balance is effectively a bond you owe, and could be counted as a negative-valued holding. Suppose a couple has $800k retirement savings, and follow the "age in bonds" rule to get 35%/65% stock/bond, or $280k/$520k. All well and good.
Now add in a 400k mortgage; then effectively they have 520k-400k=120k bonds and 280k stocks, or 70%/30% stock/bond, which is a rather aggressive growth kind of allocation that will be WAY more volatile than they were bargaining for.
I read another artical from a PHd and essentially the very simple way to look at a 30 year fixed loan is actaully 360 individual loans where you pay X worth of interest on the remaining amount of the amount borrowed and it is completely up to the borrower to prepay the pricipal. This artical was very helpful and all the comments as well.
G
Don't let the peaches scare you away. My grandma makes a mean variation using chocolate cake mix and cherry pie filling. It's a chocolate-covered cherry dream. So yummy! Thanks so visiting, and I hope you find our other articles to be enjoyable, as well!
Linsey Knerl
I agree that you are considered a chump by most investment professionals and tax accountants if you decide to pay off you mortgage early.
But, I think way too much is made of the 30 year; invest money in other things along the way, will do better in the market over time..way of thinking..and it leads people down the wrong road for them and their situation.
I really think it depends on the person, their life situation, risk tolerance and their ability to handle money. It really takes a lot of discipline to have several things going at once [multi-taskers] and as much as people like to say their good at it, truth is, for many people, they are not (i.e. regular contribution to 401K; 529; emergency fund; health savings accounts, roths). And that is okay in my book.
Just because you choose to pay down your house first, its not really that bad in my opinion. It does not mean you cannot invest after your done with that. And for people with unique situations, for example, there is a 9 year difference between my husband and I. We married much later in life, we had a wonderful surprise, a daughter at me at 44; my husband at 53. We took out a 30 year mortgage, but it will help us a great deal if we pay it off sooner, so we are looking to refinance to a 20 or even a 15 year mortgage, because we may have tuition payments and other stuff.
So attention all financial people, be careful what you preach!
It would be nice to put a measure on risk -- as I mentioned that getting an 8% return in the market could be viewed as 6.8% after taxes (capital gains), which doesn't seem to compensate much for the risk taken. Just for the record, my mortgage will be paid off this year also and I do have investments -- timing is everything and we can't really predict what will happen next. For example, I wouldn't necessarily want to be five years away from paying the mortgage but with lots of money tied up in the house and little in investments or savings right now. I think it makes sense to pay attention to all areas, taking some risk but keeping a level of safety also.
Allie,
The main farmer's market here are run by the city. The city just wants a full lot so they allow anyone in as long as you pay up Over 75% of the vendors don't even sell food.
Ironically the others are run by a local grocery store. They have all farmers but they require that the prices be equal or higher to what the store is selling at. The only advantage is that you know it is local and fresh.
So in NE Wisconsin there is no savings.
The interest savings vs. the potential investment growth does look skewed, partly because the $1,000 is in home equity rather than an investment account. And once you pay off the house, you can then have money to invest, save, or spend, possibly using that money you used to have to use to make the mortgage payment, or you can pursue some sort of work or leisure that is not dependent on a steady income.
Many were so concerned with the "spread" that they didn't consider the absolute costs of owning a home (all that interest). Not only is that spread not guaranteed (the fixed rate part is but the investment returns aren't), which I think we see now, but the spread is also skewed by taxes. So, even when the S&P was returning an average of 10%, the invest advantage, depending on the tax set-up and individual returns as well as your loan rate, wasn't quite as good as it seemed to be.
Thanks for the song, it feels like the 70's all over again... in more ways than one.