Dry your clothes the awesome way

I never thought I would be one of those people who hangs up their clothes to dry. Here I am, three weeks into my own laundry drying rack experiment, and I can honestly say it is awesome and I'm not planning on going back.

The day after I fixed my furnace, I made another investment. I purchased a folding clothes drying rack off of Amazon.com (full disclosure: I just signed up for Amazon's affiliates program so I'll get money if you buy things by clicking on Amazon.com links from now on). I'm not sure what put me in the mood to make this investment and to change my default clothes-drying behavior. Perhaps because it's winter now, and it's mostly cold outside — that got me on an insulation kick where I used rope caulk to seal up my windows (maybe I'll write that story up later, though I don't think there's much to tell). And if I was willing to make that investment, then why not an investment in clothes drying which has an insanely high ROI?

Mr. Money Mustache wrote this up a year and a half ago. With a ballpark estimate of 1000% ROI, this is an incredibly worthwhile investment opportunity. I don't know enough to improve upon the 50-cents-per-load estimate on running a traditional electric clothes drying machine, so let's let that ROI estimate stand. What I can tell you about is how my new drying rack has changed my laundry habits over the past three weeks. Spoiler alert: I like what I'm seeing.

I'll admit that my laundry habits are pretty abysmal. I'm guilty of your typical college or adolescent behaviors: using the floor as a laundry basket, leaving clothes in the washer or dryer for hours, leaving clean clothes in a laundry basket for days (sometimes folded and sometimes not). But, while I can't say a drying rack addresses all of my bad laundry habits, it's a serious force pushing in the right direction.

How is air drying different? First, I have to do smaller washes. The drying rack only holds about half a "normal" load of laundry. In the picture above you can see maybe four t-shirts, four pairs of boxers, and some socks (and there are probably one or two things you can't see). It means I can't spend three hours on a weekend powering through my entire wardrobe. Maybe that's a bad thing, but it also means I get to avoid the laundry folding fest that I've come to dislike. The task of "doing laundry" now entails a series of five steps, each of which takes no more than five minutes at a time: collect dirty clothes, engage wash cycle, hang up washed clothes, fold dry clothes, put away folded clothes. Small loads means homogeneous loads that are quicker and more fun to get through.

Clothes that are already hanging don't wrinkle if you neglect to fold them as soon as they're done. They are a lot less fluffy than when they come out of a dryer — at first. This leads us to a fun new activity: beating up your clothes to fluff them up! You can flap them around in the air for a bit, though I much prefer beating them against a couch or my leg. It was an unexpected activity that I now can look forward to whenever my clothes are dry.

There's also the savings from having your clothes wear out more slowly. Dryers put a good deal of wear on clothing because of the high heat (and all that lint coming off the clothes probably doesn't help). Even estimating a modest reduction in clothing depreciation and conservative wardrobe turnover, this alone can save somewhere between $10 and $100 per year — nothing to sneeze at.

Last, I'm quite happy with the model of drying rack I purchased. It feels sturdy, both when it's standing assembled and during assembly and disassembly. Assembly and disassembly are quick and easy. It folds up small so it can be stored away when it isn't being used. And it's got a small footprint while still providing a bunch of hanging spots; the other drying racks I looked at took up way too much space.

In conclusion, I highly recommend you try air drying your laundry. For less than $25 it's worth a shot, and you just may find you enjoy it more than the status quo.

Save money by diagnosing furnace problems yourself

tl;dr I saved a bunch of money by diagnosing furnace problems myself, instead of calling in a technician.

Two weekends ago the furnace was on the fritz. It clicked on to start running and my girlfriend smelled gas. That was at 10pm. We switched off the furnace, called the gas company to send out a technician, and waited. He arrived after midnight, which gave us plenty of time to worry about all the things that could be wrong, how much money it would cost to replace everything, and of course, what it would be like for our house to blow up.

The technician was a nice guy. He assured me in no uncertain terms that our house was not about to blow up. He popped open the furnace case and took a look. It seemed the hot surface igniter was heating up, the gas was kicking on, but the gas wasn't igniting before an automatic fail-safe shut down the process (to prevent gas leaks). At the time he said our igniter was probably bad, that we should call a HVAC technician in the morning and not worry too much. (Spoiler alert: it wasn't the igniter, which makes sense since the igniter was heating up just fine).

Naturally I figured it was the igniter, since that's what the gas technician said. I also figured I should leave this matter to the professionals. The gas technician shut off the gas line to the furnace, wrote up some scary looking OPEN AT YOUR OWN RISK-type warnings and put them in appropriate places on the furnace — typical cover-your-butt stuff. So I called up the company that I already used to inspect our air conditioning unit. I fully expected to set up an appointment and do whatever they recommended.

But then we got into the details. I mentioned to the receptionist that the gas technician said it was probably our hot surface igniter. Is that usually an easy fix? "It depends. We might not even stock your igniter. What's the model of your furnace?" I read her some names and numbers that looked relevant. "It doesn't look like we have those parts in stock. I'll have to get in touch with a technician to see if he has a universal igniter that will fit." Alright, fair enough. How much will this cost? "$90 for the service call. After that it's parts and labor." Can you give me a ballpark on how much that might be? "Sorry, the technicians handle that." Really? You can't give me any sort of estimate? "Sorry." Alright, thank you. I'll call you back to schedule something.

At this point, I'm worried. I'm worried about opening myself up to a big financial risk, on the order of hundreds of dollars, for what might be a wild goose chase and replacing the whole furnace anyway. I'm worried about being over-charged on an easy repair, or a part I can get for half the cost online. I decide it's worth looking into myself first. I can always call in the professionals later.

First I crack open my furnace, warning labels be damned. I turn the gas on and have it run again. Same thing, igniter heats up, gas kicks on, gas doesn't ignite, gas kicks off. Okay cool. I'm still operating under the assumption that the igniter is bad, maybe it's not getting hot enough or something. I figure out how to unscrew it and pop it out. Now I start googling around for where to buy this part. Is there some local HVAC supply store I can go to? It's the weekend, and they're all closed. Maybe I can get it shipped quickly? Here's one, same model number, but it won't get here until Tuesday. Okay, that's an option.

There I was, all ready to buy a replacement part. But it would take days to arrive, and I wasn't even sure that would fix my problem. So I kept researching. Youtube is fantastic for DIY home repair how-tos. I found a couple of guys taking apart their furnaces, explaining what each part is, how the ignition system is supposed to work. That's when I learned that when hot surface igniters fail, they fail by cracking or breaking so they don't heat up at all. Hmm, very interesting, because mine was still glowing just fine. I didn't have an ohm meter to test whether or not it was broken for sure, but "the igniter is fine" was my new operating assumption and I made a note that probably I should own a multi-meter for answering such questions about when electrical devices are burnt out.

With fresh resolve, I kept googling until I found a website for troubleshooting all the things that could possibly be wrong with your furnace. I found a scenario for all the symptoms I was seeing: igniter heats up, gas kicks on, but gas doesn't ignite. The website said that the gas nozzle might not be positioned properly, so it's not blowing over the igniter — that or something is wrong with the flame detector.

I re-installed the igniter, this time shifting it back or forth just a little bit from where it was positioned earlier. And what do you know, after a little fiddling, the gas ignited properly.

It was all pretty awesome. I solved a problem myself, learned a lot about my furnace in the process, and saved at least a hundred dollars. To celebrate, I invested some of the money I saved into tools for future money-saving endeavors: a multi-meter, a kill-a-watt, and a package of incense sticks (for checking for drafts). Total cost: $46.72 through Amazon.com. Previously I had bought some rope caulk to seal up my windows, and the next day I decided to take the plunge and buy a clothes drying rack — but those are stories for another time.

In conclusion, furnaces are not as scary as I thought before. Once the guy from your gas company tells you that the house is not going to blow up, you can learn a lot (and potentially save a lot of money) by looking around in there yourself.

Bringing home-made lunch to work

I've picked up a few habits from Mr. Money Mustache that, while they seem small at first, compound greatly over time. Making your own lunch is a great example. Eating out on any given day doesn't cost that much money (if you're debt-free). But eating out every day, or even just a few times a week, adds up fast. And in the same way you can have an eating-out habit, you can also cultivate a bringing-leftovers-to-work-for-lunch habit that will save you tons of money over the course of your working life.

Let's dig in with some numbers.

Restaurants around me charge anywhere from $5 to $12 for a lunch. I think this is relatively high-cost: even when I worked in San Francisco there were $5 lunch options on every corner, whereas the only $5 lunch I know of around here is Subway. Let's say buying lunch from a restaurant costs $8 on average.

Bringing lunch from home is much cheaper. On average you should be spending around $1 per person per meal in frugal mode. I know that a lot of people do better, too, reconstituting dry beans and mixing up delicious vegetarian meals with rice, lentils, and fresh veggies. But even if you confine yourself to the frozen meals section of your local grocery store, I bet that you can eat for less than $2.50 a meal. Let's agree on a very generous amount of $2 per meal that you prepare yourself and bring to work.

If we work 50 weeks per year on average, with 5 days per work week, that's 250 work days per year. If you bring your lunch every single day, it will cost you $500 for the year just to eat lunch while you're at work. If you buy lunch every single day, it will cost you $2000, for a difference of $1500 above and beyond the home-made lunch option. At a safe withdrawl rate of 3%, you would need $50k to generate the additional I-can't-be-bothered-to-cook-my-own-lunch income.

But the real world is rarely all-or-nothing. Let's take the scenario of buying lunch once per week. That's $6 extra per week, for fifty weeks out of the year, for a total of $300 extra dollars spent per year — a 60% increase over never eating out. That represents $10k in your stash (at 3% SWR).

Here is that same calculation for one extra lunch purchase per month: $6 per month is $72 per year, which requires $2400 in your stash (at 3% SWR). This scenario is much more reasonable. I think many debt-free Mustachians could find an excuse to treat themselves to lunch at a restaurant once or twice per month, especially in the company of some awesome co-workers who can all celebrate at least in part about all the money they've been saving by eating leftovers.

I have been watching my eating out for about a year now, ever since I started reading MMM. I would estimate I used to buy lunch two to three times per week; now I buy lunch perhaps one to two times per month. So my more-spendy self would spend somewhere between $36 and $66 dollars per month more than my less-spendy self. Let's take the average and say I've saved $50 per month, just on lunches at work, thanks to reading Mr. Money Mustache. That means that in just the past year, I've become $600 richer than I would have been. Just from lunch at work!

I hope these calculations can be yet another data point on how small incremental changes to your lifestyle can yield big effects.

Fun with tax-advantaged accounts

Already it's the fourth quarter of 2012. I tend to go into review mode at the end of the year. One thing I review is my tax situation. In the past I haven't had many metaphorical tax levers to adjust, though that's been changing as my financial situation gets more and more complicated.

There are two types of tax-advantaged accounts I'm thinking of funding for tax year 2012, above and beyond my 401k which I have on auto-pilot. One is my Health Savings Account (HSA), and one is a Roth IRA. I'll start with the HSA.

Early October was benefits season at work, time for open enrollment and a question-and-answer session about most of our benefits, like health care and life and disability insurance. I've already had my HSA for a year and I'm pretty happy with it. Essentially it's a high-deductible health care plan coupled with a tax-advantaged savings account. Preventative care is free and there are no co-pays, but I pay the full amount for other doctor visits (though it's a pre-negotiated rate that's lower than the normal rate). If and when I hit the deductible of $1500/year for an individual, then all health care afterward does not cost me anything. I think there's an exception for prescription drugs but it seemed like minutia so I mostly ignored that point.

Employers like this plan, I imagine, because it costs less than traditional health care plans. I like it because my employer is paying 75% of my yearly deductible into my HSA. It's money I get to keep if I don't use it. It gives me the incentive to care about how much health care costs — for example, using an urgent care clinic instead of the emergency room for non-life-threatening emergencies. And it's money I get to keep if I leave my job, and that I can use on any qualifying medical expenses. I checked my savings account balance and found I have over $1500. That means I've got all my medical expenses covered for a whole year! It's a good feeling.

The IRS annual contribution limit for an individual's HSA is $3100 for 2012. My employer has contributed 75% of my $1500 deductible, or $1125 by the end of the year. That leaves $1975 for me to contribute (and then deduct from my taxes for 2012). I'm thinking saving up $1000 to contribute. It'll delay my loan payoff by around half a month, but the tax savings of (I expect) over $200 makes it worth it to me. Not to mention the margin of safety of having even more money in my HSA.

Now for the Roth IRA. Where an HSA is funded with pre-tax dollars, a Roth IRA is funded with post-tax dollars. But your investments get to compound tax-free, and you'll never have to pay taxes on any of that money again. I think the 2012 IRS limit for Roth IRA contributions is $5k. I'd like to be able to contribute that much for 2012. This will add months to my student loan repayment, but the way I see it, missing out on 20+ years of tax-free compound growth is something I would regret big time when I get older. Luckily I think you have until tax day in 2013 to fund your Roth IRA for 2012, so that gives me a few extra months to save up the money.

When I get the cash for a Roth IRA I'm going to open it up with Vanguard. Those guys are the best and I can't wait to have an account with them.

A final word on my student loans. What I described above is going to entail a significant slowdown from the pace I've been paying off my loans. That said, it will still be an accelerated pace. Depending on my Christmas bonus I should be student loan free before mid-2013. I have to remind myself that my goal for student loan payoff was year-end of 2013. Anything earlier than that is gravy. I don't want to sacrifice more productive uses for my money while striving for a single goal. My primary (financial) goal is financial independence ASAP and I feel that funding my HSA and Roth IRA for 2012 will be more effective than using that same money to pay down my student loans.

Update from Stupidland

The title is an allusion to one of my favorite MMM posts.

Today I drove to work, though I should have biked. I had the radio tuned to NPR where there was some news about new car buying being down in Europe. Since new car sales are important to the economy they had a guest from Edmunds.com, an online source for car information.

I was a little miffed because the Edmunds woman talked (and was asked questions) mostly about buying new cars, when really macroeconomic analysis of car buying and its relation to the broader economy would have fit the news story more closely. I was also listening intently for the poor advice that passes for common knowledge, like that people should buy new cars at all.

When the host asked a question like "how much should a person spend on a car?", I was floored by the answer: "no more than 20% of your net income". Twenty percent?!?!? Are you crazy?! This could make sense if she meant the cost of the entire car. But no, of course she was referring to monthly payments on a car. As we all know, the real number that matters is the price of the car, not some monthly payment number. To be fair, she made sure to mention including cost of insurance and repairs, so she's not completely misleading people, but it was pretty close.

Here's some better advice. How about: "You NEVER, EVER borrow money to buy a car." This is fantastic advice I freely admit I did not follow, though it was a calculated bit of wussypants stupidity on my part. (The non-wussypants option is to bike literally everywhere.)

My monthly take-home pay is around $4700. Twenty percent of that is $940. At 0% interest, for a 5-year loan, that's over $55k of car, if I ignore maintenance and insurance. Maybe with maintenance and insurance that translates into a $40k car, give or take. That is crazy. I'm getting the heebie jeebies just thinking about it.

There was talk about leasing and when it makes sense to lease. Leasing makes sense if you're the kind of person who wants to have a new car every two years, but in that case, what the hell are you doing? I think of leasing as the most efficient means of throwing one's money away on cars. Stop treating cars like status symbols and show off your badassity instead.

The Edmunds woman kept mentioning fuel efficiency. It sounds like car people think of fuel efficiency as just another feature, like power steering or a sun roof. I don't understand why people would care much about fuel efficiency when they're buying a new car. You're wasting thousands of dollars to "save" a few tens of dollars a month in gas from a baseline of a gas-guzzling SUV or pick-up truck. And even then, fuel efficiency will only really come to play when you do a crap ton of driving, like way more driving than people should be doing.

And yet this is how many Americans think about cars. What is a monthly payment that fits into my budget? How much will I have to spend on gas for my commute? How swanky a car can I finance?

It is so important for people to have the right mindset when it comes to automobiles and related issues like commuting. By my estimation, getting this right will get you half of the way to a golden Mustachian existence, if not measured in badassity then at least measured in money saved.

My other emergency fund is a personal line of credit

I was planning on writing today about saving money in tax-sheltered accounts. I'm still going to write about that but something came up that's much more exciting, and I wanted to share it with you.

Today I was on PenFed's website scheduling our mortgage payment for October. I like to pay it manually because it's a large enough sum of money that I feel I should be taking a little time from my busy day to say goodbye (and to make sure I don't overdraw our checking account). On the sidebar a couple of pre-screened offers caught my eye. Now, I already have a mortgage, an auto loan, and a credit card with PenFed — and a checking account. But I figured I might as well look at the looong list of other products they offer and see if anything looked interesting.

And boy did I ever find an interesting product! They offered me a "personal line of credit", basically a home equity line of credit except that it's unsecured. I was so excited I just had to apply right then and there.

The default amount offered was $15k, so I went ahead and applied for that. Denied! they said. Too many hard inquiries in the past 12 months, accounts not open long enough, too many balances on accounts. "Oh well," I thought, "I guess I'll have to try later." But no! Instead, five minutes later, I applied for $5k, because the worst that could happen is they turn me down again. The response was that my application was "under review", and just this evening I found I was approved.

I love lines of credit. I love the idea of some amount of money I can tap if I need it, and that I don't have to pay for when I don't. I love the feeling of more possibilities, of more security, and like I'm being trusted with something valuable.

I don't have a personal emergency fund, so that's what my line of credit is going to be. Just in case any big expense comes up I've got another $5k I can tap in a hurry. Most likely I'll never use it. Every time I buy something big I'll consider paying for it with my line of credit — and then I'll say "No, not worth it". I've neglected to tell you the interest rate: 6% above the prime rate, which makes it somewhere around 9% (I can't find the exact number on the website for some reason). 9% is a high interest rate, and that's why I'm using my personal line of credit for emergencies only.

In the medium term it should help increase my credit score as well. I'm not sure why I'm so interested in increasing my credit score since I've already got all the credit I need. One reason could be I keep telling myself I'm going to be looking at buying a rental property in two to five years from now. And I tend to wear such things as badges of pride.

Last, I want to talk about how awesome credit unions are. I cannot stress enough how happy I've been with PenFed. They go out of their way every day to help me out. If you're not with a credit union, #1 priority in the banking area of your life should be finding a credit union you can join. It will save you money, and more importantly it will offer you a much nicer experience than the traditional Too Big To Fail banks offer.

What do you guys think? If you had access to a personal line of credit, would you want one?

Mission accomplished: September push-up challenge

Today is the last day in September, and so ends my 1000-push-up-in-a-month challenge.

Last Tuesday I had 130 push-ups left to go. Not counting today (since I haven't done any yet), I've completed 170. So: mission accomplished! After the first week of setting a habit and gaining a bit of strength, it was a pretty easy challenge too. I find myself impressed at what the human body can adapt to, especially one that leads a sedentary life like mine.

Day	Sets	Total
...	...	...
9/25 Tuesday	20 35	55
9/26 Wednesday	20 20	40
9/27 Thursday	None	0
9/28 Friday	25 30	55
9/29 Saturday	20	20
9/30 Sunday	35	35

Grand total: 1075

As you can see I sort of petered out toward the end, mostly on purpose to be honest. Ten or so days ago I noticed myself feeling fatigued, and I thought maybe some rest would allow me to do fewer sets of many more reps. That's an hypothesis I haven't fully tested yet, so let me go collect some data now...

Whew. Okay. That was 35. And a tough 35 at that. With the right type of coercion I probably could have done another five consecutively, which would meet my 2012 resolution of 40-consecutive-push-ups. My plan for the rest of the year is to do sets of 30 or 35 any time I'm not feeling fatigued, with the hope that I'll reach another fitness plateau. From there it's a short jump to 40.

In the course of the past month I've greatly increased my upper body strength. This may be a bit presumptuous, but here goes: after this month I'm of the opinion that any able-bodied man should be able do 20 consecutive push-ups. At least. Maybe it's easier for my 25-year-old body to ramp up than someone nearing the traditional retirement age. But if you can do a single push-up, that's your first step; then you put one metaphorical foot in front of the other until you can string together a set of five, ten, fifteen. You don't have to rush yourself either. It's just too simple not to. No equipment required, just lie on the floor and push.

Okay enough proselytizing about push-ups. I've taken a long enough break from discussing personal finance. Expect October to be more oriented on dollars and cents, budgets and loan payoffs, investing and other financial goals. Just take this as a reminder that Mustachianism is not totally, or even mostly, about money.

Working on the weekend; and more push-ups

First let's get push-ups out of the way. Then I'm going to share some updates on my professional life.

Day	Sets	Total
...	...	...
9/12 Wednesday	15 10 20	45
9/13 Thursday	15 20	35
9/14 Friday	20 20	40
9/15 Saturday	20 20	40
9/16 Sunday	25 20	45
9/17 Monday	20 20	40
9/18 Tuesday	None	0
9/19 Wednesday	20 30	50
9/20 Thursday	30	30
9/21 Friday	25 20	45
9/22 Saturday	20	20
9/23 Sunday	20 30	50
9/24 Monday	25 30 15	70

That's 510 more since the last time I wrote, which puts me at 870 for the month. I have 130 push-ups left to do, and six days left in which to do them, for an average of 21 2/3 per day. Eminently do-able. I'm much stronger now than I was when I started. All it took was consistency in a routine that inexorably got me to where I wanted to be. Kind of like Mustachianism! A flavor of lifestyle design where we sow little habits that pay big dividends and compound until you've got a big ol' stash; in this case, of push-up prowess.

Yesterday marked a milestone in my professional life. Sunday was the first time I ever worked on a weekend. It was totally voluntary too: I wanted to get ahead. Long story short, I care about the project I'm on, and I want what's best for our customers. That said, the jury is still out on whether my boss recognizes the value I'm providing. But I'm optimistic that by doing my best and not settling into complacency, sooner or later the work I'm doing will pay dividends.

Sometimes I'm bullish on work, other times bearish, but I do know a couple of things: 1) I never love my job enough not to mind that I have to be doing it, and 2) I feel most effective when I feel least tied down to my job. I've been fantasizing about the day when the sole reason I'll go to work is because of the good I can do, and not because of the paycheck it provides. That will probably be a decade or more in coming, but with every paycheck I'm making progress toward that (and other) goal(s).

In student loan news, this month I've sent payments of $700 and $900 in that direction. It'll be enough to get my balance somewhere in the mid-$10k range. It's totally a habit at this point ("oh, got paid again, money sitting in my checking account; time to make a payment!"). I'm making progress even more quickly than I had hoped almost a year ago. Remember that I gave myself a little over two years to pay off a little under $32k in student loan debt. Now it's looking like I'll get there in 15 months at most.

And then I can start building my stash :)

Car ownership costs

Let's talk about how much my car really costs.

For those of you just tuning in, in June I bought a 2007 Honda Fit Sport from a private party, and paid $10,500 courtesy of an auto loan through my credit union. I know, I know, car loans are bad. But in my case my student loan interest rate is 6%, my auto loan interest rate is 2%, and I'm not badass enough to go completely carless just yet.

But the cost of a car is more than what you pay for it. First and most obviously there's the cost of gas. And then there's a whole host of other fees like title and registration, emissions and safety inspections, taxes, insurance, servicing, and unexpected repairs. It's easy to sweep those costs under the proverbial rug because they're generally not charged in neat monthly increments (well, maybe insurance is).

Gas is an easy win. Before my Fit I was driving a hand-me-down Land Rover LR2, where the gas tank was twice as big and I'm pretty sure I filled it up more often. I think the gas tank on my Fit is 12 gallons and when I'm only commuting it's three weeks between fill-ups. I can get this down even further the more I bike.

Then there's taxes. Where we live we pay an annual vehicle value tax. Let me break this out into a table so it's easier to compare:

Car	Fit	LR2
Tax months	6	5
Tax due	$74.61	$129.82
Total due	$91.11	$145.65
Monthly tax	$12.44	$25.96
Assessed value	$8,825	$18,425

The Fit costs less than half as much in taxes as did the LR2. Not at all coincidentally, the assessed value of the Fit is less than half. (Those numbers are almost exactly the same ratio. I checked.) Total due is more because they charge about $16 for a yearly registration.

Then there's maintenance. I've got one more pre-paid maintenance at the Honda dealer where the previous owner serviced the car. So I got the oil change for free, and it was $16 for a state emissions and safety inspection. But I let them talk me into other preventative stuff like changing the air filters, so it cost me $167.68. A lesson is learned: car dealerships are almost always a ripoff.

And that brings me to my final point, a question for my readership:
I'm considering purchasing the Helm service manual for my vehicle's model year. The down side is that it costs $56.50, maybe more with shipping. The upside is that 1) I'm sure I can perform a bunch of easy maintenance stuff myself, thus saving lots of money, and 2) it will teach me a whole lot about my car, thus increasing my general competence level and my automotive competence level specifically.

I'm pretty sure the service manual is worth it, but I'd really like a second opinion. Thoughts?

Mid-September update

The push-up challenge is coming along nicely. It's the end of day 11 and I have 360 under my belt. 640 more to go in 19 days, for an average of around 33 1/2 per day. I've averaged 32.7 per day so far, or 36 per day if you ignore the first day. So I feel pretty good about my progress.

Day	Sets	Total
9/1 Saturday	None	0
9/2 Sunday	20	20
9/3 Monday	15 10 15	40
9/4 Tuesday	15 20	35
9/5 Wednesday	15 15 15	45
9/6 Thursday	15	15
9/7 Friday	20 15	35
9/8 Saturday	15 10 15	40
9/9 Sunday	15 20	35
9/10 Monday	15 15 10 10	50
9/11 Tuesday	15 15 15	45

I can feel my badassity increasing daily. I've settled on sets of 15 for my "average" set; it feels like the right number. Not too many that my muscles burn afterward, but enough so I feel it. Each day it's a little easier to complete my sets. One day I'm going to gear up and just knock out as many as I can, though I'd like to get a bit ahead first.

In student loan news, my most recent payment of $500 cleared which puts my current loan balance at $11,954.27. My car loan is at $9,807.90 thanks to two extra erroneous payments (basically autopay was automatically set up and I made manual payments as well before I caught myself). I'm already planning some sort of celebration for when my student loan balance drops below my car loan balance. I want an excuse to mention my aggressive student loan payoff to friends and co-workers, basically as another voice in the dialogue to balance out pervasive consumerist talk that comes so naturally. More on that later.

Last, on to investment news, which consumes a good deal of my mindshare. A co-worker heard from my office mate about my interest in the stock market and we're going to discuss such awesome things as dividend growth investing tomorrow over lunch (leftovers, of course). He was excited about buying into Corning (GLW) because he felt it was undervalued. I'm hoping I've found someone at work who I can geek out with about the stock market.

I've also been reading up on options, specifically selling covered calls and (what I think is called) selling cash-covered puts. I think there's very little risk in these moves, especially if you're committing to an action you were planning on anyway (like buying shares if they drop to a certain price, or selling shares if they rise to a certain price). I plan on writing up these strategies in a later post.

September push-up challenge: rocky start but making progress

The title says it all.

Saturday was September 1st and thus the beginning of my 1000-pushups-in-a-month challenge. Unfortunately I was too distracted by playing video games to notice. So I actually started doing push-ups on the 2nd — a measley single set of 20 — and I've been ramping up since then.

Before I show my numbers let me go knock out another set of however many push-ups I feel like doing. (In case you can't tell, I love goals that I can complete at my own pace before some long-in-the-future deadline).

Okay that was another fifteen. Let's see all the numbers:

Day	Sets	Total
9/1 Saturday	None	0
9/2 Sunday	20	20
9/3 Monday	15 10 15	40
9/4 Tuesday	15 20	35
9/5 Wednesday	15 15 15	45

140 down, 860 to go. At the beginning of the month I needed to average 33.3 push-ups per day to hit my 1000 target. That's without any rest days. As of today that number is 34.4 per day.

After my disappointing Saturday, I overcompensated on Sunday. I realized as my shoulders started tightening up that I shouldn't push myself too hard at first. This challenge is eminently achievable as long as I'm consistent about completing sets. The strategy I've settled upon is completing more sets of fewer push-ups, both to give my body time to adapt and so I can get a feel for the right posture (i.e., one that won't kill my shoulders). That should warm me up over the first week or two, and then I can push myself for larger sets later in the month.

Remember that this challenge is mostly an excuse to get me to my 40-pushups-at-once goal, which I set to be completed by the end of 2012. As such, I do want to try for more push-ups per set, just not at the expense of doing too much too fast and burning out.

Other stuff

I'm in the middle of cooking as I'm writing this post. It's a dish that I can't believe I haven't blogged about yet: Pasta Lentils! I'm capitalizing it because it's its own thing, a recipe I invented all by myself, and one of my three favorite foods. I'm totally going to write another post devoted entirely to Pasta Lentils, but to give you a sneak peek: you basically cook a pound of lentils and use it as pasta sauce for a pound of pasta. Voila! All the protein and carbs a growing grad school student needs in convenient Mustachian form. It's easy to cook, easy to store, easy to reheat, and delicious. It's great with red pepper flakes or parmesan cheese. Dinner is going to be awesome tonight (and so will lunch for the rest of the week).

From skimming my old posts it looks like my last student loan update was over a month ago. I've been throwing money at my loans as it's been coming in — I have less than $400 in my primary checking account — and my balance is at $12,442.34. At around $2000 per month that puts my payoff date some time in the February to March 2013 time frame, well in advance of my end-of-2013 goal. And who knows, maybe I'll get a bonus at work and bring that date in even further.

I'd be remiss if I didn't mention how excited I am to see Dividend Mantra blogging again. I missed his clockwork updates while he was taking his summer vacation from blogging. I continue to find his slow-and-steady march toward financial independence inspiring. Every time I read one of his Dividend Income Updates or Freedom Fund Updates, it re-kindles my excitement for dividend growth investing. The day when I start building my own Freedom Fund will come soon enough, and until then I'll just be working on my student loans.

Non-financial goals review

I can't believe how late in the year it's gotten. I've been thinking about my New Year's Resolution goals I set all the way back in January. Unlike most people who abandon their resolutions in the February/March timeframe, I tend to put them out of my mind until the subconscious nagging becomes too much and I decide to face them head-on.

Sometimes I'll fall into the trap of writing only (or mostly) about financial matters. Let me reiterate that Mustachianism is only ostensibly about money and personal finance. It's much more about continual self-improvement: increasing one's badassity. That's where these non-financial goals come into play.

I have my goals listed for all to see on the "Goals" page up there on the navigation bar. To recap, by Jan 1, 2013 I want to: be able to do 40 consecutive push-ups, lose 10 pounds (be 158lb or less), and learn to cook five meals my girlfriend will enjoy.

To date I've made the most progress on my cooking goal. I think I've got three or four recipes that I've prepared that my girlfriend has found edible. For those just tuning in now, while I wouldn't necessarily describe my girlfriend as a picky eater, she's significantly pickier than I am. I'm the kind of guy who has lived off of Ramen noodles (occasionally with an egg or some frozen veggies added) and frozen microwave burritos (with melted pre-sliced processed cheese on top when I was feeling fancy) — and I loved every minute of it. To my girlfriend, things like food temperature and consistency play a large role. Learning to sense properties of food I never previously considered has been a challenge, but I'm making progress. I'll detail the meals that fulfill this goal once I sit down and put a list together.

I've made the least progress on my weight-loss goal. I weigh between 168lb and 172lb, depending on what time of day I weigh myself. That's about where I was when I started the year, or even a pound or two worse. Biking has basically been a wash as for how it affects my weight: I think I've lost some fat and gained an equal amount of muscle. The other side of the equation is consumption: in the past week or two I've started cooking beans and rice and lentils to bring to work for lunch. My hope is that these less calorically-dense foods will get me on the right track, and be an ally in my personal war against snacking. My company is nice enough to stock a snack cabinet full of all the high-carb high-sugar processed snacks that Costco sees fit to provide. It's all too easy for me to consume a few hundred extra calories than I was expecting in a day, and to reach my goal I'll have to run a deficit of the same amount for the rest of the year. Here's hoping vigilance and a new lunchtime diet pays off.

As for my push-up goal, I've flirted with tackling it from time to time. Every now and again when I'm bored I'll do a set of 20 or 25, which is just enough that it starts to burn. I'm guessing that with two weeks or so of concerted effort, I could hit the 40-consecutive mark.

This brings me to an idea I had: how about a month-long push-up challenge? I want to structure it as "do X push-ups in a month". That way I can make measurable progress toward my goal every day, and still take a day off now and again. I realized from playing World of Warcraft that I enjoy having long-running goals that I can spend short chunks of time making meaningful progress on. A push-up challenge gives me one such long-term goal in the fitness area of my life.

I think I can do 1000 push-ups in a month. It's awesome because it's a big round number and it seems like a ton, but it should still be do-able. 1000 push-ups in a month is a little more than 33 per day. Alternately it's two sets of 20 per day, with every sixth day as a rest day. That doesn't seem so bad! Then again my body might start breaking down around the third week, though that could be as much a feature as it is a bug. I think I want to go for it.

So, what do you guys think about my push-up challenge? Is this something I should look to tackle come September?

Eating right, exercise, and some other things

My last post was Sunday, but my second-to-last post was four weeks ago today. I want to explore the reason I dropped off the face of the earth, and then move into some idle musings.

The post was about killing my 401k loan. (It's dead now, by the way.) I did some pondering afterward and decided that the Toward Mustachianism pendulum had swung too far toward talking about money and debt, and not enough about frugality and spending. I made up my mind to go through all my spending since around May and do some analysis, maybe some descriptive statistics about spending per month across a few categories. I haven't been trusting Mint much for veracity — it feels like there are instances where Mint is mis-categorizing purchases, which may throw off my findings.

I went to the source of all my spending data: my credit card statements. Two cards (for my personal spending only, not counting joint expenses), and about six statements. I copied the tables into Excel and started doing some formatting. And after about 20 minutes I hit a mental block.

I kept those Excel documents open on my computer for weeks but I kept avoiding them. Something about the task was unappealing, I guess. And in avoiding the task of analyzing my spending, so too I avoided the task of writing consistently.

I don't like it when I'm not writing consistently. My goal going forward is to write at least something each week, even if I've got a mental block on the thing I ought to be writing about. And even if it's not perfectly on-topic.

Which brings me to my next point: I've started cooking lentils again. Meals over the past month have been characterized by a noticeable lack of planning. The monthly grocery spending numbers are still in the $200-$300 ball park, though I know we could be doing better if only we tried. Last week I started trying again.

I've made two batches of red lentils, 2 cups dry each time. The first time they were a bit mushy (which they say is common with red lentils). Here's the solution I found: 1.5c water per 1c lentils, season the water and bring to a boil (but don't add salt yet!), add lentils and bring to a boil again, but immediately turn the heat as low as possible after it boils again. And leave the cover on for the simmering. And keep your eye on them so they don't over-cook. Add salt at the end if you're into that sort of thing — I'm not sure what about the salt makes lentils mushy when cooking, but it does. That recipe is simple enough that I don't need to write it down to remember it, and that's the way I like recipes.

Those two batches of lentils made 6 lunches, if I recall; three included rice, from a 25lb bag from Costco. We've had the red lentils for months: a 5lb bag couldn't have cost more than $7 at our local international market. Including seasonings, each lunch couldn't have cost more than $0.50, though I'm totally guessing in case you can't tell. If I recall, the per-meal cost target is $1, so I've got a good safety margin for lunches at least.

I missed eating lentils. They're delicious, and the protein and fiber combination keeps me full longer than I'm used to. That cuts down on snacking on high-carb junk.

And I've gotten back into the swing of biking. I'm biking to work 2-3 times a week and I'm loving it. The weather has been even more beautiful, and avoiding the commute by car is becoming a bigger and bigger benefit in my mind. And I can't help but think of how much better I'm being to my heart by getting some moderate exercise a few times a week.

My company was awesome enough to host a CPR refresher course, which I took, and which got me thinking about cardiovascular health. Heart disease runs in my family and I think there's a reasonable chance I'll have a heart attack before I'm 60. Anything I can do to give me better odds is something I should be working on wholeheartedly, pun intended.

Just another bullet point to add to the "Reasons You Should Be Biking" column.

Blast from the past with EE-series government savings bonds

Hi again, and apologies for the unplanned hiatus. Rest assured I've been making steady progress on my financial goals even if I've not been reporting back.

I came into some money since my last post. My mom handed over a stack of savings bonds, 40 in total, that she'd been holding for me almost since I was born.

Series EE bonds are pretty cool — or, they were pretty cool. The idea is that you buy them for half of their face value, and over some set period of years they'll double in value. Actually, now that I'm looking into this, that's the way it used to be. Here is the TreasuryDirect website for series EE bonds. The government isn't selling paper bonds as of January 1, 2012, and you buy electronic EE bonds for their face value. I feel like that takes some of the fun out of it. Oh well.

I spent about an hour inputting the information (issue date, face value, etc.) on my bonds into TreasuryDirect's bond calculator. That gave me a spreadsheet with a whole bunch of information, like the issue price, the accrued interest, the final maturity, and the interest rate. From that I learned something interesting: before May 1995, the interest rate for EE bonds was 4% going back to March 1987 (the earliest-issued bond I have). Starting in May 1995, interest rates are much lower, from 0.76% to 1.19% up through my latest bond, issued in January 2002.

The total value of my bonds as of July 2012 was $5,110.49. Of that, $1,264.85 was earning a low interest rate, and the remaining $3,845.64 is earning 4%. I say "was earning" because I cashed all my low interest bonds. I've got 6% student loan debt to pay down, after all. I should mention here how easy it was to cash my bonds at my local bank. After signing the back of each, the teller handled the deposit for me, and the cash was in my account right away, available for withdrawal on the next business day. I thought I'd have to wait for something to clear. That was a pleasant surprise.

I figure I should talk about why I haven't cashed my remaining bonds (and why I plan on holding them to maturity). One consideration is that cashing bonds triggers a tax event. Interest income on federal savings bonds is taxed as regular income. If I cashed out all my bonds and paid down my debt, I wouldn't be reducing my debt by the sum total of my bonds' value: whatever tax refund I'd get (if any) would be reduced by some amount. (Since there's no way I'll be debt-free before tax day I plan on using my entire refund on debt paydown.) I'm not sure if it's irrational but that course of action seemed bad to me.

Here's the big reason I want to hold my 4% bonds for as long as possible: I consider it insanely awesome that the government has to pay me 4% interest. Interest rates have been low for over a decade, and for basically my entire adult life. Here I have these relics of a bygone financial era paying me a risk-free 4%. At the time of this writing my ING savings account rate is 0.8%. I would feel absolutely awful giving up a risk-free 4% return, even if it means eliminating debt at 6%. I might be able to justify this based on the difference in maturities for my student loans and the bonds — maybe not, I haven't thought about it too hard. I do know that if today a magical elf offered me an unlimited number of government-backed 30-year-maturity bonds at 4%, I would use all my available cash buying them.

So where does that put me? I've got the $1200 from my bonds, $1k in my checking from the last time I got paid, and another $1200 repaid from when I lent it on a short-term basis to a family member in need. Combine that cash with this week's impending pay day and an outstanding balance of a little over $16,600, and I'm planning on entering September with just over $12k in student loans.

Dear 401k loan: prepare to die

Well, I've decided. Or rather, I've been convinced by my fabulous commenters here and on the Mr. Money Mustache forum. There seems to be a consensus that the debt snowball approach will keep me feeling good, deliver less risk, and not materially hinder my student loan payoff.

It was JR on the MMM forum who broke the metaphorical camel's back. It's not often I think about getting laid off. But, as a self-professed "wage slave" who depends on getting paid for my labor in order to live comfortably, losing my job is a risk I deal with. Eliminating that risk is a big part of working toward financial independence.

With my 401k loan, I'm even more exposed to job loss risk: if I lose my job, I have weeks or months before I need to repay my loan, or it counts as premature disbursement and triggers an income tax event and a 10% penalty. That's really bad! And it would be on top of losing my job.

I've been reading a lot of Warren Buffett lately, specifically his annual letters to Berkshire Hathaway shareholders. One thing I've taken away is that he assesses risk differently than most do: he always keeps catastrophic risk or "tail risk" in mind. Through Berkshire Hathaway, Warren Buffett holds billions of dollars in excess liquid reserves, earning a pittance of a return, so that he will always be solvent. He readily admits foregoing a few percentage points of return. But in the 2008 financial crisis he was able deploy massive amounts of capital both keeping the financial system afloat and ensuring Berkshire would not sink (and making a tidy profit along the way).

With that in mind, the best way I can justify paying off my 401k loan is through reduced catastrophic risk. The natural high I get from paying off another loan is a nice side benefit.

Now that that's decided I've got to follow through. Sending in this payment is not going to be nearly as easy as making a student loan payment, which I can do right now from the comfort of my desk chair. I've got to get a certified check, cashier's check, or money order to my HR person. Then hopefully she'll deal with the 401k company. I've got to make sure the amount on the check is correct and hope the check arrives at its destination while the 10-day payoff quote is still valid.

Of course, getting a cashier's check requires visiting a bank and spending a few bucks. That's annoying. There is, however, a silver lining. I'm going to use this as an excuse to extricate myself from Bank of America's tendrils once and for all. I've been fed up with their fee-this and extra-charge-that attitude for a while now. They were nicer when they held our mortgage but those days are past. Now I only use them as a physical check cashing and cash withdrawal location.

I did some research and found a local bank, walking distance from my house, that offers a completely free checking account with no minimums and no direct deposit requirement. Checks still cost money, of course; otherwise it's no-hassle. Remember that Bank of America doesn't have any no-fee checking accounts, they just have different ways of waiving the fees (one of my accounts has direct deposit; the other is grandfathered in, I think).

The headline reason I'm going to switch banks, though, is the cost of getting a cashier's check. Bank of America charges $10. My soon-to-be-new local bank charges $8.

Oh, one more thing. Even though I decided to pay off my 401k loan, I'm still making payments on my student loan. Pending my decision on the matter I set aside enough to pay off my 401k loan, and then sent the rest of my cash to the feds. And what do you know, the payment cleared today.

$2500 payment on 7/23/2012. Applied principal: $2,403.57. Applied interest: $96.43. Outstanding balance: $16,536.79. Those are some good-looking numbers.

Decision: student loan or 401k loan?

Dear readers, I have a question that I can't decide, and I'm hoping I can solicit your feedback.

As you know, I have around $19k of student loans outstanding. I also have a loan against my 401k, which in my pre-Mustachian days I took to scrape together a down payment for my house. Well, suddenly I find myself with enough cash to cover the 401k loan, and I'm wondering: should I close out my 401k loan, or should I toss all that money at my student loan?

Here's some more background:

After last month's student loan payments I was light on cash. Then I hear from my company's HR department that accounting had made a mistake processing my 401k loan paperwork last year. As I think I mentioned before, in addition to the loan I took a hardship withdrawal (yeesh, I really wanted this house). The terms of a hardship withdrawal are such that you can't contribute to your 401k (or get company matching contributions) for six months. Except that somehow their communication wires got crossed between the HR department and the 401k company, and they kept my payroll contributions flowing. The way the 401k company rectified this situation was to cut me a check for the amount of money that I shouldn't have been able to contribute for that six months.

Yes, it sucks that I missed out on six months of 401k contributions, and six months of company matching contributions. I made that decision and I'll accept the consequences. But the silver lining is that I've got an extra $2400 cash that I can use to pay down debt.

The total balance in my cash accounts is $5100. In addition to the $2400, I've been setting a few hundred dollars aside per month both as a cash buffer and so that I could pay off my 401k loan. There's about $3200 outstanding on the 401k loan, and I need to pay it off all at once by sending a certified check.

But now that I'm looking at all this cash in my account, I'm visualizing taking my student loans down from $19k to near $14k, and it looks pretty good!

The interest rate on my 401k loan is 4.25%, which I'm paying with after-tax dollars back into my 401k account. The payments are $38.91 twice a month, with a five-year term that I'm about 14 months into. So the increased cash flow would be small. There is a $50 "maintenance fee" charged once a year, so that's a reason to pre-pay this loan, but it's already happened in May so I won't get hit again until next May.

Basically the choice is between a debt snowball approach and a highest-interest-rate-first approach. In recent weeks I've been leaning toward just sending all but a few hundred dollars to pay off the student loan.

What do you think? One fewer loan to think about, or 25% off of my student loan?

Acolyte answers some questions

I've had a bit of a hard time this week thinking of what to write about. Luckily for me Yabusame left me a comment with some questions that I think would make a nice post. It's good timing, too; I've been meaning to review some of my previous endeavors to become more Mustachian, and this is as good an excuse as any.

1. How's the cycling to work going? Are you doing it EVERY day now?

Honestly it could be better, but I'm optimistic. Like I mentioned it's been a bad month for biking due to a bunch of mostly complainypants excuses. I definitely feel my awesomeness (and my legs) atrophying over time due to my lack of biking.

But there's good news! Actually I'd say there's quite a bit of good news. First, I'm convinced that biking isn't one of those fads I go through once and then drop forever. Most of my self-improvement projects fall into that category after they lapse for a month. I found myself in the car last week, when I couldn't have biked to work without remaining sweaty and gross all day, and an interaction with another driver got me really angry (the guy was a jerk, fyi). Road rage, you know? And as I was stopped at the next red light I reflected upon my situation. I never felt that stressed biking. The emotions I feel driving to work are mostly boredom, mild fear (of having some jerk slam into me with his car), and occasionally intense anger. But when I bike to work I feel focused, calm, centered, occasionally fearful (of having some jerk slam into me with his car), and accomplished. Oh, and sometimes when I'm coasting down a hill I feel like I'm flying. That's pretty awesome.

Second bit of good news: the showers at work are fixed! And now there are two showers instead of one. Actually there were always two showers but one was broken, so I'm glad building management has done something to make my life better.

The third bit of good news is that I biked to work on Monday. I didn't bike yesterday or today on account of needing my car to drive to meetings in a different building. I consider that a valid work-related excuse. But I'm free and clear to bike the rest of the week and I'm looking forward to it.

And as another minor victory, I (mostly) completed my push-up challenge last week. I did 20 push-ups in the morning and 20 push-ups in the evening every week day, except when I took a recovery break on Wednesday morning. Sticking to my plan was pretty hard! I mean, the first day was easy, but by Tuesday evening my arms felt torn apart. This puts me closer to my goal of being able to do 40 consecutive push-ups by the year's end.

I think that's the end of the story on how my biking has been going, for now at least. I'm planning on completing at least one more full work-week of bike commuting before the weather gets cold (and hopefully more than one), and I think it's feasible to bike three days a week at the least going forward.

2. How is the grocery and restaurant budget working for you and the GF?

That's actually a really good question. To be honest I'm not sure off the top of my head. Luckily I don't keep important things like that in my head, so wait a second while I go check Mint.

Ooo, this just in, it looks like Mint has improved their Trends functionality. So that's awesome.

I forget the last time I did a budget update, but it feels like a long time ago. So here are restaurant numbers since March:

March - $192

April - $88

May - $480

June - $294

We only went out twice in March, both expensive, and one of which was buying for six as part of a bar crawl we organized with friends on St. Patrick's Day. I totally agree with No More Harvard Debt that spending money on social events is way more effective at generating happiness than buying things.

April we went out twice as well. Once was to Melting Pot. That trip is showing up as less expensive because part of it was paid with a discount gift card I bought off Plastic Jungle. It's still money spent, though, so part of this low number is as a result of an accounting gimmick.

May looks a little crazy. We spent a week vacationing with my girlfriend's family so that meant more eating at restaurants.  One time was a fancy little night out between us that cost $130. Worth it, but only in small doses. So I'm not too worried.

June was a bit high but I think it's acceptable. We went out five times, which is around the number of dinners out I'd like to target per month. One of them, though, was a very fancy five-course wine-pairing dinner we went to with six of our friends. Again, those are the kinds of dinners I enjoy doing but only infrequently, or else I can't appreciate my food over the sheer guilt I'm feeling.

All in all, these numbers look reasonable. That up-tick in June is something to keep my eye on, though another concern is forgetting to plan dinners out. I think that one dinner out a week is a healthy way to break up the monotony of life as a wage slave — as long as it's not costing too much.

Next up, grocery numbers since March:
March - $10
April - $289
May - $509
June - $511

Ten dollars in March? A single trip to Trader Joe's? That can't be right. I must not have categorized my March purchases correctly. You've been warned: take all these numbers with a grain of salt.

April was pretty good, well within budget.

May looks high, and it is, but again that's because of our vacation. One day we cooked dinner for everyone (it was a huge house with like 12 adults), so that trip to Harris Teeter cost $225. Note that we didn't have to pay for vacation amenities, but there is no such thing as a free vacation.

June though? I don't know what happened in June. $511 is way too much. Maybe I've been slipping. In any case, I'm going to spend more time planning our meals for the week, because I know that keeps our food costs down. Today, for instance, I made fajitas from one of those do-it-yourself kits (this one actually, though why is the picture so small?). I enjoyed the food, my girlfriend enjoyed not cooking, and in the future I can learn how to mix my own fajita seasoning to take the kit out of the equation. It's things like this that are going to keep our grocery budget down.

3. Any no-spend months yet?

Really good question. Not yet! The thought has been stuck in my brain for a few weeks, though, and I think next month is the month. I have road trips planned on most weekends in August, but that's a challenge I'm willing to tackle head-on. Having the goal of spending money on as few days as possible in a month keeps me focused, and focus is a precious commodity.

4. Are you still making small overpayments on the mortgage?

Totally! I've sent in an extra $200 every month since we refinanced in June. It's practically automatic. I love locking away that extra money so it can keep paying dividends far into the future.

Well, that about wraps things up for now. Thanks again, Yabusame, for prompting me with those questions. It's nice to have someone keeping me honest.

Housekeeping note: I've added Brave New Life to my blog feed. I started reading BNL last December and I really like what he's doing. For some reason I thought he stopped blogging, but I must have gotten caught up and forgot to put his blog on my reader. I was pleasantly surprised to see a link to some of his new content. I encourage anyone not already familiar with Brave New Like to take a peek over there and see what you think.

My other emergency fund is debt pre-payment

I feel like it's been all debt reduction all the time around here, with relatively little in the way of frugality. I'm told I have a one-track mind and my student loans are where my mind has been for most of the year. Until I buckle down and dig up some spending numbers for the past few months, you can assume I've been making some mistakes here and there but otherwise sticking to my Mustachian roots. I'm guesstimating spending of $100/mo that I could pare down, in combined personal and joint spending, if I kept a closer eye and a tighter reign on things.

When I type out numbers like that it's a big motivation to get back to basics and pore over my Mint account. But that will come in the weeks ahead.

Since I've gotten down to one student loan, early payoff has been niggling in my brain. When I think of logging into my ING account I imagine scrounging up another few hundred dollars and sending in another payment. When I'm looking at my Google calendar, I'm checking when my next payday is. On my recent vacation to visit my mom, she dug up a stack of Series EE federal government savings bonds, which apparently I've had my whole life, and which (of course!) I'll be using to accelerate my prepayment. I think about them a lot.

Occasionally I'll think about my emergency fund, or lack thereof. I think almost everyone is doing the right thing when they save 3-6 months of living expenses in case of emergency. But I also think that in my case, an emergency fund of approximately zero is the best course of action. Being a two-income household, where we could scrape by on one of our salaries if we absolutely had to, is pretty luxurious. And I may be brash being a relative kid and all, but I'm not so set in my ways that I couldn't find work — any work — if I had to in a hurry. Not to mention that "safety" is overrated anyway.

There's one more ace I have up my sleeve. (On that note, I have found that the more I live by Mustachian principles, the more aces I find hiding up there.) Remember that whole thing about advancing your student loan due date a few months back? The short of it is that when you made a pre-payment, you could choose whether to keep your next due date the same (which would shorten the time period of the loan), or push it out a number of months proportional to the size of the pre-payment (which would buy you time in case you needed it).

Well, as best I can tell that's not an option anymore. I made three payments last month and I wasn't prompted to "advance my due date" once: it advanced the due date for me. That's all well and good. It's not going to make much difference for me.

Check out where it leaves me:

No payment due until next year

No payment due for two years

No payment due for three years

 My June 2012 payments of $6,800 mean that I don't have to make a single payment on my loans until May of 2015. The most likely scenario is that I lose my job and am unemployed for a number of months. It's a nice safety cushion in case I need it.

I like it better than six months of expenses in a savings account, personally.

Falling off the biking-to-work bandwagon

The past three weeks have been weird. I got sick, I took two and a half sick days off work, and I took another two days of vacation. I biked to work exactly zero times, and due to circumstances beyond my control this week is not looking good for biking either.

It started the week of June 18th.  I felt like I was coming down with some kind of upper respiratory illness (probably allergy related and not unusual) so I took off of work on Tuesday to try and head it off with extra fluids and sleep. No luck. I ended up sick anyway. Just the same, I'm glad I decided to take off. Too often I feel people will try to power through an illness, which only serves to infect co-workers while your productivity is diminished. I probably would have taken another sick day if not for a big deployment I've been working on that's due to ship soon.

I didn't bike because I didn't feel well. I don't know if that's a good enough excuse but it sure felt like one at the time. The rational side of my brain could recall articles about how exercising when you're sick doesn't hurt and can actually help speed recovery. The emotional side of my brain wanted none of it. To anyone reading this who has a story about biking in spite of being sick, I'm very interested to hear about it.

That brings me to the week of July 4th. My girlfriend and I had festivities planned for both weekends, but none included my mom who I still wanted to see, so I decided to take two vacation days on Thursday and Friday. I think it was a pretty good decision in retrospect. I got to catch up with an old friend and clean out my old bedroom, which had stuff in it from my highschool days.

I haven't been to work in five days. Coupled with the sick days I mentioned earlier I'm getting a faint glimpse of what early retirement might be like. It's pretty nice! I have plenty of things to work on, and I feel like less of my time is spent in a brain dead recovery state. I've been reading about investing and doing little jobs around the house.

Back to biking. On Friday I got an email from a co-worker. Building management sent out a notice that the shower room would be closed all next week. I don't like our building management. Giving us short notice about facilities not being available is par for the course for them. I'm not willing to spend all day being sweaty and gross, so I don't plan on biking this week. I am hoping and praying that it will only take a week.

Losing our shower room for a week is unfortunate. It's outside of my locus of control. During times like these I try to compensate by picking something that is under my control and running with it. It's time to dust off my list of goals. For the most part I've been ignoring my 2012 non-financial goals, but with half the year gone already (!) it's time to get serious. I'm going to aim at doing 20 push-ups twice a day every day this week, to partially make up for not biking to work. That should jump start my progress toward being able to doing 40 consecutive push-ups.

Does anyone else have New Years Resolutions they're not ready to give up on yet?

Spending money I don't have

Today I bought a used Honda Fit. I bought it using money I don't have: a loan from my credit union.

Buying a car on credit was a difficult decision for me. I vacillated among buying the cheapest beater I could find on Craigslist, to getting it over with quickly and buying a car at Car Max, to closing my eyes and just ordering a new car. ...Just kidding, I was never considering getting a new car. That would fly in the face of everything that Mr. Money Mustache stands for. If I'd gone down that path I would not be surprised if MMM himself showed up at my door step to personally deliver a punch to my face.

The decision for what car I would purchase, really, was a three-way one. The options were 1) cheapest beater possible, 2) something in the $10-15k range from a dealer, or 3) something in the $10-15k range from a private party. As I did a lot more research I concluded that dealers overcharge, and that really all they provide is convenience. This convenience is minuscule when dealing with used cars because inventory is all over the place. The inventory on Craigslist was comparable to inventory at all the local dealers I could find and Craigslist provided one website whereas each dealer has its own website.

I got lucky and found a 2007 Honda Fit Sport, manual transmission of course, with 67k miles. My insistence on a manual transmission explains the lack of used car inventory at dealerships. The guy I bought it from was really nice, explained how diligently he had serviced it and why he didn't need it anymore (he bought a used Saab). I paid $10,500, which is maybe $100 or $200 more than book value for this car in Very Good condition. I was happy with the price because the service record has been sterling and all it needs is new tires in around 10k miles (I'm estimating ~$500 at Costco).

$10,500 is more than I have in cash right now. Remember that I've been holding back cash since almost the beginning of the year in anticipation of buying a car. There was the possibility my mom would lend me her 2008 Yaris, but in the end we decided she would be better off selling it and using the money for her pending retirement. I have around $6k in cash, which does not include $2k that just last week I sent in to pay down my student loan (I hadn't told you guys about that payment yet). Tonight, now that my car situation is settled, I'm going to send in another large payment, probably around $4k.

Here is a copy of the relevant details on this used car loan of mine:

My Truth-in-Lending Disclosure for my used car loan

The obvious problem with car loans, or any loans for that matter, is the interest you have to pay. In this case I think it's an acceptable tradeoff. If I don't pre-pay any of this loan (unlikely!) then my total finance charge will come to $550.52, or a little over 5% of the loan amount. I'm not worried about the new monthly payment either since I'm basically swimming in free cash flow right now. Other things equal I'd rather have the $550 over five years, but even more I'd rather have the $6k in my bank account to pay down my student loans.

The really insidious problem with car loans is that they subtly and inexorably encourage you to buy more and more expensive cars. If I didn't have access to credit I would literally not have been able to purchase this car. What's worse, I could have easily gotten approved for a much larger loan, maybe even $30k. Can you imagine if I weren't relatively frugal? And I do mean relatively frugal: my Fit is a damn nice vehicle and I paid a premium for it over, for example, an early 2000s Toyota or Honda.

I'm sure I could be just as happy with an older and less expensive vehicle. But I did the calculations and I decided on the set of tradeoffs I describe above. Access to credit shifted my decision toward a more expensive vehicle and now I'm poorer because of it. The thing is, I'd still make the same decision. Debt is sneaky like that.

I don't mean to be all doom and gloom. But I do want to give myself up as a cautionary tale. The less automotive inventory you keep the richer you will be.

I think it's funny how everyone I tell is congratulatory. I'm happy about my new (used) car, too. I don't think congratulations are necessarily out of order. But it would be more reasonable, I think, if we offered each other condolences upon taking on new debt.

Debt: the financial equivalent of the dark side of the force

Yesterday I wrote about interest rate arbitrage, or using debt for what amounts to financial jiu-jitsu. Today I want to write about how my views on debt have changed since I've adopted a more Mustachian outlook.

There is something satisfying about gaming the system with rewards credit cards, as Mr. Money Mustache and many others have written about. I like it because it feels like getting one over on those fat cat 1% bankers I keep hearing so much about. It's not for everyone, and I consider it the financial equivalent of playing with fire.

Then there are other forms of leverage. Almost every homeowner uses a mortgage. Just imagine, taking 20% of a house's value in cash and having someone else give you the remaining 80% so you can buy it. If you're in the real estate business you can use leverage to greatly increase the profitability of your invested capital a la The Aggressive Landlord in this MMM post.

Leverage increases your risk. Let's say you're leveraged 4-to-1 on your house (25% down, and let's say it's a rental house so it counts as an investment). If housing prices go up by 10%, awesome! that's 40% profit! But what if housing prices drop by 10%? Crap, there goes 40% of your equity. Wall Street investment banks use massive amounts of leverage, sometimes in the ballpark of 100-to-1, to greatly increase their potential profits and endanger the health of the global financial system while they're at it. (See, for example, the history of Long-Term Capital Management).

Using debt is the quicker, easier, more seductive side of personal finance. I'd be lying if I said I wasn't tempted. I've even been engaging in some debt-fueled risky business per yesterday's post. But I've decided that my ultimate goal is to lead a debt-free lifestyle, even if it means foregoing lucrative financial opportunities like investing in rental properties.

Warren Buffett famously eschewed debt over his many years of investing. (I read his biography, it's a great read and totally worth the length). When he was in his twenties and thirties he had dozens of partnerships and knew about hundreds of insanely profitable investment opportunities. He was consistently cash-starved up until the 80s (I think) in that he always had many more good investments than cash to buy them with. But he would never take on debt to pursue those investments, no matter how much of a sure deal they were. His brand of long-term investing requires that he always stays solvent, no matter how irrational the market is. Having to make a margin call even once would have cost him billions.

I like the principled stand of no debt, only equity. There is an oldschool feel about it. If you don't have a mortgage then the bank can't foreclose on your farm, no matter how bad this year's crop has been.

I'm already committed to paying down my student loans. After that, I'm thinking of winding down every other debt I have. Right now that's the mortgage, the 0% credit card debt, and the 401k loan. Soon it will include a used car loan (more on that later, it's not as bad as it sounds). That's a lot of debt, especially the mortgage, and I need to decide how aggressive I'll want to be in paying it down. I do want to pay it down, though, all of it, that's what I've decided. I want to live the equity-only lifestyle.

The allure of leverage isn't going to go away. But avoiding temptation is future Mustachian Acolyte's problem. Right now I'll keep putting one financial foot in front of the other.

Interest rate arbitrage

Don't try this at home, kids.

Around the time I paid off my first student loan, I applied for another credit card. I had heard good things about Discover and I don't need my credit for anything in particular going forward. I had an ulterior motive though.

Back in my non-Mustachian heyday as a college student I played a little game with credit cards. First, some background. I went to a private university, and an expensive one at that (though what private universities aren't expensive these days?), and had my way paid for me through a combination of scholarships, student loans, and parents. I made it a point not to work during school so as to focus on schoolwork. In my defense, I finished with a good GPA and I worked and saved up money every summer. Still, I didn't have a lot of cash money, and I was fine with that because I was fully expecting to be well-off after I got out of school. (Now that I think about it, that's a bit of revisionist history. I planned on going into a PhD program so it would have been years before I got a good salary.)

My first two years I signed up for the college-provided meal plan. It was decent food but mondo expensive. In my junior and senior years I opted to cook for myself, and that decision probably saved me between $2k and $3k a year. I knew that signing up for the meal plan would be the easy way out. It would also be paid for with future money, and potentially my parents money, but a 2x markup is pretty steep. I guess I would have to pay for my food out of my meager cash savings. Unless...

Unless I could use future money without using student loans. I'm talking, of course, about credit card debt! Don't worry, I wasn't totally insane. I managed to score two credit cards at 0% interest for 12 or 18 months (the details are fuzzy, I think it was an Amex Blue and a Citi Mastercard). The limits were low, like $2k or $4k. That way I got to keep my cash while still buying foodstuffs to keep from starving. The low limits were a boon, too, because I could still feel poor without having to pay cash for things.

I kept those cards at or near their limits for months on end. Often times I would need to pay more than the minimum payment so I would have room for new purchases. This whole process took a lot of fine tuning. I wouldn't recommend it if you don't plan on being very hands-on with your money. When the introductory APR period came up I would either pay the card off in full, if I had the cash, or I think once I needed to balance-transfer the money onto another 0% card (and eat the $30 fee).

It was a dangerous game I was playing. I didn't pretend otherwise, though in my youthful swagger I didn't really have a concept of what exactly could go wrong and just how wrong it could go. To tie that story up, I managed to pay off all my credit card debt during my one year of grad school, on a stipend of $18k/yr. I kept my living expenses low and I'm pretty happy about it, though part of that should be considered a debt rollover since I took out the maximum I could in Stafford loans.

I knew some things about money, but I certainly did not know everything.

Fast forward to today. I've seen the light of Mustachianism as delivered by our wise mustachioed sage. I've been aggressively paying off my accumulated student loan debt for over six months now. I make an obscenely large amount of money and I live an over-the-top flippantly luxurious lifestyle. And the thought crept into my brain: could I use credit card introductory teaser offers to accelerate my student loan debt paydown?

I've started down a dangerous path once more. Since I got my 0% Discover card in May, I've been charging anything I can to it instead of my other cards. I will only be paying the minimum. This will free up a few hundred dollars of cash per month which I will be using to pay off my loans. I've also gone one step further by charging some joint account purchases to the Discover card and reimbursing myself with cash from the joint checking account (having cleared this with my girlfriend first, of course). In this way I can borrow money at 0% to pay off my student loans at 6%.

I'm taking on additional cash flow related risk with this little maneuver. I'm also taking on the risk that I'll buy things I wouldn't have ordinarily bought because I don't have to pay for them right away. The benefit is something on the order of $100/mo of interest I'll save by paying off my student loans earlier (0.5%/mo on $20k is $100. I have over $25k student loan debt outstanding.)

I've been grappling with what my personal stance on debt should be. But this post is a lot longer than I had originally intended, so I'll pontificate some more tomorrow.