Thursday, April 26, 2012

Negative wealth shocks

It's been too long. Long story short, I've continued biking 1+ days a week, I've kept paying down my student loans. I'm overdue for a monthly expenses post and a follow-up on my student loan progress. Here's what's really on my mind, though: this week, I lost my wallet.

Tuesday I biked in to work. I noticed my wallet was missing around lunch time. I distinctly remember putting it in my bag, and it wasn't there when I got to the office, so it must have fallen out while I was biking to work. Usually it's snug at the bottom of my messenger bag while I'm biking but maybe I left it on top and didn't fasten the bag tight enough and it jostled itself out.

Of course, I checked everywhere I thought it could be and a lot of places I knew it wasn't. I filed a lost-and-found report with the local police department — no luck. By Tuesday evening I had given up and called all my credit card companies to cancel my cards.

When I first noticed my wallet was missing, what struck me was how (relatively) calm I felt. It should have been one of those moments where you feel like your stomach drops out from under you and you feel kind of queasy. No, I felt more of a detached "that sucks, I guess I have to deal". There was nothing in my wallet I couldn't replace, just credit and debit cards, drivers license, insurance cards, and cash. I felt worst about the cash, but still not that bad. I think I had somewhere between $80 and $120 in there.

For some reason losing that money didn't upset me so much. Don't get me wrong, it totally sucks. I'd much rather have $100 than lose $100. But I have this feeling like: it's only money. Crappy things are going to happen. In the grand scheme of things losing your wallet isn't that bad.

Come to think of it, my pre-Mustachian behavior was the effective equivalent of losing a wallet full of cash per week. And I did that without worrying about it. Now I'm on the path toward financial independence, with my personal wealth snowballing thanks to principles of frugality and resourcefulness and — dare I say it — badassity.

This won't be the last exogenous shock to my wealth, positive or negative. Those are out of my control and I'm assuming they'll even out in the end (and even if they don't, what can I do about it?). What really matters is the skills I'm learning, my Mustachian habits I've picked up, and the course toward Mustachianism I've been sticking to. Maybe that's why I'm not terribly upset about losing my wallet.

Wednesday, April 18, 2012

Why run your A/C when you can run your fan?

File this one in the "things that should have been obvious to me in the first place" category.

Last summer, living in my then-new-to-me house, I couldn't help but notice that the basement was much colder than the second floor. I closed all the basement vents, and I switched the volume control dampers (I think that's what they're called) so more air would be forced upward. Still it was really cold downstairs and pretty warm upstairs. That was a problem because I find it hard to fall asleep when it's too warm — I think most people are the same way. Most often what would happen is we'd keep the air conditioning on at night, at a lower temperature than I would have liked, so the upstairs was comfortable. Of course, that meant downstairs was freezing.

I wasn't looking forward to doing the same thing this year. I thought that maybe something was wrong with my vent system, maybe something was blocked, maybe my A/C isn't powerful enough, something. I thought I would call a HVAC guy out to inspect my stuff.

Then, earlier this week, I was playing with my Nest thermostat, when I realized that I can turn on the HVAC fan independent of heating or cooling being on. In retrospect this should have been obvious. The part of the air conditioner that gets cold is different from the part that circulates air.

Honestly I was alerted to this fact by Nest again — they rolled out a software update with the feature that the thermostat shuts off the air conditioning before shutting off the fan, so the still-cold air continues cooling your house. It only does this if the humidity is low enough that it won't get uncomfortable.

I don't think I'll be using that feature much, even though it's really cool, because I've been running my fan non-stop and it's really evened out the temperature in my house. Generally the basement stays cooler since there's way more insulation, so circulating the air down here to the second floor is kind of a no-brainer.

Anyway this finding made me really happy and I wanted to share it. I'm hoping this will save some money on cooling bills this summer, mainly because I'll have a more comfortable top floor while keeping the A/C on a higher temperature. We'll see. And if not, I'm still counting this as a win.

Thursday, April 12, 2012

Commentary on two MMM posts

I've been thinking a lot about Mr. Money Mustache's blog posts from April 9th and April 11th. I'm going to share my thoughts and hopefully add something of value.

What if everyone became frugal? [link]

Oh man, let me tell you. I thought about this topic a lot; sometimes it would make my head hurt, and sometimes I would worry about global frugality leading to a ridiculously low interest rate. I'm really glad MMM posted about how everything will be fine if we stop consuming like we're trying to wreck the planet. His post forced me to think more clearly about the consequences of a more frugal world.

The first lesson I'm taking away is don't think about economics if you don't have a model in mind. This is a noob mistake that I make over and over. Let me illustrate with an example.

My thought process went something like this: "Okay, let's say everyone starts saving at a higher rate than before. They're accumulating cash, now everyone has more savings. Increasing the supply of liquid funds will drive interest rates down. That means everyone will have to save more if we're all going to be living off interest. Oh no, now my stash will need to be way bigger...".

I was getting way ahead of myself. Economics is hard, and figuring out what the effects of a global move toward frugality takes more than pondering for a few minutes. Really if you're going to be answering a hard question, you need to work through a model.

Here is a post from an economics professor with whom I almost always disagree. That post, however, is completely uncontroversial, and illustrates the same point Mr. Money Mustache does. As societies save more, they become richer.

If you want to get a bit wonkier, study up on the Solow growth model (Wikipedia article actually not very good). There's a "golden rule" level of savings that maximizes consumption — I know, I know, but remember that in this case "consumption" is broad enough to include leisure time. What happens when a country's savings rate is below the golden rule level of saving, and then all of a sudden people decide to start saving at the golden rule rate? At first consumption decreases, but then it asymptotically approaches a higher level.

Eventually, if we (as a society) save more, we'll be richer. We'll thus be able to consume more leisure. We'll also be more productive, because of the additional capital available, which means we'll have to spend less time building our 'stash and more time enjoying life.

Get rich with: good old-fashioned honesty [link]

I only have a little to say about this one. It's nice to hear, from time to time, about how being honest and doing the right things makes you better off in the long run.

Character counts. I think the more we build our character, the happier we become as a direct consequence.

When I was still in college and looking to graduate, I wanted to stay in academia, because I didn't know how I could be happy with the narrow profit-maximizing head-down existence that a full-time job provides. Now that I'm living the grind, I've found a certain professional honesty to be a real boon to my workplace happiness.

With software development there is always pressure to cut quality in the name of shipping code quickly. To me, and to many, this feels wrong. It leads to shoddy products, and unhappy customers and workers. It's the same as the examples MMM gives about dishonest plumbers or sneaky used car salesmen.

I found a code of ethics from the ACM and IEEE for software engineers, and it makes me really happy. I'll be applying it to my work and thus reaping the benefits of this professionalism throughout my career.

Tuesday, April 10, 2012

The option value of foregoing a purchase

Mustachianism is about trade-offs. Really it is about striking a balance between consumption and other areas of our lives. Many peoples' lives are heavily weighted toward consumption over work-life balance, or family, or leisure time; so naturally moving toward balance is the same as moving toward frugality. But rather than trying to consume as little as possible, I think Mustachianism is more about consuming at the right level.

This post is starting off more philosophically than I had intended. Let me get to an example that's currently on my mind of two recent purchases I made off Amazon. The first was a bundle of clothing, which I want to argue was a Mustachian purchase through-and-through. The second, a decidedly non-Mustachian purchase, was a pair of mugs intending to replace one of our broken ones.

First, the clothes. I've never enjoyed clothes shopping, or really thinking about clothes at all, so I've never considered clothing a luxury or non-necessity purchase. Don't get me wrong, I know how it could be, if you're always buying clothes. I'm saying when I was a kid my mom would take me shopping maybe once a year to replace the stuff I outgrew, and then when I got to high school it was awesome because I stopped growing and I could wear the same clothes year after year. I could be making this up, but my current cohort of shorts is upwards of five years old.

That's where I'm coming from on the clothing front. Usually I needed to will myself to schedule a trip to the clothing store because of how painful it was. Clothing does wear out and need to be replaced.

I can count on one hand the number of times I've bought clothing since I started my working life. I spent maybe $500 in that amount of time, $400 of which was an entire wardrobe of collared shirts and slacks for starting my job. Two of three pairs of my jeans I bought at Costco (one got too big, so now I use a belt rather than getting rid of it).

Why am I telling you all this about clothes? Because inadvertently this month I stumbled upon the very important concept of option value in foregoing a purchase. My wardrobe can use some updating, and this has been true for several months, but I've been putting it off because of my psychic aversion to clothes shopping. If I were a normal person, and if I had a high clothing-consumption lifestyle, I would have just kept making trips to the mall until everything I wore was stylish.

I got an email from Amazon earlier this month that they were offering a promotion on clothing. Now, I regularly read through a bunch of discount advertisements. Very very rarely will a company offer me something I'm interested in (the rule is that I would have already been intending to purchase the item anyway). This one was different: Amazon is offering $10 off $50 of clothes sold by Amazon itself.

Twenty percent discount is pretty good. So I bought six pairs of white socks, two white undershirts, and a pair of jeans for something like $55 ($45 with the discount). I especially liked the part where I didn't have to leave my house.

Here is my point: the act of waiting to purchase those clothes, even if they all would have qualified as reasonable purchases, wound up saving me $10. That's pretty good! And it's another reason why, even if a purchase is reasonable, there's always a reason to wait.

I did make a second purchase at around the same time, though, which is pretty much the opposite of the option value I described. Double-wall insulated glass mugs, which I bought for my girlfriend as a Christmas gift, and which honestly are awesome mugs that I've been really happy with. One of them broke a few weeks back and it's unfortunate that now we only have one.

I shouldn't need to list the reasons why this isn't a Mustachian purchase. They're expensive, and we already have plenty of mugs. But the reason I want to highlight is that I immediately forewent the option value of waiting on this purchase. What if I see the same mugs at TJ Maxx next time I'm there? Too bad, I already bought them. What happens when they go on sale, or someone needs to get rid of theirs, or any one of a number of things? Oh well. Hell, and I didn't even think of this until right now: what about if they sell them at Bed, Bath & Beyond, where I have many 20% off coupons? Oops.

Let this tale of two purchases remind you of the option value in foregoing your consumption as long as possible.

Sunday, April 8, 2012

Congratulations to No More Harvard Debt

I've been reading No More Harvard Debt since I started this blog. The author graduated Harvard Business School with $100k+ in student loan debt, and seven months ago he decided he was ready to be rid of it. He set the ridiculously audacious goal of paying off $90k+ of debt in 10 months. He succeeded two months ahead of schedule.

I was — and continue to be — amazed by his story. He's just a normal guy who converted from a high-income high-consumption lifestyle to a particularly frugal lifestyle overnight. He managed to change his life while staying true to his values. He made a bunch of tough sacrifices but he stuck it out, and he's a better person for having done it. I'm inspired by his story.

Even if you don't have the time to read through the No More Harvard Debt archives, read his Mission Accomplished! post. It has a great retrospective and it's a really thoughtful piece.

Anyway, I just wanted to give a shout-out to NMHD for a job well done.

Saturday, April 7, 2012

Track your progress

I want to reiterate that biking is awesome. This was my fourth week of biking to work; time flies, it feels like only two weeks. Every day that I bike, my day is better because of it. I feel more focused at work. I'm more tired (the good kind of tired) but paradoxically more energized.

I've been tracking my progress with the MyTracks app. I love tracking my progress because it shows how I'm improving over time. Check out all the data I've generated. Time is in minutes and seconds, distance is in miles, speed is in miles per hour.

Date Total Time Moving Time Distance Avg Speed Avg Moving Speed Max Speed
3/2026:2420:543.427.779.82 18.76

By keeping a record of my bike rides I can see myself getting faster. I've decreased my moving time by six minutes from the first time I biked this year. My average moving speed has crept upwards until now I'm flirting with 13mph. My total time spent commuting (one way) is pretty consistent now at under 21 minutes. For perspective, my trip by car usually takes between 9 and 13 minutes. I know I can do better too, like around 15 minutes, once I'm fast enough.

It's really motivating to watch my progress. Some days I want to beat my best time so I'll push myself harder. Other days I'll take it easy and afterward I notice I'm still faster than I used to be.

I've biked twice a week for the past three weeks. I would have biked yesterday, too, if it were warmer in the morning. Sure, I could have anyway, and I'm a wussypants for letting a little cold stop me. But I decided it's more important to have fun with this and have my bike commute be enjoyable. The last thing I need is to feel like it's a chore.

There is another point in there. When I started I needed to take a day off after biking once. I was tired and I needed to recover. I don't feel like that anymore. I still need to recover but that need is less and less. I biked to work on Tuesday and Wednesday, and by Friday I was more than ready to go again. Soon it will be warm out every morning — or I'll stop minding the cold because I'd rather be biking.

I'll be maintaining my goal to bike at least once a week; I see that being easy from now on. My new goal is to keep pushing up the number of times I bike in per week. When I hit four days a week I'm going to be feeling pretty good about myself, let me tell you.

Last I want to say thanks for all the helpful advice people left in comments. Bethimar gave me the super useful advice to raise my bike seat, which was spot-on and afterwards biking is easier and I feel more powerful. And I'm constantly reminded about what MMM said about why we bike:
Because that's simply how you get around. There are no other alternatives. What, you're going to use a MOTOR, when your own legs can do the job?
I'll be on my way to work, sprinting up a hill so I can make the next traffic light, feeling smug watching the column of sukkas in automobiles gunning their accelerator pedals waiting for the congestion to move on to stop again at the next traffic light. And I'll think to myself, this is why I'm biking. This is how I get to work. That's just the way it is.