Thursday, October 29

A Week in the Life of a Mystery Shopper

Even throwing in a quickie vacation, I managed to earn almost $400 last week in mystery shopping fees and about $75 in reimbursed purchases. However, it was a slower week all in all:

Sunday
I signed up with a company that primarily does merchandising and completed my first two jobs today. It was easy work: I had to make sure DVDs were arranged according to a certain order, which in the industry is referred to a planogram.

Monday
This was a pretty busy day as I had a hodgepodge of shops to do. Note to self: it's easier to go with a "theme" for the day (for example, all gas stations, or restaurants, or retailers) if I want to be as efficient as possible. I did everything from fast food to merchandising to gas stations to mall stores to discount and home improvement retailers today.

Tuesday
I only did four shops today, but the pay was almost as much as what I earned Monday running around like a glutton. I visited two banks, did one merchandising job and went to a movie theatre to ensure a movie poster had been installed.

Wednesday
A quiet day. I ate a free breakfast, that was all. My Florida trip would start later in the day so I spent most of my day mapping it out, creating my data entry worksheet and hunting for more jobs.

Thursday
Busy day on the road, 15 shops total. We'd spent the night in a Best Western in small town in southern Alabama. Left the hotel around 8 AM and arrived at our hotel in Panama City beach about 4:30 PM. All I did was gas stations today. As I mentioned, I've found that having a theme for the day makes things much easier. We broke up the monotony through the day by making random stops at nurseries to look at banana trees and other native plants. All in all I enjoyed the day. This was the week's best day and I earned $200 in fees and $30 in reimbursements.

Friday
Today was a fairly easy day as I wanted to enjoy our time in paradise. I added four gas stations to my itinerary that were all within a couple miles of the hotel, then returned to the hotel to enter them before heading back to the beach to enjoy some sun and sand. After lunch we headed home. I completed two gas station shops on the way home.

Saturday
Nothing. I could have completed four shops that I'd signed up for, but all week I was battling a cold and I really didn't want to go anywhere, so I didn't. This is what's nice about mystery shopping: you have flexibility. Instead of shopping, I cleaned house, caught up on email and watched a couple of movies on the ROKU. I really enjoy cleaning house, it's good therapy, so I had fun not doing anything in particular on Saturday.

Total Income for the Week: $382.15
Total Value of Reimbursements: $67.75

Wednesday, October 28

Closed on the Rental Property

I closed on the house yesterday! This was one of the most difficult tasks I've had in some time.

For the immediate future I will be focused on renting the townhouse my tenants moved from. Before I can show it, I've got to do some major cleaning. They lived there over three years and IT'S A MESS. I may post before and after shots to give you an idea of what I'm talking about. My plan is to rent it for $625/month. It is a 2 bedroom, 1.5 bath corner unit so it has a decent yard.

Tuesday, October 27

I'm Now a Merchandiser

In my quest to make ends meet, I've supplemented my mystery shopping work with merchandising. What is merchandising, you ask? Well, some companies will use contractors to maintain the shelves at retailers that stock their products. I used to think retailers were the ones that managed their inventory and organized their merchandise. While that is true for many things, it's not for others. Think DVDs, pre-pay phone services, and greeting cards, and these items are probably handled by a merchandiser who comes into the stores on a regular basis to straighten the shelves (according to "planogram"), report outages to the supplier, and maintain the face-to-face relationship with the store managers.

I just started doing this last week, but I was able to sign up for permanent assignments with a few stores, which means I will always be assigned the work for that store and won't have to compete with others to receive it.

How much does it pay? Not much... the ones I've signed up for so far range from $6 to $12 per visit. Fortunately, most assignments pay a set fee regardless of the time it takes. Unless the visit involves installing new displays, it's generally a quick in and out. I did my first two assignments last week, and even though I was new to it, I was in and out of the store in 20 minutes.

Monday, October 26

Closing on the House Tomorrow

Tomorrow morning I will FINALLY close on Rental Property #7. I say finally because I began the hunt for this property nearly a year ago, and it was originally slated to close in September. With my job loss, I ran into some hurdles with financing the property.

A huge burden will be lifted when I hand over the keys to my tenants. I started looking for this house nearly a year ago, and it was originally scheduled to close in September. My job loss messed up the financing. However, I made a commitment, and I keep my commitments, job loss be damned. These tenants happen to be my best friends, and they've been renting a townhouse from me for over three years.

Most likely this will be the last rental property I purchase for some time. Without a more predictable, employer-originated income, banks balk at lending money these days! I do look forward to having a clearer picture of my finances.

So, beginning with November I can take a real assessment of my debt level and create an attack plan to pay it down.

Sunday, October 25

Aggressive Tax Avoidance: Deducting Travel Expenses While on Vacation

I wanted to review the tax consequences of my mystery shopping trip to the beach. Since the main purpose of the trip was to generate income, the IRS is okay if I had a bit of fun on the side. There is a great article about this on MSN. I have a lot to deduct from my taxes:

Mileage
Mileage is reimbursed at $.55/mile in 2009. I drove a total of 992 miles, so I can deduct $545.60 from taxable income for miles driven. At a 25% tax rate, that's $136.40 in cash money I save on taxes.

Lodging
Even though I did not have a cash outlay for the hotel, I can still deduct that expense, which was $139.32. Assuming I would pay 25% in taxes on the income this offsets, the value of this deduction is $34.83.

Meals
Meals are also deductible, but only for my meals... unless I can establish a business purpose for my partner's traveling with me. Since he did help me with filing, data entry and observations, I might be able to deduct his meals as well. I need to do some digging on that. I spent $101.20 for the two of us.

Other Considerations
Fortunately in 2009 I earned considerable income from a day job for the majority of the year. This means if I lose money at mystery shopping it can offset the income I made from my day job. This will be quite useful for 2009, but if I my wage income in 2010 isn't significant, the advantages of deducting these expenses are minimized.

Saturday, October 24

Cost of a Frugal Miser's "Vacation"

I mentioned Thursday that we were taking a trip funded (hopefully) by mystery shopping along the way. Today I wanted to review the trip. Tomorrow I will review the tax consequences of my trip. Just a note: when you see the deductions I am able to take, you'll be ready to pack your bags and mystery shop your way to the beach, too:

Logistics
  • If we had traveled directly to our destination, the round trip mileage would have been 638 miles. This includes 50 miles for driving along the beach, to restaurants, etc. while there.
  • We actually drove 992 miles. Difference: 354 miles.
  • I packed as usual, except I had to bring my scanner in order to upload receipts. I brought my multi-function printer/copier/scanner in case I needed to print anything. This was a bit bulky but not a huge inconvenience.
Expenses ($326.15)
  • Fuel: $47.00 (actually spent: $68.00, less $21.00 that was included in reimbursements.) BTW, we drove the sipping Corolla versus the sexy but thirsty Bimmer. I'm trying to keep miles off the Bimmer to increase the resale value when I try to sell it this spring.
  • Lodging: $139.32 (incidentally, this wasn't a cash expense. I had purchased a bunch of Best Western gift cards right before I lost my job to earn airline credits needed for a free flight for a trip I am taking in November. The idea was to use the gift cards for business travel and just expense them over time.)
  • Food: $101.20 ($28.00 of this was non-cash as I used a gift card and a $5 off coupon.)
  • Alcohol, Incidentals: $38.63 (actually spent: $59.63, less $21.00 that was included in reimbursements.)
Income ($244.89)
  • $244.89 from completing 21 gas station mystery shops.
  • this does not include the $21 in reimbursed gas and $21 in reimbursed goods, which I have offset in the expenses above.
Net (-$81.26)
  • Note that my actual cash outlay (besides that which will be reimbursed) was only $158.83 as I used gift cards for lodging and one meal.
  • Tomorrow I will cover the tax consequences of the trip. Taking that into consideration, I did come out ahead.
So, we were able to enjoy 2 1/2 days out of town and it only cost me $81 plus wear and tear on my car, which I get to recover anyway from Uncle Sam. Could I have been more frugal? Certainly. There was a cheapo budget motel on the beach (we were a few miles inland) for $39 per night, but I didn't have a gift card for that and the reviews were terrible. We also didn't have to spend as much on food, but even a miser knows when to see the forest for the trees (otherwise we get into the "miser = miserable" territory which I refuse to cross).

Friday, October 23

Update From Panama City Beach, Florida

We arrived in Panama City about 4:30 PM yesterday. We actually left the hotel we stayed in Wednesday evening a little after 7 AM. I shopped 15 gas stations along the way.

We arrived early enough to enjoy some time on the beach. After I finished entering my reports, we ate sushi and then drove to the public beach. I didn't see any signs saying the beach was closed, just the red flag warning of the high tide activity. It was about 9:30 and NO ONE was on the beach, even though it was still near 80 degrees. I kept thinking the police were going to shine their spotlights on us and tell us the beach was closed for the night. Fortunately, no one bothered us for the hour or so we were there.

Being spontaneous, I signed up for 4 gas stations this morning. The pay wasn't much (only about $20 total) but they were so close to the hotel that it only took me an hour or so. I can justify that.

We'll leave the hotel shortly and head back to the beach. It's in the low 80s again and the wind is steady, so perfect weather for rolling the windows down. Of course, a trip to Panama City Beach wouldn't be complete without stopping at a local dive for seafood. I have two gas stations to shop along the way home, but that's all I can find that is worth doing.

I'll post over the weekend a breakdown of how much was spent on this trip along with what I earned from shopping.

Thursday, October 22

Taking a Mystery Shopping Vacation

No, I'm not taking a break from mystery shopping. I'm taking a frugal vacation...and paying for it along the way.

My partner and I left yesterday for the beach. We'll be back Friday night. Along the way, I will shop several gas stations. Once we're settled, I'll check my shop sites for other jobs that might interest me, like a restaurant or two... we'll see.

So along with a couple days clothes and cosmetics, I've brought along the scanner, camera, laptop and the GPS. I'll post this weekend on how much this vacation cost (or made) me.

Tuesday, October 20

Misers Cut Heat Bills (Volume 2... Water Heater Blanket)

Insulate Your Water Heater
Purchase a water heater blanket for your water heater and it will pay for itself in a matter of months.

According to the Iowa Energy Center, an insulating blanket will cut energy loss 25% - 45%. Assuming you spend $25 per month heating your water, it is safe to say you could save $5 - $10 per month just by installing one.

Not everyone needs a water heater blanket. New models of water heaters are already insulated. How to tell? Simple... just place your hand on the outside of the water heater. If it's warm, then it needs to be insulated.

Monday, October 19

Misers Cut Heat Bills (Volume 1... Electrical Outlets)

My how winter has a way of rushing in. What happened to fall? This week I wanted to focus on ways to save money on winter energy costs. Each day I will focus on an easy task that can save money by cutting energy costs. My plan is to compare my electric and gas bills year over year (assuming the weather is similar). I have a newer home so I'm not sure how much bang I'll get for my buck. We'll see.

Secure Those Electrical Outlets
Electrical outlets on exterior walls can let cold air in. To keep cold air from entering your home via these outlets, unscrew your switch plates and spray some Great Stuff in the crack. Or you could install foam pads around the back. And, if the plug isn't being used, plug in one of those toddler-proof plugs to block more air.


Tomorrow... more ways to insulate your home.

Sunday, October 18

A Week in the Life of a Mystery Shopper

I made $685 last week in mystery shopping fees and earned $141 in reimbursed purchases:

Sunday
Bought groceries at two supermarkets, bought gas at two stations, ate lunch and dinner out, and shopped two home improvement stores.

Monday
I was exhausted and needed to get caught up on home chores. I did one discount retailer just a few minutes from home.

Tuesday
I only did four shops today, and they were all in a town 60 miles from home. One was a very lucrative evaluation of an apartment community. I made nearly $100 just on that evaluation.

Wednesday
Five gas stations, a bookstore and six banks. Three of the banks were phone shops so I didn't actually have to visit the branches. I left the house at 7 AM and was back home by 4 PM, but didn't finish entering reports until almost 7 PM.

Thursday
Busy day, 15 shops total. I traveled to a community about 50 miles from my house to pick up 11 gas stations. The other four shops included two restaurants, a mall store and a home improvement retailer. I came home with more gas in the car than I started (all free), but it was a LONG day. What made the day seem so long was all the data entry involved.

Friday
I was out way too late Thursday night celebrating my partner's birthday, so I only did 4 gas stations.

Saturday
Mystery shopping marathon. I drove nearly 700 miles in my quest to earn $250 in one day, and I did it. The nice thing was that I only shopped ten places and they were all gas stations in rural communities. I used my partner's Corolla to cut down on operating costs (the Bimmer drinks a lot more gas than the Toyota). Because all I did were gas stations, data entry was significantly less (versus restaurants which tend to take forever to fill out the report), so the time it took start to finish was only 13 hours. Plus, much of my gas for the trip was free.

Total Income for the Week: $685.23
Total Value of Reimbursements: $141.08

I grossly underestimated my income potential when I set my goal in October to earn $500, as I did far more than that in one week.

Friday, October 16

A Week in the Life of a Mystery Shopper

I've decided to ramp up my mystery shopping activity so that I can more quickly pay down some debts. In my area, there is almost always an abundance of shops available just about daily.

Last week was a busy one for mystery shopping:

Sunday
Woke up and realized I had no assignments to do, so I went online to the two shopping sites I use most often and formed a trip. First stop, 18 miles from my house, was a lucky find: for one company I shopped a fast food restaurant and for another company I shopped a gas station - both were in the same building. I then did a truck stop, 2 gas stations and finished up with another fast food restaurant.

Monday
I had planned to visit my grandfather in the nursing home, which was 60 miles from my house. So, I picked up a fast food restaurant and two gas stations that were on the way.

Tuesday
I did four gas stations in the morning, but was bored (and hungry) so I searched for a lunch time job. I found a fast food restaurant ten miles from home along with a gas station across the street from it. I also did a fast food restaurant Tuesday evening.

Wednesday
I didn't see anything exciting for Wednesday so I planned to spend the day catching up on emails, working on the blog and cleaning house. One of the schedulers from my favorite shopping company called and offered me a bonus on a casual dining restaurant for that evening. It was only 9 miles from my house and a straightforward shop mostly concerned with food quality and speed of service (as opposed to many casual restaurant shops, which ask for so much detail that entering the shop takes longer than the actual dining). I took her up on that offer and completed just one shop today.

Thursday
Over the weekend I planned ahead for this to be a busy day. I completed three very simple shops at a large bookstore chain, evaluated a public storage facility, and enjoyed breakfast at a fast food restaurant.

Friday
Signed up for a discount retailer and a home improvement store for a mid-day excursion. Evening at a fast food restaurant. The scheduler offered me a bonus to pick this one up. It was just 12 miles from home.

Saturday
Mystery shopping marathon. I decided Friday that I needed to juice my results for the week, so I went on a rampage, signing up for shops with 4 different companies. This was a road trip: the nearest shop being 20 miles away and the furthest about 100. I started with breakfast at a drive-in 20 miles from home. My journal then took me north for the remainder of the day, where I shopped several gas stations, a home improvement retailer, a bookstore, 2 video game stores, a discount retailer, a sandwich store and a movie theatre. This was a full day, but it wasn't stressful at all as my pace was leisurely. This day alone I earned over $100 in fees and $46 in reimbursements.

Total Income for the Week: $326.54
Total Value of Reimbursements: $187.25

I grossly underestimated my income potential when I set my goal in October to earn $500. If I had hustled I may have earned that in a single week!

Wednesday, October 14

Misers Save Money at the Dentist...

...Or at least defer costs.

2009 has not been the best year for my oral health. I learned, for instance, that there is a $1,500 annual cap on my dental insurance coverage. Sure enough, Murphy would have his way with me this year as I have had TWO root canals.

The most recent was in September, just a day after losing my job. Talk about being miserable. I will never forget Monday, August 31st. Over the weekend I had developed severe pain in my mouth, particularly the roof of my mouth. It felt like my face would explode. Knowing this was more than a severe sinus infection, I scheduled a same day visit to the dentist to have it checked out. He confirmed my fears and scheduled me with an endodontist for the next day. I was feeling a little loopy from the Lortab late that afternoon when my new boss told me there was someone he wanted me to talk to. I won't delve into the details of that.

Suffice to say it was my last day at work. The next morning, not sure whether I was more miserable from losing my job or from the tooth ache, I headed to my root canal appointment. The next step was supposed to be a visit to my regular dentist for the crown, but when I got the bill from the root canal and realized I had capped out my insurance for the year, I wasn't too eager to add to that cost so I procrastinated.

Fast forward to late last week. I was munching on Chex Mix when I felt a hard crunch that seemed out of place. I felt around my mouth but didn't notice anything out of the ordinary so I carried on. Then Saturday I thought I had been stabbed in the mouth with some Chinese torture device. I called the endodontist Monday morning and came in right away. He probed around and then he pulled out a big piece of tooth. I had fractured it.

I thought I would pass out. Lesson learned.

When I arrived at my dentist's office Tuesday morning, the receptionist told me that I would owe $715 for this visit. So I asked if there was any temporary measure they could take or some way to defer this cost until the new fiscal year.

Problem solved. My dentist did the "build-up", whatever that is. I even told him not to give me any anesthesia other than the topical kind to save on that.

Cost: $111. Savings: $604.

I also rescheduled my cleaning and combined that with the crown and will have that done the first week of January. At that point my insurance will pay. The only downside is that I have to be very careful what I eat and avoid crunchy foods on one side of my mouth. I think it's worth it since I'm saving $600.

Tuesday, October 13

Lessons Learned From Managing Rental Properties

When I decided to become a landlord I didn't do too much homework. My first rental property was almost by accident. I wanted to move to a new house closer to my employer and I didn't want to wait for the townhouse I was in to sell, so I rented it instead.

Along the way I have learned some valuable lessons:
  • Avoid transaction costs. As I have moved from one house to the next, I have chosen to keep the old house and convert it to a rental. Why? First, I avoid the transaction costs involved with selling the house. Second, it disciplines me to save money for a down payment on the next home since I won't be receiving funds from selling a house. I plan to post more entries about "transactional costs" as they come up in many situations, not just buying a home.
  • Buy what you know. All my properties are in the metropolitan area where I grew up, and all but two of them are on the side of town where I was raised. I know this area and its past. It's like trading on inside-information. Besides that, if you plan to manage the properties yourself, you need to be close to them unless you don't mind driving across town at ten o'clock at night to fix a problem or pick up a late rent check. The two properties I own in a different part of town are managed by a third party so that I avoid having to make these trips.
  • Go with your Gut. As with many facets of my life, I like to keep things simple. Most landlords will disagree with what I am about to say: I don't charge a deposit, and I don't do a credit check on my tenants. Why? I would dread the inevitable confrontation that would come if I decided to withhold a deposit when a tenant vacates. Instead, I charge a bit more for the monthly rent. Where a landlord may charge $600 per month, I charge $625. I figure that by lowering the hurdles to rent I will place a tenant much faster and thus the increased rent I collect will justify any damage that a deposit would have covered. And by reducing the time a property is vacant, I make up for the lost rent I would experience from having a deadbeat tenant. I have had one eviction so far. The tenants paid me steadily for about 6 months. I lost out on two months rent, but the tenants left the home in move-in condition when they left. I know this won't always happen, but I figure if you treat your tenants right, they will take better care of your investment for the most part.
  • Live By the Golden Rule. I find this to be an important rule, particularly concerning the condition of the property . Simply put, I rehab each of my properties to where I wouldn't mind living in them myself. It makes the property easier to rent, and it cuts down on ongoing problems. I don't want to be called in the middle of the night with a maintenance issue, so I head off as many problems as I can by offering a property in pristine condition. For instance, I go with tile floors in the kitchen and baths and low maintenance carpet throughout the rest of the house. I have a plumber, electrician and HVAC technician give the home a thorough inspection before I ever show a property.
By following these rules, I've made my rental properties almost entirely "passive income". Sure, I have a couple tenants who I have to remind to pay the rent, but overall my time invested each month averages 2-3 hours.

Monday, October 12

How I Came to Own 7 Houses

Some readers may argue that a frugal miser would have very few possessions. I beg to clarify: a frugal person does live a simple life without many of the material things you see advertised in magazines. But that doesn't mean you should live without income-producing assets.

I bought my first house in 2003. It was a 2 bedroom townhouse that set me back $58,000. I qualified for a zero down payment mortgage (those were the days!) with monthly payments of $473.00. I had recently began working at a start-up software company and, though my salary was meager (something like $12 per hour), the payments were about the same as my rent was at the time.

Then, in 2006 D.R. Horton began construction in a neighborhood that was located just 5 miles from work. It was the height of the construction boom, and I fell in love with the location. My commute from the townhouse, though only 22 miles, often took an hour with traffic. I figured with my increasing income I could afford the higher payments that came with a $158,000 home (House #2). Besides, my commute would take about 1/5th the time and I would be driving about 170 less miles each week.

As luck would have it, my best friend had moved back home. He and his wife had separated for a short period and wanted to reunite. The townhouse would suit them fine, so rather than trying to sell it, I rented it to my best friend.

In 2007 I purchased my first foreclosure (House #3). It was a townhouse in the same community as my original townhouse, and was priced about $20,000 less than the one I bought. I was already living like a miser, so I had put invested a good chunk of my salary in the stock market. I did very well for several years in the market, so I could afford to take risk. I took out a HELOC on my primary house, and combined that with other funds to purchase the foreclosure and then invest in fixing it up.

I was delighted by how quickly and easily that property rented. A delivery driver for Lowe's, who was bringing the new dishwasher, stove and refrigerator I had purchased, was interested in renting it. I didn't have to spend a dime marketing the rental, so without any due diligence, I executed a lease. It didn't turn out so well, but before I had to evict him, this tenant had paid me about 6 months rent. Fortunately, the following tenant also landed in my lap. She had steady employment - with the same company for 14 years and currently in a management position. She still rents from me nearly a year later.

In 2008 I bought two homes and signed a contract for a third that would close in early 2009. The first home I purchased became the primary residence I now occupy (House #4). With home prices declining, I found a new subdivision near my childhood home under construction. D.R. Horton offered a house similar in size to the one I occupied, but with a larger yard and $30,000 cheaper. It is in an unincorporated area, which means property taxes are significantly less.

Based on how quickly the neighborhood I was in was developed, I figured it wouldn't be hard to find a renter for House #3. I hired a property management company to rent the property, as I wanted a reliable renter since this was my most expensive property to date. The week after the ad ran in the paper, six prospective tenants toured the home. Within two weeks of me moving out, a new tenant moved in. That tenant fulfilled his lease obligation and moved out a year later. Once again within two weeks, a new tenant had signed a lease...even though I raised the rent $100 per month.

House #5 was the easiest transaction to date. Another townhouse in the same community as the other 2, it was a foreclosure as well. This time, I paid $27,000 less than my original purchase for the same plan. Even better, it was practically move-in ready. My tenant had rented another townhouse in the development for over 5 years but was not satisfied by her landlord's inattention to a leak in the roof and steady increase in rent. She's still with me.

House #6 was purchased at the beginning of this year. My third D.R. Horton home, I bought it under special circumstances. Though the community is in a fast-growing area, homes were slow to sell and D.R. Horton decided to exit the community. The builder cut the cost of the home by $20,000. It was the same model as I live in now, but was selling for $30,000 less than I paid for my house. I couldn't resist. I did do my homework: the neighborhood is behind a new apartment community, so I checked into rent there and also called the management company for House #3 to evaluate comparable rentals in the area. Satisfied that I would be able to rent the house profitably, I signed a contract. It rented in about 3 weeks, and thus far the tenant has paid on time.

I got lucky with House #7. It is a small (2 bedroom, 1 bath) condo in the neighborhood where I grew up. For some reason, this foreclosure stayed on the market for quite some time. I bid in the HUD auction but lost. Fortunately for me, the winning bidder was not able to close. My lowball bid of $18,500 was accepted. For comparison, the last condo in this community of 20 units to sell was purchased several months ago for $65,000. I put $4,000 into the condo, which included new carpets, tile in the bathroom, all new appliances, some plumbing and electrical work and a good cleaning. I posted the condo on Craigslist and received 12 inquiries in 3 days. I ended up renting it to a young couple (he's 19, she's 18, and they have a baby). The couple had been living with their respective parents and this was their opportunity to move in together. They both worked in management at a Christian-retailer and had been employed there for about two years each (that's how they met). They actually send their rent check a few days early each month.

I am working on closing House #8. Unfortunately, the loss of my job has made qualifying for a loan terribly difficult. Suffice to say, this will likely be my last real estate transaction for a few years.

I've learned some lessons along the way which I will share in another post. Bottom line is that I have no regrets at all about buying these properties. The mostly-passive income is a great thing to have when one loses his primary, employment-based income.

Sunday, October 11

Today is the Last Day for a Big Sale at Dollar General

Dollar General is having a buy one, get one 50 percent off sale that ends today. More than 150 store brand products are available for buy one, get one 50 percent off at Dollar General. This includes diapers, toiletries, pet food, cleaning supplies, food and medicine.

The second item must be the same item as the first. I don't frequent Dollar General regularly, but I couldn't resist going yesterday. I bought 4 bottles of peroxide for the equivalent of $0.45 each. I also found 25 oz. spray bottles of bathroom cleaner for $0.94 with the discount.

Plus, Dollar General accepts manufacturers’ coupons and EBT.

Saturday, October 10

A Tale of Two Islands: Squanderville and Thriftville

Whenever I look for advice or inspiration for managing my own finances, I ask myself, "What would Warren do?"

Warren Buffett and his good friend Carol Loomis explained the perils of debt in a Fortune article published in 2003. To me this remains the single best explanation of the consequences of taking on too much debt:

http://www.learnbuffett.com/buffetts-solution-for-americas-growing-trade-deficit.htm

Here Buffett writes about the perils of our trade deficit. But his story applies to anyone with debt:

To understand why [the trade deficit is a problem], take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squanderville and Thriftville. Land is the only capital asset on these islands, and their communities are primitive, needing only food and producing only food. Working eight hours a day, in fact, each inhabitant can produce enough food to sustain himself or herself. And for a long time that’s how things go along. On each island everybody works the prescribed eight hours a day, which means that each society is self-sufficient.

Eventually, though, the industrious citizens of Thriftville decide to do some serious saving and investing, and they start to work 16 hours a day. In this mode they continue to live off the food they produce in eight hours of work but begin exporting an equal amount to their one and only trading outlet, Squanderville.

The citizens of Squanderville are ecstatic about this turn of events, since they can now live their lives free from toil but eat as well as ever. Oh, yes, there’s a quid pro quo–but to the Squanders, it seems harmless: All that the Thrifts want in exchange for their food is Squanderbonds (which are denominated, naturally, in Squanderbucks).

Over time Thriftville accumulates an enormous amount of these bonds, which at their core represent claim checks on the future output of Squanderville. A few pundits in Squanderville smell trouble coming. They foresee that for the Squanders both to eat and to pay off–or simply service–the debt they’re piling up will eventually require them to work more than eight hours a day. But the residents of Squanderville are in no mood to listen to such doomsaying.

Meanwhile, the citizens of Thriftville begin to get nervous. Just how good, they ask, are the IOUs of a shiftless island? So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville.

At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat–they have nothing left to trade–but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold. In effect, Squanderville has been colonized by purchase rather than conquest.


Friday, October 9

October Goals

In the future I plan to have some very tangible monthly goals, such as eliminating a certain amount of debt or cutting an expense by a fair amount. For October, I have some loose ends to tie up from obligations I made pre-job loss as well as goals around secondary income:
  • close on Rental Property #7
  • $500 in mystery shopping income
  • maximum food expenses of $100; maximum fuel expenses of $100
Basis for these goals:
  • I did not qualify for financing for Rental Property #7, so I am scrambling to find alternative funds.
  • Last month I earned negative $34 in mystery shopping income. Very simple explanation: my last day at my job was August 31st, so I did A LOT of shops last month for which I have not yet been paid. I will be paid for many of those in September, and I will continue seeking additional income this way.
  • Last month I spent $268 on food, compared to $248 in September 2008. I will lower my cost this month to $100 by using gift cards (I have several), coupons for dining out, and by mystery shopping different restaurants, for which I am reimbursed. Last month I spent $106 on fuel, down from $377 in September 2008, thanks to all the gas stations I mystery shopped (which include a fuel purchase component for which I am reimbursed) as well as not having a daily 50 mile commute to my job. That, combined with lower gas prices, should enable me to reach this goal.
Gas and food are my two largest variable expenses. My two largest expenses will be hard to change: the mortgage and car payment. I consider my utility costs to be fairly reasonable, a result of my frugal habits. However, I plan to explore ways to cut these even further.

Thursday, October 8

Wash Your Car at Home... in the Rain ($40/month)

We've become a nation that prefers "Do it for me" over "Do it Yourself" that defined our parents' culture. Often we mindlessly hire someone to perform a service we are perfectly capable of doing ourselves. We justify it by thinking "My time is more valuable" or "It's just ten bucks."

I love washing my car because I am rewarded by the results. It is a relatively simple task. The hardest part is cleaning the brake dust from the wheels. Thirty minutes of my time and I have a shiny new car. Hopefully I will have burned a few calories as a side benefit.

Recently I discovered an even easier way to wash my car that also saves me some change: washing in the rain. This morning I pulled the Bimmer out of the garage. While the rain gave it a soaking, I added a cap of soap to my bucket and filled it with water from the rain barrel. I washed the car as usual, except there was no need to rinse it off.

Savings: $40.00 per month
Math: It would cost me $10 per week at the express wash. And, by washing in the rain, I don't negate that savings by running my own water.

Wednesday, October 7

Typical Mystery Shopping Itinerary

I have registered with a number of mystery shopping companies. This helps me to locate several shops in a general area so that I can be more productive and spread my fuel costs across multiple jobs.

Let me share with you my mystery shopping itinerary for Saturday, October 3rd:
  • I logged onto my PC at 8:45 to check email and review my assignments. Left the house a few minutes later and arrived at the first assignment at 9:13 AM.
  • My first assignment was a breakfast shop. I received two meals, so I took one home to eat later after sampling it for freshness.
  • Afterwards I completed an evaluation of a public storage company, two gas stations and a retail chain, where I inquired about a GPS unit.
  • My last shop was finished at 11:29 and I arrived home ten minutes later. In all I drove 26 miles, using about a gallon of gas. I leisurely entered the reports online, scanned my receipts and filed my paperwork for tax purposes.
  • By 12:45 I was completely through with everything. Four hours of work, interspersed with driving time, eating time and casually doing the data entry.
Results of my effort:

Shop Fees: $35.40
Reimbursement: $18.52
Total Shops: 5
Total Mystery Shop Companies Involved: 4
Additional Benefits: no use of home electricity for 3 hours, helps my sanity by getting me out of the house.

Tuesday, October 6

Mystery Shop ‘Til You Drop ($400/month)

Mystery shopping is absolutely the easiest way I have found to improve my standard of living. Would you believe me if I told you my monthly food budget is under $100? Or that some months I may get all my fuel for free...and I drive more than 1,000 miles each month? In a typical month, I spend about $75 for groceries and dining out. More importantly, I ditched ramen noodles when I graduated college (Have you ever looked at the sodium content in a pack of those noodles!?!). I graduated to steak and lobster.

The mystery shopping companies (there are hundreds of them) are weird about folks who “reveal” their clients. I suppose they are justified: why hand out your client list to competitors? But without further ado, I don’t see any harm in telling you what companies I shop on a regular basis.

Fuel (for your car)
I purchase much of my gas at Exxon. Snap a couple pictures of the pump and the restroom, check to see whether the floors are clean, and head down the highway. Through another company I shop Chevron convenience stores, and occasionally some Chevron competitors, I assume for benchmarking purposes. I get so much free gas some weeks that I had to buy a few 5 gallon gas cans to store it all. Those come in handy during dry spells when all the shops have been taken for the month. Another company has a contract with the franchisee of two of the Exxon shops in town. So, I get to shop the same store twice, get paid twice, and get twice as much free stuff.

Fuel (for your body)
Most fast food joints are shopped. I regularly shop McDonald’s, Arby’s, Sonic, Cici's and Zaxby’s. Higher up on the totem pole (and harder to snag), I’ve eaten at Outback, Fleming’s, Ruby Tuesday, and other casual chains.

Fuel (for your finances)
Mystery shopping tends to conjure up images of little old blue-haired ladies wearing bifocals while furiously scribbling notes under their table at Outback. My friends think it’s outright goofy. My friends, however, don’t earn $1,000+ per month in their spare time. Usually each shop reimburses me for a purchase and pays me a small fee. Often toward the end of a month, bonuses are offered. My best weekend of all time: I earned over $800 in two days, plus a free hotel room for the night, 15 gallons of gas, several 2 Liter sodas, granola bars and other inexpensive snacks that satisfied the "in-store purchase" requirement.


Monday, October 5

Carmax Says I'm Upside-Down on the Bimmer


Trying to be a good miser, I took the Bimmer to Carmax. Their pervasive "we'll buy your car whether or not you buy ours" convinced me to make the 70 mile round-trip.



I should have saved my gas:
  • I owe $39,185 on the car
  • I was offered $30,000 to sell it
Ouch. It has just 8,000 miles on it, and is in mint condition. I knew I would be upside-down, but was really hoping to fetch $35,000-$36,000 for it, write a check for the balance and be out from under it.

So, my quest continues to eliminate this $800 monthly expense. One suggestion the appraiser gave was for me to try again in the spring. It's a convertible and the market will be hungrier for one when the weather heats up. Ideas?

Sunday, October 4

More Justification for Using a Rain Barrel ($1.50/month)

In addition to filling my toilet with rain water, my Suncast Rain Barrel saves water in other areas:
  • Watering. In addition to a small yard, I have lots of tropical plants. Banana trees are thirsty creatures.
  • Car Washing. I was my car by hand, about once per week.
  • Cleaning other random things, such as my lawn mower, the shovel, and my patio.

Savings: $1.50 per month.
Math: My rain barrel holds 50 gallons, and I easily empty it four times a month on these activities. Where I live, 1 gallon of water costs about .75 cents. 200 gallons * .75 cents = $1.50 per month.

Return on Investment: In just over 5 years I will have saved enough water to pay for the rain barrel. This might be a stretch for some people. I listed two reasons when I justified the purchase: 1) it would feel good to do my part to conserve while getting a little something for myself (lower water bills); and 2) I had a large credit on my Amazon account from various gift certificates I had received, so my real cost was the opportunity cost of not spending that money on something different.

Saturday, October 3

Misers Don't Drive New Bimmers


Just about every frugal miser has violated the Miser's Code of Frugality a time or two. I committed a heinous violation earlier this year.

In March I purchased a 2009 BMW 128i convertible. I was driving a Toyota Corolla, a respectable car for a miser. When the 128i first came out, my high school dream of owning a Bimmer reared its ugly face.

I committed another violation of the Code of Frugality by financing the car. I didn't even make a down payment. I figured with a 3.9% interest rate and a steady job of six years that I could afford the payments.

Less than one month after purchasing the car, I received an action plan at my job, part of our new Six Sigma bureaucracy. I suspected in April that my job was not safe. Alas, by the end of August I would be unemployed. So now I am unemployed, but am making an almost $800 monthly payment on this car.

Huge, stupid mistake. I should have been banned from the Misers Club for making such a move. Instead, I have been forced to explore what a real miser would do to cut costs everywhere from the water bill to fuel purchases.

Friday, October 2

Canceling my Wall Street Journal Subscription (Savings: $129/year)

I subscribe to WSJ.com and have for the past 2 years. At one point a few years back I subscribed to the print edition. I love the Wall Street Journal and think every serious investor should read it. When I was downloading my Visa transactions to Quicken this week, I noticed a $129 charge for the next year of the service.

I guess I was on auto-renew because I did not realize the charge would be levied without my approval. Nevertheless, I am able to cancel for a pro-rated refund.

Justification? $129 is a lot of money at this point in my unemployed life. I can easily buy a month's worth of groceries for that. Besides, I can read the print edition at the library and also access much of the content online for free.

I have several magazines that I also subscribe to. Most, if not all, were free by redeeming airline miles or through other avenues. Since I likely won't be traveling near as much for my next job, I will only renew magazines for which I have enough leftover frequent-flier miles.

October Thoughts

I found out last night that the position I was supposed to begin this morning will not be filled for a few months. The CEO of the company said it had nothing to do with me - he said I will be the one to fill the position when he opens it back up. He's even invited me to lunch Monday. Alas, October will be a struggle. Fortunately, my severance covers this month, but my pay will only be about half what it would be since I did not earn commissions in September since I was not working.

To add to this, the financing for the rental property I was buying fell through at the last minute because of my job loss. Now, I must figure out a Plan B for buying this house. I am absolutely committed to buying it - I have a 7 year signed lease already and my best friend will be the tenant.

Surprisingly, I'm more sanguine than one would think. All my bills are current and I have several mystery shopping checks coming in this month.

Thursday, October 1

My Financial Situation

I was not planning to lose my job in August, and when I did, reality hit me:
I have amassed serious debt:
  • $28,798 in outstanding credit card bills (not counting balances on cards I pay off each month).
  • $96,832 owed on my house.
  • $33,883 owed on a HELOC used to purchase a rental property.
  • $39,185 owed on my car (the bane of my existence).
  • $17,725 owed on student loans.
  • $181,274 owed on 2 other rental properties.
  • $40,000 in other obligations related to rental properties.
  • I am purchasing another rental property in October which will add to this debt.
My balance sheet is okay:
  • I own a total of 6 rental properties (about to be 7), conservatively valued at $450,000.
  • My primary residence is worth at least $125,000.
  • The interest rate on my student loans is a paltry 1.6%.
  • The HELOC, though variable, is currently at 4.5% and is tax-deductible.
  • The credit card debt consists of the following: $5,150 at 0% through June 2010; $23,648 at just under 4% for the life of the balance.
The bane of my existence:
  • The Good: It's a sexy car.
  • The Bad: The interest rate is 3.9%.
  • The Ugly: I owe $39,185. I have 54 payments remaining at $785 per month.

I will focus on long-term debt. If I have a short-term obligation (something which will be paid off in less than a year), I won't spend much time talking about it. It is still a debt and something that needs to be paid off, but it is a more manageable one. Long-term debt - mortgages, student loans, car loans, large credit card balances - these are the debts that get consumers (you and me) in trouble.

My dad would roll over in his grave if he knew how much debt I have. His philosophy was that the only debt you should acquire should be a mortgage on your primary residence. My #1 financial goal will be to pay off my debt as fast as I can. That'll make Dad happy!