Thursday, April 26

How Much Electricity Does the Average Home Use?

Back in January I posted about my average utility bills.  In 2011 I spent an average of $47 per month for electricity.  This is the equivalent of about 275 kWh per month.  For most of last year we were a family of two although the last couple of months there were three of us.  Everything in my house is electric except my hot water, fireplace (which I never use) and piggyback heat (which only switches from electric to gas if outdoor temperatures drop below 30 degrees.


I admit I am a nosy neighbor and sometimes I check the meter next door to see how much the neighbors use (which is usually about twice as much as I do), but I wanted to know more, so I did a little digging.


In 2010, the average annual electricity consumption for a U.S. residential utility customer was 11,496 kWh, an average of 958 kilowatthours (kWh) per month. Tennessee had the highest annual consumption at 16,716 kWh and Maine the lowest at 6,252 kWh.


In the last 12 months I have used 3,739 kWh, so about 1/3 the national average but only 22% of my neighbors in Tennessee.  I'm proud to be a frugal energy user, because it frees up my cash to use for other things.  More importantly, I don't feel like I am sacrificing lifestyle in order to keep my costs down.  We keep our thermostat at 81 in summer and 60 in winter.  The TV stays off when we aren't watching it, and our computers are also shut down when not in use.  Lights go out when we leave the room.  It's all common sense stuff, so I'm left wondering why the "average" user is so much different than me. 






Source:  U.S. Energy Information Administration
http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3

Tuesday, April 24

Mystery Shopping My Way to Omaha for the Berkshire Hathaway Meeting

Here's my budget for my week-long vacation to Omaha for the Berkshire Hathaway meeting:


  • Lodging:  $40
  • Gas:  $60
  • Meals:  $60
  • Souvenirs:  $100
  • Miscellaneous:  $40



Total for Six Days:  $300

It's time for my annual dose of Warren Buffett.  My journey will begin on Wednesday, May 2nd.  Forever searching for the frugal-ist way to see my idol, I've put together a nice mystery shopping trip along the way.

The weekend kicks off with a cocktail party Friday evening, so I'm giving myself plenty of time to travel the roughly 1,000 miles to Omaha.  I'll shop some gas stations Wednesday afternoon before arriving at a Hampton Inn in rural northwest Tennessee, which I'll be shopping.  On Thursday I plan to play it by ear as far as picking up shops along the way.  In previous years there's been some good stuff in Iowa, which is where I'm staying Thursday night.  I didn't find a hotel to shop so I am staying at one of Hilton Honors' "opportunity" hotels.  These properties give you a free night for 7,500 points.  I've earned more points than that in a single night shopping a high end Hilton property.  Onward Friday morning to O-town.  I found out years ago that the only way to get a room in Omaha during the Berkshire Hathaway weekend is to book about one year in advance.  Fortunately I was able to use my Hilton Honors points when I reserved my room, so those two nights are free as well.  While I'm in Omaha I have 6 gas stations lined up (12 gallons of gas, or almost a tankful for the Corolla).  I'm sure I can find more work in that city if there's any down time.

The return trip is equally eventful.  I stop over in Kansas City on Sunday night.  Since I couldn't find a hotel to shop I am staying at the cheapest motel in the city.  I've got several gas stations to shop there.  Then Monday evening I shop a Hampton Inn in southern Tennessee.  I expect to arrive home late Tuesday morning.

So there you have it:  a frugal guide to seeing the Oracle of Omaha, Warren Buffett.  Out of six nights, I'm paying for a hotel just one night.  Breakfast every morning will be included with my hotel stay.  That leaves two meals per day and I'm sure I'll find some restaurants to shop along the way.   I'm driving about 2,000 miles, which I estimate will take 57 gallons of fuel.  I'll be starting with a full tank (13 gallons) thanks to shops I'll be doing the day before I leave.    I also will be reimbursed for 30 gallons of gas for the 15 gas station shops I'm already assigned.  That accounts for 43 of the 57 gallons I need.  Maybe I'll get lucky and find enough shops along the way to cover the other 14 gallons.

I wonder how many other Buffett fans look for the most frugal means possible with which to see The Man.  Buffett himself is famous for some of his frugal mannerisms, so it makes sense that at least some of his followers would practice frugality along their journeys.

Monday, April 23

Otelco: An Ugly Stock with an Interesting Story


This morning, Otelco (OTT) was down more than 40% after announcing Friday evening they are losing their biggest source of revenue.  I made a purchase this morning at an average cost of $7.00 in one account and $6.88 in an account I oversee.

Shares of OTT are unique in that they are an IDS.  In laymen's terms, each share of OTT represents one share of stock and one share of a bond.  The bond is valued at $7.50 and yields 13%.  It is callable in 2012 but does not mature until 2019.

The company announced Friday night that Time Warner will not be renewing its network access contract with Otelco when it expires 12/31/12.  There will be a transition period in 2013 when they stop doing business with Otelco.  In response, Otelco suspended the dividend on the stock portion of the IDS.  In my opinion, suspending the dividend is great news and the only option the company has.

Here's what we know:

  • At some point in early 2013, 11.7% of their revenues vanish (the Time Warner portion).  This is bad.  Really bad.  Based on 2011 revenues, it's a $12.1MM annual loss in revenue.
  • We also know they just dropped the dividend, and frankly that ain't coming back.  They spend $8.9MM per year on the dividend portion of their quarterly payout.
  • This leaves a gap of $3.2MM per year ($12.1MM minus $8.9MM).  BUT, we won't actually see this revenue loss until next year, so the $8.9MM in savings from cutting the dividend in 2012 will shore up the balance sheet some through 2012.  
  • The company spent $5.4MM for to acquire another telephone company,Shoreham, in October last year.  Otelco's cash balance dropped to $12.4MM at the end of 2011 as a result.
  • The business was already generating $5MM+ cash per year.  Add to that the $8.9MM they won't be paying out.  That's nearly $14MM in cash they will be able to add to the balance sheet, giving them in my estimation about $26.3MM at 12/31/12.


This is when it gets ugly.  Not only will they contend with the loss of Time Warner, but their Senior Subordinated debt owed to Wells Fargo comes due October 31, 2013.  They can't pay it off, so it will have to be refinanced.  Fortunately, the company has been chipping away at this debt over the last few years.  It has declined from a high of $173.5MM to its current $162.4MM balance.  These prepayments were completely voluntary.  As a lender, Wells Fargo likes to see a company demonstrate an ability (and desire) to prepay debt.

Otelco has way too much debt.  That's the biggest risk with this company.  In fact, roughly $.25 of every dollar they take in goes towards interest payments.  It's downright scary.  One option the company has this year is to call their subordinated notes (these are the ones yielding 13%).  The Senior notes from Wells Fargo yield 4%.  If they could work out terms with Wells Fargo to roll up all their debt into a single instrument, they could potentially lower their debt service.  A bonus to the investor is that if the notes are called in 2012, Otelco will pay you a 6.5% premium (so you would receive $7.9875/bond instead of $7.50/bond).

For the individual investor, you could buy shares of Otelco under $7.50 if you believe they will not go bankrupt.  Sure, the company could defer interest on the subordinated note, but as long as they don't declare bankruptcy, your biggest risk is the deferral of interest on your notes.  To mitigate risk further, you might purchase shares now, and sell them at the end of 2012 if they haven't been called.  What you don't want to happen is to see October 31, 2013 roll around without the company having reached new terms on their senior debt.  That's the trigger that could bring this company into bankruptcy.

I'm not a professional, and I benefit if this company's stock goes up.  Do your own research before considering a purchase of Otelco.

Friday, April 20

Telephone Mystery Shops

For someone just getting started with mystery shopping, the idea of getting paid without ever leaving the house sounds appealing.  There's no out of pocket expense, no wasted fuel, and you are doing the work from the comfort of your own home.

Deciding whether this is right for you depends on a few things.  First of all, most telephone mystery shops pay less than other types of work.   This makes sense as you spend less time on the work and your overhead is lower.  I've recently completed $8 shops making inquiries into independent living facilities as well as $3 shops calling an auto dealership and trying to get the best price on a vehicle.  Second, the call is most likely recorded, which has its pros and cons.  I like being able to listen to the call afterwards because I can make sure my report is accurate.  It also lets me be more engaging during the call since I'm not going down a form jotting notes for the report.  Of course, since the call is recorded there is no room for mistakes.  Finally, you have to be confident.  You are role playing and your facts have to be straight.  A phone conversation normally includes a lot of information discussed over a short period of time.  I find it easier to stick to "real life" as much as I possibly can.  My grandfather always plays a major role in my calls to retirement centers.

I am not a fan of most telephone shops.  I find it much easier to role play in person.  I can physically handle whatever product I am supposed to be inquiring about, and I can read the facial expressions of the employee and better redirect if I sense the shop is straying from the assigned scenario.  When you're on the phone all you have to read is the person's tone, which is hard to do sometimes.  For example, I completed a recorded call to an auto dealer near New York City yesterday.  The salesperson spoke fast, was direct, and there wasn't any small talk.  I think the generalization about the faster pace of life in NYC rang true with this call.  Had I been calling someone in small town Mississippi, they might ask about the weather or try to get to know me first.  I really didn't like doing the call to the auto dealership.  But on the other hand, the call to the retirement center was much easier.  It was a longer, more personal call, and the report was short.

If you're interested in telephone mystery shops, two companies that you might check include A Closer Look at Shopper's Critique.

Thursday, April 19

Moving to Florida, Part 2

There are two reasons I think this time I really will move to Florida.  The first is probably obvious:  I want to diversify my real estate holdings.  Most of my houses are in Jefferson County, Alabama, which recently filed the largest municipal bankruptcy in history.  While this doesn't raise any immediate concerns, I am aware of certain risks.  My county isn't bringing in adequate revenues to pay its bills.  There's bound to be collateral damage - more potholes, worsening schools, higher property taxes, a less friendly business climate.  Each of these could hurt my rental business.

But there's a second, more pressing issue I hope to address by moving.  My weight is more than it ever has been.  I'm stuck in a rut.  The last time I lost any meaningful weight I did so by drastically changing my environment.  It makes sense, right?  Doesn't an alcoholic have to sever ties with his nightly drinking buddies in order to stop drinking?  Similarly, I need to break my routine and bring myself to a place more conducive to physical activity.

If moving to Florida means that I can get in shape, that alone bests all financial motives to make this move.

In 2007, the obesity rate in Pinellas County, FL was 26.3%.  In my county, it's 31.1%.  It's not a huge difference. but it's a start.

Wednesday, April 18

Moving to Florida

I've seesawed around this many times over the last couple of years, but I'm closer than ever to doing it this time.  Chances are I will be moving to Pinellas County, Florida later this year.  Home to Clearwater, St. Petersburg and across the bridge from Tampa Bay, opportunity is calling.

Earlier this year my old boss from the software company sent me a little nudge about investing in real estate through a Self-Directed IRA.  I had heard about this type of investment before but was told there are so many hoops to jump through and fees to pay that it isn't such a great idea.

I will revisit exactly what a Self-Directed IRA is in a future post.  For now, let me just say I have decided to diversify my real estate portfolio and Pinellas County looks like a good area to plant my flag (though neighboring Hillsborough County might be in the cards, too).  There's still work to be done.  The investments I make with my IRA can only be used as rental properties - I can't use it to buy a personal residence.  I will probably purchase a rental property and then move down there, staying in a rent-by-the-week type of place temporarily.  Once the rental has been rehabbed and occupied I plan to find a second home to purchase as my primary residence.

This will sort of be like starting over.  What I mean is, in 2003 I bought my first house, then moved in 2006 and rented that one.  Then in 2008 I moved again and rented the home I was in.  This will probably be my strategy there.  The difference this time is that I have my Alabama base of rental properties to sustain me and throw off cash to use for future purchases.

Monday, April 9

My Frugal Miser - April 2012 Goals

I know April is 1/3 of the way over and here I am just now posting my goals for the month.  That's because I've been so busy mystery shopping.  I made two 500+ mile trips last week.  By the time I finish entering reports I'm usually worn out.  Here goes:

Tangible Goals

  • This month I want to reduce my personal line of credit by $2,000.
  • I will lose 4 pounds in April.  My weight at the end of the month will be 232.
  • I will earn $1,500 from mystery shopping this month.

Not so Tangible Goals

  • I have initiated the process of creating a Self-Directed IRA.  This will enable me to buy another house. I'd like to have the account set up by the end of April.  More about this later.
  • I will get my grandfather's house cleaned out.
  • I will intelligently plan my trip to Omaha for the Berkshire Hathaway meeting, which is the first weekend of May.  By "intelligently" I mean I will incorporate mystery shopping along the way to help pay for the expense of driving 1,000 miles each way.

Friday, April 6

My Frugal Miser - March 2012 Goals Review

In March I beat one of my goals and failed the other two.

Tangible Goals

  • I wanted to reduce the balance on my Chase Freedom card to $2,500.  It was at $344 at the end of March and I will pay the balance when the bill arrives.  Success!
  • I wanted to end the month at 232 pounds, a 4 pound weight loss.  My weight was unchanged.
  • I wanted to earn $1,500 from mystery shopping.  I probably did earn that much, but I don't recognize the income until it's received.  In March I received, net of expenses, $1,149.

Not so Tangible Goals

  • I wanted to reduce the amount of electricity we use.  The bill I received in March was even lower than that of February (7 kWh per day, on average versus 8 in February).  Thanks to mild weather, April looks to be a frugal energy month as well.
  • I wanted to read more and watch less TV.  I'm definitely watching less TV.  I rarely even turn the thing on whereas I used to turn it on at the same time I turned on my computer.  In March I read (and am finishing) Peter Manso's Reasonable Doubt, a true story about a murder in Cape Cod.  It's decent.   I haven't read as much as I wanted because mystery shopping has picked up so much.
  • I wanted to drive less, but all the shops I did negated that.  I can say that I combined personal errands with mystery shopping trips whenever I could.
March was decent.  I really need to work on losing weight though.

Wednesday, April 4

My Frugal Miser - March Expenses: $4,166


My March expenses were a good bit higher than February.  The biggest difference is that in March I had to replace the bathtub at one of my properties.  That cost nearly $1,500.  I also didn't have the luxury of free gas from mystery shopping last month.  I completed quite a few non-petroleum shops and did quite a bit of driving.  With gas almost $4 a gallon, my budget took a serious hit.




March Personal Expenses ($1,453)
$334 Auto ($310 fuel, $24 service)
$0 Bank Fees
$7 Clothing
$44 Entertainment (movies, gambling, alcohol)
$107 Food
$0 Gifts Given
$32 Home Repair
$210 Household
$0 Homeowner's Association Dues
$139 Health and Dental Insurance
$0 Medical
$0 Miscellaneous
$386 Mortgage Interest (primary residence)
$0 Personal Care
$0 Subscriptions
$20 Taxes
$174 Utilities
$0 Vacation

March Business Expenses ($2,713)

$753 Mortgage Interest (rental properties)
$289 Interest on Debt (not including Mortgage Interest)
$1,671 Rental Properties - Maintenance and Repairs


Total March Expenses : $4,166


Notes
  • I spent over $300 on gas.  The majority of my driving was to do mystery shops, but I also made several trips to my grandfather's house to cut the grass and tend to things there.  
  • Under $200 for all my utilities:  makes me proud.  This includes my unlimited smartphone plan with Republic Wireless, natural gas, electricity, water and sewer.
  • While I spent a lot on gas, I spent very little for food.  The common link:  mystery shops.  Much of the food, whether groceries or restaurants, was covered with reimbursements.
  • I have reduced Interest on Debt by nearly $100/mo. over the last 8 months.  Soon this expense will be less than $200 per month.

Monday, April 2

My Frugal Miser - March Income: $8,256

March was another sold month to a solid first quarter of 2012.  I earned much more than I spent and was able to accelerate debt payments.  Tomorrow I will take a look at my spending, so today let's took a look at where the money came from.




March Income
$1,149 Mystery Shopping
$6,931 Rental Income
$176 Other Sources
$8,256 Total Income for March


Notes:
  • Because much of my mystery shopping income in earned in the prior month, I didn't bring in the $1,500 I was hoping to for shopping as February was a slow month.  Things picked up in March which will be reflected in April and May numbers.
  • I took in $120 in late fees on my properties.  The rest of the rental income is from normal rent, although I should note that $125 is from our temporary roommate.   I also had a tenant prepay his April rent.  Normally I expect Rental Income to be around $6,000 when everything is rented.