 Does this sound familiar? You want to do a lot of traveling, but you don’t want to rough it, so you end up not traveling because you can’t do it the “right way.” Believe it or not, you can travel cheap but still stay in great hotels, eat top notch food, and experience the culture. Before I ever leave on a trip, I have a fun time doing my best to save as much money as possible. This includes searching for deals on everything from hotels to rental cars. And of course, once I arrive at my destination the “savings game” continues.
I think it is important for every traveler to realize that they can save money, without having to stay in cheap hotels and eat fast food every day. Here are several tips for making this happen: 1. You don’t need the best of the best in order to consider it high quality. For instance, you will find that most booking sites, such as Expedia, rank hotels from one to five stars. While the five star establishments are sure to be the best, you will be surprised to find that many of those ranking at two and three stars have a lot to offer. Tip: Opt for a Mystery Hotel from Bookit.com. With this, you book your accommodations without knowing the exact name. Immediately after booking, you will receive an email revealing the name and other details of the hotel. While this may sound risky, the system allows you to choose a star rating and location to ensure that you get pretty much everything you want. Why is this is so beneficial? Since you don’t know for sure what you are getting, the price is almost always lower. 2. Transportation to, from, and when you arrive. If you are able to drive to your destination, you should compare it to the cost of flying. This will give you a good idea of which option is most cost effective. Be sure to consider every last expense including checked bag fees, gasoline, food stops along the way, and anything else you can think of. While driving may sound like a hassle, once you compare the details you may find that you can save hundreds of dollars. If you decide to fly, you may have an interest in booking a rental car. There are times when this is a good idea, as well as times when you can cut this cost. Before arriving, research what type of public transportation is available. Some cities, such as New York, are well known for their subway system. This is a great way of getting around the city without having to worry about a rental car. Additionally, if you will be charged for parking, it makes more sense to avoid a rental. Tip: Don’t go overboard at the rental counter. Do you really need that luxury SUV? Or will a compact car do the trick? 3. Eat out, save money. One of the most enjoyable parts of traveling is tasting the local cuisine. Unfortunately, many people don’t have the money to eat out three times per day. Above all else, don’t get caught in the trap of eating every meal at a restaurant. Along with this, you can save a lot of money by opting to eat out during lunch as opposed to dinner. Tip: Search for local coupons online before you arrive. I use sites such as Valpak.com and Groupon.com. Also, look for a hotel that includes a continental breakfast. Many of the “included” breakfasts have come a long way since the old days, and you’ll often find waffle makers, fruit, yogurt, and cereal. Eating breakfast at the hotel will allow you to spend more money for lunch and dinner. (photo credit: moonjazz)  Before Some people, it seems, are blessed with a natural inclination to organization. Their desks are kept clean, the cupboards are organized, and their closets are neat. A co-worker of mine had an almost mythical ability to produce any document or sliver of information from his array of three ring labeled binders behind his desk. How can anyone not be impressed? The rest of us struggle somewhere between compulsive hoarders and clutter that occasionally gets out of control. While I have always detested filth I had come to terms with clutter, even embraced it at times in my life. If anyone has ever heard “A home is not a home without a little clutter” or “I don’t want to live in a museum” it was likely just and excuse, we’ve simply given up trying. Clutter is not a prerequisite for a home. It is still possible to have a place you feel comfortable that is also organized and more importantly efficient. If you’ve never learned how to overcome your clutter and disorganization consider the 5S’. For a more technical explanation of each of the 5S’ see the article Get Organized, Save Time, Save Money and Aggravation – Get Rid of Clutter Using the 5S’ Today I’ll share 5S in action: As one of our Mother’s Day gifts this year, my nine year old daughter and I decided to 5S a kitchen cabinet that has been a point of frustration. These cabinets hold a wide assortment of food stuff and ingredients. We have dry goods, liquids, sprays and even condiments in every shape and size.  Waste  We first removed every item, inspected it and began to Sort (1st S) the items. We began by deciding what was not going back into the space. Expiration dates made this easy and highlighted how much our overstocking and disorganization is costing us in terms of wasted foods. Items were then further sorted by product type, packaging, and size. With all the products laid out in clear view we could then strategize on the best storage methods. Each product or grouping needed to have a defined place, referred to as Setting in Order (2nd S).  Kaizen! Our primary challenge was the smallest of items, packets of gravy mix; seasonings and small packages would often fall or be knocked out as we retrieved other items. Our solution was the repurpose a storage basket we no longer used elsewhere. We cut up some manila file folders and created dividers, each labeled for the respective products. Taking the extra effort to create storage aids when necessary are instrumental to Sweeping (3rd S), or keeping the area tidy and organized. While we have not taken the corporate approach of labeling each area of the shelf or building dividers for every product types, with a cleaner and more organized space that is not cluttered by useless material we can clearly see and access supplies in this cupboard. In effect, we have established a new Standard (4th S). It is visibly clear to anyone where the gravy packets, bottles of liquids or pasta belong.  After Lastly and the most difficult step is Sustaining (5th S) what we have done. For the two of us that contributed to the process, we have invested our time and energy, we have ownership and pride in our accomplishment. It is not a stretch to think that we will have an intrinsic desire to maintain our accomplishments. However there are two others that also use this space and products; what will ensure they maintain the new standard? Without ownership, there are only external influences available. Education others is the first step, making them aware of the new methods and establishing the expectation. Beyond this, we only have peer pressure, if someone strays from the new standard, escalating levels of reminders should be enough. While I probably would not go to such lengths at home, in a working environment as a last resort an eight and a half by eleven picture of the expectation should ensure compliance. If you are like me, forever challenged with organization, give the 5S a shot. In my experience this has been the most effective and most successful approach toward building a more organized and efficient life. Readers: Are you a naturally organized person? If so, can you share where or how you learned it? Maybe the military changed your life? If you are naturally disorganized, do you really prefer it or are you envious of the other half? If you like to be challenged to see things with a fresh perspective, if you like to learn new ideas and different concepts, sign up for my RSS feed or enter your email address here to receive updates directly to your in-box.
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by Wealth Pilgrim These posts have been chosen as one of their best post by the bloggers who submitted them or hand selected. Please check out each of them and let me know what you think!  There has been a lot of talk in the past year about outliers. In large part this is due to the fabulous book Outlier by Malcolm Gladwell in which he explores what is behind those few people that seem to excel beyond all others. He highlighted success stories like Bill Gates and the Beatles to show that 10,000 hours of hard work and practice will result in expertise.
Sometimes success does not pay. Many corporate environments promote a “pay for performance” workplace. My experience indicates that this simply means a cost of living increase is provided to anyone that can meet some minimum requirement as defined by the corporate cultures version of an annual or quarterly review. This percentage is then tweaked and adjusted slightly up for those that have excelled in performance or politics. For those out of favor or performing badly, they are given what is left. Exceed the corporate expectation and you will receive a higher rating, along with the rating you have the opportunity for a higher merit increase. Remain dedicated to your company and brand, continue to excel and exceed, recognized with year after year of positive performance evaluations and one day you might be rewarded with outlier status. If you are a corporate employee you might be especially susceptible to this condition. The text books say that an outlier is an employee with income that is extraordinarily higher or lower than expected. Odds are you will not wake up one day making significantly less, so if you are notified as being an outlier, you are making too much. At least, you are making too much according to their definition of what “much” is. It appears that there is more than one model used for calculating outliers. One model looks for standard deviations between actual and expected pay, another model uses a regression analysis, and some companies establish a set range and strictly compare the actual to expected salary for a particular role. In at least 4 major corporations that I am aware of, they use an outside human resource and payroll consulting firms to calculate the pay ranges and outlier limits. Based on your job descriptions, these outfits categorize each job in your company roughly as compared to similar jobs in other industries. $What Does It Mean To Me$ This all depends on your company. The use of outlier calculations to limit excessive incomes is not a law, it is your companies choice. For example, I found this document from the University of Sussex detailing how outliers would be addressed. Effectively a “one-off” or lump sum payments in excess of the salary limitation. In this case, it appears the outlier status was triggered by changes in grade levels. In other companies the rules may vary from limits on annual merit increases, to static bonus payments to nothing. $What Can Be Done About It?$ Again, your company has established the rules that guide your payroll. Your first choice is to accept that you are a highly compensated employee, appreciate that you have a job and move on. On the other hand, depending on the political climate of your organization you could also fight it. To avoid the outlier status there are only a few realistic choices including an exception from management, re-classification of your role, and re-evaluating the comparison group. In the end, your company management made the rules, and if they so desire they could bend, adapt or change them. Based on your outstanding service, exceptional level of education or long years of service they could provide special consideration. Your future may be determined by a poorly written document. Your role was classified based on a number of criteria but mostly your job description. Ensure that it accurately represents what you do. Lastly, the comparison group should be closely reviewed. In the hundreds of job roles to be categorized it is conceivable that in some cases an accurate comparison is not being made. Readers: Every work in corporate American and been faced with outlier status? Is it truly a career limiter or did you overcome it? If you like to be challenged to see things with a fresh perspective, if you like to learn new ideas and different concepts, sign up for my RSS feed or enter your email address here to receive updates directly to your in-box. photo by explorativeapproach
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by Rainy Day Finances These posts have been chosen as one of their best post by the bloggers who submitted them or hand selected. Please check out each of them and let me know what you think! The personal finance blogoshere is filled with amazing writing talent, tremendously smart people that dedicate their time and energy to provide something of value to others. Of them all however, today’s guest post writer has challenged my thinking about efficiency, frugality and money management more than others. His extreme approach is not for everyone, but everyone can learn valuable lessons from Jacob; owner and writer of Early Retirement Extreme. It is an honor to share part II of Jacobs story. There are several ways to measure financial independence. One of them is the 4% rule which is known to any retirement planner. Another is actually numbers. In my case, I became financially independent in the 4% sense when I was 30 years old, that is, close to exactly 5 years after I started saving (or the equivalent of a 25 year emergency fund). Becoming financially independent is like turning 18 or 21. Physically you don’t feel it, but you know that something has changed. Your step becomes a little lighter because your freedom just increased tremendously and you can now do things you couldn’t do yesterday. At that point, I knew I did not have to work anymore if I did not want to. Most people don’t cross that point until they are at least 60 years old. At this point very few knew about it. Only my parents and my girl friend (now my wife) had any idea. GF (now DW) was in grad school and I was a researcher and so we both lived like grad students. I don’t remember ever having felt the pressure to “upgrade” our lifestyle to keep up other than indirectly e.g. by comparing our spending patterns to those of our colleagues. When colleagues discussed salaries and mortgage payments I could only smile sympathetically. It was hard to relate empathetically. In fact, it is still quite hard to relate. Over the years, we have accumulated a bunch of good “stuff”. On the surface, the interior of our home looks like the home of most other overly educated academics I know. Not particularly tastefully decorated, but full of books and papers stacked on top of each other. The main difference is that when we have a problem, the first impulse is not to run out and buy something. Usually it means figuring out another solution that does not involve money. I have gotten pretty good at fixing things or improvising. Oh yeah, I should probably mention that we live in an 34′ RV, but don’t let that fool you. It is not uncomfortable—people spend a lot of money to go on vacation in these—and it is not deprivation. We pay $475/month in rent or $5700 a year. With a 4% discount rate, that comes to $142,500 which means that buying a house which costs less than, say $80,000, in cash of course, would actually cost less and allow for generous spending on taxes and maintenance (much of which I could do myself). Unfortunately, such houses do not currently exist where we live having arrived late to the housing bubble. We would have to move into a house that we bought in cash and we probably will eventually. Now, I know that comfort is commonly confused with being surrounded by stuff just as lifestyle is often measured in spending. I have come to realize that neither of these misconceptions are true. Lifestyle is simply a question of what you do, how you do it, and why you do it. For instance, I practice martial arts three times a week, I crew on yacht race out of the Berkeley marina, I fix bikes for a woman’s shelter, I read 3+ books a week, I don’t have an alarm clock, I have this blog of mine, and I don’t work for money. In general, I do what I want, when I want, within reason. Other lifestyles may involve spending 60 hours a week away from home and working to maintain a big house with a lawn, 2 cars and spend money on vacations, services, and stuff. It is like comparing apples and oranges. In addition, real comfort has more to do with living without stress. Yet, it has almost become a rite of passage to get into stressful situations by signing the mortgage for a 3 bathroom, 5 bedroom house, car payments, cell phone plans, 401k plans, 529 plans, furniture on no money down, and so on, to the point of worrying about becoming unemployed. This cannot be comfortable, and this is a lifestyle I don’t want it. I’d rather have the lifestyle of sitting on a paid off sofa instead of a $1400 sofa set that I have to make payments on for the next five years and consequently pay closer to $2000 for. It is easy to get trapped, because stress creeps up on people, much like a frog in a pot of water, which is slowly heating. Consumers sign up for more and more and since the reference level (water temperature) keeps changing it is hard to realize how bad things have gotten before it is too late. I was lucky enough to escape that trap. Another trap, which I barely escaped, is the idea of finding a career one is passionate about. I used to be passionate about my work. Being passionate is much like burning the candle brighter and being really passionate means burning it at both ends. You often see people fresh out of school or with no more than a couple of years of (life-)experience boldly claiming that even if they did not get paid they love what they’re doing and they’d happily do it for the rest of their life. It is probably fair to mention that a few are lucky enough to remain in this stage for the rest of the life. I used to be like that and I also used to think I was one of the lucky ones. I used to come in during weekends because I couldn’t wait for Monday. A common idea is that if you love your work, what’s to keep you from spending, since you’re going to go to work happily ever after? In general, the more passionate you are, the higher the risk of burnout. (Doing your job merely because you are good at it without loving it is a much safer proposition!) Passion typically means working hard because you believe in your work. A burnout is, therefore, the working equivalent of losing faith. One day, or perhaps slowly, the flame just starts dying away. After more than a decade of passionate work, I began to lose my passion. I no longer came in on weekends. I was no longer excited to go to conferences. I no longer spent every waking moment thinking about my work. At that point I knew it was time to start looking for something else. I was lucky to be financially free and having the option to do what I wanted. After much consideration, I retired financially independent at 33. Having spent 100 hours a week like many other young researchers, I did not have the fire any longer. That was one year ago. I was also lucky in that I did not get into debt to pay for my education. In Denmark, all students who get admitted into the university system, far fewer than which get in in the US, get a stipend. (As far as I understand, good students in the US get scholarships as well.) In all this, I made some mistakes and in retrospect I would have done a few things differently. This is perhaps forgivable given that practically all publicly available advice is directed towards going to college to study whatever, having a career, buying a house and a minivan, investing in index funds, and working for 40 years to live an effective middle class/consumer life. Given my goals I had to create most things from scratch. If I had to do it all over, I could have done some things better. Learning how to be frugal before going cold turkey on myself would have taken the sting out of the first year—after that I never felt like I was missing something. I think first, I would not have pursued an education which did not have a strongly marketable skill component (unlike accounting, engineering, medicine, etc.). A good sign that your education doesn’t have one is an inability to answer the question: “So what are you going to do when you graduate?”. Fortunately, I made it work, but it would have been much easier to go to a trade school and learn a marketable skill and then consider my education an exercise in personal edification which could have been had with a public library card. Second, I would have paid more attention to personal finance and in particular investing. The only thing worse than not having an investment plan is to have the wrong investment plan. Before I retired and starting living off of my money, my investment portfolio was not set up for income. Changing it was a big hassle. It is better to set it up right from the start. Beyond those two mistakes, I did most things right. I never got a mortgage. I never got into debt and so I wasted nothing on interest. I always lived close to work to save on transportation costs. And I never spent money on anything that did not having lasting value and thus when put in perspective my stuff cost me very little. Finally, I happily ignored the common advice consumption smoothing, that is, “fake it until you make it” and avoided going into debt to boost my spending before I had the corresponding savings. I consistently saved 75% and eventually close to 90% as I got a real job before I retired. If you like to be challenged to see things with a fresh perspective, if you like to learn new ideas and different concepts, sign up for my RSS feed or enter your email address here to receive updates directly to your in-box.
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by Watson Inc These posts have been chosen as one of their best post by the bloggers who submitted them or hand selected. Please check out each of them and let me know what you think! The personal finance blogoshere is filled with amazing writing talent, tremendously smart people that dedicate their time and energy to provide something of value to others. Of them all however, today’s guest post writer has challenged my thinking about efficiency, frugality and money management more than others. His extreme approach is not for everyone, but everyone can learn valuable lessons from Jacob; owner and writer of Early Retirement Extreme. It is an honor to share part I of Jacobs story. My story began when I 24 years old and had just moved to Switzerland to begin graduate studies. I had just gotten my masters and received a bunch of papers about union representation, retirement plans, career negotition, etc. which I promptly ignored because I did not figure such thing concerned me. I knew very little about money. Money was essentially something I saved and after I had saved it, I spent it, typically on some electronic gadget. In fact I had a long history of gadgets that would entertain me for a few months afterwhich I would buy another one. I did realize that I was “growing up” but I really did not have any specific plans for the future other than getting a PhD. I heard something about the importance of starting a retirement account before I was 30, but that was about it. I don’t know how, but at some point shortly after buying a new computer with a humongous screen for about $2500 (I’ll convert to USD to make things easy), I read an article about the credit based monetary system—at this time I had found a dorm room about 10 minutes by foot from my office because it was highly convenient and I did not want to be socially isolated in my own apartment in a new country—specifically I suspect it was an article from some subversive website which didn’t think too highly of the banking system. Hence, right around my 25th birthday, I came to the understanding that mortgage debt was not a good debt. It was the worst possible debt I could imagine. Figure 6\% over 30 years and it meant paying for one’s home twice over, once for the actually house and once for the cumulative interest. Even worse, if one did not keeping working for the next 30 years, the home would be lost. And was it really fair that some banker could sit and collect money without working? Maybe so, but no banker was going to collect my money, so I decided to save enough money to buy my first home in cash. From this point on I found another outlets for my money. Rather than trying to build the best gaming computer possible, I would be saving to buy a house in cash. Of course, when you’re on a grad student salary (about $19000 a year or so, so it is not exactly challenging to make more than that even with just a GED, hint, become a truck driver) and saving for a house, it can seem pretty far off. I think frugality is in my genes having always been fairly tight with my money when it came to things that did not mean anything to me—for instance, I spent half a year walking 10km roundtrip each day to school rather than paying $100/month for a bus pass. On the other hand I spent $150 for a pair of silver cables to connect my CD player to my preamp—but I started spending lots of time reading frugality websites. This was back in 2001 so there weren’t any blogs around. (I did not really learn of the existing of blogs until 2006/07.) At the same time I got interested in sustainability and resource use. I began to see that this idea of buying stuff merely to replace it with the latest model some time later was slightly insane, to put it mildly. In fact, I began to understand how the entire world, including myself, was addicted to consumption. I went cold turkey. Initially, I was clueless. My meals were alright but kinda boring and now they became even more boring, but eventually I learned to cook them well and expand a bit on the selection. I stopped buying books. Since I loved reading, I went online and started reading news and forums instead. The modern equivalent is probably blogging. I stopped buying stuff. In the beginning my life became boring. However, after a few months of withdrawal, I watched my account grow. It was weird suddenly having $5000 in the account, the equivalent of two big gadgets. I had never had so much money before. I found that the potential ability to buy things gave the same pleasure as actually buying them. I remember walking past a car dealer on the way to the supermarket and noting to myself: “Hey, I could buy that car in cash.” (In Europe cars are a good deal more expensive than in the US.). Several months later, I noted that not only could I buy one car. I could buy two cars. I have found this to be a very strong motivator and a way to really put things in perspective. $20,000 may seem abstract, but walk past a car lot and note that “I could by this one, this one, and that one”, that “registers”. I also noted that my desire to buy stuff has severely decreased. It had become as uncomfortable to buy superfluous stuff as it had been not to buy it the year before. It became a game to see how long I could make things last. I darned my socks. Any seam that wasn’t visible and could be fixed was fixed. I wore out a bedsheet in the middle. I wore out the one towel I had in four years. My monthly expenses came to about $275 for rent, $85 for health insurance, $115 for food (food in Switzerland is very expensive!) and not much else. I was saving over 75% of my income. Somewhat later I began to calculate how much money I had in terms of expenses. I noted to myself that I had enough money to survive for more than 8 years if I suddenly lost my job. That somehow made any issues about finding a job after graduation easier to deal with. Later I learned that this is called an emergency fund and that most people only hold 6 months of reserve. Today, my “emergency fund” (or invested equivalent) is close to 500 months (about 40 years)! I do not know exactly when I realized that the possibility of having my money work for me rather than working for my money became an option. All along I had calculated the interest rate of my savings in the form of an hourly rate. I would take, say, $50,000 in savings and multiply it by 3% to get $1,500 per year and divide it by the 2000 annual hours of the standard work year to get $0.75 per hour. When I had $100,000 saved, I would do the same and get $1.50 per hour, and so on. I would start comparing this to actual salaries of say $12,000 a year, where $1.50 per hour corresponds to 3 months of full time work on minimum wage. I would explain that my money was the equivalent of having a sales assistant working for me full time part of the year. People who work for living never appreciate this example. It is harsh, but it is true and everybody gets the point. j I began to see myself as a poor aristocrat or a rentier—more accurately, I had values more representative of those classes than the working class or the middle class. My clothes were either bought in thrift stores or several years old and mended. I had a certain eye for quality, specifically, I bought things either used or I bought the best of the best so I would never fall for the allure of “upgrading” and I spent most of my time engaged in theoretical research and not caring much for bling, so the idea of having a “refined” taste and using things with patina while having a low level of expenses and virtual people working for me somehow validated my choices. Maybe this was a coping strategy being surrounded by consumers, who were busy converting their hard work into stuff, I don’t really know. However, is it really illusion? Was I not becoming a capitalist in the true sense of the word? Could I not become the very banker I did not want to give my money to in the beginning of the story? At this point I did not have any investments at all. All my money was residing in savings accounts. I did not have any retirement accounts either given the contractual and global orientation of academic research. It should probably be noted that many people of science have a snobby attitude towards business and investment as these fields are seen as somehow being baser and easier than the lofty science of the ivory towers. This was somewhat of a barrier to overcome. However, I realized that increasing my rate of return from 3% to 5% would make a rather big difference in my asset income: Going from 3% to 5% is an increase of 66%. I started reading all I could about investing and slowly started transferring money from my savings to investments. I have tried various strategies but eventually ended up with a strategy based on mostly on large and midcap dividend stocks. To avoid too much hassle this is the strategy I recommend for anyone wanting to have their money work for them. The money stream is fairly predictable and I sleep better at night because the dividends keep coming even when the market is crashing, but I digress. Whenever I was daydreaming, I was running mental calculations calculating passive income. At the same time I continued my way of life: Not falling into the housing trap. Living close enough to work to run over and check my calculations in less than 30 minutes, specifically not owning a car, and generally not spending money unless it concerned something I really needed and in that case buying the best I could find. I have a $50 lighter, $100 gloves, $200 day pack, and so on. However, in annual costs, having these is much cheaper than having to replace the “regular” stuff every year. My possessions were still limited to a couple of suitcases. Owning more makes it a real hassle to move. Moving every other year for the past several years I had learned my lesson. Too much stuff is a serious hassle. This also means that since I have only one lighter and not five, say, even paying that much turns out to be not that much at all. Also, after a while one ends up with a collection of pretty good stuff. Another thing I liked to do was instead of buying souvenirs, I would buy things I would actually use instead. I bought my Swiss Army Knife in Switzerland and my pocket flashlight in Hamburg. Also, if there was a question of buying something where I was not certain I was not going to use it at least once a month, I simply would not buy it but try to improvise a solution instead. If you like to be challenged to see things with a fresh perspective, if you like to learn new ideas and different concepts, sign up for my RSS feed or enter your email address here to receive updates directly to your in-box.
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