Eliminate The Muda!

Nothing Is Free - Everything Costs

The average family spends 9.4 cents each minute. That’s right, everything; the wife and kids, the house and car, the dog and cats along with taxes and utilities all combined costs a grand total of nine cents a minute.

Just to save the slow pokes a few keystrokes we spend about $49,638 per year supporting our families and enjoying a few extra’s.

Advertisers have a unique ability to create the perception of free. We see commercials for free annual credit reports. We see placards at the grocery store that state “buy one get one free.” Yet in reality the annual credit report comes with a monthly service charge for credit monitoring and the you don’t really get any products for free you just get two items each for half price.

It is said by some that nothing in life is free. Few of us really believe this. However few of us really consider the expenses we incur to simply exist. The average family spends nine cents every minute.

Some costs are obvious and front of mind. When you stop to fill your tank twice a week you may ponder the ever rising cost of gasoline. “What happened to the days you could get a gallon for under a dollar?” In comparison to the old days, today’s average of $2.70 per gallon seems like a lot, especially when you fill your eighteen gallon tank. Fifty dollars for a tank of gas is easy to get emotional about, its tangible and it is frequent enough that these costs remain in focus.

On the other end are the more intangible and infrequent expenses. Something like term life insurance would be a good example. What do you have to show for your purchase? All you have is some documents and peace of mind, its real value is not revealed until you have passed. You may cringe when you make that annual payment but for the other 364 days of the year you may rarely consider it. Your single payment is spread to cover you for the entire year.

The frugally minded make wonderful suggestions to live a more cost conscious life. For frugal family entertainment they might suggest a day at the park having a picnic. While this may be a more frugal choice than others, it can illustrate that life costs more than we think.

How much does it cost to go to the park for a picnic? Our first thought is that it is free. But we do have to pay for the food. You may argue that the food expense would exist regardless of where the meal is enjoyed. But a picnic requires some additional supplies and materiel. In addition, transportation to the picnic and back requires fuel and maintenance of the vehicle. With this example we see that our true cost of the picnic is not limited to what we eat or just the park.

What if, instead of a picnic, you decided to skip lunch and sit on your porch? Your costs would go down, but not completely away. When we say nothing in life is free, from a lean perspective we really mean nothing. Everything you do and every minute you spend has a cost associated with it. While it is sometimes difficult to calculate the exact value, expenses exist, regardless.

While sitting on your porch you may be spending less than you would on a picnic, but still spending you are. You’ve paid your rent or mortgage for the month, some of which is paying for the few minutes of time you sit on the porch. You’ve paid your utility bill so you can enjoy a porch light to read by and you have stocked your refrigerator so you may quench your thirst. Each of these have a cost associated with them.

Every moment of every day you are incurring expenses. We may only make one payment each month for our mortgage or utilities but the benefits of these are utilized continuously; 24/7. Can you control this expense? At nine cents a minute is it even worth it?

The answer is a resounding YES! In our house nine cents a minute covers 4 of us. Nine cents every minute for an hour costs five dollars and forty cents an hour. Each day our life costs us one-hundred and twenty-nine dollars. Each year, nine cents a minute totaled up costs just over $49,000!

Save just one cent, just one little penny each minute and you will have an extra $5,276 to invest into your future.

So tell me, what can you do to reduce expenses by just 1 cent per minute?

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 my dog sighs

Daily Yakezie Short Carnival

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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!

Thought Experiment - Retirement Dwellings

Einstein was famous for many things including the theories of general and special relativity. I also learned that he was known for using a technique to dream up the answers to his questions of the universe, called “Thought Experiments.” This series takes the concept of thought experiments to different places. Today’s thought experiment is Detroit!

Some of us run comprehensive calculators to determine how much we need to afford the retirement of our dreams. Others live life with faith alone that we will arrive in retirement properly prepared. Yet neither approach guarantees success. None of us can predict all the events that will build our ultimate retirement.

How many were prepared for the Market Meltdown of 2007? Thousands of baby boomers had to alter their retirement plans unexpectedly. Sadly, many of these no longer see retirement as even being an option.

According to AARP, for example, the average baby boomer holds two-thirds of their net worth in their homes. When real estate prices collapsed, their dreams of retirement did as well. Million continue to face foreclosure or have already lost their homes. What many boomers perceived as the very lifeboat of their retirement became the anchor that dragged them back towards poverty.

How can you prevent this from happening to yourself? Diversification is the only protection. As long as your home represents the majority of your wealth, you risk catastrophic loss due to real estate market fluctuations. Conceivably, guaranteed protection would only be possible if your home represented a small portion of your overall net worth.

Today’s thought experiment, how frugal of a home could you retire in? So what are the options?

Frugal Living, Retirement, Saving, Money, Investing

photo by tobyotter

Living off the land -This is not for the squeamish or the lazy. It is the ultimate in frugal living and convenience-tax free, but it does come with a price, labor. This approach will require a completely different skill-set. If you are serious, check out this homeless survival guide for some good tips.

Being homeless you can live in or under public buildings and structures. Some of proven resourceful enough to find shelter in drainage pipes, tunnels, and caves.

photo by bothered by bees

Portable Living – Portable living gives you several low cost options to lodging. My personal preference would be a decent strong-hulled sailboat. Boats can be more frugal than you think. While the boat itself requires continued maintenance, it is hard to spend money when you are not on-shore! If the water is not for you, there are some great deals on used recreational vehicles from small pop-ups to the giant diesel pushers. Land or water, the price of these housing options can be extremely frugal or get out of control very quickly; tread lightly and be well-educated before committing.

Retirement Living, Money, Saving, Investing, Frugal

photo by nicolas boullosa

Minimalist Construction – Minimalist homes come in all shapes, sizes and of a range of materials. Even old shipping containers are being turned into houses. Some amazing dwellings have been built in trees or on trailers. If you can find enjoyment in cramped quarters or spend the majority of your day outside this may be an ideal low-cost option.

Renewable Construction – If alternative living situations and the minimalist approach are not up your alley, there are frugal options to building your dream-home. While many look down on the idea of a home constructed of rammed-earth or adobe, the reality is these kinds of construction methods have housed our ancestors for thousands of years. In fact, earthen homes have proven their ability to outlast conventional stick-built homes.

Log cabins when properly constructed have also passed the test of time as have sod, bamboo and straw-bale construction. Just make sure your material of choice is suited to the environment in which you build. Some of these materials can be obtained for little or no cost. With sweat equity, some of these homes could be built for price of utilities, appliances and fixtures.

Reuse Construction – As cheap as homes are in Detroit (Another Thought Experiment), it is conceivable that the right purchase could be disassembled and all material reused in a location of your choice. OK, so this idea is a little extreme, but homes have been built from old wine bottles, tires, and yes, even from torn-down homes. The key here is free materials, the more you don’t spend on materials, the more you have to fund your retirement.

Existing Construction- Like Detroit, there are locations around the globe that have very low cost housing options. In the past I have considered Caribbean or Central American locations while some Eliminate the Muda readers have recommended Bali.

For some of us, leaving the U.S. is out of the question. Just because it cost hundreds of thousands to build an existing structure does not mean that you must pay full price. On the other hand, you could spend all the money (someone else’s!). If you could find the right multi-family housing unit, rents could cover your living expense. You may also enjoy the benefit of a positive cash flow to supplement your retirement income.

In the end, low or no cost house leaves you with more liquid assets to invest or finance your retirement living.

Readers: How about you; are you taking one of these approaches to frugal living or do you have another idea? If not, when you do need the money there will always be the reverse mortgage option!

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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 Hitchhiker's Guide To Dealing With Financial Catastrophe

Don’t Panic! Words to live by. Virtually any financial challenge that you find yourself in can be dealt with. The key is to not panic. When we panic, it simply makes the problems appear worse and may lead to a belief that our problems cannot be solved. When we have lost hope we also loose our motivation.

Take Responsibility

When faced with a financial challenge our first step is take responsibility. For most of us, we can only blame ourselves. It was our own bad decisions, lack of decision or poor spending habits that fueled our problem. Some of us arrive in hell through no fault of our own; a major medical issue, a job loss or other mishap. But then how many of us are prepared for the unexpected?

This post was listed in the Carnival of Debt Reduction. Please take a look for other great articles!

Whether we got ourselves into the mess or not, now is time to get out of it. Putting it off only allows your issue to grow worse. By all means, please fix it yourself. Delegation of distasteful tasks only increases the potential for communication errors and delays.

Commit Yourself

Commit to finding a solution. For virtually any challenge there are options to be explored. It may not be easy or painless but a solution likely exists.

Resolving your financial catastrophes may mean serious sacrifices on your part. Unexpected financial challenges are something none of us wants, so let’s make it a priority to address it.

Develop A Plan

Before you can address any situation you must first fully understand the situation. If you are in debt up to your eyeballs because of a drunken spending spree then you better quit drinking. For most there will be multiple factors that must all be addressed. All potential causes should be thoroughly examined.

Once you fully understand the current situation, you must establish a plan to address it. Recovering from identity theft would be a different animal than an unexpected household expense such as an A/C replacement. In any case, it might be best to establish S.M.A.R.T. goals to hold yourself accountable.

Stay Focused

Once you have a plan in place and begin implementation, you must follow through. Knowing fully that there will be new obstacles in front of you, setbacks are likely. How you handle each of these events will determine how quickly and how effectively you achieve your final goal.

Avoid Insanity

My favorite saying from Einstein – “Insanity is doing the same thing over and over again and expecting different results.” Having suffered the burden of an unexpected challenge you may be able to leverage the experience to prevent a re-occurrence. Taking the time to understand the events leading up to your challenge you may be able to establish safeguards to prevent from having to deal with the problem again.

And please, do not forget the most important tool of all. A Towel!

Readers: Do you handle the unexpected well? Can you stay rational in stressful situations or are you more willing to pay a premium to get someone else to handle your problems for you?

photo by Jim Linwood

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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!

DIY'ing is Illegal!

Do you ever feel as if you just woke up to a changed world?

This country was built upon the backs of settlers that founded our schools, churches and cities. They built their homes and businesses from scratch, felling their own trees to make lumber and painting their own signs.

Home ownership and the freedoms that should come with it are part of the American Dream. Along with that privilege, comes responsibility to maintain your home or suffer from its demise.

Our Nation enjoys a rich history of people that have struggled to survive and even thrive in large part through their own efforts to do-it-themselves. That might mean replacing your own light switch, building your own home or even building a business.

This post was featured on the Yakezie Carnival hosted by Free From Broke. Please follow this link to see other great articles!

Since when did doing-it-yourself become illegal? Of course it is not! But that is what unsuspecting consumers are being led to believe.

Last week we lost our A/C system. During the initial inspection by the technician we were told that, legally, all work must be done by a licensed company. hmmm…

During a follow-up (closing technique warning flag!) visit by a HVAC specialist we were told that installations and repair may only be legally performed by those with the appropriate license.

While I began with no intention of making this a DIY project, the more I heard that I was not allowed to work on my own air conditioning system the more I wanted to! The benefit of doing it ourselves was, of course, cost and also control over the quality of work. We all know labor is going to be expensive, one company quoted me $185 per hour for labor! Who is ready to tackle the replacement of a major HVAC component if not the entire system? Not me, with an upcoming meeting to plan, I have too much on my plate as it is.

Fundamentally, a conventional refrigerant (Freon) charged central A/C system is extremely simple. There is an electric motor that runs a pump which compresses the refrigerant, turning it into a liquid.

The rest of system is a long circuit of tubing that refrigerant runs through. The refrigerant releases heat when it is compressed into a liquid; this liquid begins to cool in the condenser, the big box that sits outside of your house.

The refrigerant then passes through the expansion valve turning from a liquid into a gas and getting really cold. At this stage the refrigerant gas passes through evaporator, inside your home, which is in direct path of the flow of air which will cool your home.

If you can use a screwdriver, solder and make minor electrical connections you have the skills necessary to work on your own system or even replace it! Admittedly the soldering can be a little tricky and demands some practice on scrap pipe.

Certain refrigerants however are federally controlled; including the most common R22 for homes and R12 for automobiles. These products contain chlorofluorocarbons (CFC) that damage the ozone layer. It is against the law to release these gases to the atmosphere and it is against EPA regulations to handle these refrigerants without a license.

The contractors tried hard to convince us it is illegal to work on our own system, but it is just not the case. Georgia Title 43, Chapter 14 understandably prevents me from “engaging in the business or profession of a conditioned air contractor without a license as required under this chapter.” But nothing stops you from working on your own.

Our system had a leak at the condenser motor assembly. If you read my earlier post, Knowledge = Money in the Bank, you will know that we were given three options to address the hole in our A/C system:

1) Fill it with freon and see how long it lasts – $250 (does not fix the hole) – plus it is illegal!

2) Replace the compressor – $1800 (fixes the hole)

3) Upgrade the compressor and evaporator to the new R410 standard – $2,800 (fixes the hole)

And the rest of the story…

On the surface the pricing is disturbing. When you look at the details, one cannot help be feel wronged. For the system I needed, the compressor itself was priced at $995. Amazingly you can buy the entire condenser, the machinery outside your house (pictured above) which also includes the compressor, yet it only costs $60 more! R22 refrigerant is $55 per pound which would be used in a repair (option 2) or R410 in a replacement system costs $16 per pound with 4 pounds per system.

The evaporator, the unit inside (it is what gets cold) costs $300. So if we are keeping score, labor to repair our system (option 2) is $585 (excl. R22) and of course comes with no guarantee the remaining components will last. The labor to upgrade would be $1381! That is nearly $800 just to replace the evaporator.

For the most part, the repair or replacement requires the same skills; some soldering, a few electrical connections and some mechanical work to replace key components. The only challenge is the process of charging the system with refrigerant. This requires some specialized equipment, precise measurements, not to mention the license, and follows an exacting process to ensure the best performance. For this reason alone we decided to stick with a professional.

However, we were not about to give our money to anyone that used deceptive Closing Techniques such as fear. It was irritating how commonly the HVAC vendors used scare tactics and threats of fines and imprisonment to pressure me to buy from their companies. I was not willing to give my money to a person that takes this approach.

The good news in this ordeal was that we didn’t give up. While some might simply accept the first and maybe most costly estimate, we continued request competitive bids.

Eventually we found a licensed technician with zero complaints and in good standing that upgraded us to a R410 system for $700. Additionally he absorbed the cost of the refrigerant and added no mark-up to the parts and supplies, we literally purchased them direct from the supply house. In the end we saved over $900 by taking the time to make a few more phone calls and read a few more articles.

And… just an update, in case you wanted to know about our friends… they unfortunately paid double the average estimate I was able to find. We verified their $300 capacitor replacement should have been half as much and that doesn’t include the service plan they purchased as well!

Caveat emptor!

photo by Paul Schultz

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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!

Best of Money Carnival #50 - The Mother's Day Edition

Eliminate the Muda is honored to present the Best of Money Carnival #50 The Mother’s Day edition. The Best of Money Carnival was started by one of the blogoshere’s most respected personal finance bloggers, Free Money Finance.

Picking my favorites from such a large selection was almost as difficult as buying my wife a good Mother’s Day present, and that’s where we find inspiration for this weeks theme. With every passing year it seems finding the right gift is getting harder. Get some ideas of what to buy (and not buy) your favorite mom.

Please take a look at each of my 10 favorite articles in no particular order. When done, please leave a comment and share your best Mother’s day gift ideas. This way, it will be easier for us all next year!

Our first Mother’s Day I bought my wife a beanie baby. We thought we were being smart investors by dumping our disposable income of the latest investing fad. Anyone want to buy a chilly bear? It is mint! – photo by asteegabo

A Top 10 Pick- Do you need a financial makeover? – by Simple Life in France - We work hard to learn about money and investments. Then as we get older we get complacent. Is your money in the best place and being put to the best use? Maybe you do need a financial makeover.

Since the cute Beanie Baby was a flop in year 1 of motherhood, I decided to go all out for the next. The wife received a strand of pearls with matching earrings. Today they sit in a dark safety deposit box. That doesn’t count as money in the bank, does it?- photo by Mnxan Opena

A Top 10 Pick – Through the Looking Glass – by Watson Inc. – Roshawn inspires us to believe in ourselves and our abilities to achieve our dreams.

We had only lived in California for a few months when my wife’s third Mother’s Day rolled around. Being hot and sunny we decided to tint the windows of her car so she could ride in comfort. As I recall we spent $150. Years later I learned you can find tint for less than $30 and do it yourself in an afternoon. Ouch! – photo by JeffWilcox

A Top 10 Pick- Dave Ramsey Gives Bad Investment Advice by The Oblivious Investor – This article illustrates that no one person is as smart as everyone. Dave Ramsey deserves a lot of credit in my book ( The Book That Changed My Life) for the inspiration he provides to millions. In this post you learn that even Dave can still learn!

Our fourth Mother’s day was a catastrophe! It was our first year in California. The only thing she wanted was a vacuum and I obliged. I never lived it down! Not from her, she was happy. It was my co-workers that berated me!- photo by markhillary

A Top 10 Pick- Pay Off Mortgage Sooner, Invest, Or Save? The Math Analysis by Money Help for Christians – Craig Ford not only knows how to cook a killer pizza (I’m getting there!), he also shares some important and pertinent insights to the argument of investing or paying down the mortgage. For me he clinched it in one of the last few bullet points.

My wife’s fifth Mother’s Day was a frugal one. We had both changed jobs. I took a cushy corporate job with great benefits and low pay while she became self-employed as a stay-at-home mom. With my pay cut and hers, our income dropped by 50%, our savings had run out, and our debt was quickly growing. This was the year my wife received a white nightshirt with a photo of her kids ironed-on. – photo by 91RS

A Top 10 Pick- 14 Dumb Mistakes That College Graduates Make by GenYWealth - RJ provides timeless advice for your child that is graduating this year. Then again, you might want to read it for yourself. There is also great advice for the rest of us as well. What, you haven’t started a Roth IRA yet?

One of our many methods of ensuring our continued indebtedness was spending money on “collections.” In this case it was not the beanie babies, it was clocks. For my wife’s sixth Mother’s day she received another clock. The minimalists would cringe to know we sport a collection of more than 60 time pieces!- photo by laffy4K

A Top 10 Pick- Could Legalizing Marijuana Help Balance the Budget? – by The Amateur Financier – A comprehensive look at the dollar and sense behind the debate.

One of the other “collections” we have is Life is Good products. It doesn’t matter; shirts, hats, pajamas we love all their stuff. For our seventh Mother’s Day it was a Life is Good extravaganza with water bottles and even a dog bowl.- photo by Monica Arellano Ongpin

A Top 10 Pick- You’ve Got to Really WANT it by Budgets are $exy – J.$ (J. Money) is knockin em’ dead with his laid-back but entertaining approach to personal finance. J. shows us that we all have what it takes AND he even helps you find it! Life is good, isn’t it J?

There are few people that don’t enjoy running water. You can now find personal fountains both big and small. The eighth year of Motherhood my wife received a wall-mounted fountain. It was a monster and definitely had running water. Unfortunately, the motor was so loud that we couldn’t enjoy the fountain. It now sits dormant. – photo by sarahgardenvisit

A Top 10 Pick- Your Interview With Local Psychologist Dr. Matthew Bowen Part 1 by Enemy of Debt – Few people exude passion like this blogger does for personal finance. He captures me every time I venture near his site. This interview was based on questions from dozens of people and is sure to enlighten you.

Our ninth year of parenthood had entered routine and I had no ideas of what to get my wife. She saved the day when she expressed interest in a purse that had an outer shell which could be changed to match her mood. You would think with 7 shells you would get at least 7 years use? Think again!

A Top 10 Pick- Different Types of Insurance: Do You Have What You Need? by PTMoney. It could be said that life is just a long series of gambles. Each decision can result in gain or loss. Making sure you have the right kind and right amount of insurance provides protection. – photo by rojer

I scored big for year 10! The kids greeted their mother as she awoke for the morning. Each of them handed her a turned wooden block. About six inches tall they resembled goblets from the Renaissance, thick and hefty. She remained perplexed as she turned them, one in each hand. The contours were similar but they were not the same. Only when it was pointed out did she see that the goblets reflected the shape of her children’s silhouette. Follow the contour of the goblets shape, or focus on the shape of the shadow, to see the facial profile.

And if you would like to have a goblet crafted in the profile of your child’s face, follow this link to ProfileInWood.com

Joe Plemon also scored big with this weeks Editors Pick!

The Top Pick – 6 Financial Lessons From Johnny Appleseed by Christian PF. Joe Plemon eloquently weaves a great story with a little history and teaches valuable money lessons along the way.

Do not forget, click below to leave a comment about your best Mother’s Day gift idea!

If you would like to learn what my wife got for Mother’s Day this year, sign up for my RSS Feed or subscribe via email. All will be revealed later this week. Hint: It beats the vacuum!