No Debt Plan

No Debt Plan is a blog about living a debt-free life. If you're new here, you may want to subscribe to my RSS feed (e-mail subscription also available). Learn more about me, or read some other popular articles. Thanks for visiting!

Mike, the author of Clever Dude, recently put a post requesting some guest posts to add to his content. I replied back almost immediately and he put up my article titled Spouses, Finances, and Teamwork. Head on over to Clever Dude to check it out; let me know what you think.

(Photo by kk+, and no she didn’t turn 6!)

Yesterday was my wife’s birthday. Hooray Birthdays!

We had a talk about a week before her birthday about our budget and being frugal. She reminded me that she is an absolute birthday fanatic. Seems normal, right? So why mention this? Well… I’m not rah-rah excited about birthdays. They just aren’t my thing when it’s my turn. So to make sure that I understood, she wanted to remind me that not only is she super excited when her birthday comes around, but to definitely celebrate it.

We’ve discussed being superfrugal in the past. I told you to take your spouse on a date. Don’t forget how to do that. She wanted to remind me that even though we are on a budget and whatnot, I do have spendable money and she would appreciate a celebration of some sort.

Now let me be clear this wasn’t an ultimatium of “give me the biggest birthday bash ever!” It was just a gentle reminder of … hey, you don’t celebrate birthdays all out, and I would appreciate it if we did something.

Thus last night we celebrated with a trip to our favorite bar-b-que restaurant, and a double doozie cookie cake. Oh yes. It was fantastic.

On top of that we’re going to celebrate this Saturday as well. Having a birthday in the middle of the week is not as managable as it was back when we didn’t have jobs, a dog, and I wasn’t in my MBA program!

So just another reminder to all of you: don’t let superfrugality hurt your relationship. Manage your finances effectively. Budget appropriately. But don’t not spend any money on anything. (Unless you are spending more than you earn… then you’ve got to cut everywhere).

One man’s trash is another man’s treasure. With inflation increasing, gas and energy prices skyrocketing, and your pay not moving an inch every dime you can save on just about anything is a grand savings.

You can find all sorts of deals online. Just take a look at eBay and Craigslist. People are selling stuff out of their closets and basements for (usually) bargain prices. I have had great success with Craigslist. I bought my car on Craigslist from a private seller. When I left Birmingham after an internship the summer before I graduated, I sold an old, disgusting loveseat on Craigslist. The loveseat had a broken spring, kind of smelled, and was ugly. I bought a $75 slipcover for my use during the summer and listed it on Craigslist for $50. It sold and the woman brought cash. I figured I got a steal by cutting my losses to $25. To top it off my then girlfriend was more than pleased to see it go!

But those sites require you to have money. There are other ways to grab some deals… and in the following two cases you can grab items for absolutely free.

FreeCycle

I had heard of FreeCycle in the past. For the uninitiated, straight from their webpage:

Welcome! The Freecycle Network™ is made up of 4,362 groups with 5,099,000 members across the globe. It’s a grassroots and entirely nonprofit movement of people who are giving (& getting) stuff for free in their own towns. It’s all about reuse and keeping good stuff out of landfills. Each local group is moderated by a local volunteer (them’s good people). Membership is free. To sign up, find your community by entering it into the search box above or by clicking on “Browse Groups” above the search box. Have fun!

The FreeCycle webpage doesn’t actually do all that much. It just links you to your local freecycle group which is done all on Yahoo Groups. I guess as a grassroots organization it is easier to use a free service like Yahoo than running everyone on the group’s local server.

With FreeCycle, there are three different terms you will see on listings: offer, wanted, and taken. As you might imagine, offer means someone is offering the item to be picked up. Wanted is an item someone is looking to get for free. Taken means someone had offered an item, and it has now been taken (so don’t waste your time contacting the offer-er).

A look at my local FreeCycle group, here are some of the most recent listings:

• Offer: Shopping bag full of wire coathangers
• Wanted: Vanity Table and Chair
• Offer: Freezer (needs some repair)
• Taken: Two identical Graco Car seats

The two identical car seats sounds like a great deal — if you could verify they had not be damaged. The coat hangers… hey, someone might need them. If you’re handy you could get a freezer for free — just haul it away yourself.

Clever Dude recently snagged a Garmin for free on FreeCycle! Unbelievable. This is the exception, not the rule.

Rehash Clothes

Rehashclothes.com is a relatively new player in the “get stuff for free” arena. Here’s how they describe themselves:

By Rehashing, you can shop for clothes without spending a penny, all while helping the environment. Oh, and did we mention it’s free?

So you wear that new dress three times before you get tired of it. Rehash it to someone else and grab another dress from a different user.

I haven’t read of anyone using it, but it seems to be coming along just fine.

So, where do you go to get the best deals on “stuff”? Would you trust someone to send you clean clothes?

I am honored that 27,000 people have come from various parts of the web to visit this blog since January of this year. Stumble Upon has brought in a huge boost of traffic — and I hope you guys stay.

I hope you find the articles engaging and interesting… and that you take something away from each and every one.

If you enjoy the blog, tell a friend. If you hate the blog, tell a friend and tell me. I’m not a professional write. Make me improve.

Cheers.

CNN Money thinks you only need 7 investments. I think that is four to six too many for the average investor.

Here is the list of investments Money Magazine thinks you need:

A blue chip US-stock fund (track the S&P 500 index) (Fidelity Spartan 500 Index, FSMKX)

A blue chip foreign-stock fund (track the international stock index) (Vanguard Total International Stock Index, VGTSX)

A small company fund (T. Rowe Price New Horizons, PRNHX)

A value fund (Vanguard Value Index, VIVAX)

A high-quality bond fund (Vanguard Total Bond Market, VBMFX)

An inflation-protected bond fund (Vanguard Inflation Protected Securities, VIPSX)

A money-market fund (Fidelity Cash Reserves, FDRXX)

If you made it to the end of that long list, congratulations. For the 50% of you asleep at the computer, I apologize.

Seriously, 7 funds is “all” you need? The above is just fine. It covers every single aspect that you might ever want to possibly cover.That’s great and all, but…

7 Funds is Complicated

We live in a society with a negative savings rate. You’re telling me that I am somehow going to convince Mr. Average American to invest not in one fund. Not in two. Yes, seven sounds is just right.

7 funds is very complicated. Here’s a few reasons why (I’ll show you the alternatives in a moment):

• Each fund has a minimum required investment. The more funds involved, the more minimum required investments required. The combined minimum required investment for the above seven funds is $24,500! The Vanguard funds are all $3,000 (four funds), the T.Rowe Price Fund is $2,500, and the Fidelity S&P 500 fund is $10,000. The money-market fund isn’t publicly traded from what I can tell; I’m not sure if it has a minimum or not. Even if you dropped the Fidelity S&P index in favor of its Vanguard brother (VFINX) your minimum required investment is still $17,500. If you gave each fund equal weighting, or $3,000 for each of the seven, you would need $21,000. That’s a ton of money if you are just getting started.
• There are three fund companies on the list. “What’s wrong with three companies? Shouldn’t you pick the best funds?” I’m pro-Vanguard and not afraid to admit it. However, You should not stick with a fund company if there are better options out there. In this case, suppose you’re investing in a Roth IRA. To get all of the above mentioned funds, you first have to find a brokerage that gives you access to all of the funds. After that, you’ll be paying fees to trade your mutual funds. Fees = less money for retirement. If you stuck with one company such as Vanguard and swapped out the funds for comparable ones, you would avoid a lot of those fees.
• If you’re investing in an IRA (traditional or Roth), you are limited on the amount of money you can invest each year. This goes with my first point — you would need $17,500 to $21,000 to get started with this plan. An IRA limits you to $5,000 worth of contributions per year right now. You now have to enact this plan over a four year period, making it all the more likely you will never complete it.
• ETFs might serve you better. If you are investing a lump sum — that is, if you had $21,000 to invest right now — ETFs might serve you better. You would pay a brokerage fee ($6.95 at Firstrade) and then a much lower annual expense fee versus the mutual fund. If you’re invested over time (e.g. $3,000 at a time) then a mutual fund would be the better option for you.

Two Alternatives

Investing and retirement do not have to be that complicated. Honest. Remove the glitz, the glam, and the extras. In my eyes, you have two easier options.

Here’s what I recommend:

• One fund. A Target Retirement Fund will take care of everything for you. These funds are a “fund of funds”… so they buy other funds to hold in the fund’s portfolio. For example, many of Vanguard’s funds invest in the Total Stock Market, Total Int’l Stock Market, Total Bond Market, Euro/Pacific funds, and allocate them base on what fund you buy (the later the year on the fund, the more stock-heavy it will be). A target retirement fund is a “set it and forget it” option if you don’t want to think about which funds to invest in.
  • Example Portfolio:
    • Vanguard Target Retirement 2050 (VFIFX)
• Three funds. If that is just too simple for you, invest in an all encompassing US-stock fund, an all encompassing Foreign-stock fund, and a bond fund.
  • Example Portfolio:
    • Vanguard Total Stock Market (VTSMX)
    • Vanguard Total International Stock Market (VGTSX)
    • Vanguard Total Bond Market (VBMFX)

The best thing about a Target Retirement Fund is it is easy to get started. With the Vanguard fund mentioned above, you need $3,000 to invest. Once you’re invested, you not only have instant diversification, but you can then contribute as little as $100 at a time. With each additional fund you want to participate in, you need another $3,000.

I think Money’s intentions were good here and I don’t have anything personal against the funds they mentioned. (Well, except the Fidelity S&P 500 fund. $10,000 minimum investment? Are you kidding?) I sincerely think seven funds is too much. You end up sharing a lot of the same stocks in many instances.

PFBloggers.com:

• Pinching Copper has a hilarious entry on “What GTA IV Taught Me About Personal Finance.” I’ve seen it all when you can compare a video game to personal finance, but it does make sense… just think in any game you’ve ever played, there is no “credit” (at least usually) that you can use to buy upgrades or weapons. You have $X and you can only spend $X.
• Saving Savy thinks The Little Things Make a Big Difference.
• Master Your Card tells us about the first biometric credit card and wants to know what we think. I think it’s kind of scary. I don’t know if I would trust the credit card networks with my biometric data…
• Living Almost Large shares a sad story about a med student just piling on extra debt because really, it doesn’t matter.
• Girls Just Wanna Have Funds asks how we are all coping with increasing gas prices. To be honest, we haven’t changed much because we weren’t overspending to begin with.

Elsewhere:

• The Carnival of Personal Finance is up at Money Under 30 and my post 10 Steps to Avoid Becoming a Millionaire is an Editor’s Pick! This is my first time ever having an editor’s pick, woohoo!
• Get Rich Slowly talks about Rescue Time, a program to help you track where you spend your time. I’ve afraid of installing this program…
• Free Money Finance discusses an article where a family of four eats on $300/month. Impressive!
• The Simple Dollar gives us the Debtor’s Toolkit.
• Brip Blap gives the details on how to make money even without a job. He thinks we should all do it. I agree — in the past 3 weeks, I’ve earned $200+ blogging through various blogs.

Yesterday was Mother’s Day, so if you haven’t already, reach out to your Mom and thank her! You’re already in deep trouble if you forgot, but at least try to make up for it.

(Photo by mdid)

Frustration mounts.

With all the rah-rah celebration around the tax rebates, I was actually looking forward to getting ours. We filed our taxes electronically so we should be receiving our “free” money electronically. I want to get it not to go out and buy a TV (although that would be nice), but to bolster our emergency fund. We talked about the tax rebate twice last week.

No matter how I feel about the overall impact of the checks — I still want mine. Everyone else is blogging about getting theirs… where’s ours?

We filed together, and both of our social security numbers fit into the middle tier for electronic filing. That means our rebate should have been processed by May 9th, this past Friday. (You can see more about the tiers over at Consumerism Commentary.)

But nothing has shown up in the bank account that we paid our taxes from. Zip. Zada.

Frustrating.

I’ve also heard that it can take up to two weeks from the transmission date for it to hit your bank account. That seems odd; it’s all electronic.

As they say, you can’t lose what you never had. I suppose that’s true — but this is something technically I should have! I feel like we’ve lost it.

I think the real issue I have with it is I am fearing having to call the IRS to try and figure it out. We’ll give it a few days before resorting to that.

A quick poll: I’m curious… anyone else out there expecting the tax rebate and haven’t received it yet? Especially if you filed electronically?

I’ve been aware of Skype for quite some time. It’s a very interesting idea — making phone calls from your computer to land line phones and cell phones.

However, I never truly paid it any mind. It requires a Skype phone, and you have to sign up for service. I’m in the target demographic — 20-30 somethings — but I have a cell phone. Why would I pay for another phone and another service?

Wait, did you just say $2.95/month unlimited calling in the US and Canada? Woah. Now I’m paying attention.

Again, let me restate I doubt I would use the service. But it sounds like a darn good deal.

Compare to…

• Vonage $24.99 per month
• Typical phone service $15-20 per month plus long distance charges
• Cell phone (roughly 10 cents per minute)

…then $2.95 per month (roughly $36 per year) and you get unlimited calls within the US and Canada. If you do a lot of desk work or call from your home phone a lot, that seems like a stellar deal.

Maybe I’m missing something. You tell me. Skype — too good to be true or simply awesome deal?

Update: Comments from the Readers

Some readers have pointed out that Skype to Skype calls are absolutely free if both users have Skype and a microphone for a computer. So if everyone was using Skype, you wouldn’t even have to pay the $3/month charge. However, $3/month for unlimited calling to non-Skype users is still a great deal.

The weather has warmed up around here, and we’re enjoying temperatures in the 80s and 90s. Nothing soothes on a hot day like a few scoops of ice cream in a waffle cone.

But, why pay $3 per cone when you can buy a half-gallon for $5 or $6? You could buy two ice cream cones or enjoy a whole quart of ice cream. That seems like simple math to me.

Granted, a trip to Bruster’s Ice Cream Shop or Cold Stone Creamery can be a fun date. I’m not discounting that. I just think it can be expensive.

Then again, at Bruster’s the amount of ice cream they give you might be a quart!

Nonetheless it is much more frugal to eat ice cream at home. You may miss the waffle cone, but you get more bang for your buck with the half-gallon bucket.

Two Added Bonuses to Eating Ice Cream at Home

You can control the portion size. Smaller portions means your container lasts longer and eating less ice cream each serving is a slightly healthier option (hey, it’s still ice cream).

Additionally, when you purchase ice cream at the grocery store you can see the nutritional facts. Ice cream isn’t the best thing for you, but maybe you choose a brand with less fat. Every little bit counts.

So let’s have it — who here loves ice cream? What’s your favorite flavor? Leave a comment!

I personally love chocolate chip cookie dough, especially from Bruster’s because they have actual huge chunks of cookie dough in it. Back in the day Baskin Robbin’s had a flavor called Double Chocolate Fudge or something like that. It was very dark brown and extremely rich… but so good. I haven’t seen it in a while.

(Photo above by Tom Coates.)

Debt Kid has an interesting article up about what he would tell his 18 year old self if he had the chance. That’s a very interesting take on things and sounded like a great kick off to a new article.

Six years ago I was just about to graduate high school. It’s nuts to think about that as it seems like a terribly long time ago, but at the same time it feels like no time has passed at all.

A Recap of Major Life Events, 2002-2008

• I graduated high school in 2002, and graduated college in December 2005.
• I got engaged October 2005, and married the woman of my dreams in January 2007.
• I’ve worked two real-world career jobs.
• We bought our first house last summer (remind me to write about this at some point).
• We got a dog two weeks ago.

What I Would Tell My 18 Year Old Self

These are in no particular order, lest you think me a cold hearted man.

• Get an internship for every summer between school, even if you have to pay out of pocket.
  • I turned down an internship with BMW USA in New Jersey because it didn’t pay enough to even pay rent up in New Jersey. In hindsight it was a great opportunity, but the program seemed very unorganized (no list of available corporate apartments for interns, etc.). I may have missed the boat with my favorite car company.
• Network more.
  • I was brought up to believe that hard work and good grades were what it took to succeed in life. I’ve learned over the years that a significant portion of life is who you know. It may not be fair, it may be kind of cynical, but it is definitely true. I would network with more people and put the books away more often.
• Be appropriately frugal.
  • I’m definitely pro-frugality. Just don’t let it affect your life. (Psst… take your spouse on a date.)
• Walk in the rain with the one you love.
  • Be silly. It can be fun. Branch out a bit.
• Life is short.
  • You will know people who die young. Your family isn’t getting any younger, either. Call your parents. Call your wife’s parents. Stay in touch with friends.
• Figure out how to get organized.
  • By far one of the most important things you can do. Come up with an organization system and stick to it.
• Get engaged later or marry faster.
  • You and your future wife will both agree waiting 14 months to get married is far too long, you impatient jerk.
• You can do a long distance relationship and make it work.
  • When it becomes a short distance relationship, you will truly appreciate it more. It sucks for now, but stick it out. She’s a winner.
• Don’t forget how to dream and thank God for every day. Repeat: Life is short.
• Take risks. Repeat: Life. Is. Short. Live a little.
  
• In fact, don’t forget to live.
  • You’ll end up writing a personal finance blog and focusing on money a lot. Don’t let it take over your life. Life each day to the fullest. Take her to Brusters. Get ice cream. Rent a movie. Don’t be an old fuddy-duddy.

That wraps it up for now. What if we turned this into a meme?

What would you tell your 18 year old self, Cash Money Life, Being Frugal, and Master Your Card?