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Wednesday, July 22, 2015

Welcome to Penny Pincher Journal!

Welcome to Penny Pincher Journal!

Dr. Penny Pincher
 Dr. Penny Pincher 
Do you wish you had more money?  The easiest way to get more money is to spend less!

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The Trouble with Having an Emergency Fund

Emergency Fund- Bad Advice?



I have read on many personal finance blogs that the way out of debt starts with building a cash emergency fund, with a goal of being able to cover several months of expenses using your emergency fund.

Although this may work well for some, for me there are several problems with this approach.

First off, I don't want to park this kind of cash in a savings account making 0% interest!  Let's say several months of living expenses amounts to $10,000.  If you keep this in savings account for 30 years at 0.85% interest, you'll end up with $12,903.  If you invest this money instead and get an 8% return, you'll end up with $109,357.  So having the cash emergency fund would cost you around $100,000!  You can run the numbers yourself on my savings calculator.

Not everyone who recommends having an emergency fund recommends keeping $10,000- I just wanted to pick out a number to make my point.

The next problem I have with building a cash emergency fund while you have credit card debt- if you have credit card debt at 20% interest, paying that down seems to me to me to be the best use of any available funds.  It would be hard for me to look at money sitting in a savings account and not pay down high interest credit cards.



My third major problem with advising people to build up lots of cash and keep it around- it would be tempting to spend it!  Even if you have credit card debt, if you have $10,000, or even $2,000 sitting in a savings account, I think many people would be tempted to spend it if the right opportunity came along.  Maybe a fun project car to fix up, or getting in on a special vacation offer, etc.  If you have $0 savings and mostly maxed out credit cards, it is harder to spend more money and you won't forget that you are in debt.  If you have money sitting around not being used, I think it would be at risk for unplanned spending.

In Case Of Emergency...

So, what if you don't have an emergency fund and a financial emergency comes along?  No matter how much you have in an emergency fund, something could happen that would take more money than you have saved up.  In this case, you would end up using credit or borrowing from your retirement fund to pay for the emergency.

This is not good, but I think most people would be further ahead focusing on paying down credit cards and building investment funds rather than parking cash in an emergency savings fund.  Hopefully that emergency won't happen, but if it does happen while you are still paying down credit card debt, you'll have some funds build up in investments and some credit cards paid off that will be resources to get through the emergency.

Is Putting Money In an Emergency Fund Bad Advice?

I discussed my concerns about emergency funds with a popular blogger, Chris Peach at Money Peach.  He replied that from the math perspective, my objections to advising people to set up an emergency fund make sense.  But from a behavioral perspective, getting people to develop the discipline to save money and watch that savings account grow is powerful and can change behavior.  Plus having a cushion can help people avoid charging more on their credit cards.

I think Mr. Peach had a nice comment when he said I can be right on my blog and he can be right on his blog.  Nicely said.  From my perspective, setting up an emergency cash fund when you could be paying down high interest debt or investing with a historical average return of around 9% doesn't make much sense.  But if you are trying to change your behavior and get away from depending on credit cards, maybe setting up an emergency fund could help.



Even with my reservations about putting a lot of cash in an emergency fund, I do keep cash around.  What if the electronic networks go down and credit cards don't work for some reason?  I like to have enough cash to cover a couple weeks of food and gas at least in case of a disaster.

In conclusion, having cash at home or in a saving account has a cost.  If you have credit debt, you could be getting a 20% return on the money.  If you invest in stocks, you could be getting a 9% historical average return over the long run.

From the perspective of optimal financial results, I would recommend people with credit card debt to pay into an emergency fund only if this will help control credit card spending.  Otherwise, use all available funds to pay down the high interest debt and at the same time invest some money in stocks.   I would suggest saving up enough cash to cover basic expenses for a few weeks to survive a disaster.


Copyright © 2015 by Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

Monday, July 20, 2015

Straw Bale Garden- Does It Work?

Can You Really Grow Your Garden In Straw Bales?

Straw Bale Garden Jalapeno Peppers
Straw Bale Garden Jalapeno Peppers
Image Source: Dr. Penny Pincher

I was a little skeptical when I started my straw bale garden back in April.  I was looking for an easy way to get a garden started at my new house without a lot of hard work breaking sod and building up the soil.

I bought 25 straw bales from a local farmer for $5 each.  I used some metal stakes that I found in the garage to stake them down, and used some landscape fabric between the bales to prevent weeds from growing between the straw bales.  You can learn more about starting a straw bale garden in my earlier posts.

The big question I had, of course, was "Would this really work?"  Based on what I have seen through mid-July, I can say that it is working!

Straw Bale Garden Cucumbers
Straw Bale Garden Cucumber
Image Source: Dr. Penny Pincher

We have harvested a few things so far- spinach, peas, and cucumbers.  As you can see in the photos, the plants are growing like crazy.  It is hard to even see the bales under the cucumbers.

Benefits of a Straw Bale Garden

The main benefits of a straw bale garden are that it is easy to start without breaking ground or roto-tilling, and provides easy raised garden beds without building anything.  Also, there are very few weeds to deal with in a straw bale garden.

Straw Bale Garden Broccoli
Straw Bale Garden Broccoli
Image Source: Dr. Penny Pincher

Drawbacks of a Straw Bale Garden

Some of the negative aspects of a straw bale garden are that you need to buy a lot of straw bales and get them to your garden.  It also takes a couple weeks of work to condition the straw bales before planting.  

I have also found that the straw bales don't hold water as well as soil, so they require more frequent watering.  I have set up soaker hoses right on top of the straw bales so I can let this run occasionally.  Believe it or not, I also found the soaker hoses in the garage so I didn't have to buy them either.

Straw Bale Garden Tomatoes
Straw Bale Garden Tomatoes
Image Source: Dr. Penny Pincher
Some crops do not work well in straw bales- growing sweet corn in straw bales is not recommended, and I planted my zucchini in a small patch in the ground instead of in straw bales.

Even though I have listed more drawbacks than advantages to straw bale gardens, I think a straw bale garden is a good solution in some situations.  If you want a small garden and don't mind watering it frequently, a straw bale garden could work well.  The cost of the straw bales and amount of watering could be prohibitive for a large garden.

I plan to use the straw bales to make compost and transition to some garden in the ground and perhaps some new straw bales again next year.

Does Straw Bale Gardening Work?

Straw Bale Garden Herbs
Straw Bale Garden Herbs
Image Source: Dr. Penny Pincher

The harvest is just getting started, and it has been great to have some fresh vegetables growing right outside the back door.    I wanted a garden that would be fairly easy to get started and not too expensive.  So far, the straw bale garden is working out very nicely.

Check back for more updates on how the straw bale garden turns out.

Copyright © 2015 by Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

Monday, July 13, 2015

Pants Are Not Optional At Work!

When Pants Are Required... Quickly


What To Do If Your Pants Fail At Work!
What To Do If Your Pants Fail At Work!
Image Source: Dr. Penny Pincher

Sometimes at work I get a memo with a dress code for a meeting that says something like "shirt and tie".  I always joke that pants must be optional...

Last week, I was wearing some 20 year old pants at work and they failed badly.  I don't like to spend money on clothes, but my career is my most valuable asset, and I couldn't very well go walking around with my fly fully open all day!

I briefly considered some options to repair my pants with office supplies such as tape or staples.  I saw lots of opportunities to make a bad situation worse and decided not to repair my pants with office supplies.

The next option I considered was to drive home and change pants.  There were two problems with this.  First, I didn't have that much time- it would take me at least an hour to drive home, change pants, and drive back.  The next problem was that it would take a couple gallons of gas and put about 40 miles of extra wear and tear on my car.

So, I decided to run to the Kohl's store that was a few blocks away.  I had a Kohl's coupon in my car, and Kohl's has some great clearance bargains.  Kohl's was a natural choice.  I slipped out of my office before anyone saw my problem pants and soon arrived at Kohl's.

Clearance on Clothes at Kohl's- 80% Off
Clearance on Clothes at Kohl's- 80% Off
Image Source: Dr. Penny Pincher

The first pair of bargain pants I picked up had a waist of 40 inches and length of 30 inches.  Not even close!  After about 1 minute of scanning and looking for my size, I found some nice Dockers brown corduroy pants in just the right size: 34W, 34L.  And they were priced at $5.80.  With my coupon, the total ended up at $5.28.

Receipt For Emergency Pants
Receipt For Emergency Pants
Image Source: Dr. Penny Pincher

I wasn't planning to spend $5.28 on clothes, so this is $5.28 of extra spending, but all things considered things turned out pretty well.  I could have missed an hour of work and spent money on gas for an extra trip home, or I could have used office supplies to repair my pants which may have looked ridiculous.

I wonder how long a pair of brand new Dockers corduroy pants will last?

Copyright © 2015 by Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

Sunday, July 5, 2015

25 IS THE NEW 65: How To "Retire" Outrageously Early And Do Whatever The Heck You Want

Book Review- 25 Is The New 65 by Travis Hornsby





I recently stumbled across Travis Hornsby's book 25 Is The New 65: How To "Retire" Outrageously Early And Do Whatever The Heck You Want while it was free on Amazon for a 3-day promotion when it was launched.  This book is about how Travis (aka TMONEY on his blog) was able to get through college with a respectable amount of savings and lived a very frugal lifestyle while working full-time a few years.  Travis clearly did not enjoy his time working in the corporate world and decided to get out and go a different way.  Living a frugal lifestyle allowed Travis to save and invest enough after working only a few years to "retire" at a very early age.

In this case, "retirement" does not mean never working again, but instead means working part-time or working on things that he enjoys and wants to do to continue to make some money.  Also, this sort of retirement will require living a very frugal lifestyle, living on about $16,000 per year.

This is clearly not the path for everyone.  There is a trade-off between having time to do whatever you want and having money to experience things that cost money.  I am fortunate that I have a career that is interesting, so I don't see working as a form or torture.  Of course, I would like to retire someday, but for me I don't mind the lifestyle of having a professional career and making lots of money for awhile.

This book does have some good examples of how you can live frugally to minimize expenses and boost your savings and investment contributions.  I liked his examples of "typical" spending by young people out of college and how this could lead to working for a very long time to pay off debt.

Many people do not learn to control spending until later in life, this book provides an example of what is possible with extreme financial discipline early in life.  If you are dealing with debt, this book can provide some motivation to cut expenses, boost savings, and get rid of that debt to find your path to freedom.

I enjoyed the exercise of thinking about how frugal I want to be and what trade-offs I am willing to make to have time available to pursue my interests.





Copyright © 2015 by Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy

Sunday, June 28, 2015

Making My Old Shoes Like New Again

Shoe Wash Today!  I saved over $50...

Wash Your Shoes Instead of Throwing Them Away!
Wash Your Shoes Instead of Throwing Them Away!
Image Source: Dr. Penny Pincher

I have not worn my "good" tennis shoes for a few weeks.  The cat decided to spray them, so I set them outside to get some sun and rain for awhile.  These shoes are a couple years old and have small holes in them, so I thought getting sprayed by my cat might be the end for them.

But these are some of the nicest tennis shoes I have ever owned.  I originally bought them for my son for $25 at Famous Footwear, but they weren't quite right for him.  I was going to take them back to the store, but that would take a driving trip and I needed shoes and liked these.  They were a size too small, but $25 was a great deal, and like I said, I needed shoes...

That was 2 years ago, and the shoes have been great.  They are very lightweight and have memory foam.  I decided to wash these shoes the old fashioned way and try to get another year of life from them.


I Washed My Shoes- No Need to Throw Them Away!
I Washed My Shoes- No Need to Throw Them Away!
Image Source: Dr. Penny Pincher
My son also had a pair of shoes in the same situation (darn cat!).  I set the shoes on the grass and blasted them with a hose.  Then I put the shoes in a bucket, added some car wash soap that I had handy in the garage, and blasted them some more.  I let them soak in the soapy water for a couple hours, then scrubbed them with a scrub brush that I use to wash the tires on my car.

Next, I set them out to dry in the sun.  I should have shoes back in action after a few days of drying.  I am going to keep them somewhere where my cat can't get them.

Reusing two pairs of shoes instead of buying new ones will save over $50.  That's real money- $50 will buy a day's worth of food for the family.  Try washing your shoes to give them new life.  If you need to replace your shoes, check out how I got a pair of dress shoes for work for $25.


Copyright © 2015 by Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy



Recycled Plant for Hanging Basket = Free

Plant Rescued, Money Saved!


Our hanging basket got dried out after we forgot about it- I brought it back to life with lots of watering
Image Source: Dr. Penny Pincher

We got an outdoor flower in a hanging basket early this spring and forgot about it. It was dried out and looked mostly dead and the flowers were all gone. My wife mentioned getting another plant to replace it. I decided to try to rescue the plant (and also rescue some of the money in my wallet). I filled the pot overflowing with water every day and fertilized once a week. Now after a few weeks, it looks better than ever!

This worked out well for everyone involved- we didn't buy another plant, so my wallet is happy. We have a nice looking flower, so my wife is happy. And, of course, the plant is happy with how this worked out.

You might ask how much I spent on fertilizer and extra water to bring the plant back to life.  My house is on a community well, with no water meter, so the water was free.  You would think with unmetered water that people would use water like crazy, but surprisingly, people here are very careful with water.

I found the fertilizer in the garage from a past year, so I'm going to count that as free as well since I didn't have to buy it. 

I should note that the "Before" picture was actually taken after to give an idea of what the plant looked like.  It was actually much more dried out and I don't think there were any green leaves remaining.


Copyright © 2015 by Dr. Penny Pincher.  All Rights Reserved.  Privacy Policy