Friday, September 28, 2007

Getting Defensive About Spending Habits » My Money Blog

Jonathan at My Money Blog, just posted up a little piece about the flack that "frugal financial bloggers" have received lately.

Here's the link: Getting Defensive About Spending Habits » My Money Blog

And of course, the reply:

OK two points:

1. As an aside, the culture of people who save tons of money are benefiting from those who don't. Don't get me wrong, we could probably double the number of Jonathans in the world and still not notice. But when you buy stock or bonds, or rent real estate, you are benefiting from someone else's sweat. I'm OK with that.

2. We hit this vein when we talked about "frugal tips" and "lifestyle" a while back. At some point you have have to "do something" with the money that you're earning, and there are two sides to this.

Some people don't "get" that people do all of this saving b/c they don't have their own savings goals. But by the same measure, many people in the PF blogosphere are absolute horrible role models for showing off their savings achievements. They save all kinds of "retirement money" but then never talk about what they actually want to do in retirement.

How the heck can you be sure that you're saving enough for retirement if you haven't even defined what retirement means to you? Why are people saving all of this money when they don't have anything they want to do with the money? Most PF bloggers don't even list their interests anywhere in their Bios, it's like the only thing they do is "work and save money".

The typical PF blogger makes almost zero posts about the things they do buy, they just keep throwing out money savings tips and net worth updates, but they don't give us pics of the new rental property or the x-mas toys they bought the kids or the new car they bought in cash(!).

To the outside world, the average young PF blogger just looks like a freak. Like some money-saving hole with 100k in the bank and no dreams outside of owning a home. They post up these stupid "Net Worth IQ" plug-ins, but they don't actually have top-level links to the posts where they talk about their "dreams for the money".

Now, the two sites that are linked to? Yeah, they're probably taking some undeserved flak. But check out the "About me" pages on both of them. Not a word about what they do with their money, not a word about their financial goals, or their dreams or what they want to during retirement or where they want to be in the next 10 years.

That's horrible!
That stuff should be front and center! Many bloggers actually do have them "sitting around", but that's not enough, that's not real, it need to be front and center.

David and Trent (the bloggers being linked to) are evangelists for the Frugal Lifestyle (tm), but they're not doing anything that makes me want to be like them. They've put frugality front and center as if saving money were some type of self-fulfilling cult. Check out Trent's post here. He puts like 1000 words into explaining his investment portfolio but at no point does he mention what he's actually planning to do with the money! He's just templating some "savings plan" and saying "this is good, it works", while completely ignoring the purpose of the money he's saving.

I'm sure that his aims are valiant, but "regular joes" simply can't buy into this concept. These uber-savers simply don't seem human, they don't have any desire connections (material or philosophical). They're not "saving money to buy their XBox 360" or "saving their money to help save the whales", they're just "saving money". And average people don't buy that b/c it's not really rational, you don't save money "just because", you save money "for something".

When you're writing a blog about frugal living you have to put the goals front and center. People have to see that you have something other than just numbers on a ledger. They have to see you saving money AND spending money. Otherwise you just look like some kind of freak.

Wednesday, September 19, 2007

American economics and the USD

This whole post started with the following post on MyMoneyBlog.
Hedging Against The Dollar: Opening A Foreign Currency Bank Account vs. Buying A Currency ETF » My Money Blog

Look guys, I've mentioned this before and there are some great links already posted. The US economy has some serious issues and barring a massive war to claim vast booty and slaves, the purchasing power of the dollar will decline.

What does this mean? It means that means that more Chinese people will be able to afford the 10th generation iPod and less American people will be able to afford the same iPod. Peter Schiff pretty much nails it: as the value of the USD goes down and goods become relatively more expensive, other buyers with stronger currencies will swoop in and buy those goods.

Why is this happening? That's very complex, but here's a very simple explanation: You are fat and in debt. (same thing) You import more goods than you export and you've been doing it for years. You bring in 10 bananas each worth a dime but you're only bringing 90 cents to the deal. You then give out an IOU for the other 10 cents.

This basically means that you owe people lots of money (40% of the US national debt is foreign-held), but people aren't going to just take cash, b/c the value of that cash keeps dropping. They want stuff. They want oil, gold, food, they want services (skilled american workers), etc.

Cash is just trust. The US handed out a bunch of IOUs for cash, but they're not worth anything if nobody can cash them in for stuff. Of course, the world has been accumulating these IOUs, but they haven't been able to cash in b/c all of the American stuff is so expensive. But that's part and parcel with the whole import/export thing. For USD $100 I can buy 2 Russian programmers for 3 days or I can buy one american programmer for one hour. I can buy one bottle of "American pharmaceutical" or 10 bottles of "Indian Pharmaceutical" (both made from the same stuff).

Nobody wants to buy American stuff b/c it's too expensive; but everyone has these American IOUs that they want to cash in. Of course, everyone's in on the deal now and nobody thinks that these American IOUs are any good. So the solution is simple: the American economy will suffer until they can start paying off the debts and letting people cash in their IOUs. Again, money is just trust. It's pieces of paper or computer bytes with promises attached. The world does not trust the American economy, it does not trust that the American IOUs are worth anything. Until the dollar drops to the point where other countries can "get their money's worth" when they cash in the IOUs, then the dollar will continue to drop.

Jonathan: you said: As long as I can still buy what I need with the dollar, I don’t care if it trade 3:1 with the Euro.

But this is what you're missing, if the Euro goes 3:1 you won't be able to buy what you need with your dollars. Your salary will be the same, but the cost of the iPod will double. Your food will be more expensive as foreign markets start buying your produce with the money you owe them.

Yeah, yeah, this is happening right now on a small scale, we call it inflation. But you've just seen minor inflation, almost a side effect of the reserve banking system. Underneath all of this, the citizens of the US (whose very birth certificates back the money that is printed) are in debt to the world and they continue to live beyond their means. The US consumes more energy and gas than it can produce, while hinging its entire economy on those very resources. US labour is too expensive for all but the western european countries and manufactured goods are likewise too expensive. The only thing the US can "afford" to export is the food, but nobody else really needs the food at American prices.

When the whole thing falls, then you'll see real inflation, gas & food will suddenly cost twice as much and you won't be making any more money. Once it's fallen, you won't be able to "buy what you need with your dollars", your purchasing power will be drastically reduced. This is the cost of globalization, the world is catching up and the US is at the top of the ladder, so the only place left to go is down.

The US is the richest country in the world living a lifestyle on credit. Take all of these "credit card debt ruined my life" stories and scale that out to a whole country. That's what going to happen to the US. We're already seeing record foreclosures which means that people are being forced to sell their biggest asset/investment, in some cases their only real investment. People are skipping vacations to make extra money, they have their kids working at 16, then 15, then 13 & 12 just to keep up the pace. Elderly people are coming back to work greeter jobs at Wal-Mart and the workforce continues to churn harder and harder to keep up.

These are not the signs of prosperity, prosperous people work less not more. These are the signs of a people stretched too thin and ready to pop.

Monday, September 17, 2007

Frugal Tips from the Farm?

Found a neat link from Rather-be-shopping.Com, where he talks about his father's "neat" frugal ideas.

-He puts a brick in the back of the toilet tank...
- He puts a five gallon bucket in the shower and when it gets filled he uses the water in the bucket to water his garden..
- He has a wood burning stove and the furnace is NEVER to be turned on...

Our place has a metal farm gate which we open and close each time we leave and return home. I timed it and it takes about 30 seconds to get out of the car, close or open the gate, then return to the car. Since I leave home on the average of twice each day that is four opens/closes of the gate each day. That is 120 seconds or 2 minutes per day. Two times 350 days per year (I am not home every day) is 700 minutes or 11.7 hours that my car idles needlessly. I believe it would require 9 gallons of gas to idle that long. At $3 per gallon that is $27 per year I save by turning the the engine off when opening and closing the gate

The reply:
Wow, I don't know what to say man, I'm just kind of baffled from reading both. But maybe I have a strange sense of Frugality with a very big bent on "my time is important".

Why don't you just install a remote opener and save yourself 11.7 hours/year + part of the overall energy? You're worried about saving $27/year, I'd be worried about saving 11.7 hours/year.

Brick in the toilet? That's basically just saying "Hey my toilet uses too much water" and all things considered the brick is pretty imprecise. Why not just install a toilet that's built to use less water / flush? Then you'll save water and you'll get a correct flush every time. In fact, why not just find/build a toilet with 2 flush buttons (cleverly named #1 and #2) so that you can get a variable amount of water / flush?

The wood burning stove is only "cheaper" if he can chop the wood himself (and his time is worth very little) and he has the place to put the wood. Depending on location, electric heating may be more efficient (such as in Manitoba, Canada, land of Hydroelectric dams). Again, if he wanted to be really efficient he would move over to a high-efficiency pellet stove which is currently getting the most heat/$. A buddy of mine is involved in the manufacture of these (pellet, gas and wood stoves) and he says that the pellet ones are efficient enough that greenhouses have actually started buying them to maintain heat.

As to the "bucket in the shower", well I can't argue with that for utility. However (and this is a personal beef), I really wish that this wasn't actually efficient. I'd really like to see a day where homes had more efficient use of their own water, such as an in-home filtration unit. Right now we basically have "in" pipes and "out" pipes, so water that could be reused isn't being reused. By the same measure we could be capturing rain run-off into our own filters (if we had them) and then we wouldn't need to use as much "public water".

I mean, if you have a roof and a lawn that are about the same size, then every time it rains, you could actually "water" twice. However, right now we're just sending that extra water into the storm sewers. We already have eaves, if we could pipe the stuff into a reservoir, then we can water the lawn two days later using the water we were just going to send away. If we wanted to get fancy, we could run the bath water through the filters and send part down the sewers and part into the reservoir, so now it costs less to water the plants and the lawn.

Don't get me wrong, you and your father are definitely "frugal", but it's worth looking at the old "penny-wise / pound-foolish" deal. You spent 250 words talking about conserving $27 in gas; but didn't seem to care that you were "wasting" nearly 12 hours of your time. At what point do we start talking about the efficiency wonders of driving a manual transmission and when do we finally cave in and say "I was sick of trying to save small money, so I just bought a Toyota Prius (or other Toyota Hybrid) and decided to save big money for the rest of the life of the car". These are all neat ways to "squeak out" a little more efficiency, but the tips are actually just capitalizing on the poorly-designed inefficiencies of the existing systems.

Why not just make a better system?

Thursday, September 6, 2007

10 Clichés to live by

Here's quick link to some good material:
10 Clichés to live by :: Discursive Monologue :: Blog Archive

I don't think that I could describe my existence as eloquently.

#2 (Pick your battles) has been a long-term challenge for me, I'm still learning to pick my battles. Of course, being a perfectionist is the direct cause of the difficulty.

#4 (Don't be a hog) has also been a big issue on my list. Which is funny b/c I think that the whole "global warming" deal is just bad math and I firmly believe that most "environmentalists" are pretty clueless (the whole "save endangered species, but only if they're cute or useful" thing). I'm just a follower of the mentality b/c it's simpler and fairer :) This one paragraph starkly reminds me of Violent Acres and her Americans are Fat because they're broke concept. I live in Canada, but my region (Edmonton) is the land of the truck, with city-slickers driving F250s to and from work. We're one of the least dense major north american cities which means that we spend lots of resources just getting around town.

#8 (Never stop learning) is one of my personal rallying calls and one of the reasons I love to blog. You learn a lot of stuff reading blogs, writing blogs and jockeying back and forth in the comments.

#10 (Don’t do something that you will regret) is probably the strangest but most simply useful piece of advice. Consider the whole is the key component that's generally just missed. We makes lots of decisions without regarding as much relevant information as we can. So you see people who take up sub-prime mortgages and really don't know that won't be able to afford them when interest rates go up. You see people start up unhealthy diets or go to the gym to lift weights and then do it completely wrong (i.e.: dangerously). You see smart people putting their RRSP investments in all of the wrong things. You get people who walk into the Welfare office complaining that they can't buy milk for their kids while they hold an over-priced pop that they just bought in lobby vending maching (true story).

People make all of these bad decisions, sometimes by lack of planning and sometimes just by default (I have nothing better to do, guess I should...), and then they spend time lamenting all of their failed actions and "missed opportunities". Yeah, don't do shit that you know you'll regret; you'll probably end up regretting enough stuff already, why aggravate the situation?