Suze Orman's Recession Rescue Plan

If you are one of those who follow Oprah's daily TV show, you might have caught Oprah's favorite financial guru, Suze Orman expounding on her Five-Step Recession Rescue Plan. Her five-step plan is simple but requires a fair measure of discipline:

1. Learn to live on half what you're used to and save the other half.


2. Stash your cash, especially since credit card companies are becoming less generous.


3. Make the Federal Stimulus Package work for you.


4. Make your home affordable.


5. Look at what you have and not what you had.

In other words, Suze is saying the things I have practiced all my life: be frugal. Save. Plan for unforeseen circumstances, e.g., losing one's job or getting a pay cut.

Suze advocates a 8-month emergency fund. I am planning for 12 months. She says, "no credit card usage, everybody, Pay for things in cash." As I explained in an earlier blog, I use credit card to leverage a monthly interest float and get rewards points. But Suze has a point: if you aren't disciplined enough to budget with a credit card and keep track of your daily credit card expenses, you are better off using cold, hard cash.

Balancing Frugality with Healthy Living

Many of my colleagues and friends have asked me how I reconcile my frugality with my desire to maintain a healthy living lifestyle. Isn't it the case, I get asked, that manufacturer coupons are usually for processed foods that are laden with artificial colorings, preservatives or flavorings? I concede that many of the manufacturer coupons in the Sunday newspaper inserts are for processed food that I don't care much about. But it is possible to live frugally and healthily. Here's how I do it:

• I avoid all processed foods with artificial colorings, flavorings, preservatives, as well as artificial stuff like trans fat, hormones, etc. That means most of the coupons in the Sunday newspapers are out.
  


• I used to love red meat but gave it up after my doctor diagnosed me with high cholesterol several years ago. If you think this is extreme, latest medical research points to a whole host of health problems associated with consuming a diet that is rich in red meat.
  


• As far as possible, I eat fresh vegetables, meat, nuts, chicken and fish. Rather than buying frozen prepared meals, I buy the ingredients and cook them myself. I buy organic produce, meat, milk and eggs from my two favorite shopping destinations: Trader Joe's and Whole Foods.


• At both Trader Joe's and Whole Foods, I buy their store brands (Trader Joe's and the "365" brand for Whole Foods). I find Trader Joe's private label products meet or even exceed commercial brands. For example, I absolutely love Trader Joe's Organic Concord Grape Jelly, which tastes so much better and costs much less than competing products (e.g., Cascadian Farm). Similarly, Whole Food's 365 brand Organic Morning O's are tasty and easy on the wallet, compared to competing products from Cascadian Farm, Kashi, etc.


• Wherever possible, I use manufacturer coupons to purchase organic products. If I can combine manufacturer coupons with sales, that's even better. For example, I use Organic Valley's manufacturer coupons from Mambo Sprouts, Whole Foods' Whole Deals coupon booklets and Organic Valley's coupon page to purchase Organic Valley products (milk, eggs, butter, etc.). I buy my Organic Valley eggs and milk at Whole Foods using Organic Valley coupons from Mambo Sprouts printed and online coupons booklets.
  

More Reviews on the new Honda Insight hybrid

Here are more reviews and articles on the new Honda Insight hybrid:

• Wall Street Journal: Honda's New Insight Targets the Prius


• New York Times: A New Hybrid Sprouts in the Shadow of the Prius


• New York Times: New Honda Takes on the Prius
  

I have also blogged about my interest in the Honda Insight: Honda Insight Launch

Credit Cards & Frugal Living

Credit cards issuers have gotten a very bad rap for their aggressive tactics. Even President Obama has gotten into the act, pressuring credit card issuers on rates. As far as I am concerned, credit cards are like guns, i.e., you can either use them to your benefit or abuse them at your peril. In the industry parlance, I am what the credit card issuers call a "deadbeat," i.e., someone who pays the entire monthly credit card bill on time, i.e., I do not carry a monthly balance. In my opinion, carrying a credit card balance is like entering Hotel California, you can enter but you can't leave :-)

Having said that, let me share my ground rules on my credit card usage:

1. I draw up a monthly budget for my expenses, allocating funds for recurring expenses (e.g., utility bills, groceries, etc.) and giving myself a reasonable allowance for unexpected expenses.


2. I divide up my monthly income to cover my expenses. If I don't have enough funds for a specific expense, I either postpone that expense until I have saved enough funds, or I cut my discretionary spending to cover that.


3. I keep my funds in my ING online high yield savings and use my credit cards to pay those bills.


4. In other words, my credit cards function like a monthly float, allowing me to earn some interest, albeit a pittance as a result of the Fed's generous bailouts to banks.


5. I keep track of all my daily credit card expenses in my Excel spreadsheet. If I made any unexpected credit card expense on a specific day, I immediately readjust my monthly budget in my Excel spreadsheet accordingly. This way, I never spend more than what I allocate. In other words, I have trained myself to treat my credit cards as if they were like cash. It requires discipline and over the years I have gotten better at it.
   


6. When the time comes to pay my monthly credit bills, I transfer the funds from my ING online high yield savings to my ING Electric Orange checking account and arrange for payment of my credit cards.


7. This way, I not only avoid carrying cash but also earn a monthly interest float and also the purchase protection that credit cards issuers offer.


8. In addition, I use only fee-free premium credit cards, aka rewards cards. I avoid all credit cards that require me to pay an annual fee or credit cards with no rewards. In addition, I have no use for credit cards with low interest rates, since I pay off my monthly credit card bill in full.
   


9. Currently, I am using Citibank's Diamond Preferred Mastercard with Thank You Rewards and American Express' Blue Card with Membership Rewards. My Citibank Diamond Preferred Mastercard is my principal credit card. I normally redeem the Thank You points for statement credit. For a long time, I used this card regularly because it offered me 5 Thank You points for gas, drugstores and supermarkets. This would mean that I not only earn interest on my monthly float, I also get regular and bonus points that I redeem for statement credit, thereby lowering my monthly credit bill even further.
   


10. A few years ago, Citibank reduced that to double Thank You points for those categories. Early this year, Citibank eliminated those bonus points. If I get a better credit card deal, I would definitely consider switching to a different credit card.


11. I used to have a AAA Visa with Gas Rebate (then issued by MBNA). After Bank of America took over and got rid of the gas rebates, I stopped using my card and last year Bank of America unilaterally closed that card without notifying me. I only found out when I did a routine quarterly check on all my various dormant account and discovered that Bank of America closed my AAA credit card.


12. My Amex Blue card is my oldest credit card, dating all the way from my college days. This card started out as an Amex Blue credit card for students that Amex upgraded to a standard card once I graduated from college. I keep it alive to maintain my FICO credit score, since a portion of a person's FICO score is determined by length of credit history. After my bad experience with Bank of America closing my AAA credit card unilaterally without prior notice, I use my Amex Blue card once or twice a month to keep it alive.

If you have any good credit card tips, please let me know.

Buy now or later? Planning for Summer Travel

If you are one of those who are planning a vacation this summer and waiting for the prices of airfares to drop, you might be interested in the discussion of buying strategies in this New York Times' Practical Traveler column, Airfare Debate: Buy Now or Wait? This article discusses the pros and cons of buying now or waiting, tracking fares at different online sites, and offers these words of advice:

But predicting airfares is a bit like forecasting the weather. Even with the most sophisticated technology, you can still be way off. Ultimately, travelers must decide for themselves when to push the buy button.

For my earlier discussions:
Orbitz's New Marketing Tactic: Full Disclosure of Actual Pricing
Frugal Traveling Strategies

Orbitz's New Marketing Tactic: Full Disclosure of Actual Pricing

Online travel agency Orbitz.com announced that it would start including all taxes and fees in its initial price display for hotels on Orbitz.com instead of just the base rate, in an attempt to stimulate loyalty among price-sensitive customers amid economic recession (source: Reuters).

I have shared my views on the online travel booking websites that I frequently use: Frugal Traveling Strategies

Recycling Your Tech Stuff

Are you one of those who have accumulated all kinds of electronic gadgets and equipment that have become obsolete and now gathering dust somewhere around your home? Why not recycle them? You could get a tax write-off or even cold hard cash. This Computerworld article, Recycle Your Tech Gear: It's Easier Than You Think explains to you the ins and outs of tech recycling and how you could even get some cash from your old stuff.

Thift Nation

This week's Time Magazine devotes its attention on a topic that is the subject of this blog: thrift and frugality. Its central theme is that Americans are reacting to the great recession of 2008 with "big changes in attitudes and spending habits, but they're not giving up hope." Here's what you can expect to read and ponder over:

• The lead article, The Great Recession: America Becomes a Thrift Nation discusses how Americans are rediscovering the virtue of frugality as a means of coping with the economic downturn.


• Thrift Nation profiles 17 individuals/families and how they are coping with the economic downturn.


• American Thrift: A Time Poll discusses the results of 1,000 Americans who were polled about "how they're feeling, where they're scrimping and what they see in the road ahead."

New Car Buying Tips & Avoiding Car Dealer Tricks

The website carbuyingtips.com gives lots of good advice, strategies, and tactics for buying a car and avoiding being taken for a ride by the dealer. It teaches you about how dealers squeeze money from car buyers and how you, as a buyer can save by understanding the strategies and tactics used by dealers.

Toyota Trims Price of Prius to compete with Honda's Insight Hybrid

Toyota has decided to lower the prices of their 2010 Prius to compete with Honda's new Insight hybrid, which will be officially launched on Wednesday, April 22, 2009. This is good news for those looking to save money on new hybrids.

See also my blog posting yesterday: Honda Insight launch

Honda Insight Launch

I received a mailing from my local Honda dealer to an invitation only launch of the new Honda Insight hybrid this Wednesday evening (Apr 22). Unfortunately, I won't be able to make it, since I have another appointment at that time. Moreover, as an early adopter who bought one of the earlier Honda Fit to arrive in the U.S. 3 years ago (April 2006), I am still ecstatic by my Honda Fit, which is a frugal yet chic/sporty car. When I have the time, I'll blog about my experiences after having this car for 3 years now. Anyway, for those interested in the new Honda Insight hybrid, here are links to information to satisfy your curiosity:

• Honda's official Insight page
• Honda Insight's Pricing & EPA Data
• Honda Insight's Specifications & Features
• Temple of VTEC's Jeff Palmer's Test Drive of the Honda Insight

Other Useful Information from Honda's Official Media Kit:

• Honda Insight's Overview
  
• Honda Insight's Concept & Background
  
• Honda Insight's Environmental Performance
  
• Honda Insight's Powertrain
• Honda Insight's Safety

I'd be interested in any comments/feedback from any early adopter who has bought a production model of the Insight.

Trader Joe's Fan Sites

As a frugal connoisseur, I am eternally grateful for Trader Joe's, my favorite food destination for amazing, delectable yet cheap private label gourmet treats. Unlike other grocery stores and supermarkets, Trader Joe's website is very spartan. Enter fan sites, which can be a useful source of information:

• Trader Joe's Twitter: Tweets by and for Trader Joe's aficionados. This is a very active tweet community. I find it especially useful to get daily fix/updates about new products, reviews, etc.


• Trader Joe's Fan: An active fan site with reviews, recipes, etc. Unfortunately, its twitter page isn't updated as reguarly :-(
  


• Tracking Trader Joe's: Outdated: This blog started out well but is no longer maintained/updated. What a pity.
  

A Golden Age for Cheapskates

Today's Washington Post's article, A Golden Age for Cheapskates and its companion piece, Deals are Just A Click Away both speak volumes about how more and more Americans are rediscovering the joys of frugality in this depressed economy. Landing freebies has become the national pastime and businesses are taking notice. As the main article explains:

The recession has emboldened a certain kind of consumer: The mooch. With dwindling retirement savings, a higher cost of living and wobbly job market, they don't just want discounts on items they used to pay full price for without a second thought. They want freebies -- meals, magazine subscriptions, toiletries, you name it. They scour the Internet, make clever use of coupons or simply take advantage of struggling shops and restaurants that are increasingly giving away free things to lure customers.

"One of the things that makes us feel smart is getting something for free," said Matt Wallaert, a behavioral psychologist at JustThrive.com, a free online personal financial advisory service for people in their 20s and 30s. "During a recession, frugal is not a bad word. It's a good word. This is something that people are supposed to be doing. So people think, 'I've got to get on board.' They're searching for free more than ever because it's a symbol of financial savviness."
...
Another sign that consumers are increasingly searching for free items is the growing popularity of coupons. Coupon redemption on consumer packaged goods increased 16.7 percent in the fourth quarter of 2008 from the same quarter a year earlier, according to Valassis, a media and marketing services company. Savvy shoppers know that using coupons on days when stores have double or triple coupon promotions can lead to free goods.

Frugal Living & Managing Risk, IV

In response to the e-mails that I received with regard to my "Frugal Living & Managing Risk" series:

1. Aren't you a bit too conservative in your strategy? How would you ensure that you do not outlive your retirement savings?
   This is a good question. What most people forget is that stocks are inherently risky investments. There is no such thing as risk-free stocks. While stocks offer the potential of good returns, I would also argue that stocks carry significant risks that people ignore at their own peril. Those who focus on the fact that the long term average return of stocks beat other investments often forget that historical figures indicative of future performance. When investments dropped 30%-40% in 2008, it is really painful and will take a long time to recover. The stock market cannot guarantee an annual 10%-20% return to make up for a 30%-40% drop in 2008. Hence, I stand by my decision to invest in stable-value funds, a decision I made in 2006.


2. Would you ever invest in stocks or mutual/index funds?
   I don't rule out investing in stocks, index funds or mutual funds. My strategy comprises keeping my 401K and emergency fund in conservative investments (stable value funds for my 401K and high yield savings/CDs for emergency fund). Once I fully fund my 401K (to its annual tax-free limit) and emergency funds (to 1 year's worth of expenses), then I would invest in stocks, index funds, mutual funds, etc.., which I would consider as my "extra investments." If I lose any money in my "extra investments," the losses would be limited to the "extra" money that I could afford to lose. Retirement and emergency funds are money that I cannot afford to lose. In other words, I have deliberately adopted a conservative investment strategy that requires me to save more, rather than to take higher risks. The 2008 financial crash is a reminder to us that an aggressive investment strategy is no antidote to inadequate savings.
   

Previous postings in this series:
Frugal Living & Managing Risk, I
Frugal Living & Managing Risk, II
Frugal Living & Managing Risk, III

Frugal Living & Compact Fluorescent Lamps (CFLs)

Compact fluorescent lamps (CFLs) have been in the news lately. Columnist George F. Will wrote a recent op-ed piece on CFLs in the Washington Post (April 2, 2009). A week earlier, the New York Times discussed the challenges of using CFLs in an article, Do New Bulbs Save Money If They Don't Work? Depending on who you're talking to, CFLs are either praised or villified.

I have been using CFLs in my home since 2003 and haven't encountered the problems that are highlighted in the Washington Post and New York Times articles. Here's how I use CFLs in my house:

• CFLs are not meant to be used in areas that are exposed to the elements outside one's house. Neither would they work work in temperatures below freezing. Extreme moisture from the rain and cold weather would significantly degrade the built-in fragile electronic ballast that lights a typical CFL, thereby shortening its lifespan. Hence, I continue to use incadescent lamps outside my house.


• Standard CFLs do not work in dimmers. As I am too frugal to buy the more expensive CFLs that would work with a dimmer, I continue to use incadescent bulbs in fixtures with dimmers.


• I use CFLs in the kitchen, in table lamps and floor lamps in living areas, and in the bathroom. Notwithstanding the advice not to use CFLs in three-way floor lamps, I have not had any problems using CFLs in the three-way floor lamps that I bought from Target.
  


• I have been using GE CFLs exclusively (no, I don't work for GE). GE CFLs are typically more expensive than store-brand CFLs from Wal-Mart, Home Depot, etc. I buy GE CFLs when they are on sale at Target and using manufacturer coupons to lower the price. I stocked up on GE CFLs when I combined the then $2.00 off manufacturer coupons (no longer available now) with Target's sale on their buy two get one free pack of CFLs a few years ago. I bought enough CFLs then to last for a long, long time.


• The GE CFLs that I have been using last any where from 3 to 4 years. I never had any CFL failing before 3 years. So long as I do not use them in enclosed fixtures (where temperature in the electronic ballast could build up and shorten its lifespan) or in outdoor fixtures (where rain and extreme cold would likewise shorten the ballast's lifespan), I see no reason why CFLs wouldn't last their advertised lifespan.
  


• I think more could be done to educate people on how to use CFLs. CFLs are not always appropriate for all fixtures and locations. I am not sure whether labelling is the solution, since most folks don't read the fine print.


• As for the color, I haven't had any problems with color. Most complaints about the color stem from a misunderstanding about color temperature of CFLs. Here is how color temperature works. Color temperature is measured in Kelvins (K). The lower the number (2700K), the yellower the color. The higher the number (6000K), the bluer the color.
  

1. Standard incadescent "warm bright" color: 2700K-3000K


2. Cool white color: 3500K-4100K


3. Standard white fluorescent color: 5000-6500K
   

• I have CFLs that are 3000K-3500K. At 2500K, they almost replicate the warm bright color of incadescent bulbs. I think the problem lies in the fact that most CFLs do not come labelled with their color temperature. One has to do some sleuthing over the internet.
  


• As for the question of mercury, I have always recycled my used CFLs. For a while, I recycled my CFLs through my employer, which has a contract to recycle the fluorescent tubes used in the office. Although I haven't had the occasion to do so, I am happy that Ikea, Home Depot and WalMart have drop-off CFL recycling programs. I may take advantage of these opportunities.

FREE OFFER: Home Depot is offering a free CFL (available in-store only) on Sunday, April 19, 2009.

For more information:

• Tips for using Compact Flourescent Bulbs (via New York Times)
• Energy Star's CFL Buying Guide
  

PineCone Research Sign-up Link (won't last long)

PineCone Research is looking for new members. Here's the elusive sign-up link (Warning: won't last long).

See my earlier blog post about PineCone Research and other paid survey sites.

(via mymoneyblog.com)

Free access to Wall Street Journal via iPhone app

If you are a regular reader of the Wall Street Journal (whether print or online), you would know that the Wall Street Journal, unlike its competitors, charges for access to digital/online content. There's a way to save money by accessing WSJ's digital content for free via WSJ's iPhone app. Find out more in Wired.com Blog's article, Wall Street Journal iPhone App Sets Content Free. If you own an iPhone, this could be a way to save money accessing WSJ's digital content.

UPDATE: New York Time's Frugal Traveler Column on Netbooks

After I shared my own experiences with my newly acquired netbook, which has displaced my heavier ThinkPad R52 to become my principal travel computer (and companion), lo and behold, the New York Times' Frugal Traveler Column agrees with me in its latest column (published April 15, 2009): Lighter on Laps and Wallets.

Frugal Traveling Strategies

I am proud to say that I have always searched for bargains when I travel, whether for business or pleasure. Over the years, I have assembled my own favorites websites for hunting bargain deals:

• Mobissimo.com (which bills itself as the world's most comprehensive travel search engine. I go to this site when I need to search for bargain deals for international travel)


• Farecast.com (an airfare prediction service -- very useful to gauge airfare prices for pleasure travel, when your travel plans are flexible)
  


• Kayak.com (another travel search engine aggregator that I visit)


• Travelocity.com (an old standby -- I use this site to double check for bargains)


• Orbitz.com (another old standby -- I use this site to double check for bargains)

After checking these sites, I also visit the airlines' and hotels' own websites, in case they have exclusive deals. Whenever possible, I try to book through the airlines' own sites to avoid the booking fee. Sometimes this is not possible (e.g., I have found cheap international airfares on Mobissimo.com that were not available on the airlines' own sites).

In addition, you should also check out PCMag.com's 10 Sites For Cheap Flights, which provides additional sites and comments that you could use to sniff out cheap air fares.

Frugal Living: Online Coupons & Coupon Codes Sites

Here are additional online coupons & coupon codes sites that I visit regularly:

• Organic Valley: If you, like me, love Organic Valley products, then you should bookmark and visit Organic Valley's coupon page regularly to print out coupons for their organic products (redeemable at Whole Foods, etc.).


• Fatwallet.com: The granddaddy of coupon codes websites. This is the very first site I visited. It's still the first site I visit before I surf other sites for coupon codes.
  


• CouponCode.com: One of the many sites I visit when I'm hunting for coupon codes for online purchases.


• Retailmenot.com: Another good coupon codes site that I check out regularly.

There's another site, CouponMom.com that may interest you. I have not personally checked out or used this site, since I don't do that much grocery shopping for conventional products (my personal choice). If you have used it, please feel free to share your experiences.

As someone who buys organic groceries as far as possible, I tend to get my grocery coupons from MamboSprouts and Whole Foods' Whole Deals coupon booklet. As far as I am concerned, I can be frugal and eat wholesomely by combining coupons for organic and natural food products with sales at my local Whole Foods store, as well as shopping at my local Trader Joe's. Using coupons doesn't have to result in eating food with artificial colorings, flavorings or preservatives. I may be frugal but not at the expense of my health.

For further discussion, please see my earlier post: Using Coupons

The Netbook as a Frugal Replacement for Laptops? My Netbook Experiences

I have always been a mobile computing person. I never owned a desktop. My first laptop was a ThinkPad 755 that I bought in 1994. Since then, I have always been a loyal ThinkPad user. My current ThinkPad, a ThinkPad R52that I bought in May 2005 almost 4 years ago, has traveled with me as I used it for work and pleasure. I love my ThinkPad, especially its fabulous keyboard and its signature red eraserhead trackpoint. The ThinkPad keyboard is as good, if not better than many desktop keyboards. Unfortunately, I have grown weary of toting it when I travel for business. Truth be told, lugging along 8 lbs (including power supply) in a shoulder bag is beginning to wear me down.


Enter a new game changer, the netbook, which has exponentially exploded in popularity around the second half of 2008. If you have no idea what I am talking about, the New York Times technology columnist David Pogue has written an excellent column on netbooks: When Laptops Go Light. I got my first attempt at evaluating a physical netbook when I visited my local Circuit City's liquidation sale in February 2009. I tried the Lenovo Ideapad S10 Netbook and the HP Mini Netbook. I found both netbooks very attractive and more importantly, really compact and light. I finally settled for the Ideapad S10 instead of the HP Mini Netbook because of two reasons: (1) price: the Ideapad S10 (at $380.oo inclusive of sales tax) was about $80.00 cheaper, and more importantly, (2) I kept missing the unintuitive (at least for me) mouse buttons that are mounted on the left and right of the touchpad (which was a deal-killer for me).

I have now used the Ideapad S10 for two months. Here are my thoughts. First, notwithstanding its small size, the IdeaPad is more advanced than my aging ThinkPad R52. Specifically, my ThinkPad R52only has 512 MB of RAM, a 80 GB hard drive that is showing its age, no webcam or ExpressCard slot. Because of its puny RAM, which was ample in 2005 but small by today's standards, my ThinkPad R52was always using virtual RAM on the hard drive, thereby slowing down many of today's memory-hungry programs. By contrast, the Ideapad S10, which is running Windows XP Home SP3, has 1 GB of RAM and a roomy 160 GB hard drive, a 1.3 megapixel webcam and an express card. Ironically, programs run faster on my netbook, since the 1 GB RAM meant that programs need not access virtual memory on the hard drive. The 10 inch screen on my Ideapad S10 netbook was surprisingly sharp, crisp and easy to read, with its LCD backlight (compared with the 14 inch screen on my ThinkPad R52, with a fluorescent backlight that has gradually dimmed over the 4-year lifespan). The Ideapad S10's 2.7 lb weight means that it is truly a delight to lug around compared with my heavier ThinkPad.

Enough about the positives. I have only one complaint: the 92% size keyboard. I confess that I keep hitting the wrong keys, having grown used to the standard size ThinkPad R52 keyboard. This is no big deal, since I use my ThinkPad R52 for typing intensive work, while my Ideapad S10 becomes my traveling partner, to be used for giving presentations and doing web-based tasks, e.g., web browsing, checking e-mail, using Skype, etc. The lack of an optical drive (my ThinkPad comes with a removable DVD burner) is no deal breaker either, since I am a heavy user of Google Docs and use portable flash drives to move software and data files around. Moreover, I rarely watch movies on DVDs, turning instead to watching streaming movies and tv shows on hulu.com and boxee.tv. My Ideapad S10 doesn't blink an eye when it streams video from hulu.com and boxee.tv.

Compared to the prices of current ThinkPad models, I truly think that my Ideapad S10 is really value for money. As I grow older, I no longer wish to lug along a heavier laptop. If my ThinkPad R52 were to go off to laptop heaven tomorrow, I will not buy another ThinkPad as a replacement. Instead, I'll just get an external wireless keyboard to use with my Ideapad S10. While it is true that the first generation of netbooks made too many compromises to be useful as mainstream laptop replacements, I find the current and forthcoming models of netbooks are full of features found in more expensive laptops (minus the weight), such that there is no compelling reason to buy a laptop today for general work, unless one is looking for a gaming machine or doing graphics intensive work. Besides, netbooks are priced so competitively that a frugal person like me can buy one and an external keyboard, and go away a happy camper.

Update: American Consumer Opinion (ACOP)

I am happy to report that I received a check for $4.00 from American Consumer Opinion (ACOP) this afternoon for a survey that I recently completed For my review/opinion on paid survey, please see my earlier blog posting. While it is true that no one has ever gotten rich from doing paid surveys, it is a useful way of earning a few dollars here and there when you're taking a break and have some time to spare. My ground rules are as follows:

• I don't do paid surveys for online draws no matter how attractive the prize may be. My time is valuable and I want to be compensated for giving up my time to complete the surveys.


• The only unpaid surveys that I do are screener surveys that gather demographic data as a prequalification to paid surveys.
  


• At this moment, the only paid surveys that I do are Pinecone Research, American Consumer Opinion (ACOP) and SurveySavvy.com.
  

Austere Times? Perfect

I'm excited by today's New York Times' article, Austere Times? Perfect, which discusses "a subset of savers" who "are reducing costs not just with purpose, but with relish. These are the gleefully frugal." In other words, people like me. Here are some excerpts from the article:

“I’m enjoying this,” said Becky Martin, 52, who has cut up her 10 credit cards, borrows movies from the library instead of renting them, and grows her own fruits and vegetables — even though her family is comfortable.

Ms. Martin is a real estate investor, her husband is a plastic surgeon, and their home sits on the 12th hole of a Cincinnati country club.

“It’s a chance to pass along the frugal lifestyle that my mother gave to me,” she says, noting that her sensibilities seem to be rubbing off not just on her sons, but also on her husband. “We’re on the same page financially for the first time in years, and it’s fabulous.”

...

“It’s huge,” said Martha Olney, an economics professor at the University of California, Berkeley, who specializes in the Great Depression, consumerism and indebtedness. The rapid reversal is even more remarkable, she said, because in recessions consumers usually save less money. Not this time. “It implies a re-emergence of thrift as a value,” she said.

The gleefully frugal happily seek new ways to economize and take pride in outsaving the Joneses. The mantra is cut, cut, cut — magazine and cable subscriptions, credit cards, fancy coffee drinks and your own hair.

...

Indeed, the recession has given penny pinchers — once closeted in a society that valued what one had, not what one saved — license to speak up.

“There is no joy in other people suffering, but this validates the choices I’ve made,” said Vicki Robin, author of “Your Money or Your Life,” a guide to saving money that was a best seller in the 1990s and was re-released last year.

That's right. In the past, my friends and colleagues poked fun at my frugality. But now, it feels great that people are asking me for advice on how to live frugally.

Like the folks in the article, I live frugally, but not cheaply. I shop at Trader Joe's and Whole Foods, but have no compunction about using coupons from Mambo Sprouts and Whole Food's The Whole Deal Value Guide to buy organic food on the cheap. I recycle my unneeded stuff on, and have gotten perfectly usable stuff from Freecycle. I love yard sales and hunting for bargains on Craigslist. In short, I am a sensible frugalogist.

Frugal Living & Managing Risk, III

Two days ago, I wrote about the issue of long term risk and how two academics are suggesting that the long run may be riskier than the short run. Yesterday, I shared my own experiences with balancing my goal of frugal living and risk. Today, I'll discuss my understanding of risk and how this influences my savings and investment strategies.

Managing risk is a big topic in many financial planning magazines, sites and blogs. I am particularly intrigued by the lead article in April 2009 issue of Money Magazine, The 7 New Rules of Financial Security, which seeks to "examine the flaws in the conventional wisdom" about money management and "propose some new rules for the road ahead." Here are the 7 Rules, as excerpted from the online article:

RULE 1: RISK
Old Thinking: If you can stomach the ups and downs that come with risk, you'll be rewarded.
New Rule: Risk isn't about your stomach. It's about making or missing an important goal.

RULE 2: CASH
Old Thinking: Keeping enough money in ultrasafe accounts to cover life's emergencies, but no more
New Rule: Rely more on cash can rescue you in an "asset emergency."

RULE 3: HUMAN CAPITAL
Old Thinking: The longer your time horizon, the more stocks you should own.
New Rule: Time isn't everything. You must also consider your earnings potential.

RULE 4: BORROWING
Old Thinking: Borrowing sensibly is a good way to build wealth.
New Rule: Borrow cautiously. You have to worry about the other guy's debt too.

RULE 5: HOUSING
Old Thinking: You can expect your house to appreciate handsomely over the long run.
New Rule: Your home won't make you rich. But it is an important savings tool.

RULE 6: DIVERSIFICATION
Old Thinking: A diversified portfolio lowers your risk.
New Rule: Diversification won't always save you - and you need more of it than you think.

RULE 7: RETIREMENT
Old Thinking: Retiring early is a prize.
New Rule: Retiring early is a problem.

Like the Money magazine article, I have also articulated my own rules for frugal living and managing risk. As I mentioned in Part II, my frugal nature and understanding of risk management have been shaped by the collapse of my parents' finances in the 1980-1982 recession. My dad was gungho and wanted to build up the family's financial wealth in a get-rick-quick approach by putting 100% of the family's investments in aggressive growth stocks. My family middle-class wealth was wiped out by the 1980 recession, and my parents have been very cautious ever since. Unlike some of my uncles and aunts, who lost a huge chunk of their investments in the 2008 crash, my parents, now comfortably retired, actually came out unscatched, since the bulk of their investments are in FDIC-insured CDs and high yield savings.

My own views for managing risks are as follow:

1. My overriding life goal is to live frugally and save sufficiently for my retirement especially since I no longer have the safety net of a traditional defined-pension.


2. I do not count on job security and work on the assumption that I can be laid off any time. In view of the deep-seated nature of the 2008 recession, I expect that I will take longer than normal to get a new job or may have to accept a job with lower pay and benefits.


3. My views on risk management are shaped by #1 and #2 above. If I know that my own job is not secure, then I should not take on unnecessary debt and make risky moves.


4. I argue that traditional financial planning advice assumes job security, so that one could ride out the swings in one's stocks and property investments by relying on one's regular salary. But what if there is a triple whammy: huge losses in stocks, property values and jobs?


5. First, I manage my risk by having a sufficient emergency fund in case I am laid off tomorrow. My goal is to have an emergency fund that is sufficient to cover 12 months' worth of expenses (much higher than the 6-9 months advocated by financial planning experts, who in my opinion, never anticipated the Great Recession of 2008). As I mentioned previously, I keep my emergency fund in an HSBC High Yield Online Savings. While I'm not happy about an annual interest rate of 1.65%, the main goal of my emergency account is liquidity.


6. Second, I manage my risk by investing my 401k in a stable value fund that is offered by my plan administrator. I contribute the maximum amount to get the employer matching contributions. As far as I am concerned, this is free money that my employer is giving me. Management is discussing the possibility of temporarily ending the employer match, in addition to other options like pay freeze, etc. Hence, the preservation of principal is important. I don't mind a 5% compound interest on my retirement investment, rather than seeing a 40%-50% plunge that my colleagues have seen, when they invested aggressively with the goal of early retirement.


7. Third, I manage my risk by living frugally and not taking on unnecessary debt. The only debt I have is a 30-year fixed mortgage on my home and student loans. I have no credit card debt, as I pay off the balance in full every month. I'll blog more about my credit card strategies in a future post. I have no car loan, since I bought my car with cash. In other words, if I want something, e.g., a car, I save up in full and then go out to buy the car. This is not just being frugal on my part, but it also forces me to think whether I truly need something, thereby avoiding impulse purchases that I would regret later.


8. Finally, I manage risk by investing cautiously. At this moment, I put my money in high-yield online savings and online CDs. As I mentioned yesterday, I would rather be the cautious and plodding tortoise that wins the race rather than the overconfident high speed hare that falls asleep and is left behind.
   

Frugal Living & Managing Risk, II

Yesterday, I wrote about the issue of long term risk and how two academics are suggesting that the long run may be riskier than the short run. My own, decidedly non-academic views are shaped primarily by my parents' experiences in the 1980-1982 recession. My dad decided to invest 100% of the family emergency's fund in aggressive growth stocks. Not surprisingly, the 1980-1982 recession took a toll on my family's emergency fund. I remembered my parents talking about it and my mom grumbling about how the family lost at least $20,000, if not more. That was a pivotal moment in my parents' financial planning, as my mom decided that all future investments would be in FDIC-guaranteed CDs and bank instruments.

My parents' 1980s financial turmoil struck a nerve in me. I was in elementary school at that time and my brothers and I had to make significant financial sacrifices. It was my first introduction to frugal living and something that really made a significant impact on me. When I finished graduate school and started working in 2002, life was great. Pay was good and I opened my 401k with a 50-50 (stocks/bonds) mix. The stock market shot through the roof and my quarterly statements look great. However, some time in 2006 I was beginning to feel uneasy. I thought that the property bubble was unsustainable, especially when several extended family members quit their jobs to get into the mortgage broking business because it was minting money. In mid-2006, I told my 401k administrator to switch my entire retirement holdings to a stable-value fund. That's right. Everyone thought I was out of my mind. Inflation would out-run the guaranteed interest. I was in my 30s and should be able to take on greater risk. I have cousins who thought that I was losing out.

After the 2008 crash, it appears that my 2006 decision is prescient. If I had switched in 2007, I could have made even more money. But nevertheless, my retirement portfolio grows at a reasonable 4.5% pace. Hopefully AIG or whoever the insurer that is insuring my stable value fund will not go bankrupt. It really does feel good that my 401k is growing at a respectable pace (with low inflation) while my colleagues are looking at 30%-50% losses, depending on how aggressive they have invested.

I'm not saying that everyone should turn to stable-value funds. But it works for me. When I read about would-be retirees who have invested for 30-40 years and hoping to retire around this time, but now having to postpone their retirement because their 401k have dropped by 30%-40% in value, I realize that the "long run" is meaningless if you need the money now. Many of my colleagues scoffed at stable value funds, saying they are stodgy and plodding in its "stable" growth. After the 2008 crash, I realize the forgotten wisdom in the old Aesop fable of the hare and the tortoise, i.e., "slow and steady wins the race." And when I read about academics who suggest that the long run may be riskier than assumed, I think I made the right decision to opt for steady unspectacular growth that result in intact principal + reasonable growth.

In the next part, I'll discuss my understanding of risk and how this influences my savings and investment strategies.

Frugal Living & Managing Risk, I

It goes without saying that as a frugal person, I am always looking for news ways to save money, as well as receiving a good return on my savings. The dilemma that I am faced with is one that everyone, frugal or otherwise, have to contend with: balancing return and risk on one's savings. The traditional advice that investment professionals have always given is to invest in stocks in the long run because stocks have historically given the best returns over time. The 2008 financial meltdown has challenged this popular view, leading to much soul searching and a reconsideration of risk by many professionals. It appears that many folks put their blind faith in the assumption that the stock market produces positive long term growth of their retirement and other investment portfolios, notwithstanding the oft-cited disclaimer that past performance is no guarantee of future performance.

I found myself thinking about this when I was browsing the New York Times Online on Sunday, March 29 and an article, Now the Long Run Looks Riskier, Too caught my eye. In that article, Mark Hulbert challenges the conventional thinking that the stock market produces good long term returns, aqnd Hulbert cites a recent academic paper, "Are Stocks Really Less Volatile in the Long Run?" by Lubos Pastor, a finance professor at the University of Chicago Booth School of Business and Robert F. Stambaugh, a finance professor at the Wharton School of the University of Pennsylvania, who turned to Bayesian analysis, which was first articulated by an 18th century English mathematician and Presbyterian minister, Thomas Bayes to consider how the uncertainty of future outcomes affect risk. The Bayesian approach is opposite of traditional statistical methods that analyze historical data, which, as the two authors pointed out may not occur in the future. Hulbert summarizes:

Applying Bayesian techniques, the professors found that reversion to the mean isn’t powerful enough to overcome the growing uncertainty caused by other factors as the holding period grows. Specifically, they estimated that the volatility of stock market returns at the 30-year horizon is nearly one and a half times the volatility at the one-year horizon.
...
In an interview, Professor Pastor emphasized that the last two centuries could easily have been less hospitable to the United States, most likely lowering the stock market’s returns. An investor couldn’t have known in advance that the United States would win two world wars, for example, or emerge victorious from the cold war. In any case, he said, there is no guarantee that the next two centuries will be as kind to the domestic equity market as the last two.

If Pastor and Stambaugh are correct, then Americans have to rethink what they understand by risk, especially long term risk and reconsider how they plan their short and long term savings. Frugal living is not simply a question of saving every cent, but also thinking of the returns on one's frugal efforts.

In the next part, I will share my own experiences on this topic.

My 2008 Tax Filing Experiences

April 15th is just round the corner next week and if are a perennial procrastinator, this weekend is probably the best time to file your taxes. I did mine last weekend. Usually I file much earlier, but this year one of my clients took forever to give me a Form 1099 for services rendered. After what happened to Tim Geithner, one couldn't be too vigilant about getting that Form 1099 for filing.

Being the frugal person I am, I have always opted for free tax preparation and filing as far as possible. In the 1990s, that meant doing my own paper form filing. When Taxact.com offered free online tax preparation (but not filing) for standard federal returns, I took the opportunity to do my first online preparation for my 2002 taxes and filed the paper returns by hand. I did my state return the old fashioned way, by pen, calculator and paper.

At that time, Turbotax's free online tax preparation and filing service was limited to low income earners. That changed when the time came for filing my 2006 taxes. Turbotax did a deal with State Farm whereby it offered all Statefarm's customers free online preparation and filing using their deluxe package. Since I bought my homeowner's insurance from State Farm, I took advantage of this deal to do my 2006 and 2007 using Turbotax's online Deluxe option. It was a really great deal because I was able to file both my federal and state income taxes for free in 2006 and 2007. Compared to Taxact, Turbotax's Deluxe version was really a breeze to use. The layout was easy to navigate.

All good things come to an end, and this year Turbotax's offer to State Farm customers is limited to customers of State Farm Bank only. Turbotax is offering their EZ version for free, but since I have to file Schedules C & SE, I am unable to take advantage of their EZ version. As I am not a customer of State Farm Bank (I only have homeowners' insurance through State Farm Insurance), I turned back to Taxact.com, which is now offering free preparation and filing for standard federal returns without any income qualification. That is great news for me.

Going back to Taxact took a while to get used to, since Taxact's layout and menus aren't as user-friendly or intuitive as Turbotax. Nevertheless, I am grateful for the free preparation and filing service for federal tax returns and am looking forward to my $2,417 refund by direct deposit. As for my state return, I was able to take advantage of my state's free online tax filing.

If your return is uncomplicated, take advantage of Turbotax's free EZ service. However, if you, like me, have a more complicated tax return, nothing beats Taxact's free standard federal preparation and filing. It still beats doing the forms by hand. I have never tried H&R Block's Taxcut and am therefore unable to offer you any thoughts about Taxcut.

How did your tax filing go this year?

My Experiences with Online Savings Accounts

My first foray into online savings account came about when I opened an ING Direct Orange Savings account in 2004. At that time, I was in a position to put aside some money for emergency use and yields on savings and CDs at banks with brick-and-mortar branches were unattractive, to say the least. Since then, I have opened a Capital One Direct Banking Online Savings Account and a HSBC Direct Savings Account. Here are my experiences with these three products:

ING Direct:

ING Direct is my oldest online only bank account. Having had no previous experience with online only banking relationship, I opened an Orange Savings Account to see how things would work. The opening process was easy. I set up a link with my existing checking account to transfer funds, and ING Direct initiated two trial deposits to verify the link (this is also the practice for opening a HSBC Direct and Capital One Direct Banking accounts).

Since then, I have opened CDs and an Electric Orange Checking Account with ING Direct I use my Electric Orange checking account to pay my credit cards and other bills through ACH transfers (be warned that Electric Orange checking does not offer conventional paper checks). I keep the funds in my Orange Savings and transfer the required funds to my Electric Orange account just before payment is due, to maximize my interest earning potential. Hence, my collection of ING Direct accounts are for meeting my current and medium term expenses.

Compared to Capital One Direct Banking and HSBC Direct, ING Direct remains the easiest to use. The online interface is extremely user friendly and highly intuitive, even for non-techies. Fund transfers with an external checking account takes 5 working days for Orange Savings, 3 working days for Electric Orange and instantaneous between different ING Direct accounts. Hence, I always transfer money between my brick-and-mortar bank's account and the Electric Orange checking, and then transfer between Electric Orange and my Orange Savings or Orange CD. In the early 2000s, ING Direct has the best rates, but today's rates are at the low-end of online only accounts: 1.5% for Orange Savings and 0.25% for Electric Orange (for deposits up to $49,999.99).

HSBC Direct:

I opened a HSBC Direct Savings Account in 2006 to take advantage of the promotional nterest rates that HSBC Direct was offering at that time. Compared to ING Direct, HSBC Direct's online interface is more cumbersome and less intuitive. I have not tried their Online Payment account (HSBC Direct's answer to ING Direct's Electric Orange) or their Online CDs. My HSBC Direct Savings Account is designated as my emergency fund. The fact that the transfer mechanism is more cumbersome keeps me from tapping into this fund too readily. I am happy to report that I have currently saved enough to cover 12 months' worth of expenses. In view of today's prolonged recession and uncertainty in the job market, I think a year's worth of emergency savings is a necessity, since I am not sure how long I would remain unemployed if I were to be laid off. The current interest rate for savings is slightly more competitive than ING Direct: 1.65%.

Capital One:

I opened a Capital One Direct Banking Online Savings Account around the same time I opened my HSBC Direct Savings Account. Compared to ING Direct and HSBC Direct, I find that Capital One has the least intuitive and most cumbersome online interface. It took me a while to figure out how to navigate their original interface. The current interface has been redesigned and is more intuitive than the first-generation version, but it still pales compared to ING Direct's user-friendliness. Indeed, even HSBC Direct's interface is more user-friendly than Capital One's interface. Today, I no longer keep any money with Capital One for three reasons: (1) the hassle of dealing with Capital One's clumsy online interface, (2) among the three banks, Capital One has the longest hold on bank transfers, and (3) they introduced a tiered-interest rate structure, which I didn't care much for.

Astute readers might wonder why I haven't tried other high-yield savings accounts with other online only banks. I am perfectly happy with my ING Direct and HSBC Direct combination, and I see no reason to complicate matters by introducing a third online account. Indeed, I tried that with Capital One and gave up.

Using Coupons

Growing up in a middle class household, I learned about the power of coupons at an early age. My mother used to cut coupons from the Sunday newspapers and used the coupons at the local supermarkets. For a while, marketers have wondered whether coupons have a place in the 21st century, especially since the U.S. economy was booming and many Americans have high aspirational goals that were financed through debt. Using coupons seemed so passé and screams of being a cheapskate. With the collapse of the US economy in 2008 and new layoffs announced every week, the humble coupon is back in vogue. More and more folks are using coupons and even trading coupons on Freecycle, eBay and Craigslist.

I have always used coupons, even when times are good. My childhood years of being part of a family where money was tight have taught me the value of frugality and saving money wherever possible. I must confess that using coupons at grocery stores in the booming years of 2000 led to many stares, especially since I, a guy was using coupons. Often, when I am in the line, I find myself as the only guy who is using coupons. I recalled the days when I used coupons at my local Whole Foods, and not only did the cashier not know how to handle coupons, I had to endure the stares of others in the line. But those days are now long gone, since Whole Foods is promoting their in-store coupons, which you can pick up at the store entrance.

Another gripe I have is the fact that coupon products are designed for, and marketed toward women. I wouldn't be caught dead with the coupon holders that are designed on the assumption that only women use coupons. Being the frugal person I am, I stuff my coupons in an envelope that I dig out before I head to the checkout. I won't be surprised that with the economic downturn, more men are using coupons too.

The internet has also revolutionized the way I go about with coupons. I admit that I no longer buy the Sunday newspapers, when I could read all the news I wanted to know on the internet. The demise of newspaper publishers because of people like me could be the subject of another discussion, but I think newspaper publishers should come up with a new business model. Anyway, since I don't buy the Sunday newspapers but get my news online, I am also getting many of my coupons online.

I frequent two coupon websites: coupons.com (for coupons that I use at my local supermarket) and mambosprouts.com (for organic products coupons that I use at my local Whole Foods). You can select and print coupons from the privacy of your home and use them your local retailer. Mambosprouts.com also has a sign-up option for you to receive their printed coupon booklet by postal mail.

Finally, I am not an extreme coupon user, in that I don't do what some folks do, i.e., using coupons at Walgreens or CVS combined with sales and rebates to get cash back on their receipts. OK, I am a guy and I don't have that kind of patience. But printing out grocery coupons on coupons.com and mambosprouts.com is something that I can do, and it saves you money especially if you are able to plan your meals and shopping in advance.

What about you? Do you use coupons? Have you found any good coupon ideas?

My Thoughts on Paid Surveys

Today, I received a $3.00 check in the mail from Pinecone Research. Since I joined their panel in November 2008, I have completed five surveys and earned $15.00. Pinecone Research used to offer $5.00, but by the time I joined, the company reduced the compensation to $3.00 per survey. The company also offers products for sampling. My experience with Pinecone Research has been great, and I have no hesitation recommending them. Unfortunately, you have to chase the elusive sign-up links that pop up from time to time on personal finance blogs.

Other paid surveys that I participate in are: SurveySavvy.com, MySurvey.com and American Consumer Opinion. Here are my experiences with these three companies:

I haven't had much success with SurveySavvy.com, as I can't seem to land on any paid surveys with them. I don't have the patience to fill up surveys that promise sweepstakes entries. You may have better luck than me, depending on your location, gender, age, ethnicity, and salary. If you are interested, here's the sign-up link.

MySurvey.com offers points for different survey that you completed. I have done many surveys and are slowly accumulating points to redeem for cash. If you're interested, here's the sign-up link.

Since joining American Consumer Opinion at the beginning of this year, I have landed one survey that paid $4.00. They have lots of screener surveys, and I can't seem to get past these screener surveys. I am beginning to think that I may not fit the demographics of their clients. Here is the sign-up link, if you are interested. Perhaps you may fare better than me.

All the paid survey sites I mentioned above are free. There are no membership fees to join any of them. Beware of sites that require you to pay a membership fee to join. I'm not sure that they are worth their money. Worse, they could also be scams.

My Favorite Personal Finance Blogs

Everyone has his or her favorite personal finance blogs, and I am no exception. I too have my daily fix of personal finance blogs, which I have highlighted in my blogroll section. Here are my thoughts on the personal finance blogs I follow:

• My Money Blog: I first learned about this blog in a Businessweek article some years ago. I like this blog for its interesting insights and useful links, and I have learned a great deal from the articles and write-ups that Jonathan has put up over the years.


• My Open Wallet: I stumbled onto this blog by accident and have been captivated by the saga of Madame X, as she tries to matchmake fellow frugalists, shares her successes and misses, as she survives in the publishing business in New York City. Not to be missed are her stories about her childhood and her parents' financial struggles.


• Boston's Gal Open Wallet chronicles another mid-life blogger as she watches her spending and shares her insights. I like this site for the articles from various news media sources, and the links to various personal finance stories.


• Single Ma's Fabulous Financials is the brainchild of a witty single mother with a spunky daughter who transformed her life from the hood to a successful executive. I like this site for Single Ma's no-holds barred wit and her frank honesty about successes and failures.


• Chief Family Officer and its companion site CFO Reviews are maintained by Cathy, who discusses family, child-raising, saving money, and much more. CFO Reviews has lots of deals, freebies and more, while the main site, Chief Family Officer offers recipes, tips on child-raising, more tips on coupons, and more.

Enjoy!

Welcome Message

Frugalogy documents the travails and challenges of a mid-life career guy juggling between competing financial responsibilities, budgeting, finding bargains, learning from life's mistakes, and learning to be frugal in these challenging times. This blog is a reflection of my own experiences, choices, and personal opinion. I am not a qualified financial adviser or licensed financial services professional. Please feel free to comment and share your thoughts. Thank you for your contributions.