Getting control of your finances: You have to be willing to put in the effort!


I have a few friends, who will remain nameless, who always say things like:

  • "I wish I could save more money"
  • "I spend too much on ________"
  • "I need to open a savings account"
And many more similar items I hear. They all have one thing in common: These are empty statements that they never do anything about. They are always running out of money before the next paycheck and are probably behind on their bills.

The source of the problem: They do not track their money in any way. Most of them spend without thought and just log into online banking once in a while so see if they are overdrawn. I cringe every time I hear about when they are overdrawn or have 47 cents left with 10 days until payday.

The issue is that either they don't care enough to track their money or lazy or simply do not know how. I am not sure which is the case with my friends but frankly it doesn't matter. It bothers me to see them like this as I cannot even fathom being like that myself. I am a very conscious spender and know where I stand at all times.

The bottom line is that in order to get ahead you have to put in time and effort to actively track your spending. Every day. No exceptions. You have to budget your money and know when to stop. Some of my friends were laid off, fell way behind, and still struggle even with new jobs. They easily make twice what I make and have nothing to show for it. I have tried to convince them to change their ways but it falls on deaf ears.

This is partly the fault of our education system. I personally believe that everyone should have a mandatory personal finance class in high school and/or college. I did it as an elective and learned a lot more than I imagined!

How much do you save (per hour)?


I find a great tool in convincing myself to save more money is to look at it on an hourly basis. I currently work for a set salary. I have to first translate that into an hourly wage. There are 2080 work hours per year so I divide my annual salary by 2080. In this example I will use a $50,000 annual salary.

A $50,000 annual salary works out to be $24.04 per hour. That is a pretty good wage and should easily cover basic expenses and then some. Next we have to annualize the various amounts that we save. This includes cash savings, IRA's, 401(k)'s, etc. Here is an example:

  1. 6% of salary goes to 401(k) (includes company match) which is $3,000 annually.
  2. $50 per month goes to emergency fund which is $600 annually.
  3. $50 per month goes to travel fund which is $600 annually.
The total annual savings is $4,200 annually. This number represents less than 10% of the total salaried income. If you divide that total by 2080 you see that they save $2.02 per hour. This means that $22.02 of the salary goes to taxes, expenses, needs, wants, and other spending. If you follow the general rule of "you need to save at least 20%" then that hourly number should be $4.81 per hour. This means they need to more than double their current savings by cutting expenses where they can and increasing contributions to their various savings vehicles.

This is a great exercise and it shows you not only how much you save from 1 hour of work but can also reveal how much of your salary you use for "today" and how little you use for "tomorrow". All of the millionaires and financially independent have very high "tomorrow" figures. I am working on increasing mine to 20% (at least!).

101 goals in 1001 days update


It has been quite some time since I have updated on the progress of my list. I have actually gotten some good progress on many friends that I would love to share. I feel that by following this list I can already tell that a lot of areas of my life feel more orderly and sane. This is a great exercise!

Here is a sample of my recent accomplishments:

  • Closed all unused credit card and bank accounts.
  • Earned real money from my blog!
  • Eaten at a couple new, great places
  • Increased my monthly savings
  • Planned a month off from work to go to Asia
  • ...and much more!
For the full details check out my 101 list page

Weekly Blog Roundup


This is a series where I link to my favorite blog posts from the financial blogs that I follow and read directly. These are the articles I found particularly useful or good in some way. I hope you enjoy my choices and learn something too!

Week of 9/20/2010:
  • Rule of Thumb on Insurances To Avoid @ Bargaineering. Jim shares a great rule on which types of insurance you should and should not purchase and why. Very good ideas!
  • The War on Work @ Get Rich Slowly. JD wrote a great in depth article on Financial Independence and getting to the point in which you no longer have to work. Awesomely done.
  • The Myth of the Exceptional Life @ The Simple Dollar. The term "exceptional life" is a marketing term. It does not exist. Trent explains this in detail and is a great post to help us all refocus.
These are my favorites for the last week. Feel free to comment and share some others that I may have missed or not even know about. Have a great week! 

Southwest to buy Airtran


I saw the news story this morning on Google. This is good news in a way and possibly bad news in another. I am happy to see the god awful excuse for an airline (Air Tran) go away and be replaced with one that knows what it is doing. On the same note flying Southwest tends to be a bit of a mad house at check in and on the plane.

The good points I see is that Delta, the other major player here in Atlanta, may have to stop charging baggage fees. Southwest has never charged baggage fees and Delta would lose a lot of business to this. Also it could mean lower fares on domestic Delta flights for more or Southwest would simply raise fares. That is yet to be seen. Southwest would be handy if they offer the really good sale fares out of Atlanta.

The down sides are Southwest does not assign seats on their flights. They also have much less comfortable planes. I have flown Southwest a couple of times and you get what you pay for. A madhouse at the gate and during boarding since everyone makes a mad dash for the seat they want. I think this is ok for short flights but long haul flights I prefer Delta, the chance (or even option!) of first class and of course the miles I can use to go overseas. Southwest is domestic only.

We shall see how this will turn out! I hope it is for the better.

Rant: Calculating how much I need to "retire"


I am not a fan of the word "retirement." It has a bad connotation of working until you cannot work anymore to have enough money to live out the rest of your life. That doesn't sound very good to me. I prefer financially independent where I don't necessarily have to collect social security to stop working. I am currently working on my target net worth number to mark the day I quit working full time.

I have found that a lot of other things have to be considered than just the total amount. I also have to include:

  • Expected income from investments
  • Income from other sources (side work, contracting, etc.)
  • What the other income sources are
  • Cost to travel (I want to do this as much as possible)
  • Expenses that have to be paid after I stop full time work
  • Making sure I am happy with all the above choices
This seems simple enough but each of the above items has a lot of complexity. I have to make estimates on what I will earn from my investments. What sort of side work would I do, how often, and how much could it potentially pay? Travel costs fluctuate wildly. I have to decided where to travel, for how long, and get a reasonable estimate of costs. Expenses are the easiest to predict but not completely. And most of all I want to be happy with my choices and no stressing over these items all the time. Everything has to fit right!

As it stands now I am nowhere close to being able to say with 100% or even 75% assurance of what each in the above list should be. All I do know at this point is that I want to travel at least half the year to various countries worldwide. I have a good grasp on the home-side expenses but still working on the travel part. The expected income from investments is like trying to see the future. I know what sort of returns I would want but attaining them is another story. I am also working on ideas for side work, projects, and contracting to help me fill the gaps.

Being able to stop 100% relying on salary is a long process. I do know that saving as much as I can everyday will get me closer. I am a person who likes numbers and measurable goals so I am going to come up with a target and put 110% of my effort into it. I have a lot of variables to juggle. It's called life. I have to take a step back and not worry about every detail being hammered out. With plan A, B, & C I will make it work somehow. Time to get to work!

How to stay frugal at the airport


We all know that travel is expensive. Especially air travel. There are many costs in flying that most of us don't think about. First there is the cost of getting to the airport. Next you have baggage fees (if you don't pay them in advance). Once through security you might want a drink or need to have a meal. These both are much higher in the airport.

I have some tips that help combat this. I will address each one above.

  • Getting to the airport costs include: gas, parking, train fare, taxi etc. Explore all your options. Compare total cost of daily parking versus train, bus, or taxi. You will be surprised how much it costs!
  • Baggage Fees: If you are not "elite" with the chosen airline you most likely have to pay for checked luggage. The best avoidance is to not check a bag. If you do need to check a bag a lot of airlines offer a cheaper rate if you prepay the fee online.
  • Food and Drink at the airport: Use the free water fountains. The restriction on security is for liquid. You can bring 50 sandwiches if you want. Bring your pre-made meals or snacks with you. If you must buy a drink the vending machines are usually cheapest. If you want alcohol look into a day pass cost for the business lounges (open bar) versus how much a drink is at the terminal bar.
No matter how you slice it travel costs money. Following the tips above can "reduce the damage" if executed well. Traveling can be expensive but that does not mean it has to be. Happy travels!

Home Insurance Shopping: Lesson Learned!


I recently switch my homeowner's insurance since it would save me nearly $200 per year. Doing so I went online to to get quotes. To be fair I did get some quotes and the end result was good. On the down side I am getting endless calls from insurance agents. I will not do this again!

It was good to get multiple quotes so I can be sure that I get a fair price. The problem lies in the agents. They almost all work on commission and are aggressive. I am to the point now where I simply hang up on all of them as they don't seem to understand that I have bought and am completely not interested in anything they have to say.

I know now better for next time. I will look up and contact a few companies directly so some website doesn't fan out my phone number to 20 people. The fact that this burns my cell phone minutes is a minor annoyance to the calls I get all day long while I am at work. I was also annoyed that most of them did not simply email the quote I requested. They wanted to call and try to sell me other insurance. Lesson learned!

Work Travel: Detroit, MI in October


Things are picking up at the office! I am starting to travel for work again and I must admit I am happier as a result. Being busy and on the road keeps me occupied, provides some break in routine, and best of all I earn a little more money!

I have not booked the travel yet as I am still waiting on some hard dates but I know I will be going in October for sure. I should be there for 2 days total as it will be a quick trip up and back. Makes for a great mileage run! It will put me close to renewing my elite status for next year with Delta.

I also got word that I might get some more travel to Baltimore in December and January. Yay!

Weekly Blog Roundup


This is a series where I link to my favorite blog posts from the financial blogs that I follow and read directly. These are the articles I found particularly useful or good in some way. I hope you enjoy my choices and learn something too!

Week of 9/13/2010:
These are my favorites for the last week. Feel free to comment and share some others that I may have missed or not even know about. Have a great week! 

Tip: Saving on Insurance Costs - Pay Premiums Annually


For those with good money discipline you can save a bit on insurance by paying your premiums annually. I do this with my homeowners, auto, and life insurance. In all cases it costs me less. I have a "Bills Escrow" savings account in which I transfer money monthly for annual (and other irregular) expenses.

Example: My Life Insurance -- I have the option to pay $12.85 per month or $146.00 per year. $146 works out to be around $12.17 per month. The difference between the two is not large ($8.20 annually) but it costs me 5.62% less over the 1 year span. I have a 20 year term life policy so over 20 years that saves me $164 which essentially means the 20th year is "free" versus the monthly payment.

Also while the money sits in my "Bills Escrow" online savings account I earn interest. This is a double win since not only am I paying less for my insurance but earning interest while the money sits there on top! I simply take my annual premium and divide it by 12. I transfer that amount each month into the savings account. When the bill comes I transfer the amount I need back and pay it. Simple!

I looked into my other insurance premiums and I found that by paying them annually I save roughly 5% of those premiums by paying annually. This adds up fast on more expensive insurance. Everyone can do this with some planning. To start today you simply call up the insurance company and ask them to switch you to annual payment plans. In most cases you have to pay the difference between now and the next bill immediately.

The next step is to open a "Bills Escrow" savings account (I use ING Direct) and start the monthly transfers to the  account. I like to do separate transfers for each insurance policy for budgeting and ease of tracking. The only slightly tricky part is figuring out the initial deposit. You have to deposit the total amount you should have saved by now on a yearly plan.

Example: Your car insurance is $1200 per year if you pay yearly. You are currently on a monthly payment plan. Let's say you originally got your insurance in June. Most insurance companies will make annual payments due on your policy's anniversary. It is now September. If you switch to an annual plan today you will have to pay ~$900 to the insurance company now (to pay off the rest of this year for the insurance). Now you need to calculate your "back payments" to put into the savings account.

June through September is 3 months. That means you should have $300 in your savings account today. This is your initial deposit for your auto insurance. Starting in October you will set up a transfer of $100 per month to the savings account. By next June (9 months from now) you will have the $1200 you need to pay the annual premium again (plus interest!).

Some numbers: Let's say the total of all the insurance premiums on a monthly plan add up to be $3,000 per year. If switching to an annual payment saves you an average of 5% then you have $150 more per year (plus the interest you earn on the savings account!) to work with. The more expensive insurance you carry the more you win! This will take you a couple of hours to calculate and set up. Great return on investment!

Frugal Tip: Recycle before you Recycle


Trent over at The Simple Dollar wrote in a post "find a second use for everything" as a tip to become more frugal. I never really thought of it that way and it struck me as a good idea. He used the example of using worn out clothing for rags which I have done in the past. He was alluding to a form of recycling.

The idea does have it's limits. It can lead to having too much stuff or hoarding problems. It is most certainly not a tip for "pack rats" as they already have too much!

Problems to overcome:

  • Taking up space: limit yourself to a certain amount of each item. Maybe just one small bag of old clothes or a small box of plastic bottles to use later.
  • Accumulation of too much stuff in general: Keeping things because they might be useful one day is a bad idea. If you are keeping something to reuse have a specific purpose for it and make sure you will actually use it within 1 year.
  • Hygiene: Reusing things has cleanliness limits. Make sure to thoroughly clean anything you intent to reuse. Too much can attract pests and rodents to live in your stuff!
Now that I have all the problems out of the way I want to share what and how I reuse some stuff around my house. I try my best to limit my waste and recycle what I can as a starting point. After that I start looking at things in a new light and figure out if I can use it to fill another need. Here are some examples:
  • Plastic Grocery bags: I get a lot of these (free in GA) and use some of them as trash bags for my small bathroom trash bins. They cost me nothing and I don't have to buy bags instead. I get way too many and return the ones I don't use to the grocery store for recycling monthly.
  • Old and worn clothes: Aside from Trent's rag idea I keep a couple old or slightly torn tshirts to use for house projects and working my car. This goes for shorts/jeans too. If some of them are in reasonable shape I donate them for the tax benefits.
  • Food Scraps: I don't compost as I don't garden but I know people who do and just go over and put my scraps in their composter. It costs me nothing, helps a neighbor, and saves some waste in landfills.
  • Jars and Bottles: I keep a bin of jars and bottles of various sizes. Some can take the place of expensive tupperware. I use them for a wide range of things: mixing home made sauces, storing small amounts of liquids and powders for transport in my car, small ones as travel size containers that I can take to the airport, and so on. I limit myself only to what my "empties bin" will hold. I recycle the rest.
I could go on for a while with reuse ideas. The above are the ones I use the most often. I always suggest that "when in doubt recycle it first" so that you don't end up over accumulating stuff you will never use. Finding a second use for items does save money but moderation must be applied and we should not buy something simply because it could have a second use.

September 2010 Prosper Lending Update


It is the middle of the month again and it is time for my update on lending. It has been a quiet month with business as usually. I still have 2 very late loans and one is currently slightly late. I have no open bids at this time.

I am no longer bidding on prosper loans unless they come from my lending group. I am drawing down my account for now. I "write off" all loans in collections as a loss.

Here are my stats as of today:

Outstanding Loans:

Late: 1 (< 30 days)
In Collections: 2 (written off)
Current: 35

Closed Loans:

Charged Off: 8
Paid Off: 18

Open Bids:0

Total currently invested: $894.92 (Principal Value)
Cash in Account: $25.95 (includes open bids)

Total Principal: $920.87

New Site Title: Explained


I decided today that my old blog title did not fit anymore. Since I have altered my focus a bit to include my travels as well as financial topics I decided that the new title is more appropriate. I also feel it describes me a lot better.

As of today this blog will be known as "The Frugal Backpacker". Both of the words describe me accurately and paint a picture for those who have never met me. It is also my chosen direction in life and encompasses a lot of my lifelong goals.

What does it mean?

First I must break down the title to explain it:

Frugal - to me frugal means I make conscious choices with how I spend my money. It does not mean that I am cheap. I am not afraid to spend for quality but I do make sure my purchases are with good reason. By carefully tracking my spending and making educated decisions I buy myself more freedom. This includes the ability to travel more often.

Backpacker - A lot of people here this word and generally think of two things. The first is someone who hikes in the mountains a lot. The other is the "broke college kid" traveling in Europe and staying in dives or sleeping in a train station. To me a backpacker is a traveler who carries a backpack with everything he needs to live in it. I tend to stay in backpacker-style accommodation including hostels, guesthouses, and budget hotels. I travel to see the country, the food, and the people--not to see the inside of another Hilton. There is a lot of places out there to see and you shouldn't have to spend a fortune to do it!

I find that in my case the above two mix well. I make frugal choices at home as well as on the road. I apply the principles of each in my daily life. Everyday I am working I work toward the ultimate goal of traveling again. The goal is to travel wherever I want and whenever I want to do it. Frugal practices and financial independence is the only way I can make this happen. This blog will be a record of my journey both physically and financially.

I hope that this blog will help not only me stay motivated and focused on my goals, but hopefully someone will find the information that I share useful. It would be great to make money from this site but it is not the ultimate goal. In my experience I have found that if I make my goals public I am more apt to attain them. This blog servers exactly that purpose.

Weekly Blog Roundup


This is a series where I link to my favorite blog posts from the financial blogs that I follow and read directly. These are the articles I found particularly useful or good in some way. I hope you enjoy my choices and learn something too!

Week of 9/6/2010:
These are my favorites for the last week. Feel free to comment and share some others that I may have missed or not even know about. Have a great week!

I just saved $180 with a phone call!


I did some looking around online to day at internet service. I noticed that AT&T has DSL for significantly less that my current comcast bill. I got on the website chat with comcast customer service and they directed me to call about lowering my bill.

I called comcast billing and told them I can get the same internet a lot cheaper from AT&T but wanted to give them a chance to match. The billing rep told me there were no specials that I qualified for. I threatened to cancel and then was transferred to the "Loyalty Department". These are the people with power. I got $15 per month knocked off my bill for the next 12 months!

This adds up to $180 saved over the next year for no change in service. I have set a calendar reminder to revisit the internet rates then and see if I should switch or continue as I am. Don't be afraid to call and ask for a discount. Threatening to leave in such a cut throat internet market can yield you discounts!

Refinance Closing Complete! Consolidation Begins!


Today I closed on the refinance of my current mortgage and HELOC into a new 30-year mortgage. I went through my local credit union and lowered my interest rate from 6% to 4.5% on my entire balance. This is a great rate and I freed up almost $200/month in cash flow as a result!

I finished my closing around 2 hours ago and I feel a big relief. All the paperwork, applications, appraisal, inspectors, and general hectic mess is over. I am now paying just shy of $400 per month for my newly remodeled foreclosure home in a great area. It took me 1 year, 2 months to get to this point. It feels great!

Now some real work begins. As I write this I am on hold with yet another credit card company. Now that I am past credit checks and needs for borrowing I am doing an "avalanche" of account closings. I have multiple cards that I no longer use. I opened them to get bonuses and rewards and am now closing the accounts I don't need.

I am in the big process of simplifying my financial life so I can focus on other things. I have paid off all of my credit card balances except for 1 and that will be paid off this month and I will close that account too. I will be left with only a handful of my oldest accounts to maintain my credit history and to have for emergencies. I will continue to use my Delta SkyMiles card to earn my free travel rewards as usual.

Weekly Blog Roundup


This is a series where I link to my favorite blog posts from the financial blogs that I follow and read directly. These are the articles I found particularly useful or good in some way. I hope you enjoy my choices and learn something too!

Week of 8/29/2010:
These are my favorites for the last week. Feel free to comment and share some others that I may have missed or not even know about. Have a great week!

Going to Asia? Shoot for a layover in Seoul!


No matter where you are headed in Asia you are almost guaranteed a layover flying from the USA. Especially us on the east coast. Through various research I have determined that Seoul, South Korea is usually your best option. It involves long layovers but they have figured that out and offer a lot to do with your time.

Options include:

  • Transit lounge - At the time of writing the access to the lounge costs $21 USD (approximately) and the lounge offers internet, clean bathrooms, comfortable seats, open bar, buffet food, showers, business center, and great service. 
  • Spa on Air - The Incheon Airport (ICN) has a spa outside the secure area. It includes hot tubs, saunas, message (paid), sleeping rooms (limited, extra costs), and lounge with couches, recliners and TV's. You are allowed to sleep in the lounge. Cost: 20,000 Won at time of writing. Add 15,000 if you want a private bedroom if it is available.
  • Day Trips - There are lots of options. On the expensive end you have tours into Seoul and the DMZ zone with North Korea. For the budget minded you can take the train that connects to the Seoul subway system and have your own tour. Buses also run into the city but cost more and are susceptible to traffic. Seoul has great food, shopping, shows, and sites to see to kill 5+ hours.
  • Free Sleeping Lounge - I used this back in 2006! There is an area with beds in the transit hall. If one is available have a nap and catch your next flight if you arrive at odd hours or just not up to leaving the airport
  • Restaurants - some offer free internet access with purchase. Others have entertainment such as music and TV's. No matter your budget you can find something to pass the time!
  • Airport Hotel - Asiana and Korean Air offer free stays in the airport hotel under certain conditions. It is best to call the airline when you have a ticket booked to get details.
South Korea is less expensive than other major hubs (such as Tokyo or Beijing) and is a lot more tourist friendly as they are heavily promoting tourism. With all the above amenities in the airport I cannot think of a better place to be "stuck" on a long layover. If you face a long layover why not pick an interesting and relatively inexpensive place?

Work Travel: Memphis, TN!


I have to work on Labor Day but I get to add a new place to my list. Memphis, TN! I have never been there and am passively interested in the place. If time permits I plan to go to Graceland (Elvis!), Beale Street, and of course have some Tennessee BBQ. I will be there Sept 6-7 for work purposes but if all goes well I should end up with free time.

We have had a bit of last minute work travel as of late. This works out for me as I have better shots at first class upgrades, earn more miles via expenses, and best of all get out of the office for a couple days. This time I am setting up a demo for a large potential customer so I have to be on my "A" game!

Hope everyone had a great Labor Day weekend!

ING Direct Cafe: New York, NY


Ever since I saw the information on ING's site about their cafes I was curious. I thought to myself: "Why would a bank open a coffee shop?" While I was in New York last weekend for work I stopped by to check it out. I was pleasantly surprised by my experience.

ING Direct Cafe, New York

The idea behind the ING direct cafe is to provide information about ING Direct products as well as offer very inexpensive, high quality coffee. Coffee was $1 and frozen and other fancier drinks were $1.50. As an ING Direct debit card holder I got half off those prices! How is that for your "latte factor"?? This is a great deal anywhere but especially in New York.

Jokes aside it was a good place. When you buy a drink they give you a card for 45 minutes of access to their free internet terminals. I found that they would give you more time if you asked for it. Also great was the free wifi. Bring your own laptop and surf as much as you want.

If you are near any of their locations (New York, Philadelphia, Los Angeles, Wilmington, DE, Chicago, St. Cloud, MN, Honolulu). I suggest checking them out! They are inexpensive, good source of ING Direct information, and have great, cheap coffee. They also have the only known ING Direct branded ATM machines in the nation!

Traveling For Work? Maximize your per diem!


I travel a fair bit for work and we have a per diem system to cover our meal costs on the road. In my case I get a set amount of money paid to me for each day on the road. Other employers use a system where meals are reimbursed with receipts.

In my case I simply try to spend less than I am given. Making sandwiches, bringing snacks from home, drinking more water all saves me money on the road. I normally come out ahead which is nice! I also look for groupons and half off depot coupons for eateries in the are I will be in. This is less out of my pocket and I get a better meal than a boring sandwich!

For those of you that have a set limit but have to expense there are some strategies to maximize your return. You can go to a grocery store and use your expense limit to buy stuff you can take home. I have heard of lots of travelers doing this to cut grocery costs. You can use the above mentioned online coupon method to have nicer meals than you otherwise would have if that is your desire.

I also insist on using my personal credit card for the company expenses and they reimburse me for them. My argument is that I am on the road, away from home, and on my own time as well and I deserve to reap the reward points for spending as a little "extra" compensation. In my case my company agreed to this arrangement. The points I earn add up to mostly free flights overseas for my vacation!

If you travel for work make sure you get the most out of your expense accounts! Remember you are away from home and the company should compensate you appropriately for that. The best argument: "I am away from my family for you so you can at least do X for me." This works well and is hard to argue. Happy Travels!

September 2010 Net Worth Update


It is the 1st of the month again and it is time for my net worth report card. I had a great month and am beyond happy with my results!

As of today my current net worth is ($1,074.93). That is an increase of $8,368.73 over last month. The major contributing factors were an increased house appraisal (ghost money) and increased income!

I expect next month to be a slower month. I have more work travel plans and no more big financial changes on the horizon. I am restarting the contributions to my emergency fund! I will remain focused on debt elimination and increasing my income in any way I can!

Alternative Income this month:

IT Consulting: $86
New Rent!: $400