You Have 24 Hours

ticket_counterI recently learned that the Department of Transportation has a “24-hour reservation requirement” rule for airlines that, “requires carriers to hold a reservation at the quoted fare for 24 hours without payment or allow a reservation to be canceled within 24 hours without penalty”.

More information:
Guidance on the 24-hour reservation requirement

I foolishly assumed that a teenager could find the best flight to get to a summer activity in another state and I allowed that teenager to make a reservation for connecting flights and and a long layover.  Then I found that Southwest had a less expensive direct flight.  But all was well.  I was able to cancel the more expensive flight, get a refund, and book the better alternative.

Thanks, Department of Transportation!

Einstein, Algamish, and Compound Interest

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“Burritt’s Universal Multipliers for Computing Interest, Simple and Compound” by Elijah Hinsdale Burritt

Albert Einstein probably never said,

  • “Compound interest … one of man’s greatest inventions.”
  • “The most powerful force in the universe is compound interest.”
  • “Compound interest … the greatest mathematical discovery of all time”
  • “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

At least, despite all of the appearances of these and similar quotes attributed to the great physicist in modern personal finance literature (and all I’ve seen were published long after Einstein’s departure from this sphere), I’ve never seen any that had a proper citation.

The formula used to calculate the future value of an investment with compound interest is pretty cool.  Maybe that’s what Einstein was talking about.  But I digress.

While there’s a lot wisdom in those (probably) spurious “Einstein quotes”, and I especially like the last one, here’s another saying about compound interest that I like even more (and I don’t know who said it):

Compound interest can either work for you or against you.  You decide.

Borrow money and you’re in debt.  If things go as planned, you pay all of the interest and part of the principal in a given month.  (Of course, you should pay more than just whatever part of the principal is required by the lender.  You should pay more so you can get out of debt as quickly as possible)  But if don’t manage to pay all of the interest you owe in a given month, then that interest is added to the principal.  Let that happen and you owe more than you initially borrowed.  Then you owe interest on the interest!  That’s compound interest working against you.  Another reason to avoid debt.

But:

Put your dollars into a good investment.  They earn more dollars.  Then put those dollars you earned into the same investment.  They will earn even more dollars along with the dollars that were invested first.  It goes on forever.  That’s what’s so powerful about it.

In The Richest Man in Babylon, Algamish says it this way:

Every gold piece thou keepeth is a slave to work for thee.

Every copper it earns is its child that also can work for thee.

If thou wouldst become wealthy, then thou must keep and save.

And every coin thou keepest must work and earn, and their children must also work and earn, that all may help to give thee the abundance thou dost crave.

 

 

Which Movie to See?

On Father’s Day, I thought it would be the thing to do to eat hamburgers and see a movie with the kids and wife. There’s one place I like to go for burgers, so that was the easy choice to make. The movie, however, was another matter. So many choices. Which to see? It so happened that two movies that I was interested in seeing were in theaters that weekend. One was a new release, in theaters for only a short time. The other had been in theaters a couple months and had found its way to the second-run discount theaters (which used to be called “dollar theaters”).  Which to see?

I thought of “The Richest Man in Babylon“, in which wealthy Arkad speaks about the many things that we won’t be able to do:

“… consider them but a part of that great multitude of desires that must go unsatisfied and regret them not.”

Arkad is making the point that there are an infinite number of things we might like to do, but we will never have the time, the appetite, the stamina, and (not to mention) the money to do them all.  We need to make choices.  The smart thing to do is find things that are equally enjoyable.  Things that provide equal amounts of utility as economists say.  Then choose the one that’s least expensive — especially if it’s free.

jungle_bookIt’s fun to see the just-premiered movie. But when you think about it, a movie that’s been in theaters for a few months is just as new to you if you haven’t seen it yet.  I spend a lot of time watching movies that are new to me but were made before I was born.  That recent Father’s Day, it seemed that both movies were likely equally enjoyable.  Pay more than $10 per person to see a movie just because it’s new?  Not me.  Why not see the movie at the discount theater and save over $6 per ticket?  And that’s what we did.  (And we enjoyed “The Jungle Book” very much.  Maybe we’ll see “Finding Dori” when it’s at the second-run theater.)

Free Scissors and Light Bulb

hair_cutting_kit.pngOne of neighbors moved away, leaving a huge pile of things on the curb in front of her house.  I took a look.  Saw an  old 1960s-era electric clippers hair-cutting set.  I didn’t see much point in taking it, as I already have one.  But it did contain a pair of scissors that were in very good condition.  There was also an old floor lamp, which I didn’t want, but it did have a light bulb in the socket.  I took the bulb home and it worked.  Scissors and light bulb.  Together worth at least a few dollars.  Not bad for about 2 minutes work.  On an hourly basis, that’s around $100 per hour.  That’s why I keep my eyes open.

Please Don’t Get A Car-Title Loan

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It makes me sad and angry to read, “Back in 2007, the couple took a $500 car-title loan that mushroomed into a $3,000 headache”, in a news story about car-title loans.  Clearly, there’s something morally wrong here. Lenders just shouldn’t lend money to people who can’t pay it back.  These lenders not only lend money, they count on profiting when the borrowers are unable to repay.  That’s when the lenders pile on the fees and the loan gets rolled over into a new loan.  The story of a $500 loan growing into a $3,000 debt is only one of thousands of such stories.  Many of these loans grow much larger.

We could discuss what the couple should have done (work more, spend less, beg or borrow from family and friends instead of going to the car-title loan place).  Or we could discuss what kind of laws might help protect people from this sort of lending (limits on interest rates or fees? mandate that all loans must allow repayment in some large number of monthly payments?).

But what I want to say most is simply this: Debt can be an awful, evil, horrible thing and must be used with extreme care and caution and avoided as much as possible.

If you aren’t able to borrow a small amount like $500 by just filling out a couple forms and signing on the dotted line (without putting up your car or any other valuable property as collateral), then you shouldn’t be borrowing money at all.  The system is telling you that you are not a good borrower.  You are not a good risk.  If you proceed you will be treated accordingly.

The rich rule over the poor, and the borrower is slave to the lender.
— Proverbs 22:7

Keep Checking and Savings Accounts at a Credit Union

Commercial banks exist to make money for their owners.  One way they do that is by charging fees.  ATM fees.  Monthly maintenance fees.  Account closure fees.  Minimum balance fees.  Paper statement fees.  Teller fees.  It seems like there’s no end.  I’ve long thought that the only reason banks don’t charge a fee every time you merely think about your money is that they haven’t figured out a way to do it.  Look for mandatory thought-monitoring implants as a requirement for having a checking account at some point in the future.

credit_union_savings
You Should Know About Credit Unions

Credit unions offer the same basic services as banks offer, but credit unions are set up and operated in a different way.  Wikipedia defines them like this:  “A credit union is a member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.”

Generally, credit unions charge lower fees than banks.  They also usually have lower minimum balance requirements and are more likely to offer free checking accounts.  They might not offer as many fancy services as commercial banks, but saving money may be worth giving up some of the bells and whistles.

If you’re eligible to join a credit union (eligibility typically depends on working for a certain employer or being a member of a group such as a labor union or attending a particular school), you should look into the benefits.

Two links to get you started:

 

Shave With a Double-Edged Razor

A little thing, done repeatedly,  can add up to a large total over time.

Take shaving:  Most men shave at least 4 times a week, many every day.  Look at the money a man allocates to the daily shave and consider how it adds up over the course of decades.  Shaving is a big deal.  If you can adjust your shaving habits a bit and spend a little less, the savings can be significant.

safety_razor

Remember, it’s the razor that holds the blade

How much can you save if you change the way you shave? It might not sound like much, but a little each day, each week, … adds up to quite a lot considering the number of times you’re going to shave over the rest of your life. Why give more of your $$$ to the shaving industrial complex than is necessary?

First, let’s define some terms we’ll be using.

Razor.  The device you hold in your hand that holds the blades that cut your whiskers.  Don’t confuse “razor” and “blade”.

Double-edged razor.  A type of safety razor that takes double-edged blades.  Double-edged razors were the way that most men shaved during most of the twentieth century.  Safety razors are so called because the blade is partially covered, making them safer to use than the straight razor used in the 1800s and earlier.

Double-edged razor blades.  The blades, with a sharp edge on two sides, that go into the double-edged razor.  (There is also a type of blade that is sharp on only one edge that is used with a different kind of safety razor.)

Multi-blade razor.  A razor that uses 2, 3, 4 or ??? blades.  These started becoming popular in the 1970s.  Some are cartridge razors, which use blades that come in a plastic cartridge, others are disposable razors.  These razors can also be classified as safety razors because the blades are partially recessed under a cover.

micro_touchMy shaving odyssey.  After shaving for more than 30 years with cartridge razors — the Trac II, Mach3, Fusion, and other similar 2-blade and 3-blade contraptions that were becoming popular when I started shaving in the 1970s — I somehow got interested in shaving with a double-edged (DE) safety razor. (Maybe it was those ads on TV with Rick Harrison, the pawn shop guy …)

If you were born after the early 1970s, you might have never seen anyone shave with a double-edged razor.  I can remember my Dad using one when I was young, before he, along with most American men, switched to cartridge razors.  I did some research and found lots of websites where enthusiasts share information.  That got me interested.  I bought a razor and started shaving with it a couple years ago.

The truth is:  You don’t need 2, 3, 4, or 5 blades on one razor to shave your face.  That’s just advertising and marketing.  You don’t need to throw away a handful of plastic every month.  You don’t need to spend $5 to $10 per month on blades.  Look what’s happened:  Big razor company wants to make more money by selling patented razors that take only one kind of blade cartridges — the kind they make.  The company gets you started with their razor for which they are the only supplier of blades, the monopoly supplier.  And they get to charge you monopoly prices.  Of course, if you know any economics, then you know that those prices are going to be as high as possible.  Much higher than the prices in a competitive free market.

DE safety razors are a more economical and enjoyable way to shave.

A DE safety razor (remember, that’s the handle and mechanism that holds the blade) is made of metal.  It’s solid.  It’s heavy.  Not a piece of plastic.  A good DE safety razor, costing $25 to $50, will last a lifetime with normal use and basic care.  In fact, a good razor might last more than a lifetime.  You can use your father’s or grandfather’s if you can obtain it.  You can buy vintage DE razors on eBay.  Sterilize them with alcohol before you use them.

I will admit that using a safety razor requires developing a new set of skills.  That takes several days.  You don’t handle a DE razor the way you handle a cartridge razor.  There are lots of helpful websites and videos.  Study a few before you try a safety razor.  Now that I have learned, I am able to get a better, smoother, closer, and more enjoyable shave with a safety razor than I ever had with cartridge razors.  Yes, as weird as it may sound, it’s actually enjoyable to shave with a DE safety razor.

There are some other advantages to using DE razors.

Safety razor blades are more sanitary than cartridge blades.  And when you’re pulling a piece of sharpened steel across your skin, you want it to be clean!, don’t you?  The DE safety razor can be opened and cleaned with running water.  Compare that with cartridge razors; they’re difficult to clean and get gummed up with shave cream, whiskers, bits of exfoliated skin and whatnot.  Did you ever look closely at one after you’ve used it for a several days?  No matter how you rinse them, you can’t get them clean.  There they sit in your bathroom, gunked up with damp scum: the perfect breeding ground for germs, bacteria and who knows what.  Multi-blade cartridge razors are more likely to irritate your face and leave you with razor bumps (ingrown hairs), irritation, and infections.

Safety razors better for the environment.  All I dispose of each week is small piece of steel (the blade itself) and a bit of paper (that the blade comes wrapped in).  All of that can be recycled.  Multi-blade cartridges consist of steel blades encased in plastic.  They can’t easily be taken apart, so they can’t easily be recycled.

[Note: I actually don’t throw the blades in the trash. That might be dangerous. I put them into a “blade bank” that I made from an empty chicken broth can.  After I found a can of broth in the pantry, I cut a slit in the top (just big enough for a blade to slide thru), drained the broth into a pot of french onion soup I was making, and rinsed the can a few times.  I put my used blades thru the slot into the can.  It will take years before the can is full.  Then I will put it into the recycling.  Fun fact: Bathroom medicine cabinets in older homes have small slots that allow used blades to be deposited between the walls of the house itself.  They accumulate there never to be seen, unless the house is torn down.]

But here’s the real deal:  It’s less expensive to use the double-edged blades and razor system.

DE blades are more-or-less a commodity.  Many companies, located in many countries, make dozens of brands of blades, and they are all the same standard size.  Thus, any DE blade will fit in any DE razor.  Free market competition at its best.  If you buy them in bulk, enough blades for a year will cost less than $25.  I use one blade a week, and am currently working my way thru a pack of 100 that I bought from a big online retailer for about $17.00.  That’s 45 cents per blade … 45 cents per week!  Compare that to the cost of new cartridges for a plastic multi-blade razor.

How much can you save if you change the way you shave?  It might not sound like much, but a little each day, each week, … adds up to quite a lot considering the number of days you’re going to shave over the rest of your life.  Like I said: Why give more $$$ to the razor companies than you need to?

Like a lot of things, it takes some upfront cost to get started.  Spend a little more now, save a lot over the years to come.  The cartridge razor companies know this; that’s why they are careful to price their introductory package lower than the cost of a safety razor.  Once you’re using their system and have to buy their blade cartridges, … that’s where they make their profits.

Let’s compare.

Cartridge Razor

$31 for the plastic razor and 4 blade cartridges. Each cartridge lasts a month, according to the manufacturer.  (I doubt that, but we’ll take it as a given.)

After that, you buy 12-pack of cartridges for about $35 every year.

Total cost after 64 weeks (to use up the 4 cartridges that came with the razor and the 12-pack): about $65, which is about $1 per week.

Double-Edged Razor

This is a bit more complicated because you have a large choice of razors and blades. You will want to experiment with some different blades to see which one gives you the best shave. But you want to wait until you know what you’re doing, until you’ve learned the safety-razor basic technique, before you start experimenting with different blades.

Let’s say about $30 for a decent double-edged safety razor.

Buy a 100-pack of your favorite blades for $20 every year, assuming you use 2 blades per week.  (This price varies a bit, depending which brand you like, there are some blades that cost less).

Total cost after 50 weeks: about $45, which is about 90¢ per week.  To go 64 weeks (matching the cartridge razor example above) would cost about $58.

Continuing Savings with Continuing Shavings

In the second year, the multi-blade cartridges will be another $34.

Another pack of 100 DE blades, only $15.

And so the savings accumulate

Your metal safety razor should last for many years.  (And your plastic cartridge razor … do you think it will last decades?)

The longer you use your safety razor, the more you save.  The Gillette razor I currently use is older than I am — it belonged to my grandfather!

Furthermore, I find that I use DE blades at a slower rate than 2 per week.  And as I’ve already mentioned, I doubt that any plastic multi-blade cartridge will last an entire month.  If you use 2 cartridges per month, then your annual cost will be close to $70.

More Savings with Shaving Soap

williams_mug_shaving-soapYou can save even more by using shaving soap and a brush instead of canned shaving cream.  Shaving soap is usually sold in round pucks that fit into a bowl (or a cup, mug, or scuttle) that holds the soap so you can use a wet brush to whip up a good lather.  It also comes in sticks that you rub onto your face much the same way you apply stick deodorant, then you use a wet brush to whip up the lather right on your face.  Generally the pucks are larger than the sticks, by weight.  A puck of shaving soap costs more than a can of shaving cream, but it lasts far longer — so shaving soap is less expensive on a per-shave basis.  Some luxury brands of shaving soap cost much more, so they might be good to receive as gifts (hint, hint).  Even modestly-priced shaving soap gives a better shaving experience than foam from a can.  It does take a little longer and requires handling a brush and bowl (getting them out, rising the brush, putting them away), but many men swear by it.

arkoAs with the razor and blades, some up front costs must be borne before the savings can be realized.  You definitely need a brush.  You can’t make later with your hands.  Shaving brushes start at about $15.  Some are much more.  Some brushes are made with natural animal hair.  Badger and boar are commonly used.  Some brushes are made with synthetic bristles.  You should also get a stand that holds the brush, bristles down, and allows it to dry between uses.  You don’t really need a special bowl or mug to put the soap in, thought one is nice to have.  To get started, you can use a bowl or mug from your kitchen.  I recommend something non-breakable: plastic, rubber, stainless steel, or wood.  (Some shaving soaps come packaged in a bowl.)

My Advice

If you’re considering switching to a safety razor, here’s some advice.  Get yourself a safety razor and learn to use it.  If it comes with 5 or 10 blades, use those and learn the skills so that you can shave without getting any cuts or nicks.  Then, before you buy a box of 50 or 100 blades … get a blade sampler pack.  Most men find that some blades work better than others.  There is no one blade that works well for everyone.  It depends on your beard, your face, your technique, and your razor (different razors hold blades differently: slightly different angles, different amounts of blade exposure, etc.)  You’ll want to find which blade works best before you buy in bulk.

I shave right after I shower and wash my face. Gotta get the whiskers wet and well hydrated.  I use either shave cream from a tube, rubbed on with my fingers (no brush) or I do the whole shaving soap, bowl, and brush ritual.  (You get a lot more shaves from a tube of shave cream than from a can. Shaving soap is even more economical.)  Then I shave with my safety razor!  It feels great.  I’ll never go back to cartridge razors.

So …

Do yourself a favor: Make the investment in a basic DE safety razor.

One Last Tip

It’s a good idea for your razor, blade, and brush to dry completely between uses.  Because I share a bathroom with other people who take long showers, I store my shaving equipment in my bedroom where the air is drier.  I also usually rinse my razor and blade by dripping rubbing alcohol of them to displace any water and sterilize everything before I put it away.

Here’s a video from “The Art of Manliness”,

Pay Yourself First

The first post in my blog is about THE personal finance book that I would recommend to everyone. The basic lesson of that book is:

Pay yourself first; A part of all you earn is yours to keep.

What does that mean?  How do I “pay myself”?  Isn’t all I earn “mine to keep”?

It’s simple.  But it’s not obvious.  It wasn’t obvious to me until my Uncle told me to be sure to “pay myself first” when I was a fresh-out-of-college graduate starting my first “real” job.  (Now that I’ve read “The Richest Man in Babylon” (read and re-read, because it’s good to go back to the well of inspiration), I wonder if my Uncle read it when he was young or if perhaps heard the advice to “pay yourself first” from one of his elders.)

The trick is to think of saving and investing as just as much of an obligation as paying for all the other things you regularly purchase.  Each month you pay for a place to live, you pay for food to eat, you pay for water, electricity, and heating or cooling.  You pay for transportation, clothes, and dozens of other things.  The taxes you pay are your share of the cost of public schools, parks, roads, police, courts, and prisons.

Those things are necessary.  But you should also consider your future well-being.  Your future security.  Your future comfort.  Your future peace of mind.  Aren’t those things also necessary?  Set money aside for yourself, or we could say, for your future self.  It’s up to you to make your future self as comfortable and secure as possible, don’t you think?  So, pay yourself.  Just as you pay the landlord or mortgage lender for a place to live, just as you pay the grocer, just as you pay everyone else, you also need to pay for the good things your future self should have.  In a manner of speaking, just as you pay everyone else, you also pay yourself.

But why you pay yourself first?

Every time you get paid, before you pay your ordinary living expenses, before you pay anyone else for anything, take some percentage of your earnings and set them aside for your future self.

It’s important to set this money aside first, before you spend money on anything else.  If you decide instead to wait until the end of the month and then set aside whatever is left after you’ve paid for all your living expenses and whatever else you need and want, then you’re very likely to find there’s nothing left.  Let that happen month after month, and you future self won’t be get anything.

However, if you set aside money for your future self before you begin to pay and spend for everything else, you will find that you will automatically adjust your spending such that you won’t even miss the money you’ve set aside.  That’s the magic of paying yourself first.

Another way of saying it:

“Do not save what is left after spending, but spend what is left after saving.”
— Warren Buffet.

Don’t think of this as depriving yourself of anything.  Don’t think of that money you used to pay yourself as something you no longer have.  Rather, think of it as a payment, or better yet, a gift” a gift that you’re giving to yourself.

Remember the other part of the lesson: a part of all you earn is yours to keep.  If you don’t set aside part of your earnings, if you just spend, spend and spend until it’s all gone, then you’re not keeping any of what you’ve earned.  It’s all going to the landlord, the banker, the grocer, the butcher, the baker, … maybe even the candlestick maker.  Should everyone else have a claim to your earnings while you have no claim to even some part of it?  Keep some percentage of your earnings for yourself.  For your future self.  A part of all you earn is yours to keep, so Pay Yourself First.

a_part_of_all_you_earn_is_yours_to_keep