There are only a few things in life that are as easy as calculating a 10% discount.  I think I grasped the concept at about age 7.  Look at the total and move the decimal point one digit to the left to figure out what a 10% discount would be.  For example a $10.00 total would yield a $1 discount.  A $100.00 total would yield a $10 discount.  If you are out here surfing through personal finance websites, I’m sure you didn’t just learn something new.  If you happen to be Forest Gump, you also probably didn’t learn anything new here.

So why do the employees and managers at my local Mexican fast food restaurant struggle to calculate a 10% discount on my total EVERY time I go in there?  You see, I bought one of those discount cards from the neighbor who was selling them as a football fundraiser.  I wanted to support him and also noticed that my favorite Mexican fast food chain had a 10% off discount simply by flashing the card at them when I visit.  Anyway, every time I go in to the restaurant, the employee has to call over the manager, who then proceeds to struggle for a couple minutes trying to calculate the discount.  Usually they head to the calculator and crunch some numbers. (And they still manage to come up with the wrong answer most of the time).

The good news is that their complete lack of ability to calculate the appropriate 10% discount usually works in my favor.  Sometimes by a little bit, but most of the time the discount ends up being somewhat substantial.  Here are the details from my latest visit:

Ticket total before tax: $7.48

The discount I received: $2.51

Total cost after discount: $ $4.98

That means that, due to the managers inability to figure out a 10% discount, they instead gave me a 33% discount.  Why didn’t my math teach ever tell me I’d be the beneficiary of other people’s lack of math skills?

As I looked over the numbers on the spreadsheet, one number really stood out.  It was the “total monthly expenses” number.  The number was actually higher than our expenses are today.  I won’t lie.  It put a smile on my face, mostly because it made me feel like we’re succeeding at keeping lifestyle inflation away.  What’s even more remarkable about this is that we really haven’t sacrificed in order to do it.  In the last four years we’ve purchased a new car (it’s paid for), built a second home (it’s paid for), taken a couple vacations, re-roofed our home and had multiple other expenses pop up.  We were able to do these things because we have managed to keep our monthly committed expenses at about the same level as they’ve been for years which has freed up additional monthly income to keep our emergency fund full and cover all those unplanned expenses that come up.

How have we managed to keep our expenses level for this many years?  One bill at a time.  I have always considered recurring monthly expenses to be evil.  They will suck the life right out of your budget if you don’t keep a close eye on them.  By paying close attention to all of our monthly bills, I am able to keep them as low as possible, evaluate which ones we are truly getting our money’s worth out of and ditch the ones that just don’t make sense.  Here are a couple examples:

Car payments:

We used to always have at least one car payment.  We just accepted the fact that people always have a car payment.  A few years ago, I decided to quit the car payment rollercoaster.  That has freed up over $300 per month in our budget.  By saving up and THEN buying the car, it proves to us that 1) we really wanted the car and 2) we can afford it.  This has probably had the single biggest impact to keeping our monthly bills at a minimum level.

Cable and Telephone:

A long time ago in a galaxy far away, we used to have a home phone line with all the bells and whistles.  Caller ID?  You bet.  Voicemail?  Yep.  Call waiting?  Uh huh.  Now we don’t.  We maintain a home phone line for $21 per month, solely so that I can use it for work.  If not for work, we wouldn’t even have it.

Cable has also been a drag on our budget over the years.  I’ve been pretty religious about calling to negotiate a lower price, but recently we went a step further and scaled back cable to only our local channels.  We haven’t missed cable even ONE bit.  Between the local channels, our old Tivo box and the cheap $8.99 a month Netflix plan, we have more TV than any human should ever watch.  We also save hundreds of dollars a year compared to the old days.

Electricity and Gas:

Growing up in a house where we didn’t have a lot of money, I was always told to turn off the lights when you leave a room.  It’s a hard habit to break.  Between my wife, daughter and I, we do a pretty good job of turning off lights and only using electricity in the room that we’re in.  We also keep the heat at a lower level than most (somewhere around 67-68 in the winter) and keep the A/C off unless we REALLY need it.  We also heavily use CFC bulbs in the house to minimize the amount of electricity we use for lights.  All these techniques save us hundreds of dollars a year compared to the equivalent houses in our neighborhood.  How do I know this?  I get a letter once a month showing our energy consumption compared to our neighbors.  We consistently beat even the “most efficient” neighbors.

No Revolving Debt:

By not having any credit card or consumer debt, we save a ton of money on interest compared to those people that do carry revolving debt.  It also frees up monthly cash flow.  It’s nice not having a line item on our budget that has the minimum monthly credit card payment on it.

Shopping for Insurance:

I used to just send my checks in to the insurance company, resigned to the fact that insurance just costs lots of money.  This year, I’ve taken a more aggressive stance on insurance.  By shopping this year, I’ve been able to reduce our insurance costs by over 15%.  It all adds up.  I’m done being loyal to one insurance company.  I make all the other companies out there earn my business.  Why not make insurance do the same thing?

Home Mortgage:

Since having a mortgage seems to be a given where I live, at my age, I might as well make sure I’m getting the best rate possible.  By having good credit scores, my wife and I have been able to lower our interest rate by nearly a point.  That change shaved nearly $200 a month off of our house payment.  Yes, we had to extend the loan back out to 30 years but I’m mitigating that by paying bi-weekly (works out to an extra payment each year) and throwing a bit more at the mortgage every so often.  Just these steps should get the house paid off faster than before the refinance, with a lot less interest paid.

None of this stuff is rocket science.  I get that.  I guess the main reason we’ve been able to keep our expenses level over a number of years is that we’ve refused to allow lifestyle inflation to increase them.  We’ve been on a “pay as you go” plan for a number of years so that we still enjoy the things we really want without committing to additional fixed monthly expenses.

Then I started wondering how much it costs me per day to be in my house.  If it costs me $12.19 for taxes, how much does it cost me in interest and insurance costs?  $51.00 per day.  Geez.  Maybe I should sell this place and go live in a seedy motel for $29.95 a night where they even clean your sheets and keep the place tidy.  Or maybe not.

Then I thought, if it costs me $51 per day in taxes, interest and insurance, I wonder how much it costs when you add in expenses like power, water, sewer, and garbage?  That brings the total to just over $60 per day.  Yikes.  $60 per day that I’ll never recoup.  I think I just got some new motivation to pay off our house and live mortgage free.  If we can get the house paid off, it would lower our daily cost to: $21.85.  Now that’s a number I can live with.

So if I was able to get the costs down to $21.85 a month, (which I fully intend to do by the time we retire), that still equates to somewhere around $665 a month just to live in our existing house.  It’s looking more and more like I don’t want to live here in retirement.  If ever there was a case for downsizing, I think I just stumbled upon it.

We also own a smaller house out at the lake.  Taxes on that are only about $1200 per year.  Electricity would be FAR cheaper because it’s only about 1000 square feet and is much more energy efficient.  I’d estimate the cost at about $60 per month averaged across the year.  There is a nominal fee for water because we are on a community well.  Currently it’s about $20 per month.  There are no costs for sewer because we have a septic system.  Garbage is around $20 per month.  Wow.  This is definitely making a strong case to downsize when we retire.  Instead of $665 per month, we’d only be faced with about $200 per month.  That’s a 70% savings by shrinking from a 2700 square foot house (which is frankly kind of absurd for three people) to a 1000 square foot house.  Of course, the lower property taxes also means we get less government services but I think we could live with that.

From my experience, I knew this wasn’t a “pull over right now!” warning but it was telling me that something was wrong.  My first suspicion was that all the pinging had triggered a sensor that was trying to tell me that the engine wasn’t running well and it needed to be looked at.  The rest of the trip was uneventful with the exception of the check engine light.  Once I got home, I decided to reset the light and see if maybe it was just a fluke.  (To reset the light all I had to do was disconnect the negative battery terminal to reset the computer).  With the light off, I pretty much forgot about it.  About two days ago I was heading back over to my mom’s when I approached the same hill.  As we started up the hill, the pinging returned and so did the check engine light.  Ugh.

I was considering calling the dealership but then decided maybe I would be better off just stopping by Autozone to have them hook up their error code reader to the ODBII plug under the dash to find out what the computer was trying to tell me.  I knew they’d at least be able to give me the error code so that I could “Google” it and find out what the vast powers of the Internet could tell me about it.  It only took the reader a few seconds to bring back an error code of P0171.  I thanked the guy and headed home.  After spending a bit of time reading about it, I found that the most likely cause was a dirty air flow sensor.  This is the sensor that sits upstream of the air filter and measures how much air is flowing in to the engine so that the fuel injection computer can tell the fuel injectors how much fuel to shoot in to the cylinders.  I went out and located the sensor on my truck and then unscrewed it to see if there were any signs of dirt on it.  Sure enough I could see a light coating of “crud” on it.  I used some brake cleaner (it was all I had) and the dirt came right off.  I skeptically (I mean, when is the last time someone had this easy of a time fixing their vehicle???) reinstalled it on the truck and put everything back together.  To my surprise the truck ran BEAUTIFULLY.  Seriously, this truck hasn’t run this good the entire time I’ve owned it.

By spending a little time investigating this, I was able to save myself hundreds of dollars.  The total cost to fix this was ZERO.  (Okay, I used a few squirts of brake cleaner but I’ve had that in the garage for 5+ years so I’m not going to count that).  Little victories like this really make me happy!

How did we settle on the $250,000?  Well, frankly it wasn’t very scientific.  We knew we needed more than $100,000 and we thought $500,000 was excessive.  After all, I didn’t want to give my wife any reasons to want me dead.  I kid.  Anyway, it turns out that the life insurance we have now will more than cover our mortgage and will give my wife and daughter the option of living in this house long term, regardless of how much she makes at her job.  When you add in the social security benefits that they would receive until my daughter is 18, they should be more than comfortable.

Having this all lined up brings me some inner peace.  I want to know that they’ll be okay if anything happens to me.  My only hope is that we never have to use it.

When I first started looking for a dryer, I spent about an hour looking around online.   I checked Home Depot, Lowes, Sears and all the usual suspects.  For a standard dryer the prices all seemed to be around $450 to $500.  Once I’d gotten my fill of online browsing, I decided to hop in the truck and head down to a couple of the stores, (including Costco) to see each of them in person.  As I stood in front of the first dryer I found myself thinking, “Geez, these things are expensive.”  Just as my mind finished that sentence, it occurred to me that I was putting a lot of thought and effort in to the purchase of a $450 dryer while nonchalantly throwing down $500 for a tiny metal and glass piece of electronics called the Ipad (a few months back).  I was feeling far more stress and indecision about a large appliance that I consider to be a “must have” in our home, and I hadn’t even paused for one second before spending all that money on a “luxury” item like the Ipad.

Realizing that the dryer was something that we absolutely needed and also realizing that I needed to keep things in perspective made it much easier to finally comes to terms with buying the dryer.  After that realization, the stress seemed to melt away but not nearly as much as it did once I realized I was going to solve the dryer problem with a $45 check to my neighbor instead of spending upwards of $1400 for a new washer and dryer.

Since then, I’ve found myself thinking about the comparison of the two items.  It bothers me that I’m so eager to throw down $500 for a frivolous item like an Ipad while I actually felt a bit of anxiety over what I should do about the dryer.  I suppose it all centers around the “want” vs “need” scenario, but my thought process really should be reversed.  I should readily buy what I consider a “necessity” and really spend the time anguishing over whether it’s a good decision to blow $500 on something that will be outdated and completely disposable long before a dryer.

I spent some time shopping around and my wife and I finally settled on new Maytag front loader machines.  It was killing me to buy both a new washer and dryer just because the dryer quit working but I guess I finally hit that frustration point where I just wanted the problem solved.  Total cost for my indifference: $1400.  They are due to be delivered on Friday.

Today I was talking to my neighbor across the street telling him that the dryer had died and that we’d bought new machines.  He said, “Oh, you should have told me sooner.  I’ve got a washer and dryer that are in great shape that I need to get rid of in the garage.”  At first I said, “Naaah.  We really don’t want to have mismatched units since you see them as you walk through the hallway downstairs and my wife wants the new ones.”  Yes, I know.  Pathetic.  Anyway, I decided to just take a peak at his units since we were standing right in front of his house.  They are an exact match to what we have.  Not close.  They are an exact match.  So, I bought the dryer for $50 and am heading down to cancel our order at Home Depot tonight.  At least I finally realized I was being a bonehead.

JD ultimately realized how fortunate he is in his CURRENT home and situation.  He references lifestyle inflation which is incredibly important to pay attention to.  It’s so easy to slowly increase your spending as your income levels go up.  It’s something I’ve battled for all of my adult working years and it’s why we’ve managed to keep our spending at 47% of our after tax, after investment income.

A few things came to mind as I was reading the blog post.  First, along with a large house like that comes large expenses.  Even if I could afford to buy a “mansion on the hill”, I probably couldn’t afford even the most basic expenses.  Heating and cooling a place like that would cost many hundreds of dollars a month.  Taxes on a $2.3M house would be exorbitant.  Even paying to keep the landscaping looking decent would be a significant burden.  And the list goes on and on.  For all those extra expenses, would I find myself content?  It’s doubtful.  There is always more to covet.

Secondly, I’m not sure I’d enjoy isolating myself on to a gated estate.  I’m a social person and actually enjoy conversing with my neighbors.  In a house like the one JD highlights, I’d basically be walling off the rest of my neighbors and would probably, at best, just get a wave as I drove by the people near me.

The bottom line is that I’m pretty darned happy with where I’m at in life as well.  We have a nice, reasonable house to live in that has a new roof, new siding and should be ample to last us through raising our daughter.  There is plenty of room (2700 sq feet) and we have nice neighbors.  While we could upgrade to a nicer house in a nicer neighborhood, I don’t think the economic tradeoff would come close to being worth it and I know as soon as I got there, I’d find myself yearning for the bigger, nicer house down the street.  It’s really not about the houses at all, but rather, it’s about managing your expectations and being happy with what you have.

A few months ago my wife and I talked it over and decided that we’d try to avoid any major expenditures in 2010.  For the last couple years we’ve had to spend thousands and thousands of dollars on a new roof, construction at the lake, buying a new car for my wife, and the list goes on and on.  The last thing we really need to do is replace the windows in our house.  I’ve been contemplating doing that to take advantage of the 30% energy tax credit, but so far I’ve decided to forgo the tax credit and just build our savings account.  Had we not spent so much money on our house over the last couple years, I’d be much more inclined to take advantage of it.

So, for the rest of the summer we’ll be spending time at the local amusement/water park that my aunt bought us season tickets to, visiting our lake house that we built a couple years ago and just taking short day trips around the area.  Hopefully we’ll be able to enjoy ourselves thoroughly AND see our savings account increase.