Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

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Creative Commons License photo figure credit: AdamL212

When I was a kid my family had a Commodore 128 computer.  The vast majority of the time spent on this computer was in playing video games.  We had a game called Ghostbusters which, of course, was modeled after the hit movie of the same name.

The object of the game was to respond to calls of high paranormal activity in buildings all around New York City.  At the start of the game you are given an allowance of funds with which you can buy gear for catching ghosts.  The amount of money that you start with is enough to buy the cheapest car and a minimum of ghost catching gear — just 1 Slimer trap, and not even enough money to buy an Ecto-1.  When the trap is full, you have to return to Headquarters to empty the trap.  You get paid for each ghost that you catch.

As the game progresses, the Keymaster and the Gatekeeper arrive on the scene.  These two wander rather aimlessly around the city until they finally arrive at Zuul.  When they arrive at Zuul, if you have caught enough ghosts (it was never clear to me what metric was used to determine whether you had caught enough), you are given the opportunity to sneak through the legs of a dancing Stay Puft Marshmallow Man, take a trip to the roof of Spook Central, cross the streams and win the game.  If you manage to do all this, you get a code that you can use the next time that you play so that you can enter the game with more money.

What does all this have to do with personal finance and avoiding lifestyle inflation?  Well, it was my experience that no matter how much money I earned in the game, it never did me any good to buy more and better equipment.  Some of the options available were 4 different cars, each faster than the next, as well as the ability to buy several traps.  Having more than one trap allowed you to catch more than one ghost before having to return to headquarters to empty it, and having a better car allowed you to get from ghost call to ghost call and back to headquarters much faster.  It seemed, however, that the more money that you spent up front, the harder and faster you had to work to catch enough ghosts before the Keymaster and the Gatekeeper got together at Zuul. In fact, it was so hard to catch enough ghosts, that I was never able to beat the game by using anything more than the most minimal gear available.

I’ve been thinking of the parallels between this game and personal finance for a long time, and more lately as I read the popular personal finance book Your Money or Your Life by Vicki Robin and Joe Dominguez (more on that later…).  I’m finding it less and less useful to want to make more and more money if one of the big problems that it’s going to create for me is to need to keep making more and more money to support our lifestyle.  I would much rather be happy with what we’ve got and use any money that we happen to make above and beyond what we need to boost our retirement savings and lower our retirement age.  Coming to realize that we don’t need more stuff or a bigger house to make us happy has been a very freeing realization, and one that will allow us to maintain our lifestyle more easily over time.


Creative Commons License photo figure credit: Derek Purdy

This past Friday I used some comp time at work to take advantage of some non-weekend skiing at Killington Mountain in Vermont.  My host for the day was an old friend who sold a company during the Dot-Com boom and has been, for the most part, living off of the interest and dividends provided by his investment of the proceeds of the sale.  We talked about a lot of things while riding the ski lift, from parenting philosophy to Wall Street bailouts to the whereabouts of our mutual friends.

My friend challenged me in many ways, not the least of which was in trying to keep up with him on the slopes.  But as the memories of freshly groomed courderoy fade away, I’ve been chewing on a number of the things I learned or relearned in our ski lift discussions.  Please excuse the fact that some of these are broad, and some are narrow, but that’s how the conversation went.

  1. Citigroup is not going back to $45 - Throughout most of the 2000s, Citigroup’s stock price was in the $40 to $50 range.  It closed at $1.03 on Friday.  There are two important lessons here: A. You should not own individual stocks unless you own enough and varied stock to be able to weather problems in one particular market segment, like banking or energy — in other words you should be diversified enough to mitigate non-systemic losses.  B. Even if you believe that the market will bounce back, it will have to do so without Citigroup, GM, and any number of other well established, large companies whose stock is now all but worthless.  Money invested in Citi at $45 is gone.
  2. Koreans make bad pilots – There’s a book out now by Malcolm Gladwell called Outliers.  In it, there is a story about the problems that Korea Air had keeping their planes in the sky in the 80s and 90s.  Apparently the problem stemmed from a cultural requirement for co-pilots and other crew members to respect their elders by not questioning their authority and decisions in the cockpit.  It seems to me that a lot of the financial mess we’re in today stems from people not asking enough questions when they didn’t understand the terms of a deal, be it a mortgage or a credit default swap.
  3. This is not the first time the government has bailed out a “too big to fail” company – Do you remember a company called Long-Term Capital Management?  I didn’t either.  But I learned that this was a hedge fund that failed “spectacularly” in 1998 and was bailed out by a consortium of banks.  This fund was “too big to fail” in that its quick liquidation would have led to a collapse of financial markets.  You can’t sell large stock positions all at once since it causes the price to fall sharply, and you certainly can’t do so for many stocks all at once since it causes entire markets to fall sharply.  My ski buddy wonders why we put ourselves into a position again in which unregulated entities were allowed to become too big to fail.
  4. When you can’t find value in something that you need, you can always go for cheap – I was eyeing the sushi bar at lunch time, but a $15+ dollar lunch was not worth it to me.  Instead I went with a $4 hot dog.  This is similar to why I choose index funds instead of managed mutual funds.
  5. Giving up a little can be worth a lot – A season pass at Killington cost $999.  A season pass with 14 blackout days costs $650.  By giving up less than 10% of the available days during the ski season — which also happen to be the days with the longest lift lines — you save 35% on the pass.  This works the opposite way as well.  I’m reminded of the fact that most of the gains in the stock market happen on VERY few days.  If you had invested $10,000 in 1996 in an S&P 500 Index Fund, you’d have $17,280 in 2008.  If you had missed the 10 best days during that period, you would have just $10,748.  If you had missed the 20 best days, you’d have lost money and be left with just $7,360.  (Source)
  6. The government should not have let Lehman Brothers fail – It was distasteful to the American people that the government bailed out Bear Sterns, so it let Lehman Brothers fail to appease the taxpayer rather than do what was right with respect to fiscal policy.  In all likelyhood this has cost the taxpayers far more than it would have otherwise in the form of bailout after bailout.  The failure of Lehman Brothers began a downward spiral which seemingly has not yet found it’s floor.
  7. Don’t take the experts at their word without doing your due diligence – The “ski index” for Killington on Friday was a 1 out of 10, with 1 being the worst.  I decided to make the 3+ hour drive and see for myself.  At the very worst case it would be a long way to go for a couple of beers.  My friend says that he would have given the day a 4.5 overall (5 in the morning, 4 in the afternoon).  I would give it a 7, since my bias is towards smaller, less challenging mountains with generally worse conditions.  Check out this clip from The Daily Show which features a great quote from Jon Stewart: “If I’d only followed CNBC’s advice I’d have a million dollars today…provided I’d started with $100 million.” (Thanks to David at My Two Dollars for posting the link earlier this week.)

I had a great time skiing, and a great time chatting on Friday.  I like to think they were both somehow good for my soul.  I like to hear your opinion on any of these points.  Leave a Comment below.

Nail Biting

Nail Biting: A Bad Habit Creative Commons License photo figure credit: coxy

We’ve had a busy few months:

During this time, we have not paid very much attention to our finances.  Most of our finances are automated, so our bills still got paid on time, and I know that we’re generally doing okay.  However, I really can’t say whether we’re still saving enough, or even whether we have anything to save.  

Our busyness is really no excuse for taking our proverbial eyes off the ball here.  The truth of the matter is that I’ve had my head in the sand since shortly after ScrapperMom lost her job.  I really did not want to have to acknowledge the drop in income and figure out how to live without it.  As a result, I haven’t looked out our Spending Plan in months, I have no idea whether we’re spending more than we earn.  I do know that we have not yet made any retirement contributions for 2009 even though we are already 13% of the way through the year, and that’s starting to bug me.

Good personal finance is a habit like any other.  Breaking bad personal finance habits takes time, dedication, and work.  We’re all susceptible to falling back into our old habits, especially during times of stress, inattention, etc.  I gained a few pounds over the holidays (no excuse again…), and I’ve been working to take the excess off again.  Similarly, it’s time to get serious with our finances again.

Tomorrow I will draw up a new Spending Plan.  I will find money to contribute to our Roth IRAs, even if I have to take it out of our savings.  I will forget about our spending over the last month or two and focus on the future.  I will get back into the habit of good personal finance.

Do you fall back into old habits?  How do you get yourself back on track when you do?  Share your story in the Comments section below.

Broken Pipes

Creative Commons License photo figure credit: Remy Sharp

A week or so after our new tenants moved in, it was reported to me that their toilet wobbles.  A quick inspection found that the screws that hold the toilet down were not tight, so I tightened them.  It took about 2 minutes in total to diagnose and fix the problem.

Fast forward about a month: ScrapperMom discovered that a leak had developed in the basement ceiling, almost directly under the tenant’s bathroom.  The leak was at the low spot in the ceiling, which happens to have an access door built into it for reaching some shut-off valves and other stuff.  My immediate fear was that when I fixed the toilet, I broke or unseated its seal.  

This was just before we had our baby, so I was not in a good position to try to investigate and repair the problem myself. I resorted to calling a plumber.  After investigating, he said that there is a leak at the seal in the toilet, but that it wasn’t the bulk of the problem.  It seems that our approximately 90 year old cast-iron waste drain stack had rotted clean through just below where all of the tenant’s fixtures drain into the stack.  The plumber fixed the toilet seal and applyed some temporary epoxy to patch the hole in the stack.

The plumber returned today to permanently repair the hole.  The first thing he had to do was to cut a hole in the wall in the tenant’s apartment and then cut another hole in the ceiling in the basement.  Then they had to cut out a section of the old pipe and install the new one.  They did a nice job minimizing the collateral damage and cleaning up after the fact, but plumbers don’t typically repair drywall.

All together, both plumbing repairs came to nearly $1,400, and the drywall isn’t even fixed yet.  We have an emergency fund, but because we also put a little bit away into a slush fund every month, we did not have to dip into it.  I’m not happy about spending $1,400 on something that I can’t really enjoy all that much (not that I don’t REALLY enjoy indoor plumbing).  But that’s life.  I guess this is another one of those little things that reminds me that I’m an adult now.

Now I need to go investigate the weird noise the car started making last week…

Have you had any unexpected expenses lately?  How did you deal with them?  Leave a Comment below!


photo figure credit: MITBeta

In the spring of 1998 as I prepared to graduate from college, I made a classic personal finance blunder: I bought a $1500 surround sound receiver on my credit card.  At the time I was earning about $240/week before taxes, which means that I really could not afford this stereo.  It took me many years to pay off that credit card since there were obviously many other charges on this card, though no single item this expensive.

Fast forward to 2004: Having at least partially learned my lesson about buying things I could not afford (the receiver wasn’t the last…), I still owned the receiver and it still had a prominent position in our home theater setup.  Imagine our disappointment when the volume control started to go south.  When pushing the volume up or down buttons on the remote control, the receiver would display the corresponding message, such as “Volume Up”, but the volume knob would not turn as it once had.

Bravely, I disassembled enough of the receiver to get a good look at the volume control, hoping that an obvious loose connection was apparent.  I didn’t find anything obvious, and after reassembling, the control started working again.  For a while.  When the knob stopped working again, I discovered that if I gave it a couple of quick raps, the control would start working again.

The “knock on knob” solution worked for another 5 years until last December.  No matter how much knocking I did, the volume control would not come back to life.  I started to think about having to replace the receiver, which prompted this post: Replacing Items That Put You in Debt.  Then ScrapperMom asked a simple, but brilliant question: “Can it be fixed?”

“Duh,” I thought, “why didn’t I think of that?”

When I disassembled the receiver in 2004 I made sure to take a number of pictures of the parts that appeared to be broken (one of which appears above).  So I went back to those pictures and found the part number for the board.  Then I visited the manufacturer’s website and found a place to search for parts.  I put in the information I had and quickly received an email back with a couple of possibilities.  Hmm.  I called the phone number at the bottom of the email and asked if I could speak to technical support.  The tech who came on the line (almost immediately, by the way) knew the troubleshooting for this product, which hadn’t been manufactured in almost 10 years, cold.  Within 5 minutes I was armed with enough info to diagnose the root cause of the problem.  After testing out the receiver, I found that the motor that drives the knob was bad, and I ordered a new assembly for about $43.

Yesterday, a friend who has lots of experience with soldering delicate electronic parts to circuit boards came by and had the old part off and the new one on in about 45 minutes.  We checked out the receiver and the volume control works fine now.  Lest you think to yourself that that’s all fine and good if you have a friend who can solder, my initial research for this volume control problem indicated that the part and the repair would have cost about $100 at a qualified service center.

By doing a little research, getting my hands dirty, being resourceful (i.e. calling Bryan), and being reminded not to Pitch, but Fix, we have saved ourselves at least several hundred dollars on not having to buy a new receiver.  Yes, we could have survived getting up to turn the volume knob for quite a while (if you can imagine that horror!), but modern society has made the remote control ubiquitous, and having quick access to volume control with a newborn and a toddler in the house will save our sanity for sure.

Do you have a story about fixing instead of pitching? Let’s hear about in the Comments below.

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