RPF_0005_-_The_Ultimate_Guide_to_Spending_Money_-_How_a_smart_person_can_optimize_each_and_every_buying_decision_to_get_maximum_utility_out_of_their_money
00:00:00.000 | Welcome to the Radical Personal Finance Podcast, Episode 5. I'm your host, Josh Rascheetz.
00:00:07.000 | Today's show is somewhat pompously entitled, "The Ultimate Guide to Spending Money. How
00:00:15.360 | a Smart Person Can Optimize Each and Every Buying Decision to Get the Maximum Utility
00:00:21.720 | Out of Their Money." Now stick with me, I know that sounds a little bit pretentious
00:00:25.780 | and somewhat pompous, but the show is designed to be a comprehensive view of all the interesting
00:00:32.780 | ideas that I was able to come up with to get more value when you make a spending decision.
00:00:40.580 | Essentially what the show is, I've sat down, I've brainstormed every way that I could come
00:00:46.200 | up with to make smarter buying decisions. And hopefully by the end of the show, you'll
00:00:53.560 | have some ideas and some information that will be helpful to you. Now, as I start off
00:00:58.880 | here, I just want to clarify. These are simply ideas, and it's possible that only one or
00:01:05.880 | two or three of them could ever be applicable to your life. I'm not assuming that any of
00:01:13.080 | them are applicable to your life. They're ideas that I think have value and can be applied
00:01:19.160 | in a lot of different circumstances. So I also think that ideas, I personally love ideas.
00:01:26.160 | I love ideas because ideas have a tendency, once you think of them and understand them,
00:01:36.200 | to mate with each other and to get themselves in a situation where they pop out right at
00:01:43.760 | the time that you need one. So I may say something today about, I don't know, a smart way of
00:01:49.400 | buying socks and underwear, and a few years from now you may be buying a car and there
00:01:55.600 | may be an idea that's going to pop out to you. So that's okay.
00:01:59.040 | So today's show is going to be, again, an overview of all the different ideas I was
00:02:06.040 | able to come up with, interesting questions to ask yourself when you're buying something.
00:02:10.480 | Now obviously these are a lot of questions. I'm not thinking that anybody would ever ask
00:02:15.640 | themselves all these questions, but think about them and apply them to different areas
00:02:20.640 | of your life. And at the end of the show we'll talk about that.
00:02:27.440 | First though, before we get into the ideas, I want to get into the topic and the question
00:02:31.160 | of frugality. Here's my question. When is it okay for you to spend a lot of money?
00:02:38.800 | Frugality is incredibly important. I'm not the frugality police, but frugality is incredibly
00:02:45.800 | important. It's important at the beginning stages of financial success when one is just
00:02:55.560 | getting started putting together their financial plan, just getting started earning money,
00:03:04.480 | making money and investing money. Every $10 you can invest at the beginning of your life
00:03:10.160 | has a huge potential future result. So frugality is incredibly important then.
00:03:17.160 | I would argue that frugality is important later on down the road because the people
00:03:22.120 | who become wealthy are the ones who tend to practice these principles and they become
00:03:30.920 | a part of them. So frugality is important at every stage along life.
00:03:37.920 | Question 1. When is it okay for you to spend a lot of money? I've got four answers to that
00:03:42.040 | question.
00:03:42.760 | Answer 1. Whenever you want to. I know it sounds a little bit unusual, but it's your
00:03:49.760 | money. You can do what you want to with it. So I'd say you can spend a lot of money whenever
00:03:56.260 | you want to because it satisfies something that's important to you. Some random guy on
00:04:02.480 | the internet, it's not my job to tell you what to do with your money. It's your money.
00:04:07.920 | You earned it or it was given to you. You can do whatever you want with it. But obviously
00:04:13.520 | you're probably not here to hear me tell you that, but it is true.
00:04:17.960 | Answer 2. It's okay for you to spend a lot of money when you've considered the opportunity
00:04:21.960 | cost of your purchase. What are you giving up with your choice? To me opportunity cost
00:04:28.260 | is the key. Each of us has a finite amount of time. Each of us has a finite amount of
00:04:33.360 | resources. The things that we choose to do or not do with our time and with our resources
00:04:40.360 | are going to determine our choices. Excuse me, I guess our choices are what we're doing
00:04:47.000 | when we choose. Each time we choose to do something ourselves, our opportunity cost
00:04:54.000 | is what we could have been doing with the time that we gave up to do it. Some people
00:05:00.840 | might find a task like mowing the lawn and they may say I need to hire that out because
00:05:05.720 | it's more valuable to me to spend the money on mowing the lawn than it is to give up the
00:05:11.560 | time that I have for it. Now on the other hand, the opportunity cost is also financial.
00:05:17.280 | So if you spend money on doing something, you're giving up what you could be doing with
00:05:22.080 | that money otherwise. And this entire show practically is talking at times about what
00:05:28.720 | those costs are. But if you've considered seriously the opportunity cost, what the alternative
00:05:33.900 | use of the dollar would be in your situation and you're satisfied with that, go for it.
00:05:40.840 | Then is it okay if you spend a lot of money? Answer three, I would suggest that if you're
00:05:44.840 | interested in being wealthy, it's okay to spend a lot of money when it's a small percentage
00:05:49.720 | of your wealth. Rich people consistently spend only a small percentage of their wealth. That's
00:05:56.720 | why they got wealthy and that's why they stay wealthy. If you find someone that's spending
00:06:02.180 | a higher percentage of their, that's spending a lot more money than expresses a percentage
00:06:06.920 | of their wealth, I can promise you two things. Either number one, they're not wealthy and
00:06:11.000 | they're just spending out of income. So they're high income earners and they're not high,
00:06:18.000 | but they're not very wealthy. Or I can promise you it's because they're not going to stay
00:06:24.480 | wealthy long. There are plenty of stories you can go on the internet and read about
00:06:29.120 | and there are plenty of stories of very wealthy people who became wealthy and then spent a
00:06:37.040 | lot because of foolish spending.
00:06:40.560 | Let me give you an example. We often forget that rich people and wealthy people may actually
00:06:47.360 | be quite frugal because of the dollars involved. An example that came to me is the example
00:06:54.360 | of Paul Allen. Paul Allen was the co-founder of Microsoft with Bill Gates, very wealthy
00:07:02.200 | man. For some reason, I don't know, he always sticks out in my head because of the yacht
00:07:07.920 | that he owns. Years ago I remember the yacht being in a lot of articles that I would read.
00:07:13.480 | It's this huge, fancy, expensive yacht. So I went and looked it up because I was interested
00:07:18.680 | in the numbers on it.
00:07:21.040 | So in 2003, Paul Allen bought a yacht named Octopus and this thing is incredible. It's
00:07:27.920 | an ocean liner. It's got a helicopter pad, it's got a couple of swimming pools. It's
00:07:32.160 | huge. It's absolutely huge. He paid $200 million for it in 2003 and according to various news
00:07:39.160 | articles which I've read and I'll link to in the show notes, it costs him about $20
00:07:45.240 | million per year to run. So he paid $200 million for it, it cost him $20 million a year to
00:07:51.400 | run. Quite a lavish expense.
00:07:56.160 | I don't know what Paul Allen was worth in 2003 but I looked up on celebrity net worth
00:08:01.280 | and in 2013 as I record this, the website estimates his wealth to be about $15 billion.
00:08:08.280 | I don't know if he was wealthier back then or less wealthy, it doesn't really matter.
00:08:16.520 | Allen's worth $15 billion and he pays $200 million for a yacht that costs him $20 million
00:08:22.760 | per year to run.
00:08:24.160 | Now, what I tried to do is I tried to make up an illustration and I don't know how
00:08:29.840 | much he earns. I have no idea what his return is on his investments, on his businesses.
00:08:34.200 | I don't know if he works for earned income and has consulting projects. I don't know.
00:08:39.120 | But if I just make up a number and I say that he's taking a 5% income level off of his
00:08:44.280 | $15 billion portfolio, he has $750 million a year of income. $750 million a year of income.
00:08:52.120 | $750 million a year of income every year and it costs him $20 million per year to run his
00:08:59.120 | boat.
00:09:01.120 | So if you run some percentages on that, it's really interesting. So what I did was I ran
00:09:05.560 | the percentages and I said what percentage of his net worth is caught tied up in that
00:09:12.560 | boat and the answer is 1.3%.
00:09:17.440 | And I said what percentage of his net annual income does it cost him to run the boat and
00:09:21.560 | the answer is 2.6%.
00:09:23.700 | So the equivalent cost, let's break these down to smaller numbers. It costs him, if
00:09:30.700 | the equivalent cost of somebody who has a net worth of $2 million, so pretend you have
00:09:35.920 | a net worth of $2 million and therefore at 5% using my same numbers earns $100,000 per
00:09:42.440 | year from their investments. It's like somebody in that situation going out and buying a boat
00:09:48.360 | which has a price tag of $26,000 and spending $2,600 a year maintaining it. Not that big
00:09:55.360 | of a deal now, huh?
00:10:04.000 | To me, I would think that's actually quite reasonable. If somebody has a $2 million net
00:10:09.120 | worth, $100,000 a year of income from their investments, they want to buy a boat that
00:10:13.800 | costs them $26,000 and then spend $2,600 a year operating it, go for it. That's a reasonable
00:10:20.800 | number. It's actually quite frugal number.
00:10:25.980 | So my thought is make sure that your luxury spending or even your spending is a small
00:10:32.720 | percentage of your wealth if possible if you care about wealth.
00:10:39.720 | When you've seriously considered the best way to get the maximum utility out of your
00:10:47.400 | purchase and that's what this shows about. If you've really considered and thought about
00:10:52.080 | the best way to get a deal and to stack on a lot of utility to each and every decision,
00:11:01.640 | it's fine. If you don't do that though, you find a lot of inefficiencies in your finances.
00:11:08.640 | But if you'll do that, you can make excellent, very efficient buying decisions that will
00:11:15.000 | stand you in good step.
00:11:18.320 | So first some general tips. When you're making a buying decision, slow down. Most people's
00:11:27.240 | mistakes would, they would be able to coach themselves out of mistakes if they would slow
00:11:32.800 | down. Take time to research your choice. Think about your choice. Plan it out and consider
00:11:39.540 | the options. Research the alternatives that you could do. Think if this really meets your
00:11:46.540 | needs. Plan the purchase out. Management consultant Brian Tracy who I've thoroughly enjoyed over
00:11:53.840 | the years listening to a lot of his audio and books, reading his books, has a rule which
00:12:00.840 | he applies to making investment decisions. And his general rule is, I think it's a good
00:12:05.840 | one. He says, "Spend as much time investigating the investment as you spend earning the money
00:12:12.840 | that you're thinking of investing." I really don't think that that's ultimately possible.
00:12:21.840 | At the end of the day, it's not really possible to spend as much time investigating something
00:12:28.840 | as it takes you to earn the money. But it's a good, I think it's a step in the right direction.
00:12:35.600 | If you're going to make a $10 decision, make it quickly. That's fine if it doesn't take
00:12:39.280 | you that long to earn $10. If you're going to make a $100 decision, slow down. If you're
00:12:44.520 | going to make a $1,000 decision, do it even slower. $100,000 decision, make sure you take
00:12:50.520 | lots of time considering that decision, considering all of your options, considering everything
00:12:56.360 | that you can do to really make a quality decision. If you're going to buy something, buy it smart.
00:13:03.360 | Develop your buying skill. There's an incredible world of abundance available for those who
00:13:14.440 | know the tips and techniques about buying and who've developed methods of paying for
00:13:21.440 | things in such a way that they get more use for their dollar. There's a world of scarcity
00:13:31.160 | for those who run out, plunk down a credit card and pay retail.
00:13:37.600 | So when you're making a buying decision, consider your method of payment to get maximum value.
00:13:42.800 | Here's some ideas that I came up with. Number one, can you pay cash and get a discount instead
00:13:47.560 | of paying with a card? So when working with private individuals, sometimes ask yourself
00:13:53.080 | the question, "Can I pay cash?" Cash often, in the right circumstance, speaks louder than
00:13:59.800 | plastic does. So if you're buying a car from an individual on the side of the road, it's
00:14:07.280 | very possible that a few stacks of hundred dollar bills will get you a better deal than
00:14:14.280 | a credit card swipe or a bank check. It's also possible that sometimes with services,
00:14:21.400 | if you're hiring services from a tradesperson, you may ask if you can get yourself a cash
00:14:28.400 | discount of some kind or if you're in a store. Just ask.
00:14:32.600 | Now the flip side of this, can you pay with some kind of rewards credit card instead of
00:14:38.600 | cash or a debit card in order to get more value for yourself? So if you walk into your
00:14:43.760 | local big box store, it's very unlikely that you're going to be able to negotiate a cash
00:14:47.500 | discount. So why pay cash? Why not pay with some sort of paying mechanism that allows
00:14:57.560 | you to get a discount on the services with either rewards points or mileage programs
00:15:04.560 | or just a cash, straight cash back return? I would love it if all stores offered cash
00:15:09.880 | discounts, but until they do, why not look out for yourself?
00:15:14.960 | Could you pay with a credit card instead of a debit card in order to get better consumer
00:15:18.680 | protection? So anytime you're buying electronics or something like that, strongly consider
00:15:26.520 | paying for those services with something like an American Express or some kind of platinum
00:15:33.000 | credit card. American Express has a fairly generous warranty program that would save
00:15:39.000 | you money if you simply paid with that instead of a store warranty. They have a very strong
00:15:46.000 | return policy. So if the equipment breaks or you simply want to take it back, you take
00:15:51.520 | it right back. So things like that, if you pay with a credit card versus a debit card
00:15:57.560 | and that credit card has better protections for it, that may bring you out ahead. It could
00:16:04.560 | also be smart to use a credit card instead of a debit card or cash or a check in a transaction
00:16:10.320 | where you're not quite sure what's ultimately going to happen. So assume that you're having
00:16:17.760 | a contractor work on your home or a service provider. It may be a useful way of protecting
00:16:23.080 | yourself to pay with a credit card if possible so that you'd have the ability to reverse
00:16:29.560 | the transaction if the work weren't done properly. So on a credit card, when you buy and spend
00:16:36.140 | money on a credit card, it's extremely easy to do a chargeback. A lot harder though if
00:16:42.280 | you've paid cash or a check to ever get the money back. If you're paying cash back, forget
00:16:46.360 | it. If you're paying with cash, forget it. You're never getting the money back. But with
00:16:50.000 | a credit card, you've always got a hook in the money where according to the terms of
00:16:54.280 | the card issuer, you can do a chargeback and get the money back. So consider that. That
00:16:59.360 | may be a valuable way to protect yourself. I would seriously consider that if I were
00:17:04.720 | having a service provider or a contractor do work for me. Could you pay with a debit
00:17:11.240 | card instead of a credit card so that you feel the expense more emotionally and that
00:17:16.600 | you don't overspend? Many times people get upset at credit cards in the popular financial
00:17:23.600 | press because they feel that spending money with credit cards causes you to spend more
00:17:33.760 | money. I've seen this go both ways and it depends on who you are as a person. For some
00:17:41.360 | people, spending money on a credit card is thoughtless and it's easy for them. So if
00:17:48.160 | they could switch to spending with cash or with a debit card, they would feel the money
00:17:55.160 | a lot more. They would feel the money leaving their hands. On the flip side, some people
00:18:02.720 | just feel very, very careful about credit card purchases and debit card purchases because
00:18:08.120 | they show up on their tracking software if they track their expenditures and cash just
00:18:13.440 | seems to float out of their life. Consider what your spending habits are and consider
00:18:17.760 | what the best way to do it is. But many times people could be served by paying with a debit
00:18:23.000 | card or cash instead of a credit card so that the expenses felt a little bit more fully.
00:18:30.000 | There is good research on this. I looked for the actual source studies and I couldn't find
00:18:35.760 | them. Commonly, you'll find if you go on the internet and start researching this subject,
00:18:41.960 | you'll find a Dun and Bradstreet survey which says that people spend a significantly higher
00:18:48.040 | amount on credit cards than debit cards. I looked for the original study. I couldn't
00:18:52.080 | find it so I can't prove that but hey, the interweb says it's out there so let's assume
00:18:59.080 | it is. You also find fast food restaurants are often quoted that evidently some of the
00:19:05.600 | major fast food players, their average purchase size significantly went up when they started
00:19:11.480 | accepting plastic instead of cash for transactions. That's why you can go to a fast food restaurant
00:19:18.480 | and there's no minimum purchase of a certain amount. You can just pay for the purchase
00:19:23.400 | using plastic. Now another question, could you pay with cash in order to have greater
00:19:28.920 | purchase privacy? So if you pay with plastic, whatever it is that you're purchasing is always
00:19:35.920 | on your record. It's always available. Would it be wise for you to consider paying with
00:19:44.560 | cash in order to have an anonymous form of payment? I actually personally see more and
00:19:54.520 | more societies moving towards a cashless society in Europe. I can't remember, I was reading
00:20:01.080 | an article some months ago about one of the countries in Europe, maybe Denmark, that is
00:20:05.320 | very close to that, in that direction. I don't think it was Denmark. Anyway, it doesn't matter.
00:20:12.320 | But this really concerns me because there should be a certain amount of anonymity with
00:20:21.760 | your purchases and cash is what gets you that. You're going to find in the future, the systems,
00:20:28.760 | my personal opinion, you're going to find that the systems are going to move more in
00:20:33.520 | the direction of electronic transactions as part of the overreaching growth of government
00:20:39.920 | and the more consistent tracking. I'm not upset about it, it's just a fact of life.
00:20:45.840 | So realize that just like through over the last few months with the NSA release of Edward
00:20:52.840 | Snowden of the information of what the US government tracks and many European governments,
00:21:02.200 | realize that every single buying decision that you make, every product or service that
00:21:07.380 | you pay for is tracked and there's a record of it. And so is every email that you send
00:21:15.380 | and so is every phone call. So when you start stacking those things together, there's a
00:21:21.500 | pretty compelling list of purchases that can be made.
00:21:28.500 | Was recently, just last night I was reading the discovery documents which I found online
00:21:35.660 | from the Trayvon Martin, George Zimmerman case. And it's very interesting as part of
00:21:40.700 | the discovery documents that the attorneys were using, some of the documents were all
00:21:45.660 | of Trayvon Martin's cell phone records. Now these weren't admitted, the judge didn't allow
00:21:49.660 | these to be admitted in the court case. But I was reading, posted online every single
00:21:55.940 | text message that Trayvon Martin sent. It's freely available. Realize that every single
00:22:02.940 | dollar that he spent was tracked as well. So consider, which should you pay with cash
00:22:07.300 | for greater purchase privacy? One little tip for you, if you need cash, you can always
00:22:13.940 | get cash out of the bank, you can always do ATMs, things like that. If you ever need anonymous
00:22:19.340 | cash, the best way that I know to do that is simply to do cash back transactions when
00:22:24.620 | you're at a store. So if you're at a grocery store or a home improvement store or something
00:22:30.260 | like that, swipe your debit card and then get extra cash back on the side. Probably
00:22:35.820 | a little bit more of a private way of getting cash out than going to the ATM every day.
00:22:39.300 | You've got stricter limits of course, but just pass that along in case you ever need
00:22:42.380 | that. Next question, can you barter for the service or the item instead of using currency
00:22:47.820 | for it? So instead of paying with money, could you pay with something else? Could you trade
00:22:54.820 | something? Could you swap something? Could you trade services or an alternative product?
00:23:02.060 | I always enjoy going on Craigslist, on Craigslist they always have the trade section, I can't
00:23:07.740 | remember what it's called, but they have the trading section. Do you have an old object
00:23:14.580 | sitting in your yard that you don't want or need anymore that you'd be willing to trade
00:23:18.300 | for someone else's object B that's sitting in their yard? You could join a barter network.
00:23:25.220 | So there are a lot of barter networks that are available. This could especially be something
00:23:31.660 | for businesses. When you're setting up a business and you're building out, could you join a
00:23:38.660 | local barter or trade network and do business there? A couple of advantages, number one,
00:23:44.220 | this lowers your outgoing flow of currency, which is helpful when you're starting a business.
00:23:51.220 | It also allows you to have access to a specific market and specific customers. So by joining
00:23:58.620 | a barter network you're automatically going to be part of that network's customers. And
00:24:03.180 | if you're the first person in your occupation or if you're a very small pool of occupations
00:24:09.300 | that can be extremely helpful. There are a lot of alternative barter currencies available.
00:24:14.900 | Famous ones such as the Ithaca dollar I think is up in Ithaca, New York. It was started
00:24:21.900 | back at least 20 years ago now that the Ithaca dollar has been operating as a small local
00:24:28.900 | form of time banking. There are barter currencies that work in gold and silver. One I'm familiar
00:24:36.060 | with which I'll link to in the show notes is the American Open Currency Standard where
00:24:43.460 | it's a system of a barter network where the barter is done with gold and silver and copper
00:24:47.460 | coins which are assigned a token face value and that allows trade to be done within the
00:24:54.460 | network using the gold and silver coins as a commodity. There are online currencies such
00:25:01.740 | as Bitcoin. Bitcoin is the most famous but there are plenty of online currencies. There's
00:25:10.620 | a dozen or two. And consider also that online currencies go that are transferable between
00:25:17.620 | national currencies so you can transfer between Bitcoins and US dollars. There are also online
00:25:24.200 | currencies that exist purely in the online world just like there are currencies that
00:25:28.480 | exist purely without any exchange to dollars in the physical world. Be careful with tax
00:25:36.820 | issues. Barter income is not tax free. I found some interesting information on the IRS website
00:25:43.820 | that actually talks through the tax guidance for it. Basically it's treated just like any
00:25:51.900 | other dollar transaction. If you realize a profit then you need to declare that profit
00:25:57.300 | and exchange that profit and pay income tax on that profit. Obviously I would imagine
00:26:05.980 | that it would depend on the transaction and depend on the business as far as how that's
00:26:11.300 | actually conducted. But be careful. Bartering is not simply tax free but it is an option.
00:26:18.140 | Does save you money if there's a lower outflow of cash out of your pocket. Now obviously
00:26:24.340 | I enjoy the barter currencies and the time banking concepts but reality is that even
00:26:31.340 | things like babysitting is probably where this is more practical. Do you have kids?
00:26:35.460 | Do you pay for babysitting? Just swap babysitting services with another family. That could help
00:26:41.300 | save a tremendous amount of money. Maybe instead of doing date night every week you do it every
00:26:45.220 | other week and one of your date nights is taking care of some of your other family friends
00:26:50.340 | kids so that they can go out. Things like that can have a tremendous impact as far as
00:26:55.540 | the dollars saved and they're fairly easy changes to make. Buy with the lowest price
00:27:04.940 | and with the lowest cost. Always consider in making a buying decision price and cost.
00:27:10.620 | Now they're not the same thing and you have to consider them both. So the way I define
00:27:16.140 | it price is what you pay up front. Price is just simply the number that's listed on the
00:27:20.820 | price tag. Cost is what the item or the service costs you over its lifetime. It may have a
00:27:29.020 | very low up front cost and a higher ongoing, it may have a low up front cost and low ongoing
00:27:36.020 | expenses or it may have a low up front cost and higher ongoing expenses. The example that
00:27:42.300 | probably many of us have experienced would be something like buying inkjet printers.
00:27:47.540 | Inkjet printers have an extremely low price and they have a ridiculously awful cost. So
00:27:56.100 | the printer is basically subsidized by the company that's producing it and many printers
00:28:02.580 | require you to use their company's cartridges to fill it. So consider both the price and
00:28:09.580 | the cost and consider, try to calculate what those numbers are going to be. And in some
00:28:23.020 | situations it may be right for you to buy the lowest price and in some situations it
00:28:27.460 | may be right for you to buy the lowest cost. But consider them.
00:28:33.180 | One of the first things that I and probably many of you often look for is can you buy
00:28:38.260 | an item online instead of in a store? Online shopping has been an incredible help to the
00:28:45.260 | consumer in general. First you could save on sales tax currently that's in the process
00:28:52.820 | of changing in the US but I live in the state of Florida which has a standard 6% sales tax.
00:28:59.820 | If I can buy a product online from a store that's not going to charge me sales tax that's
00:29:04.540 | an automatic 6% discount. That's substantial. You can get a lower price sometimes because
00:29:11.540 | the company has lower costs. So if you are a retailer and you're required to maintain
00:29:17.860 | a number of physical locations that comes with a high expense and that high expense
00:29:21.660 | needs to be built into the product price. But sometimes an online store will often just
00:29:28.660 | have a lower price because lower internal costs. Also greater selection. So if you're
00:29:42.780 | shopping for pet supplies chances are you're going to find a substantially higher selection
00:29:48.260 | from an online pet company, pet store company than you are from the local grocery store
00:29:54.620 | where you buy your groceries. So sometimes just simply by the greater selection you're
00:30:01.140 | going to be able to save money. And the selection comes partly because the company doesn't have
00:30:04.900 | to display the products. They can have loads and loads of products that just simply sit
00:30:09.560 | on a warehouse shelf. They don't have to be displayed in a beautiful store where you
00:30:13.820 | can see them all individually. So consider, can you buy something online instead of in
00:30:18.260 | a store? Can you buy something used and still good? Many people often jump straight to buying
00:30:25.260 | something used. Many people don't. Stores like Goodwill, thrift stores, yard sales obviously
00:30:33.500 | are some people's secret source of great items. But I have a great near-multi-million dollar
00:30:43.780 | store near my house. They've got a great Goodwill location that's just very close by. Anytime
00:30:48.740 | I need something I often check there first. Wine glasses would be an example. I've been
00:30:55.140 | buying wine glasses little by little. I go down there and many of them I don't like but
00:30:59.020 | there's lots of really fancy nice ones there. I pick them up for a buck each. That's pure
00:31:04.260 | profit for Goodwill which they have their own business model of helping out people to
00:31:10.460 | build employment skills. But it's also a good deal for me. Dog bowls. My wife and I bought
00:31:17.460 | some dog bowls there at the Goodwill store for our puppies to eat out of. A buck each
00:31:24.100 | versus the six or seven, sorry it was a buck for two versus the six or seven dollars at
00:31:29.260 | the local pet store. So consider, can you buy something used but still good? Can you
00:31:35.580 | buy something on sale? So another example would be always looking and buying off of
00:31:42.580 | sale prices. One thing I do is when I shop for groceries, we generally shop for groceries
00:31:50.140 | based upon what's on sale and then simply learn to use what we bought. So instead of
00:31:58.900 | saying going to the store with a list of here are the vegetables that I want to buy today,
00:32:03.580 | we simply say what are the vegetables that are on sale, let's buy those and then let's
00:32:08.860 | figure out how to make menus out of them. When you start doing that type of thing consistently,
00:32:14.420 | lot of savings there. So look for things that are on sale. Plan ahead for specific sales.
00:32:21.420 | If you know that there's something that you're going to buy, back to taking the time to think
00:32:25.340 | about it, a lot of times there are specific sales that are offered on a seasonal basis.
00:32:31.180 | I've for a long time preferred to wear Brooks Brothers non-iron shirts. Those were my thing
00:32:38.180 | for a long time. Brooks Brothers has a sale basically twice a year when those shirts would
00:32:42.940 | go on sale. If I would plan ahead and buy those shirts when they're on sale, then there
00:32:49.940 | would be a substantial discount. I've read about the Berkshire Hathaway discounts. Berkshire
00:32:57.340 | Hathaway is Warren Buffet's company. He owns dozens of companies in the umbrella of his
00:33:02.220 | parent company. Every year they have the Berkshire Hathaway annual meeting. During annual meeting,
00:33:09.220 | many of the products from many of the stores go on sale. So if I were living in the Midwest
00:33:16.740 | where Nebraska Furniture Mart, which is one of the companies that Berkshire Hathaway owns,
00:33:21.860 | if I were living there and I were going to do my furniture shopping, I'd be pretty sure
00:33:26.540 | to wait for that Berkshire Hathaway sale and figure out how to get a discount on it because
00:33:33.060 | of that timing. So if you plan ahead, oftentimes things go on sale at times when...if you plan
00:33:40.060 | ahead and are able to buy them, you can get them when they're on sale. Consider things
00:33:45.920 | like travel. There's always seasons of travel. There's the high season and the low season
00:33:52.300 | and then they have what they call the shoulder season. So if you're going to go to...well,
00:33:59.300 | each destination would be different, but look into the prices of where you're going and
00:34:05.540 | see if maybe you can travel in the shoulder season. So instead of going skiing in the
00:34:10.060 | most popular week, and I'm not sure when that is, a lot of times there's a couple of weeks
00:34:15.180 | in between the most popular weeks around the holidays or spring break that the prices would
00:34:20.100 | be substantially decreased. So just think, can you buy something on sale? Could you become
00:34:26.620 | a shareholder or a member in the company? One interesting aspect on the Berkshire Hathaway
00:34:33.620 | conversation, when I was reading Warren Buffett's most recent annual report, I learned that
00:34:41.180 | you can get a discount on your car insurance if you're a GEICO member if you are a Berkshire
00:34:46.580 | Hathaway shareholder. Now GEICO is...my insurance is not with them. I have no idea if they're
00:34:51.900 | a good company or not, but they advertise themselves as having substantially low prices.
00:34:58.220 | So if somebody has substantially low prices and if you call them up and tell them you're
00:35:01.940 | a Berkshire Hathaway shareholder, you can get an additional shareholder discount. Now
00:35:06.420 | I don't know if you have to buy the shares that are Class A Berkshire Hathaway shares
00:35:12.660 | that are $100,000 plus. I don't know as of the time of the recording, $150,000, $180,000
00:35:19.660 | a share. But maybe you can buy some of the fractional shares that are available in other
00:35:24.720 | classes or other forms of ownership. But I've got no idea. But the point is research it
00:35:29.540 | and see if there's some sort of discount that you can get by becoming a shareholder or a
00:35:35.260 | member. I'm a member of USAA for my car insurance. So as a member of USAA, I'm entitled to a
00:35:43.060 | dividend back. And basically, we'll talk about that in a minute. But that allows me
00:35:48.300 | to have my specific costs or whatever the actual company's costs are. It saves me a
00:35:53.660 | substantial amount of money for great car insurance and great service. Can you buy something
00:35:59.380 | that goes up in value instead of going down? Is there something where if you changed which
00:36:06.420 | option you were buying, it would go up in value in the long run instead of down? So
00:36:13.140 | the example that came to me for this one is fancy wooden furniture versus cheaper furniture.
00:36:20.140 | Tom Stanley's book Millionaire Next Door, he talked about that millionaires' houses
00:36:24.700 | are more likely to be decorated or furnished with high quality wooden furniture. I thought
00:36:33.220 | that was really interesting. I've read various articles over the years. I'll link to one
00:36:38.540 | in the show notes by Joshua Cannon about luxury furniture. I don't own any luxury furniture.
00:36:44.820 | I never have and maybe who knows, maybe I will in the future. But I was fascinated to
00:36:49.220 | find that there are brands of furniture out there which if you buy them and you buy them
00:36:54.100 | right and you buy them well, will actually increase their value over time. Generally,
00:37:00.020 | they have at least a good past track record of doing so. So it might be worth considering.
00:37:07.020 | Could you spend more money up front, buy furniture that's likely to keep its value and then
00:37:15.700 | when you go to sell it in the future, instead of losing money on it, you wind up making
00:37:23.340 | money on it? So if I were going to go for some middle of the road furnishings or I were
00:37:30.340 | going to go for some high end, I would consider going the high end if you had the cash to
00:37:34.260 | do it. Another example, if you have money, you can do this in a lot of different areas
00:37:40.500 | of life. I don't know anything about watches. I'm not a watch guy but I would imagine
00:37:45.260 | if you buy a well-known brand that has a history and has an audience, you can watch the watches
00:37:52.260 | and you can wear that luxury timepiece for potentially decades and then if you decide
00:37:59.260 | to sell it, it's possible that if you buy it properly and you know what you're doing,
00:38:04.260 | it's possible that that timepiece may actually appreciate in value. My understanding, I know
00:38:10.020 | Rolex is not one of the highest brands but it's one that most consumers recognize. My
00:38:17.620 | understanding is a 1980 Rolex is going to cost you a substantially similar amount to
00:38:22.820 | a 2013 Rolex. So that would be something to consider. Now the flip side is can you buy
00:38:29.820 | something super cheap that simply does the job instead of going middle of the road? So
00:38:35.180 | back to my furniture example, I would imagine that the worst place to be as far as financially
00:38:40.740 | is middle of the road furniture like you get from Target or from, I don't know, insert
00:38:45.980 | local furniture store of your choice. That furniture is going to be nicer furniture but
00:38:52.780 | it's probably not going to have a high resale value. So you could go on the high end and
00:38:57.980 | buy expensive furniture that's going to retain its value or you could go on the very low
00:39:02.220 | end. Ikea is very trendy, has a very low purchase acquisition cost so can that do the job for
00:39:09.220 | you? Now is it going to be cheap, more cheaply made? Absolutely. But maybe in your situation
00:39:15.780 | that fills the needs. So think about can you go to the very high end and get a product
00:39:22.340 | that retains its value or can you go extremely cheap on the very low end, something that
00:39:27.340 | does the job instead of going with the middle of the road product that does the job maybe
00:39:31.900 | a little bit better but it's going to lose all of its value. Can you buy something that
00:39:36.420 | has a high resale value? So this is back to cost. Consider the resale value of a purchase.
00:39:43.500 | My wife and I are expecting our first baby and as part of that, this may surprise you
00:39:48.580 | and I hope it doesn't gross you out but it's been really interesting. As part of that we're
00:39:52.020 | planning on if possible using cloth diapers instead of disposable plastic diapers. A number
00:39:58.740 | of reasons for that, I won't get into all of them right now. Partly the health concerns
00:40:04.620 | of disposable diapers but partly the cost, that's not the full thing, there are a lot
00:40:11.020 | of other factors than that, mainly the health concerns. But it's interesting if you actually
00:40:16.740 | look at the cost. I never would have imagined the resale value that exists with cloth diapers.
00:40:23.740 | A cloth diaper, one of the fancier brands that you buy is about 20 bucks each for a
00:40:31.340 | new one. The way they work and I won't get into all the different options and what not,
00:40:37.100 | you can do your own research. But about 20 bucks each. Go on eBay, you'll find them selling
00:40:42.500 | every day, used diapers for 10 to 12 bucks each. I was surprised too. It's not the kind
00:40:49.500 | of thing that usually you consider as having a high resale value but these brands really
00:40:56.020 | do. They really do have a tremendously high resale value. So you could, if you were doing
00:41:02.000 | an analysis on something like that, you could buy brand new, well run cloth diapers, use
00:41:08.420 | them for a child or two, turn around and at least in the current market, resell them for
00:41:12.740 | a substantial amount of money. So your amortized cost ends up being quite low. Now what we've
00:41:19.740 | done is buy them used at a lower cost than the 10 or 12 dollars by being very selective
00:41:25.460 | about that and who knows, maybe we'll make a profit on them, I don't know. But most people
00:41:30.000 | probably don't want to talk about cloth diapers but I just was fascinated by seeing this little
00:41:35.260 | quirk in the marketplace that I wouldn't have expected. Another example would be something
00:41:40.840 | like cars. So consider the lifetime cost of the car. Are you buying a car that has a high
00:41:46.060 | resale value? Now if you're buying something new, this would be very important. So if I
00:41:53.060 | were buying a car, a new car, I would strongly consider buying maybe a Honda or a Toyota
00:41:59.940 | or another brand that's known for having a higher resale value versus buying something
00:42:04.900 | like a Kia or a Hyundai. I would try to exploit that and try to make sure that I had a car
00:42:11.220 | with a high resale value if I were buying it new. Now if I were buying it used, I would
00:42:16.820 | consider the quality and I would probably consider strongly buying the car with a lower
00:42:21.340 | resale value. I recently bought a Hyundai minivan. What I learned when kind of shopping
00:42:28.020 | the market for minivans was that the Hyundai was several thousand dollars cheaper than
00:42:35.020 | the Toyota and the Honda were and I found that the quality ratings were substantially
00:42:42.540 | similar. I couldn't find any evidence that would show me that the quality of the Hyundai
00:42:48.180 | or the Kia minivan was anything really remarkably less than the Honda or the Toyota. So I just
00:42:53.820 | went ahead and bought the cheaper brand that had the lower resale value and saved the money.
00:42:59.220 | But consider that in your buying decisions. Could you buy something just as good that's
00:43:03.740 | cheaper? So could you go with a store brand? I'd purchase the Target store brand razors
00:43:10.380 | instead of what I used to buy which was the Gillette Mach 3. The razor companies have
00:43:17.380 | a very high opinion of their product in my opinion and charge a substantial amount. Well,
00:43:22.900 | I'd like to save money and so I started trying some of the different options and I found
00:43:27.180 | that the Target brand razors were delivered as good of a shave as the more expensive Gillette
00:43:34.180 | Mach 3 did. I didn't sacrifice anything and I saved a substantial amount of money. Store
00:43:41.460 | brand groceries versus name brand. More and more across the country, store brands are
00:43:48.540 | incredible quality. If you're not one who shops store brands, try them. The reason that
00:43:54.820 | they're cheaper is because the store brand doesn't generally have all of the...it's often
00:43:59.740 | the same product, just packaged differently and the store brand doesn't have all of the
00:44:03.500 | advertising costs that the large packaged good companies have to get you to buy their
00:44:08.460 | product. Try it. Substantial savings sometimes. We find that in shopping for canned goods,
00:44:16.700 | my wife and I find that buying the store brand is almost always cheaper still than buying
00:44:23.700 | the name brand option when it's on sale. So instead of having to wait for a sale, like
00:44:31.260 | I said earlier with waiting for sales, we just simply buy the store brand. Can you buy
00:44:35.540 | something with lower ongoing taxes and fees? So consider the lifetime costs here of taxes
00:44:42.580 | and fees. One interesting thing, again I live in the state of Florida, if you have a boat
00:44:48.800 | in the state of Florida that has a hull that's older than 30 years, the state of Florida
00:44:54.020 | considers that to be an antique boat and doesn't charge you annual registration fees. I didn't
00:44:59.420 | know that until I was talking to someone who told me that, but I thought that was fascinating.
00:45:04.780 | Now that's a 30 year old boat, but you know what? There are a lot of great hulls out there
00:45:10.020 | that are from decades ago. In fact, many times the person who was telling me about that had
00:45:14.980 | a sailboat. That sailboat had a substantially lower, the sailboat was a great hull from
00:45:21.260 | years and years ago, but they simply made sure to choose one that was 30 years old plus
00:45:26.980 | and had no annual registration fees, no annual taxes. I thought that was powerful. Now I
00:45:32.860 | don't know if they do the same thing with antique cars, that would be cool, because
00:45:36.660 | if it were antique cars, you could stack buying the car at a discounted price, potentially
00:45:43.660 | buying one that could appreciate in value and have low ongoing registration fees as
00:45:51.460 | well. So that would be a good, now I don't know if that's the case or not, it would be
00:45:55.620 | interesting to study, but it is there with boats. So consider, is there something like
00:45:59.860 | that in your area? Research it. Are there any special tax credits available? So if you're
00:46:06.860 | buying a car, a hybrid, are there any hybrid renewable energy credits available? If you're
00:46:13.820 | buying an air conditioner, are there any kind of renewable energy credits, efficiency credits,
00:46:19.740 | things like that that are available to you? A few years ago there was the first time home
00:46:23.540 | buyer credit, which was an $8,000, if my memory is correct, a $8,000 government contribution
00:46:29.460 | towards the purchase of your new home. If you were planning on buying a new home, as
00:46:33.580 | long as, maybe the price is inflated by that amount because everybody was doing it, but
00:46:38.100 | if you were planning on buying a new home, that was a substantial amount of money that
00:46:42.860 | you could consider pursuing. So always research and see if there are some tax credits available.
00:46:49.860 | Interestingly, the tax credits, you kind of have to always study those for yourself, and
00:46:58.060 | that's one that's going to come into play if you're usually on the front end of a wave
00:47:05.060 | of people making similar decisions. The government generally uses tax credits to try to encourage
00:47:11.420 | or discourage certain behaviors. So when there were tax credits available for hybrid cars,
00:47:17.780 | it was only for a certain number of vehicles sold under that type of model. So you've got
00:47:25.700 | to be an early adopter, but that can help lower your cost. Research it. Can you get
00:47:31.620 | the best deal by checking out the competition? Try some sort of competition site or application
00:47:37.260 | for your computer or for your phone. There are a lot of versions of this available. Online
00:47:44.260 | shopping sites like Price Grabber, Google Shopping. When you're on your phone, sites
00:47:51.680 | like Shop Savvy or Amazon Price Check, these are wonderful. If you're sitting in a store,
00:47:57.460 | a local retail store, pull out your phone, pull up an application like Shop Savvy or
00:48:03.340 | Amazon Price Check, scan the barcode, and see what's available online. You may still,
00:48:09.820 | or at other stores, you may still choose to buy it right there, but it's at least good
00:48:13.300 | to know that information. If you're buying things online, there are a lot of short-term
00:48:19.380 | deal websites. Check out Brad's Deals, Woot, DoD Tracker, Deal of the Day Tracker, Giveaway
00:48:25.140 | of the Day, and One Sale a Day. All these are in the show notes for you to reference.
00:48:28.820 | If you're not familiar with some of them, check these sites out. If you're trying to
00:48:34.860 | get a good price on something and you're not sure if it's a good price or if it's a good
00:48:38.660 | option, use a site like Decide.com, Huckster, Deal News, and Invisible Hand. These sites
00:48:45.780 | will give you a listing. Then they'll say, "Yes, this is a good deal. Go ahead and buy,"
00:48:51.780 | or they'll say, "You should wait." This is really worth considering. There are the daily
00:48:58.180 | deal sites like Groupon, Living Social, and there are a bunch of other ones as well. Those
00:49:03.300 | are the well-known ones. Be careful. Oftentimes, you may wind up buying stuff you didn't know
00:49:07.540 | that you were going to need, but if you need something, that might be a consideration for
00:49:13.580 | you to do. I've linked to a couple of resources. Clark Howard, the radio broadcaster, his team
00:49:19.340 | keeps a really great list of these deal of the day and coupon sites updated. I've linked
00:49:23.580 | to that in the show notes. He also keeps a really great list called his Free and Cheap
00:49:29.380 | List, which is along this same vein. I think it's really interesting to investigate.
00:49:36.380 | Can you find a coupon code before you check out? Anytime you're checking out online, just
00:49:42.380 | Google "company name coupon code" before you check out and see what pops up. It'll take
00:49:47.140 | you to sites like RetailMeNot. You'll be able to look and see if there's just a quick and
00:49:51.700 | easy way to save 10% or get free shipping. Almost every single time that I buy something
00:49:57.180 | online, I can usually find something like that. It takes about two minutes to find a
00:50:00.980 | coupon code. It saves a substantial amount of money and it builds up over time.
00:50:07.100 | Can you get a lower lifetime cost by paying more up front? Back to the idea of can you
00:50:14.100 | pay for a higher product that has a lower lifetime cost? My wife and I use Brita water
00:50:22.660 | filters in our house, considering switching to a type of water filter called a Berkey.
00:50:29.060 | I think it costs a couple hundred bucks to buy new, but the lifetime cost of it is substantially
00:50:34.900 | lower than the Brita filters that we use. So each gallon of water, once you make that
00:50:41.060 | additional cost, is an extremely low price versus a very high price using the Brita filters.
00:50:47.860 | Now you have to have the money to do it up front, but consider, it could be worth it.
00:50:52.300 | Could you use something like a straight razor instead of disposable? I have a friend who
00:50:56.180 | swears by his straight razor. This is the straight razor, the thing that looks like
00:51:00.700 | you're going to slash your throat at any time. But you know what? It may be a substantial
00:51:06.500 | investment to get a good straight razor, but once you have it, that's the type of thing
00:51:10.740 | that is a lifetime purchase. So consider the cost of disposable options.
00:51:17.740 | Could you get a lower lifetime cost by using a reusable solution instead of a disposable?
00:51:24.540 | Other examples would be, I always chuckle when I see them advertise the Swiffer mops.
00:51:31.540 | What's wrong with a mop in a bucket of water? Well, the Swiffer, you've got to buy the new
00:51:36.700 | little sheets for it, and you've got to buy the new little, I don't know, the accessories
00:51:43.020 | that go with it. A mop, you don't. A mop is a one-time purchase. Could you use a dishrag
00:51:49.700 | instead of paper towels to wipe up your messes? Paper towels, disposable, ongoing cost. Dishrag,
00:51:56.700 | one-time cost plus laundry cost, which is negligible.
00:52:01.020 | Can you get the best deal by bundling or by unbundling? So investigate the options that
00:52:06.260 | are available. Try, calculate what the triple play will cost you from utility providers.
00:52:11.260 | Do the math. Did a whole podcast, obviously, on save money on cell phones. The general
00:52:16.460 | consensus that IPDaily and I came out with on that is you're usually better by unbundling,
00:52:23.460 | but run the math. You never know.
00:52:26.820 | Can you buy from a warehouse club or join a co-op of some sort? Costco, Sam's Club.
00:52:32.940 | Costco's maximum markup on their items is 14%. That's not that much. I don't know what
00:52:40.900 | Sam's Club is, but it's probably similar to that. If you're buying a lot of items, that
00:52:47.340 | may save you some money and it can be a really good option for you.
00:52:54.180 | One of my favorites is can you buy wholesale instead of retail by becoming a distributor
00:52:59.020 | or a dealer? If there's something that you buy on an ongoing basis that's a consumable
00:53:05.660 | item, investigate to see whether you can become a distributor or a dealer of that item.
00:53:10.900 | I have a friend of mine who enjoys smoking cigars and ran a retail store. What he did
00:53:17.500 | is he signed up to become a cigar dealer. Basically, all you need is what's called an
00:53:24.500 | EIN, an employer identification number, and you can become a dealer. So he bought all
00:53:30.340 | of his cigars, large numbers for his personal collection, he simply bought them at largely
00:53:37.060 | wholesale prices, which is a substantial discount from what you pay at the local cigar store.
00:53:42.380 | He was able to accumulate a nice collection, would give them to his customers and friends,
00:53:47.500 | and buy them at wholesale instead of retail.
00:53:51.580 | I'll link to an article where online Joshua Kennan writes about how to do this. He became
00:53:57.100 | a wholesale rose dealer. He loves getting roses on an ongoing basis. He simply set up
00:54:03.260 | a company and had one of the wholesale companies ship him the roses at a substantially reduced
00:54:08.700 | cost. So consider that. There are so many options available. If there's something that
00:54:13.180 | you buy on an ongoing basis that's consumable, usually, it's going to be the better option.
00:54:19.220 | Think about how you can buy it wholesale instead of retail by simply becoming a distributor
00:54:23.340 | or a dealer. A little bit of paperwork will save you a lot of money.
00:54:27.860 | Research discount programs that are available to you. I'm a USAA member. USAA has discounts
00:54:34.780 | on car buying and things like that. Mercedes-Benz. Could you become a Mercedes-Benz owner's club
00:54:41.780 | before you buy a new Mercedes-Benz? I really enjoyed, which I'll profile some of the ideas
00:54:48.240 | maybe in the future. Brad Wilson wrote a book called Get More, Spend Less. He profiled some
00:54:54.340 | of the options that are available for getting affiliate discounts on purchasing of cars
00:55:00.940 | or things like that. Consider if there's research, if there's some kind of discount program that's
00:55:05.460 | easily available to you. A lot of times a few minutes spent with a web search will save
00:55:10.620 | you tens of thousands of dollars.
00:55:13.540 | Could you cancel a subscription and buy things one by one as you need them ad hoc? Most subscriptions,
00:55:19.360 | many subscriptions are more than is necessary. We talked about this recently with the cell
00:55:23.980 | phone usage. By canceling an ongoing cell phone need and doing it prepaid, you get exactly
00:55:30.980 | what you need. This month I needed more time on my cell phone so I bought another $10 worth
00:55:37.680 | of minutes. Well, that means my cost was $20 because I needed more than my usual $10 a
00:55:42.960 | month but that's less than the ongoing $40 or $50 that I would have been paying the other
00:55:49.960 | way. So could you cancel a subscription and just buy things little by little? On the other
00:55:57.400 | side obviously, could you start a subscription instead of buying things little by little?
00:56:01.160 | If you always buy magazines at checkout, it might be worth investigating a subscription
00:56:05.480 | cost. Can you use the web to find forums filled with experts? Flyertalk forum has so much
00:56:12.920 | valuable information on how to get travel deals. Howard forums has so much information
00:56:17.720 | on cell phones. If you have a problem with your car, just type in the symptoms of your
00:56:23.960 | problem and the make and model of your car and you will find a forum filled with people
00:56:28.640 | that are experts on that car that probably have already asked that question. Use the
00:56:32.940 | web to find the forums and access those experts. Can you buy in bulk and save? A lot of people
00:56:39.360 | do this anyways but consider, can you buy in bulk and save? I had to chuckle, I was
00:56:46.360 | at a truck stop recently and in the convenience store in the truck stop, they were selling
00:56:51.760 | bottled water. So there was a display case of bottled water where the bottles were $2
00:56:57.760 | for $2, so bottles were $1 each, $2 for $2 in the display case and they were refrigerated
00:57:06.120 | in individual servings. And right next to the display case, literally right next to
00:57:11.280 | the display case was a case of water, the standard, I think it's 32 bottles that come
00:57:15.920 | in a case for $5. And I chuckled and I wondered how many people would choose to buy the $2.
00:57:22.920 | Now the $5 ones were not cold, I recognize that. But the convenience store would give
00:57:29.720 | you probably ice for about 5 cents a cup. So buy the 32 for $5 instead of the 2 for
00:57:36.720 | $2. Could you research a discount for something that you already have? On your home insurance,
00:57:44.560 | have you gone through your home insurance with your insurance company, talk to them
00:57:48.920 | about all the discounts that you have. Can you get a discount for storm windows? Can
00:57:54.240 | you cut something by changing something out? Do you have a safety device, smoke detectors,
00:57:59.920 | things like that. On your car insurance, have you gone through every discount that's available
00:58:03.840 | to you and made sure that you're getting all those discounts. And Florida where I live,
00:58:08.400 | the local power company, Florida Power and Light, will give you a savings on your electricity
00:58:12.520 | bill if you'll allow them to install a device that at peak times of usage, they can cut
00:58:17.840 | the power to certain heavy draw appliances. So I have this on the air conditioning. That
00:58:22.760 | means that potentially in the hottest time of the summer, then they may temporarily on
00:58:27.440 | a limited basis, they may cut the electricity back from the AC. Well, often times it's not
00:58:32.800 | home during the day so it's not a big deal. And even when they do it, it's not that much
00:58:37.920 | but it does save a substantial amount. So research all the expenditures that you're
00:58:42.520 | currently spending and look to see if there's a way that you could get a discount on an
00:58:50.120 | expense that you already have. Try to find a smart source of the funds for your purchase.
00:58:57.120 | So most people forget about this but try to look and see is there a way that I can buy
00:59:05.600 | this with smarter dollars. Could I pay for this out of a tax advantaged account? So my
00:59:12.320 | standard example here that I think of and use a lot myself is a health savings account.
00:59:17.320 | A health savings account is a wonderful account which you pair with a high deductible health
00:59:23.440 | plan and it allows you to put pre-tax dollars in and to spend the money tax free on medical
00:59:29.480 | expenses. Now there's a list of what medical expenses are available but that list is the
00:59:36.480 | IRS publication 502. I'll link to it in the show notes. But in that publication you can
00:59:43.280 | see everything you can spend money on. That includes everything from contacts and contact
00:59:49.600 | solution to your deductibles and your copays at the doctor's office to everything to long
00:59:55.600 | term care insurance premiums. So these little things add up. I work contacts and therefore
01:00:02.600 | contact solution is an ongoing consumption. Glasses you could say would be a good way
01:00:11.640 | of switching from that ongoing consumption to the contact solution. But anyway, I can
01:00:17.000 | buy the contact solution out of the health savings account and pay for it with pre-tax
01:00:22.080 | dollars. That's a good savings. So consider if there's some sort of tax advantaged account
01:00:26.960 | that you can use. Can you pay for school out of some sort of account that allows you to
01:00:31.960 | pay for that? A 529 plan or a covered LESA, could that be of help to you? Consider if
01:00:40.240 | there's an account that's available to you. Or could you pay for it out of a business
01:00:43.640 | account? We're going to in the future do hopefully some deep dives on some of business expenses
01:00:50.640 | but I'll tell you. There are two tax codes. One for individuals and one for businesses.
01:00:56.800 | And the really good one is for the businesses. The government as part of national tax policy,
01:01:03.080 | the government is very interested in you establishing and running a legitimate business. So consider
01:01:09.680 | is there a legitimate business expense that is associated with your expenditure? If not,
01:01:14.920 | could you start a business associated with that? And then once you have that business,
01:01:19.320 | you have an opportunity where you can start to use those business purposes and those business
01:01:26.320 | accounts with knowledge of what the rules are and you can start to structure your life
01:01:33.280 | in such a way that you stack the functions. So if you're going to take an out of town
01:01:40.280 | trip for a business trip and you need a personal trip as well, can you combine those two things
01:01:53.160 | under the business trip rules? If you have a little known rule, if you have business
01:02:00.440 | meetings on Friday and on Monday, according to my understanding of the IRS rules, you're
01:02:06.200 | allowed to stay the weekend even if you're not conducting business and that weekend is
01:02:12.520 | a deductible. Your expenses for the stay of that weekend is a deductible business expense.
01:02:17.620 | So you may have meetings on Thursday, Friday, Monday and Tuesday but there you've got an
01:02:23.680 | out of town visit that you can enjoy personally on Saturday and Sunday. That's my understanding
01:02:30.560 | of the rules. Little things like that add up, add up big time. Consider if you can pay
01:02:37.560 | for something out of a business account. Try to buy at the best time. Can you be, first
01:02:44.860 | of all, behind the times? So instead of being a leading buyer of technology, can you use
01:02:53.520 | the iPhone 4 instead of the iPhone 5? Can you wait a year to pick up the new product?
01:02:58.600 | Instead of being on the avant-garde of, I think that means in the front, instead of
01:03:01.720 | being on the front end of hybrid cars when they're very expensive, can you come along
01:03:06.240 | a couple years later and pick them up when they're a lot cheaper? So simply by just being
01:03:10.960 | a little bit behind the times, it'll save you a substantial amount of money. So consider,
01:03:17.440 | can you be behind the times? Can you buy off peak? Can you travel on the weekends or the
01:03:20.960 | holidays or in that shoulder season that we talked about? Or can you go to a region of
01:03:25.680 | the country or the world that's currently out of favor? It costs you a lot more to get
01:03:31.360 | to Europe right now from the US than it does to get to some other destination. So could
01:03:36.880 | you go to South America instead of to Europe? I'll tell you where the best travel deal is
01:03:41.360 | right now in the world, Egypt. Now I'm not sure most people aren't going to want to travel
01:03:46.200 | in Egypt right now, but a few years ago, Egypt was not that cheap to travel in. But today,
01:03:51.920 | I guarantee there's deals left and right if you are one who's able to enjoy that style
01:03:57.320 | of travel. So can you travel to somewhere that's currently out of favor or travel in
01:04:01.840 | a time that's off peak? Can you buy something that's a little bit old but still good and
01:04:06.040 | repurpose? Could you buy the day old bread? The day old bread can, my example is, you
01:04:14.320 | know, if you're going to buy fresh, if you're going to butter up a piece of bread, I would
01:04:18.400 | probably want to bake it fresh or buy it fresh. But if you're going to make some French toast
01:04:24.000 | and you're going to take that bread and cover it with eggs, buy the day old bread, save
01:04:28.200 | the money. Can you plan ahead? So the best time to buy Halloween candy? The day after
01:04:33.600 | Halloween. Buy the Halloween candy the day after Halloween and save it for the next year.
01:04:40.120 | Buy your Christmas gifts the day after Christmas. If you, this last year my wife and I went
01:04:46.000 | shopping the day after Christmas and stocked up on all of the birthday gifts that would
01:04:51.320 | be needed for the nieces and nephews and have a big box full of them. They're cheap the
01:04:57.680 | day after Christmas. They're not so cheap in March when you need them for the birthday.
01:05:02.360 | But by planning ahead, you can save a substantial amount of money. If you're on a road trip,
01:05:07.680 | buy your gas in the cheap states before you drive across the expensive states. Can you
01:05:12.120 | buy at the right time or season? So buy your gardening stuff in the fall when the prices
01:05:18.960 | come down. Buy your car at the end of the month when the sales people are under pressure
01:05:24.640 | to make a deal. Buy your houses in a depressed market. Go back five or six years at the height
01:05:32.020 | of a real estate market. That's not the time to buy a house. But a couple of years later,
01:05:36.000 | that's the time to buy a house. So look at what's happening in the market and consider
01:05:41.880 | the best time to make a decision. Buy a business when it's a tough time for the business. You
01:05:48.480 | can get a lot of deals if you're able to go against the flow and see the macro trends
01:05:54.760 | that are available. Try to find the best source for your product or service. So if you're
01:05:59.680 | going to buy something, can you buy it from a local supplier? A local supplier that supports
01:06:04.240 | your values and supports your communities. Could you buy it from a company that has certain
01:06:09.400 | ethics or certain business practices that are important to you that you want to support?
01:06:15.040 | For example, could you buy energy from a renewable source instead of just a cheaper conventional
01:06:22.360 | source? Or is there a company that treats its employees in a certain way that you feel
01:06:29.480 | better supporting with your dollars? Could you buy from a family member? If you're going
01:06:37.080 | to rent, could you rent from a family member? I'll be frank, I always scratch my head a
01:06:43.280 | little bit as to why so many young people don't simply rent from parents and family
01:06:48.480 | members. Now I understand the whole get your wings and fly, but for years I've rented from
01:06:54.040 | my parents. I want to make sure that they receive the value of my rent dollars instead
01:06:58.840 | of some unknown person. To me, I would rather support a family member instead of an unknown
01:07:07.080 | person. Could you buy from a smart place? Example here is Diamonds. Best place to buy
01:07:14.720 | Diamonds, at least according to my research right now, Costco. According to various, according
01:07:21.960 | to Consumer Reports, best place to buy Diamonds is Costco. Remember, Costco has a maximum
01:07:26.600 | 14% markup and they have a well qualified, well regulated series of gemologists that
01:07:35.120 | will grade the Diamonds so you know the quality that you're getting and you got a maximum
01:07:39.680 | 14% markup. Compare that to going to Tiffany's and buying your Diamond there. You're going
01:07:45.800 | to get the same product for substantially better value and lower cost. So consider that,
01:07:52.080 | consider the place that you get things like that. Do your research. Can you buy it used
01:07:57.120 | and still good or simply get it free? Can you buy something off of eBay or off of Freecycle?
01:08:04.880 | Interestingly earlier I mentioned the cloth diapers. One thing that I do and that my wife
01:08:10.680 | and I do is if we need something, often times we go on Freecycle and ask if anybody has
01:08:16.040 | it. So with cloth diapers, just went on Freecycle and asked if anyone had it. We got a bag of
01:08:21.920 | about, I think something like 10 or 20 of them for free. That's a substantial value
01:08:26.720 | in the marketplace but the person was able to pass them on for free and that was such
01:08:30.320 | a blessing. Right now I'm looking for some weights, like a weight set, a barbell set.
01:08:37.360 | Well, go on Freecycle and I haven't actually gotten any responses to this one but the first
01:08:41.560 | thing I did was send out an email on Freecycle. So, worth considering. Try to see if you can
01:08:47.800 | get it used and still good or simply just get it for free. Can you buy from a company
01:08:52.720 | that has a lower built-in cost? So for example, can you bank with a credit union instead of
01:08:58.920 | a bank? This would be, this is extremely valuable. A credit union doesn't have stockholders that
01:09:07.400 | it has to make a profit for. So if you bank with a bank that is traded, either publicly
01:09:13.280 | traded like the big ones, Bank of America, Wells Fargo, SunTrust, these types of large
01:09:20.120 | banks that are publicly traded or that's privately owned, these banks are in the business of
01:09:26.320 | making money. There's nothing wrong with that. That's awesome. But you're going to contribute
01:09:31.760 | to that profit. So is there a local credit union that is going to wind up providing the
01:09:39.440 | same service for you with a lower cost? If so, could you seek that company out? If there's
01:09:48.120 | a local credit union, you'll get higher rates of return on your savings and your deposits
01:09:53.040 | and you'll get lower costs for loans. It's as simple as that. And the reason, if it's
01:09:59.240 | well run, and the reason is that the bank has to make a profit. The credit union does
01:10:04.600 | not exist to make a profit. It exists to serve its members. Could you buy from a mutual insurance
01:10:11.800 | company instead of a stock insurance company? In insurance companies, there are different
01:10:17.520 | ways that they're structured. One is where they're structured in a mutual format where
01:10:21.160 | there are no stockholders. So there are property and casualty insurers. My insurance, my car
01:10:27.280 | insurance is with USAA. Every year I get a dividend check. And that dividend check is
01:10:32.280 | received and that's an amount of money that is received that is my refund for me on my
01:10:38.720 | premiums and it represents the insurance company's profit. That's refunded to me every year.
01:10:45.820 | Could you work with, so that's different than another company that's in the business of
01:10:50.700 | making money and the only way I would be able to access that company's money is by owning
01:10:55.080 | their stock. Again, nothing wrong with that, but consider your choices. Could you work
01:11:00.480 | with some sort of co-op or collective instead of buying from a for-profit institution? And
01:11:09.120 | there are all kinds of interesting versions of this, so consider it. Could you buy in
01:11:13.520 | a different state, a different region, or a different country in order to get a better
01:11:18.000 | deal? So can you buy something in a different state to save on sales taxes? There are lots
01:11:24.880 | of places where people live close to a state line and they'll go across the line to buy
01:11:29.200 | their goods in order to save on sales taxes. Do the research. If you're going to make a
01:11:34.560 | big acquisition, that could be something that's substantial. Could you buy in a different
01:11:39.120 | region of the country where the demand or the price is different? An example is, recently
01:11:46.400 | I was reading an article talking about Subarus. Up in the Pacific Northwest and up in the
01:11:52.600 | North, Subarus are very popular and in very high demand. So the prices tend to be a little
01:11:59.680 | bit higher. In the South, however, they're not so popular. So the company evidently,
01:12:04.760 | according to the article that I read, is working to increase their sales in the South and offering
01:12:13.240 | much better deals in the South. Well, if you live in the Pacific Northwest, now may be
01:12:20.080 | a great time to fly to Florida, buy yourself a car, and have an enjoyable road trip home
01:12:26.800 | for a lower cost than what you would have paid just to get the car back home. So look
01:12:33.120 | to see if there's a different region or a different country. So as far as country, Mercedes
01:12:38.560 | Benz and BMW, I think, and some of the other German car makers have programs. I'm not sure
01:12:43.720 | if all of them do. I've read about some of them and I don't remember the names. But some
01:12:46.680 | of them have programs where you can buy the car at their factory in Europe and then you
01:12:53.120 | can drive your new car throughout Europe on a European vacation. And then when you're
01:12:57.400 | done, you take it to the port and they'll ship it back to the U.S. for you. That's a
01:13:02.600 | good way of building in a lot of savings if you buy direct from the factory. I guess it's
01:13:08.040 | not technically direct. It's going to be through a dealer. But you're saving because you're
01:13:11.360 | buying from the factory and then you've got a trip through Europe. Think about things
01:13:15.040 | like medical tourism. Medical tourism is increasingly really a growing market. So if you've got
01:13:22.040 | an expensive amount of, a large amount of dental expenses coming up, and these are planned
01:13:28.360 | dental expenses, sometimes you can go to another country, have the work done at an equivalent
01:13:33.800 | value and equivalent skill level for such a substantial discount that your trip winds
01:13:40.240 | up being free. There are countries in Asia, countries in South America that are specializing
01:13:46.000 | in this. It goes beyond just dental stuff as well. I've read an article of somebody
01:13:51.120 | who went to Mexico to have their baby because it was a substantially cheaper value than
01:13:56.840 | it was, a substantially cheaper price than it was in the U.S. and had a very good experience.
01:14:01.480 | So consider that. Could you find some sort of waste stream to use? And these are all
01:14:07.840 | trying to find the best source of products. So is there a waste stream? Is there an off,
01:14:14.840 | a waste, I don't know what else to call it, a waste stream that's going out from a business
01:14:20.760 | or from a service nearby? So the one that I use is can you order up a truckload of wood
01:14:27.760 | chips from the local tree company that has to pay to dispose of those things and was
01:14:34.160 | happy to drop them off for free? Or can you order up a load of manure for your garden
01:14:39.360 | from the local horse stable? All these things are free mulch and you can use it and spread
01:14:46.040 | it out on your property instead of paying for it. If you need compost, the local municipal
01:14:52.600 | dump where I live has free mulch and free compost that is available. Can you find some
01:14:59.680 | sort of waste stream for other purposes? Can you find food for your animals? Could you
01:15:06.680 | see a bunch of food that's consistently thrown away that's appropriate for your animals?
01:15:12.920 | Consider it. Could you get free bones for your dogs or free vegetables for your pets?
01:15:19.920 | I don't know. Consider it. Look for stuff for free on the side of the road. You'd be
01:15:26.120 | shocked at the stuff that I often see for free and pick up for free. Get the absolute
01:15:31.960 | best product or service that you can find. Research the best value. Use resources like
01:15:38.120 | consumer reports. Even better, use online forums. You're going to learn more in an online
01:15:42.680 | forum about what's the best value in a specific area than just about anything else. So look
01:15:47.300 | for the best value. Can you buy it for life? An example would be instead of buying a Teflon
01:15:55.160 | pan that you're going to have to be replacing in a year or two, could you buy a cast iron
01:16:00.080 | pan which could potentially last for three generations? Could you buy a vehicle that's
01:16:06.400 | going to last for a long period of time? Could you buy a vehicle that's renowned for quality,
01:16:11.120 | a Toyota, a Honda, something like that, that's renowned for a long lifespan instead of the
01:16:18.120 | option that's just simply cheaper up front? Can you buy a product that you can repair?
01:16:24.120 | This is something that we don't think about much in a disposable society, but can you
01:16:29.200 | actually fix the product? It may be worth it to buy something that you could take apart
01:16:33.640 | and fix if it broke rather than something where you have to scrap the whole thing and
01:16:37.020 | buy a new one. Could you buy a more efficient version? So could you buy the high efficiency
01:16:42.580 | appliance instead of the less efficient version? Could you buy a product that has less processing,
01:16:51.480 | that's maybe lower on the value chain? Can you buy just straight, the example here is
01:16:56.560 | bagged rice instead of the rice that's microwave rice? You're going to get cheaper prices.
01:17:03.400 | Can you just buy something that hasn't had all the inputs put into it and get a much
01:17:07.580 | lower cost for it? Try to substitute something else in order to get the best solution. So
01:17:14.320 | here are some of the ideas I came up with on this one. Could you easily do without and
01:17:17.640 | not experience negative consequences? Sometimes it's actually pretty simple to just simply
01:17:22.280 | do without. We often don't think of that though. Can I just do without? Decide that I don't
01:17:29.280 | need this and it's no big deal. Just skip it. Skip the purchase. In a modern consumer
01:17:38.600 | society many people purchase things just purely off of impulse. They don't want to spend
01:17:46.600 | off the impulse instead of just simply consider if you could just do without this. Can you
01:17:51.240 | completely eliminate the need for an expense? So you can optimize your commuting costs,
01:17:58.240 | that's true. But could you just live closer to your job? Is there a way that you can just
01:18:05.040 | simply eliminate the expense? Could you use what you already have and wear it out? Can
01:18:12.040 | you drive your car for an extra 100,000 miles? Could you ride that bike for a little bit
01:18:17.600 | longer? Most of the time, much of the time the answer is yes. I had a car that I drove
01:18:23.640 | to 315,000 miles. I was so proud of it. And I actually know the person who owns it now.
01:18:29.480 | It's still going strong at 350,000 miles. Things like cars, your best bet is wear them
01:18:35.880 | out and wear them out to the point where they literally have to be driven to a junkyard
01:18:41.000 | where they have zero resale value. Wear out your clothes. Wear things out. Once you've
01:18:48.000 | bought something, wear it out. Could you change your mind instead of your circumstance? Example
01:18:55.760 | here is I'm fascinated with RVs. Someday I'd like to have a nice RV I enjoy. I think it
01:19:02.760 | would be really fun, especially intrigued by truck campers that go on the back of your
01:19:07.320 | pickup truck. But the question is, is it really about having the RV or is it really about
01:19:13.640 | taking the trip? I can have a lot of fun with a tent in the back of my car. It doesn't cost
01:19:19.800 | me any money. And just set up a stove. More than I need the RV. So I can and do adjust
01:19:26.800 | my mind. It's not about having the gear. It's about simply having the experience and the
01:19:33.920 | experience. If you're camping with kids, your kids are going to have just as good a time
01:19:38.360 | sleeping in a tent as they are going to be sleeping in a $100,000 RV. So could you change
01:19:43.360 | your mind instead of your circumstances? Can you adjust your real goal? If you want to
01:19:49.000 | take a road trip to South America, that's one of my things, can you just use the car
01:19:54.800 | that you have? Is that the goal? Is the goal to take the trip? Or is the goal to have a
01:19:59.720 | super cool vehicle that you spend lots of money on? Either is fine. If you're into the
01:20:04.400 | super cool vehicle, awesome. But a lot of people, if they would just simply go, you
01:20:09.680 | can do the trip in what you have. Everywhere in the world they drive cars. Can you just
01:20:14.840 | do without something? On the car thing, do you need a fancy roof rack or not? Many people
01:20:21.840 | buy an expensive fancy roof rack and sometimes you just don't need one. I watched someone,
01:20:27.560 | you could buy a fancy roof rack to put your surfboards on. You're in Florida where I live,
01:20:31.880 | you could see that. The other day I saw somebody who took two Fun Noodles, purchased for about
01:20:38.320 | 50 cents from the local discount store, threw them on his roof and strapped his surfboard
01:20:43.440 | onto that. So can you just do without or substitute something else? Can you make or grow it yourself?
01:20:52.080 | Could you grow some of your food? Can you make something yourself instead of buying
01:20:57.480 | something? Could you repurpose something else? I was watching a friend recently, a friend
01:21:03.160 | has some chickens, they turned a dresser that was old and worn out into a chicken coop and
01:21:08.600 | then added some screening around it. But the dresser drawers is where the chickens stay
01:21:12.520 | and the main structure became the structure for their chicken coop. That's a valuable
01:21:20.960 | thing to do, just repurpose something. Can you increase your internal strength so that
01:21:27.240 | you don't have to keep up with the Joneses? Are you strong enough to chart your own path?
01:21:34.240 | This one's free, go to the library and get some books on building your internal self-image.
01:21:44.080 | But can you chart your own path instead of having to keep up with everyone else just
01:21:47.320 | simply because you're stronger as a person? Can you buy something one time instead of
01:21:54.320 | an ongoing expense? So if you are someone who going to movies is really important to
01:22:05.080 | you, could you put in a really nice movie theater into your home that you love being
01:22:10.240 | in instead of going out to the movie theater every week or two? Can you just pay for it
01:22:16.640 | one time and have the ongoing expense be a lot lower? Or flip it out, are you someone
01:22:22.080 | who you're not going to go that much but you're putting in an expensive theater that you're
01:22:26.280 | not going to use that much, just go to the movies instead of putting in a nice one. So
01:22:31.080 | flip it, consider your actual needs. Could you buy a business that's associated with
01:22:38.080 | something instead of paying for the something? You probably aren't going to, this one, but
01:22:44.920 | I know a friend of mine who bought a golf course. He's a golfer, he golfs his own course
01:22:50.920 | now, he still golfs other courses, but now he's in the business, he's taken his love
01:22:55.600 | of a business and turned it into an income, his love of a sport and turned it into an
01:23:00.360 | income stream and now other people pay him to golf on his course and it really wasn't
01:23:06.640 | that expensive that he did. I won't go into any more details but it's kind of interesting.
01:23:11.080 | Could you buy something that's more concentrated? Could you buy shaving oil instead of shaving
01:23:15.880 | cream or something that has more of the good stuff? Could you change your habits? Simply
01:23:22.440 | associate your habits, we talked about with cell phones, do you need to talk on the phone
01:23:25.800 | in the car or can you talk at home where the cost is cheaper? I've used for years a dictation
01:23:32.400 | service, that dictation service is a great service, the one I use is called Copy Talk,
01:23:37.480 | it's a great service but an ongoing monthly subscription. I was able to find a new solution
01:23:42.960 | using Dragon on the computer and just simply by changing my habits instead of doing stuff
01:23:49.380 | from my cell phone in the car, I was able to record my notes in front of the computer,
01:23:54.160 | it saves a substantial amount of money. Could you increase your skill instead of buying
01:23:58.480 | yourself a solution? So a lot of times you have to buy solutions for things that you're
01:24:02.280 | not skillful in. An example would be if you need some sort of financial tracking software,
01:24:08.120 | there's lots of free versions out there but let's say you're going to pay for something
01:24:11.040 | like Microsoft Money or Quicken or QuickBooks or something like that, could you simply learn
01:24:16.400 | to run an Excel spreadsheet? It's probably already on your computer, if it's not use
01:24:22.480 | an open office, open source version and replace the buying decision with increasing the skill.
01:24:30.520 | Can you use the library instead of buying books, magazines, e-books, etc.? My library
01:24:37.520 | has a wonderful website and they have an option where I can go on there and I can request
01:24:47.320 | books to be sent to the one that's very near my house, actually about a quarter mile, a
01:24:51.120 | third of a mile away from my house. So by anytime I'm going to buy a book or I'm interested
01:24:56.520 | in something, I just pull up their website, hit reserve, they'll send that book to that
01:25:00.160 | library for me. I can do it right online, right when the impulse strikes and I'm giving
01:25:04.760 | into my impulse of getting a book but I'm not paying for it except with my taxes. So
01:25:11.760 | consider if either that tip is useful for you with your books and magazines and things
01:25:17.280 | like that or if there's some other way that you can take that idea and use it with something
01:25:22.120 | else. Can you do things yourself instead of outsourcing them? So can you mow your lawn
01:25:29.360 | yourself instead of hiring it done? Can you clean your pool yourself instead of hiring
01:25:33.240 | it done? Can you do your taxes yourself instead of hiring it done? A lot of times by simply
01:25:39.200 | doing things yourself, you can save a substantial amount of money. Now on the flip side, can
01:25:45.360 | you outsource something instead of doing it yourself and save a substantial amount of
01:25:49.200 | money? It's possible that you could learn to do your taxes yourself and if your situation
01:25:54.360 | is very simple, you probably should. But if you have any complexity whatsoever, perhaps
01:26:00.600 | a good tax advisor could save you far more than they cost you. You might be able to do
01:26:05.840 | your own legal work but perhaps having a good attorney work for you is going to save you
01:26:11.280 | far more than it costs you. You might be able to do your own financial planning but perhaps
01:26:15.960 | hiring an advisor may save you more than it costs you. You might be able to pull your
01:26:20.920 | own tooth but perhaps hiring it done would save you more than it costs you. So this is
01:26:27.000 | going to depend on your complexity and going to depend on your situation. So consider both
01:26:34.000 | sides of that. Consider doing something yourself instead of having it outsourced or consider
01:26:40.000 | simply hiring a business to do something for you or hiring somebody to do something for
01:26:45.440 | you instead of doing it yourself. Can you combine and repurpose two things? Example
01:26:52.440 | here is a friend who uses boats and a few years ago he wanted to repower his boat and
01:27:03.600 | add some new outboard engines to his boat. Now, I don't know, those of you who aren't
01:27:11.080 | boaters, outboard engines can be a substantial investment, $20,000 to $30,000 plus for a
01:27:18.080 | large powerful outboard engine and his had two. What he did was he bought an extra boat
01:27:24.360 | that had better engines on it, took the engines off of his boat, put them on the new boat,
01:27:30.200 | flipped the engines out so he had the better engines off the one he bought for the boat
01:27:33.920 | that he wanted to keep and then resold the boat. And he basically had, he didn't want
01:27:41.480 | to sell the boat for the total cost but his cost of the new engines was substantially
01:27:46.840 | cheaper than what it would have been otherwise. So consider that. Could you have a junker
01:27:53.840 | parts car that you buy and then put those parts in or could you find some way to do
01:27:59.160 | this with other items? Maybe you're not a car or a boat person. But I thought it was
01:28:03.480 | such a great idea. Buy a boat for the engines, take the engines off of it, put your old ones
01:28:08.360 | on there and then resell the thing and it was a lot cheaper than going out and buying
01:28:13.520 | the new engines a la carte. Can you substitute for something better? Can you take money that
01:28:20.160 | you would spend on college tuition and spend it on global travel tuition? My personal opinion,
01:28:26.120 | you're going to learn a lot more traveling for a year than you are in a college classroom.
01:28:29.780 | So it might be worth it. Could you use new technology instead of old? Could you use a
01:28:35.760 | virtual classroom for college instead of the physical classroom? Is there some kind of
01:28:40.400 | new technology that you could use? Can you do a Skype meeting or a GoTo meeting instead
01:28:44.880 | of needing to get on an airplane and travel someplace? Worth considering. Could you choose
01:28:50.880 | different hobbies that are by nature less expensive than others? So could you choose
01:28:57.880 | consciously to enjoy and find fulfillment in gardening instead of racing cars? And could
01:29:05.620 | you choose to get your adrenaline and enjoyment out of gardening? Something that makes money
01:29:12.620 | for you if you're eating your own food instead of something that costs you a substantial
01:29:26.460 | amount of money. Or maybe can you just make a switch to mountain biking instead of racing
01:29:30.340 | cars? I knew somebody who was very wealthy and I talked to them about their wealth strategy
01:29:35.700 | and they didn't have one. Didn't have a strong financial plan, didn't have a strong wealth
01:29:41.340 | strategy. But I asked them about his lifestyle and his lifestyle was, his hobby was mountain
01:29:46.020 | biking. Not that expensive to throw a mountain bike on the back of a car, even a really nice
01:29:51.140 | one. A lot cheaper to be a mountain biker than to be into driving big giant 4x4s across
01:29:57.340 | the country or racing cars at 100+ miles an hour. Can you enjoy reading instead of movies?
01:30:04.340 | Little things like that make a big, big difference. Can you use something instead of owning it?
01:30:11.580 | So can you use land or use a community garden instead of having to buy yourself land or
01:30:18.580 | buy yourself a house that has what you need in it? Can you live in an apartment instead
01:30:24.420 | of owning a house? Sometimes you're going to have lower costs there. Can you optimize
01:30:30.340 | in order to eliminate an expense completely? I actually already touched on this one but
01:30:35.740 | on my notes I imagine you can completely optimize your efficient, develop an efficient commute.
01:30:42.740 | Could you just live right next to your job? If I were working at McDonald's, I guarantee
01:30:49.620 | you I would be living close to my job. Sometimes maybe just by cutting out a commute you could
01:30:56.540 | save yourself a substantial amount of money. So consider there's some way that you can
01:31:02.260 | just simply eliminate an expense instead of buying that expense. With your lawn, could
01:31:08.500 | you xeriscape your yard instead of paying someone to cut it? Can you build something
01:31:17.660 | yourself? Can you make your own furniture instead of buying it? Can you build a bunk
01:31:22.220 | bed for your kids instead of spending for one? Can you use a cheap technology instead
01:31:27.940 | of an expensive technology? A lot of times there's simple and inexpensive solutions available
01:31:34.740 | and there's expensive and complex solutions available. Two that I'm interested in, one
01:31:40.900 | is my house in Florida is currently poorly insulated and it seems like the best insulation
01:31:46.860 | that I can do is this spray foam insulation on the underside of the roof deck. And I'm
01:31:53.300 | considering doing it but man is it expensive. One alternative idea that I've read about
01:31:59.020 | that I'm interested in trying and seeing if it works is to set up basically a sprinkler
01:32:03.660 | system on your roof that during the day when it's hot it pours water on the roof and soaks
01:32:09.940 | the roof and then it uses evaporative cooling to achieve the same goal that the spray foam
01:32:16.860 | insulation could achieve. I don't know if I'm going to do it, I don't know if it works,
01:32:21.740 | but it's a good example to me of an inexpensive technology of using something like that instead
01:32:27.340 | of the expensive technology. I recently was looking at some articles on an urban homesteading
01:32:34.260 | blog about using what they call Oya's for irrigation. Oya's is just an unglazed clay
01:32:41.660 | pot that you stick down in the soil and fill it with water and then because it's unglazed
01:32:47.660 | the water gets out of the pot over time and keeps the roots of your plants wet and your
01:32:52.060 | roots can get the water from it. Could you do something like that instead of an expensive
01:32:59.820 | color heads? Look for the cheap and simple before you look for the expensive and complex.
01:33:06.180 | Can you replace maintenance intensive versions of things with low maintenance? So I mentioned
01:33:12.860 | lawns. Do you have to have a very high maintenance lawn or can you figure out a landscaping system
01:33:19.500 | that is less maintenance? Can you change the style and be a trendsetter instead of a follower?
01:33:28.140 | I had to chuckle. I don't know if you've heard it. There's a rap song. I don't even know
01:33:32.780 | what the name of it is. I just had to laugh when I heard it. It's quite popular now where
01:33:40.220 | the entire song is about the good deal the guy got on his clothes from Goodwill and about
01:33:46.980 | how the fact that he wears his grandfather's clothes from Goodwill and that's his style.
01:33:51.060 | Now I'm not really into the song. I thought it was pretty funny to listen to, but consider
01:33:57.580 | what the guy was doing. Can you be out in front changing the style and you're the one
01:34:02.420 | who sets it? Can you be the one who's buying clothes from Goodwill and not being the style
01:34:09.140 | instead of following everyone else? Could you use technology to bypass limitations?
01:34:17.820 | There's a singer I was reading about the other day. I think his name was Alex Day. The young
01:34:25.140 | man has just simply done a brilliant job of building up a following on YouTube and has
01:34:30.260 | never had a record label and has never paid for any of that stuff. He's just done it all
01:34:33.660 | on YouTube himself. I subscribe to some guys called the Piano Guys. Same type of thing.
01:34:41.260 | They put all their music on YouTube and have all their views there and that's their primary
01:34:45.300 | recording system that bypasses all of the record, all of the establishment. Can you
01:34:50.820 | self-publish a book and put it on Amazon for Kindle download? Lots of people are doing
01:34:55.460 | it. It's a lot cheaper and it bypasses all the cost of all those things. Can you learn
01:35:01.460 | the details of what you need to do from a library book instead of paying for advice
01:35:05.060 | because you're uneducated? So can you go and study something? Can you learn about taxes
01:35:11.140 | or learn about another plumbing or something? All this knowledge is available from you.
01:35:17.700 | The world's knowledge is available from an internet connection and from a library. You
01:35:21.940 | probably have both of those already in your life. Can you simply eliminate something instead
01:35:27.140 | of paying someone else? So can you again zero-scape your yard instead of doing landscaping? Can
01:35:33.460 | you design something to be working passively? So can you develop a water efficient property
01:35:38.620 | instead of having to water your lawn? Can you develop the structures and the contours
01:35:44.100 | of the property where the water gets retained in the soil instead of you having to go out
01:35:49.660 | and turn on your sprinkler every day? This is something where I'm fascinated by and really
01:35:54.940 | interested in and at some point maybe we'll do a show about these types of things. But
01:36:01.060 | just design it. Can you design your property to be productive instead of without a lot
01:36:06.380 | of maintenance instead of being an energy sink? So can you plant fruit trees instead
01:36:13.220 | of ornamental trees? Can you repurpose wasted space? Can you put solar panels up on your
01:36:19.860 | roof to heat water or to give you electricity? These types of things could save you substantial
01:36:28.240 | money because you take an ongoing cost and you turn it into something that's a one-time
01:36:32.860 | cost. Well now, instead of having to constantly take money and run it through the tax system
01:36:37.980 | where you pay income taxes and ongoing utility taxes and pay for something every month, maybe
01:36:44.620 | you can take something and turn it into a one-time cost that you can lower your income
01:36:52.100 | from and still enjoy a high lifestyle. Can you replace the expert and become the expert
01:36:56.660 | yourself? We talked about this already but can you just simply learn about something
01:37:02.660 | instead of having to hire an expert? Or can you simply hire the expert for a small amount
01:37:07.140 | of time and save yourself lots and lots of money? There are a lot of examples but there
01:37:14.140 | are so many things when people do their own taxes or their own investments or things like
01:37:18.420 | that, make many, many mistakes. An example would be an expert would immediately say you
01:37:26.900 | always put your income producing assets into your retirement accounts. You own your bonds
01:37:30.180 | in your retirement accounts and you own your stocks in taxable accounts if you have those.
01:37:36.700 | And an expert would know that immediately but many people haven't thought about that.
01:37:42.020 | You put your corporate bonds inside of your taxable accounts and you hold your muni bonds
01:37:46.020 | out of it. Teach you how to buy the right class of stock for your situation. So could
01:37:51.900 | you hire an expert just for a little bit of time that would help you? Consider that. Consider
01:37:57.340 | can you do it yourself or consider can you hire an expert. Next, what if you made money
01:38:03.440 | on the deal instead of it costing you money? So can you get something for free and then
01:38:09.360 | resell it? Can you turn an expense into an income stream? The free and then resell it,
01:38:17.660 | I've had people offer me stuff. A friend of mine had some floor mats for his car. He said
01:38:25.100 | sure I'll take them. They were for a specific brand of car, actually for a Land Rover. I
01:38:30.220 | knew somebody that had a Land Rover, asked if they wanted them and was able to resell
01:38:34.140 | them to him and was able to get some income off of it. Turning an expense into an income
01:38:39.860 | stream, there are all kinds of great new ideas that are coming out. There's an idea called
01:38:45.420 | Park at My House, link in the show notes, where people park their car at your house
01:38:51.100 | while they travel. So instead of them paying a much higher cost to park at the airport,
01:38:55.900 | to park at your house, you rent out your driveway and have income from it. There's a new idea
01:39:02.420 | that's being tested out called Flight Car. And the idea is that you can rent your car
01:39:07.740 | out while you travel instead of paying to park it. So you fly, this company arranges
01:39:14.020 | for a rental of your car while you're gone and you receive income for it. Obviously there's
01:39:18.680 | challenges associated with that but what a cool idea. Flight Car. Can you rent a spare
01:39:24.260 | room out on Airbnb? If you have a spare bedroom, rent it out for part of the time. Or maybe
01:39:31.260 | you have a back, a little mother-in-law shack behind your house type of thing. Incidentally,
01:39:39.980 | you can collect up to two weeks of income for the rental of your personal house and
01:39:47.940 | that income is received completely income tax free in the US tax code. So can you do
01:39:54.580 | a house swap while you're on vacation? I'll link to an article Mr. Money Mustache wrote
01:40:00.300 | about what he did doing this, renting his entire house out while you're on vacation.
01:40:06.100 | What a cool way to finance a vacation. What a cool way to take something that most people
01:40:10.380 | have as an expense and turn it into an income. Can you pull income from something that's
01:40:15.900 | just simply usually an expense? It used to be that less now than in the past but in the
01:40:22.900 | past you could find companies that would pay you to wrap your car with advertising while
01:40:29.540 | you're driving around. And these companies would pay you a fee based upon the amount
01:40:35.980 | how much you drive every day and what your car is, what kind of car it is and they'll
01:40:39.380 | give you a wrap for a local company and that car becomes a rolling advertisement for them.
01:40:43.900 | So there's an expense that you usually have that you can now create an income stream from
01:40:50.900 | because you put a billboard on your land. I always think about the landowners that have
01:40:57.020 | land next to highways and I wonder what the rents they receive on the billboards they
01:41:03.700 | put out there on their arm. I'm sure it's not a ton but I'm sure it's better than nothing.
01:41:08.020 | Maybe it pays their property taxes or something like that. There are people who've tattooed
01:41:12.460 | logos on their body for pay. There's a guy who started, I'll link to all this in the
01:41:17.420 | show notes, there's a guy who wears a t-shirt for pay. And so I think it's Iwearyourshirt.com
01:41:24.420 | or something like that. And he allows people to send him their shirts and he wears them
01:41:37.500 | for pay. This same guy, his former name was actually Jason Sadler. Currently his name
01:41:44.420 | is jasonheadsets.com. So he auctioned off his last name. He put up a website called
01:41:51.420 | buymylastname.com and auctioned off his last name. And headsets.com bought his last name
01:41:57.980 | for a year and so he's officially changed his name and everywhere he goes it's jasonheadsets.com.
01:42:05.180 | Interesting idea. Can you rent an extra room in your house or build an apartment behind
01:42:09.260 | your house to rent out? There are a lot of times where maybe someone has a little bit
01:42:13.340 | of land, could you build just a small garage apartment and rent it out for several hundred
01:42:17.140 | dollars a month? That can be substantial over time. The point is that consider if there's
01:42:22.740 | something that you have that's currently an expense or where you have space and figure
01:42:26.620 | out if there's a way to get paid for it. Could you buy an RV for your business and then wrap
01:42:32.620 | it with your business name for the advertising? Can you turn an expense into an income stream
01:42:39.620 | by using your inside knowledge? So for example, if you're into wearing expensive name brand
01:42:46.980 | clothes can you buy them at good deals from consignment shops and then resell them when
01:42:52.100 | you're done with them? Instead of it being an expensive hobby it becomes either a cost
01:42:57.020 | neutral or maybe even a cost positive endeavor. Books, I've seen people do this with books
01:43:04.020 | that are into books. Can you turn your hobbies into money? So if you are into something like
01:43:11.020 | scuba diving, that's awesome, it's a hobby. Could you become a part time instructor at
01:43:17.380 | the local scuba diving club? Well this would allow you to number one earn a little bit
01:43:22.560 | of extra income, number two be around the scuba diving environment and you would have
01:43:28.860 | opportunities to dive with your students where you're being paid to dive. You'd also have
01:43:35.140 | opportunities to now where if the club has a boat I guarantee the instructors use the
01:43:40.620 | club property and are able to go out and do their own dives from time to time. They're
01:43:45.060 | able to use the club equipment without necessarily paying a fee for it each and every time. So
01:43:50.100 | could you take a hobby like that and turn it into an income stream? You could probably
01:43:53.820 | do the same thing with hang gliding or flying and become a flight instructor. I know a lot
01:43:58.020 | of people who are around aviation work as flight instructors and it allows them to get
01:44:02.940 | time in the airplane and get paid for it or have discounts on services. Could be worth
01:44:09.940 | pursuing. Now those may not be your hobbies but is there some way that you could apply
01:44:16.400 | that same thought process to your own hobby? Could you buy something in bulk and then resell
01:44:22.540 | part of it? So I'm interested in getting some grass fed beef. Well in order to do that I
01:44:27.860 | kind of have to buy a whole cow. So could I buy, this is a question I'm asking myself,
01:44:33.100 | could I buy an entire cow, turn around and distribute parts of it and charge people something
01:44:39.140 | for my time and effort of doing this and then wind up with a lower cost or maybe no cost
01:44:46.380 | for my share of the meat just simply by doing the work. There are lots of things where people
01:44:52.220 | could maybe arrange something like this. Buy something in bulk and then resell it. Can
01:44:56.620 | you eliminate the expense of something completely? So instead of, you know, can you store your
01:45:00.900 | stuff on Craigslist? It's one of my favorite things. I can't remember where I first heard
01:45:03.900 | that idea or maybe I made it up. I have no idea. But instead of paying for a storage
01:45:09.800 | unit which holds your stuff, why don't you just sell your stuff? Have it on Craigslist.
01:45:16.800 | Other people buy it and if you need it you go back on Craigslist and you can find someone
01:45:20.660 | else selling the stuff right back to you. So store your stuff on Craigslist. Can you
01:45:24.980 | buy it there if you need it there? So when you're traveling instead of having a big bag
01:45:30.460 | full of all the stuff that you might need, just take a little bag and buy it there if
01:45:34.220 | you actually need it. You'll save on baggage fees and just the straight up hassle. Can
01:45:40.740 | you increase your skill when using something? Example would be if you've got to have an
01:45:46.820 | expense, could you learn to increase your skill with handling it? Could you learn when
01:45:51.780 | you're driving to drive more efficiently? I'll link to a video on this guy on YouTube,
01:45:58.140 | a really interesting video. The video is called the Mad Max Hypermile. Everybody drives this
01:46:04.380 | big old pickup truck and gets 20-30 miles per gallon out of it. Now it's pretty extreme
01:46:10.060 | but remember we're studying the extreme to learn and to back up to what we can do today.
01:46:16.140 | Can you learn to, if you're going to travel, can you increase your travel skill and learn
01:46:20.820 | how to work through frequent flyer programs and get deals and discounts? So use the expenses
01:46:27.620 | that you're already going to have and pay for things efficiently. Can you take care
01:46:31.300 | of what you already have instead of replacing it? Even if you get something for free, can
01:46:34.580 | you just take care of your stuff? Eliminate the expense of replacing something by being
01:46:40.460 | gentle with it, by caring for it. Is there an alternative to buying something? Can you
01:46:45.180 | rent instead of own? If you need a pickup truck twice a year, can you just rent one
01:46:49.900 | instead of going out and buying one? If you enjoy going out on the boat a few times a
01:46:53.780 | year, can you rent a boat or join a boat club or simply charter a boat? If you once a year
01:47:00.100 | take an out of town road trip and you need a reliable car to take you across the country
01:47:06.020 | instead of an older car or a bigger car to take you across the country, can you just
01:47:09.100 | rent one? It might be worth considering. Or flip it around, can you own instead of rent?
01:47:15.580 | So are there things that you can do instead of leasing something, can you buy it inexpensively?
01:47:22.300 | Instead of leasing your cable modem, can you buy one? So always consider, is it more cost
01:47:28.420 | effective to rent instead of own or is it more cost effective to own instead of rent?
01:47:33.660 | Can you carpool or can you share? Can you carpool on a ride? Can you share a ride? Can
01:47:38.180 | you share tools instead of buy them? Can you borrow your neighbor's tools instead of going
01:47:44.560 | out and buying all your own and in exchange you lend him the specialty tools that you
01:47:47.980 | have? This can be applied in a library concept. Can you get your kids toys from the toy library?
01:47:56.420 | Instead of buying new toys for them every few months, can you go to the toy library
01:48:01.060 | and swap out their toys? If there's not one in your town, start one. Start a tool library.
01:48:06.380 | The library concept is such a great concept, it could be applied in so many different areas.
01:48:13.500 | If you need to borrow money, borrow money in an intelligent manner. So can you do intelligent
01:48:21.220 | financing? Most people, many people, when they go out and buy a house, they kind of
01:48:26.300 | automatically say, "I'm going to take out a 30 year mortgage." But what if a 30 year
01:48:30.340 | fixed rate mortgage isn't right for you? And I'm not saying that it is or isn't, just saying,
01:48:34.500 | think about it. So many times, maybe it would be better for you to do something like a 5/1
01:48:40.700 | adjustable rate mortgage or a 7/1 arm. Most people don't stay in their houses for 30 years.
01:48:46.260 | Why overpay on interest for the first 5 or 7 or 10 years of a mortgage when you're not
01:48:55.940 | going to stay there for that long? Now, you need to read the fine print, you need to be
01:48:58.780 | careful as rates may adjust for you. But many people could save a substantial amount of
01:49:03.900 | money by pursuing a different financing strategy. Or if you're going to borrow on a fixed rate
01:49:08.780 | mortgage, could you borrow on a 10 or 15 year mortgage instead of a 30 year mortgage? There's
01:49:14.180 | a substantial spread in interest rates between 10 or 15 year mortgages and 30 year mortgages.
01:49:19.700 | And the reason, at least as far as my research, has largely to do with the default rate. People
01:49:24.500 | are much more likely to default on a 30 year mortgage than on a 10 or 15 year mortgage.
01:49:28.420 | So because of that higher default rate on 30 years, that's built into the cost of the
01:49:36.740 | loan. Well, if you're not going to default, and if you can afford the payment, shorten
01:49:40.700 | up the term of that loan and save yourself a substantial amount of interest. If you need
01:49:45.700 | to borrow money, can you do it with unsecured financing instead of secured debt? So can
01:49:51.940 | you borrow off of something where, for some reason, something happened beyond your control
01:49:56.860 | and you weren't able to make the payments, the debt is not secured by property. It's
01:50:01.940 | unsecured credit card debt or unsecured personal loan instead of attached to a house or attached
01:50:08.540 | to a car that could be repossessed. This would be an example just in a practical application.
01:50:15.220 | I struggle sometimes to understand why people put additional debt onto their house through
01:50:20.100 | the form of a home equity loan or a home equity line of credit instead of doing unsecured
01:50:25.060 | debt on a credit card. Well, there can be reasons to do both. The house may have a better
01:50:29.060 | interest rate. You may be able to borrow the money at more favorable terms. But there also
01:50:33.140 | may be reasons to do it unsecured instead of secured. Can you get non-recourse loans
01:50:38.100 | instead of recourse loans where if you do default on it, then if you do default on the
01:50:44.180 | loan, the lender is not able to come after you for the balance. Can you be careful with
01:50:50.700 | your assets and make sure that you build wealth and assets that aren't attachable or that
01:50:58.020 | aren't judgment proof? The state of Florida where I live has a very generous homestead
01:51:02.340 | exemption where if you were to be sued and were to be forced to declare bankruptcy, you
01:51:09.340 | could retain the entire value of your house with no dollar limit as far as the value of
01:51:14.620 | that house. So it would make a lot of sense to have a paid off home and borrow on other
01:51:21.500 | property instead of on your personal home. Also IRA funds. IRA funds generally, depending
01:51:28.420 | on IRAs and 401(k)s, generally protected in bankruptcy court. So it wouldn't make sense
01:51:33.340 | to borrow against a 401(k) in many examples if you were worried about things like that.
01:51:38.780 | Now, it may make sense if that's where you needed the money, but consider it. Can you
01:51:42.300 | save for something? So save money. Set up an automatic savings fund, an emergency fund
01:51:51.380 | or a travel fund or a car maintenance fund or an insurance fund. Save the money. Pay
01:51:56.740 | your insurance on a six month or once a year and get the difference and then just you set
01:52:02.580 | aside the money instead of doing it every month. Can you use other people's money, other
01:52:06.780 | people's time or other people's resources instead of your own? The real estate industry
01:52:11.220 | made the OPM words famous, but it's still very, very applicable. So can you use and
01:52:19.700 | leverage somehow other people's money, other people's time or other people's resources?
01:52:23.420 | That's what business people do. That's the whole point and nature of business. Can you
01:52:30.420 | substitute other kinds of capital instead of financial capital? So instead of spending
01:52:36.420 | money on something, can you have social capital? By the fact that you have a lot of friends,
01:52:43.420 | you can borrow something from them. That's social capital. Can you substitute knowledge?
01:52:48.900 | So for example, if you need a weed eater, are you able to fix the weed eater for a friend
01:52:52.420 | of yours and you borrow the weed eater and fix it and return it? I know I'm stretching
01:52:56.260 | a little bit with the examples, but think about how this could be applied to your situation.
01:53:03.260 | Look for ways, for example, student loans. Could you repay your student loans with some
01:53:10.620 | of the government debt forgiveness programs instead of paying them back yourself? Run
01:53:15.080 | the calculations on that kind of thing. Run the calculations and see if there are programs
01:53:19.340 | available for you. If you have student loans, can you work for it as a teaching program,
01:53:23.820 | there are medical programs. Look to see if there's a program where instead of you paying
01:53:29.900 | back your student loans, the government will forgive the debt for you. I wish the program
01:53:34.260 | weren't there, but it is, so why don't you use it? Can you set something up where, for
01:53:40.500 | example, there's a website called You Promise where they'll pay back your student loans
01:53:45.220 | with a percentage of your expenditures if you buy through their portal. So can you buy
01:53:49.380 | things that you would buy anyway, but buy them through You Promise and have them pay
01:53:52.900 | back your student loan based upon that rate? Can you start a business doing things you
01:53:58.620 | want to do anyway? If you're into cars and you would be spending a lot of money on cars,
01:54:04.100 | start a car racing business and have the racing be your business. Excellent tax planning and
01:54:11.100 | also fun and you may make a bunch of money. If you love to fish, start a fishing charter
01:54:17.020 | or a fishing guide service. Be smart about where you place assets. So if you have an
01:54:22.460 | expensive car and a personal car, you should always put the expensive car into your business
01:54:26.900 | where you can depreciate it as a business expense instead of into your personal world.
01:54:33.540 | Also the higher ongoing expenses could be paid for with deductible dollars instead of
01:54:37.060 | non-deductible dollars. So consider where you place an asset. Be intelligent about it.
01:54:44.060 | If there's a hobby that you're into, why not start a business? If you were a yoga fanatic
01:54:51.060 | or a piano teacher, why not start a yoga business? If you start a yoga business, now your cost
01:54:55.940 | for your training classes and your retreats now become a deductible business expense instead
01:55:01.340 | of a personal expense. If you're into music, start a band, record music. Now you can write
01:55:08.220 | off your band touring and your travel. Do you think the big recording artists pay for
01:55:15.220 | the cost of all of their travel expenses out of their personal checkbook? Absolutely not.
01:55:20.740 | It comes out of the business checkbook. So think about if you can do the same thing.
01:55:28.380 | There's no reason why the rules are the same for you and for them. Run your band in a business
01:55:32.580 | like manner and it'll help you. A piano teacher can deduct the cost of a piano. A performer
01:55:39.580 | can deduct the cost of getting to their performances. So if you have skills and things like that,
01:55:47.220 | consider how to leverage your skills and your abilities and leverage the tax code. Can you
01:55:54.900 | find some kind of angle, loophole or exception that you can exploit? Could you get someone
01:56:01.900 | to pay for your college education by working at the college? Can you work at a job that'll
01:56:06.860 | reimburse you for college expenses or work at the school where you're studying? That's
01:56:12.940 | super valuable. Can you work at your kid's school instead of paying the tuition straight
01:56:18.100 | up or have your spouse work at your kid's school? Could you play the system? This example
01:56:25.100 | is not going to apply to everybody, but if you have kids that are going to college, let's
01:56:30.940 | say that you have some money. One aspect of the college financial aid system right now
01:56:37.220 | is based upon your income. So there's a form that's called a FAFSA, a free application
01:56:42.220 | for federal student aid. That's a need-based number that the government says, "Disclose
01:56:49.220 | to us your financial situation and we'll let you know how much money we think you should
01:56:54.820 | be able to contribute towards your kid's college." Well, if you're planning on taking some time
01:57:00.700 | off, why not take a couple of years off, a year or two off? Take a little mini-retirement,
01:57:05.340 | travel with your kids, do some work on a personal project, drop your income down to extremely
01:57:10.420 | low level. You'll qualify your kids to qualify for more financial aid based upon higher financial
01:57:17.420 | need. I've never done this, don't know all the rules on it, but it seems like it could
01:57:21.540 | be an option. Look into any kind of student loan forgiveness program or mortgage indebtedness
01:57:28.540 | forgiveness program. The HARP program that came out, I think it was HARP 2 that was actually
01:57:32.700 | somewhat effective where you can write off some balance of the money that you owe. Look
01:57:40.340 | into those types of programs. Maybe there's some kind of pricing anomaly. Right now, as
01:57:45.460 | I record this in July of 2013, I've been hearing about all these great lease deals that you
01:57:50.220 | can get on certain cars, especially electric cars. My understanding is that you can lease
01:57:55.260 | a Nissan LEAF right now for about $200 a month. $200 a month total lease cost. That's pretty
01:58:02.260 | substantial if you're commuting costs and you switch some of your gas costs over to
01:58:08.100 | electric costs. That's a subsidized cost. Sometimes companies will want to get their
01:58:13.020 | products out there so they'll basically develop these programs and they're subsidizing the
01:58:19.900 | cost of you getting the value. They're subsidizing it so that their products get out there and
01:58:26.900 | you get the deal. Finally, look for a way to stack all these ideas and stack these functions
01:58:36.300 | together. I love the concept of stacking functions. It's a permaculture concept. Basically, try
01:58:43.100 | to figure out how many things you can do with one decision. Multi-purpose would be better
01:58:50.100 | than single-purpose. Figure out how to combine multiple functions in one thing. Examples
01:58:56.860 | I came up with, these were just off the top of my head. I don't know if these things are
01:59:01.540 | applicable. You can figure it out for yourself. Think about how you can combine these ideas.
01:59:06.820 | For example, could you join the Mercedes-Benz Owner's Club or figure out a way to get into
01:59:12.860 | that club that would allow you to get a discount on the car? Could you negotiate the price
01:59:18.240 | of that car aggressively with various dealers and with the factory based upon the region
01:59:25.040 | that you're shopping in and shopping on the internet and shopping on a telephone? Could
01:59:28.900 | you buy the car in Europe and pick it up at the European factory system so that you're
01:59:35.700 | going to drive it across Europe? Do you have a reason to be in Europe on business anyway
01:59:41.000 | so you can buy the cost of the ticket to get there through your business, which turns some
01:59:47.740 | portion of your trip expenses into a deductible expense? You pick up the car in Europe and
01:59:53.460 | travel across Europe on your European vacation driving your own car. Could you buy those
01:59:58.620 | tickets through a business credit card and then later have the miles available to you
02:00:03.340 | in your account? Could you get a discount on that airline ticket by doing online research
02:00:10.820 | for what the best airline deal is right now? Could you go at a time when the price is substantially
02:00:18.620 | depressed because you're going on the shoulder season? Now you have your own car to drive
02:00:23.460 | throughout Europe, so because you have your own car you can travel to the places that
02:00:26.880 | are difficult for all the tourists to get with public transportation, which means you
02:00:30.820 | may get better deals and have a good time and then when you're ready you drop the car
02:00:33.700 | off at the port and fly home. So I don't know if that's possible or not, I've never done
02:00:39.940 | it, probably won't ever do it, but think about things like that because is there a way that
02:00:43.500 | you could stack all those functions together? Could you, you need a college education, so
02:00:48.260 | could you get a job at the university where you are interested in going to school and
02:00:54.460 | because you're getting a job there the university will fund your tuition and they will pay for
02:00:58.980 | the cost of your tuition. So instead of you having to come up with money you are being
02:01:02.820 | paid for work. Could you live at the university where you have lower expenses because you're
02:01:09.700 | living in university housing, you have discounted tuition, because you have university housing
02:01:15.260 | and you're next to your job and your classes you don't need an expensive car to drive while
02:01:19.540 | you're there so you have lower ongoing costs, you have more time freedom because you're
02:01:23.860 | in an academic environment and you're studying for academics and you have low income tax
02:01:30.980 | rates which allow you to save a substantial portion of your money. And then could you
02:01:35.100 | take advantage of any university study abroad programs or swapping deals they have where
02:01:40.860 | you could go and either be a student or be an employee at a study abroad system and work
02:01:47.100 | living in another country for an experience but still working somehow in your prior country
02:01:52.900 | of residence where perhaps the wages are higher. I don't know but I'm sure someone has put
02:02:00.980 | together some really interesting functions like that. If you need an appliance for your
02:02:09.260 | house can you find a very energy efficient washing machine and can you buy it used from
02:02:17.060 | the scratch and dent store and can you use either negotiate a cash discount or can you
02:02:21.620 | use a rewards credit card where you have an additional protection from the rewards credit
02:02:27.140 | card and can you pay for it from a local dealer who is making their income in the local economy.
02:02:34.780 | Look for ways to find these types of ways and stack all these functions together. So
02:02:40.340 | that's my list. I guarantee that there are a few hundred more ideas that you may have
02:02:46.180 | and that you can come up with. Put the ideas in the show notes. Today's episode, episode
02:02:50.100 | five, go to Radical Personal Finance and look for episode five. So put these ideas in the
02:02:56.300 | show notes and see what you can come up with. Most of all look for efficiency. Think about
02:03:03.340 | eliminating an expense completely. Think about optimizing an expense if it's something that
02:03:08.380 | you decide is worth it based upon your goals. Again, I wouldn't expect that these ideas,
02:03:13.580 | hardly any of them probably will apply to your life. There may be things that apply
02:03:16.260 | to my life. But I think that the way of thinking about it can be extremely valuable for you.
02:03:22.380 | There are ideas in here which you can use. You can find these loopholes in your own planning
02:03:28.700 | and you'll be able to use these ideas in here for your own situation if you look for
02:03:34.540 | it. These ideas are scalable. Let them mate with each other in your head and think about
02:03:40.780 | with the decisions that you have to make, think about how you can stack the functions
02:03:45.580 | and find some sort of way to get way more value for your money than many other people
02:03:53.100 | do. With that, this has been another episode of the Radical Personal Finance Podcast. I
02:03:58.580 | hope you've enjoyed it. Shoot me an email, drop me a comment, let me know how I can make
02:04:01.660 | the show better for you. Thanks so much.