When Maximizing Gains are a Stupid Idea

There are times thinking like an accountant determines how much of your hard-earned money you get to keep and how well your investments perform. Money isn’t the only thing accountants think about either. Time is more important than money by a long shot and plays into the equation every time.

This past week my oldest daughter asked if I would be helping with her tuition for next semester. I lollygagged as I didn’t want to think about it at the time. My daughter persisted, finally mentioning she wanted me to know about her tuition if I wanted to use a credit card to accumulate bonus miles or cash back.

Every year I generate cash and miles equivalents of around $10,000 per year. The whole family knows my love of these bonuses since they are tax-free and nothing motivates a tax guy like a five figure tax-free benefit.

I shrugged at the suggestion of getting another credit card for a bonus. Yes, tuition is nice spend to generate lots of cash back or miles. I did just that earlier this year.  But I didn’t feel like it anymore.

Another credit card with a required spend would be a nice added bonus. However, I only undertake the process when I feel like it. Some days I am in full hack mode and other times I could care less. Since I don’t need more miles and the kitty is full, my desire is based solely on thrill.

It comes down to time. Tracking spending on a certain card takes a small amount of time. The rate of return is high, but I don’t want to do it! Call me a spoiled child (in the comments, please), but there are times my time is worth more than another $400 tax-free.

Earlier this year I went crazy on the system. I used several new cards to generate thousands in cash, free hotels rooms and miles. I hate traveling and business travel will take years to consume all the benefits I amassed this year. Like I said, I went ape.

I also discovered selling tradelines a year or so ago and decided that looked like fun (if not tax-free). After mild research (and a few hiccups) the ride started producing a revenue stream. The numbers were nice, even if taxable income.

Selling tradelines requires more time tracking each card involved and assuring you have at least something on each card involved. It started becoming a pain in the tail real fast. The money wasn’t worth it after a while. (My attitude changes over time. When I stop enjoying the process I go do something else; when my deviant nature bubbles to the surface I am all in. Until it grows old again.)

Danger Zone

There is a danger in the FIRE (financial independence, retire early) community. We tend to research to the nth degree as we seek to maximize results with minimal risk.

But minimal risk may not be acceptable risk! As I went crazy on selling tradelines I ended up with one credit card cancelled. (Don’t cry for me. Plenty more where that came from.)

The danger part of tradelines was wasted time. Owning a business means I have plenty to spend on. Putting a few transactions on a dozen cards started being a real time consumer, however. If I didn’t have a tax practice and blog to manage I might find the time expenditure acceptable.

With tradelines you need to track when an authorized user is added to the card and when to remove them. More time is needed to track your payment so you get paid for the hassle  investment of time.

The money is good, no doubt. Selling tradelines on a few cards can add a few hundred to the mad money account. A dozen cards can reap up to a thousand every month; sometimes more.

A good accountant would milk this thing for all it’s worth. I’m not every accountant.

A bird in the hand is worth two in the bush they say. And they are wrong! Free money from credit cards is a lot of fun, but your time is more precious! I will still harvest tradelines and credit card bonuses when I feel like it, but this is the boy in me playing. It isn’t maximizing results.

Or maybe it is! Picking every bone clean that happens in your path is insanity! Not only is time precious, but what you could do with that time can easily make more. Life is too short to waste on every hack. You must be careful which hacks you pick and choose.

Blood Letting

Harvesting credit card rewards and selling tradelines at least makes you money as long as you don’t increase spending. The real danger comes when you only consider maximizing rewards in other areas of life.

Drugs might provide lots of utility as long as you realize it costs money and a piece of your soul with every purchase/use. An alcoholic drink now and again is fine for most people. But if you get confused with mild stimulants you can get in deep quickly. The jails are full of people who maximized pleasure without concern for long-term consequences.

Not to mess with your head, kind readers, but sex is good a few times a week, too. Seven times a day might sound funny, but you can do real damage. You don’t want to milk every last ounce of utility before you end the activity. (Bad choice of words.)

And now we get to the real risk of maximizing results applicable to everyone in the FIRE community. Every accountant knows (or should know) leverage is the best way to spike results. Public corporations do it all the time. XYZ, Inc. adds a pile of debt, buys back stock and watches earnings per share skyrocket.

Until it doesn’t.

Leverage is a double edged sword with the edge cutting you enjoying the advantage. You see, leverage has a built in cost. Interest is owed on each leveraged dollar, win or lose. Break even is a loss with leverage.

Investors figure this out early on. A thousand dollars can buy $2,000 of most listed stocks. If the stock increases 10%, your return is 20%, minus interest owed on the borrowed money.

Here is where it gets bad. If the investment declines the loss is also magnified! A 10% decline is a 20% loss on your original money, plus interest owed on the borrowed funds.

The worst part is staying power. Everyone knows broad market declines happen. Everyone should know the market always comes back given enough time. When you use leverage you don’t have unlimited time. Interest is accruing every day you have an outstanding balance on the loan. The market can outlast you when you use leverage.

Without leverage, all you need to do is wait. An individual stock might go down for the count. It happens. But the overall market is a reflection of the long-term growth trends of the whole economy. In time the market will reflect the continuing growth in technology, productivity and economic growth.

And only the unleveraged can outlast Mr. Market.

Hidden Leverage

Most people use leverage at a far greater level than what is allowed to buy stocks, bonds and mutual funds.

I can hear your screams of innocents. You don’t buy stocks or mutual funds on margin* (good to hear), sell your tradelines (maybe you should) or use credit cards with or without rewards and bonuses (why not?).

However, I bet you borrowed money at least once in life on an investment virtually guaranteed to lose money: a vehicle loan. Ah, but that’s different, you say. No it’s not, says your favorite accountant.

Leverage is leverage. And leverage accentuates gains and losses. An auto loan creates the same leverage a stock investment does. The only difference is the size of the loan and the guarantee the asset will decline in value.

There is another leverage I bet most readers have used: the mortgage. But how can you afford a home without a mortgage, you protest? You might not. I’m not even asking you to buy your first (or any) home without a mortgage. What I want you to think about is the amount of leverage you are taking on and the potential consequences.

Real estate tends to be a good investment, except for 2008. As bad as the housing market was in 2008 and thereabouts, the only people who lost their home to the bank had a mortgage. Usually leveraged to 100% or more.

Some leverage can be a smart move, but leveraging any asset or investment to 100% or more is begging to have your head handed to you.

Think of it this way. You buy a $100,000 home with $3,000 down. (We will ignore closing costs and other items that muddy the water.) If the value of your new home goes up 3% the first year you doubled your equity in the home. A mere 3% decline and your home has no equity. None. Zero.

In most cases you are okay as long as you are current on your payments. That is a whole different issue. What does happen when you have no equity in your home is it requires you to come to closing with cash to sell the darn place. It removes the selling option for many people.

Massive leverage is common historically in real estate. In my office landlords are the number one group to declare bankruptcy. They are also the same group who has the highest net worth. What’s up with the dichotomy?

It all comes back to leverage. Those who abuse or overuse leverage find themselves in too deep to wiggle. When you lose the ability to move financially you are in death spiral. Even if you survive there will be significant damage done.

The Efficient Frontier

I hear business owners and those willing to cheat on their way to FI brag about a method they discovered to generate massive income and net worth growth. Before the words are out of their mouth I know they read a news article on using leverage to spike returns. The article probably highlighted a major corporation using leverage to maintain and grow returns.

With rare exception it ends badly and our victims need to start over or at least re-walk part of the path toward FI.

Accountants love to talk about efficiency and maximizing returns. And it is true I want you to think like an accountant. But just because thinking like an accountant is a good thing doesn’t mean accountants never have stupid ideas. Abusing leverage is one of these ideas.

I would never, repeat, never recommend a client to borrow funds to invest in the stock market. This includes option strategies to spike investment returns.

(Side bar on options: Options are not bad in and of themselves, but most people use them wrong. I have no problem using an option to buy a stock a lower price and collecting premiums or replacing a sell order with a covered call. However, if you use an option to buy stock you must have all the cash on hand. Otherwise you are only disguising massive leverage. The bad kind.

If you don’t understand options you have no idea what I just said. That’s okay. Someday I’ll write a post on options and the incredible risks to the foolish as well as using options as a hedging tool for your own investments. Stay tuned.)

Back to our show. A car loan is leverage and not the good kind either. I understand a loan is sometimes necessary. When this is the case you must make your leverage a DEBT EMERGENCY! When you have debt on a wasting asset all nonessential spending stops until the debt is gone.

The home mortgage is a bit different. I make exceptions to the rules for mortgaging a property, but only after careful consideration. Once again, remember 2008. It never happens until it does.

If your accountant tells you to leverage your business or investments, take caution. When he (a woman would never recommend such a stupid strategy) explains how leverage maximizes your gains, grab your wallet and run like the wind. Your accountant didn’t lie, but the risk assumed to take such a strategy is insane.

If your accountant, or anyone else, encourages excessive leverage on real estate or business, or any leverage on an equity (stocks, mutual funds, et cetera) position, remember the words of the dearly departed George Carlin:

“Do you know how you can tell if you have a stupid kid? Take him to the curb in front of your house and stand him there. If you come back in two weeks and he is still there you have a stupid kid.”

And a stupid accountant.


* borrowed money

How to Complain To Your Credit Card Company

Today we have a special guest post from Josh Wilson of Family Faith Finance. Josh’s idea for an article is one I would’ve written if I’d thought of it. I talk about using credit cards as a tool to better manage your finances and those juicy bonuses they offer, tax-free. But what if something goes wrong? Identity theft drips from the newsfeeds. Unauthorized charges happen.

There is a way to protect yourself. Most readers are aware of their credit card’s dispute process. But if the dispute goes wrong there are still options short of arbitration. Josh gives us the basic framework in disputing a credit card charge or issuing bank’s action before moving to a powerful tool to resolve the worst problems with lenders. I’ll let Josh tell the story.


How to Complain To Your Credit Card Company


By Josh Wilson, creator, blogger, and personal finance junkie.


While credit cards aren’t a prerequisite, they’re a great tool for emergencies, recurring payments, cash management, to build credit score and for bonuses. Usually having a credit card is no big deal, either, but then life interferes? Having a complaint against your credit card company is normal and if you do you’re definitely not alone. The most common complaints about credit card companies include: billing disputes, identity theft, and account closure.


When you have an issue with your credit card service it’s best to work directly with the issuing bank first before seeking arbitration or help from a third-party advocacy group. Contacting a credit card company to file a complaint can seem daunting, but most complaints can easily be handled with some research and a phone call. The process is similar for most credit card companies, but there are a few things to remember when filing a credit card complaint.


  • First, it’s going to take some work. You are going to have to make phone calls, write letters, send in copies of bank statements and more to deal with a fraudulent charge on your credit card or other credit issues. Just be prepared and make sure you have everything organized.
  • Second, you must document everything. It will make the process much easier. To keep good records, use email, record your phone calls and print two copies of all paperwork you send them.


Let’s review the process of filing a complaint with your credit card company:


Evaluate the charge or discrepancy. This is the first step if we’re looking at billing mistakes or potentially fraudulent charges. You want to make doubly sure that you didn’t simply forget about a charge you did make. You may have to look up the location or call various merchants when trying to figure out if you made a purchase there.


Contact the merchant or credit card company.  Once you have your information together you should contact the merchant or credit card company. If it is for a fraudulent charge you should first contact the merchant to dispute it. If they can’t or refuse to remedy the error, contact the credit card company and alert them. [TWA Note: I would report a fraudulent charge using the bank’s online portal and let the bank deal with the issue. I wouldn’t call the merchant.]


Mail paperwork.  More than likely you will be asked to send in some information to the credit card company. This is usually handled with a fax or scan, but may require a hard copy snail mailed. Most banks don’t require paper complaints, but if required, send in a copy, keeping the original documents for your records.


Play the waiting game and appeal if necessary.  Once you’ve sent the information you need to wait while the company does their own research. Sometimes your dispute is denied. If that is the case you can appeal, asking for an explanation as to why the dispute was denied. However, most credit card companies will require you to appeal within 10-14 days of receiving your verdict on your initial complaint.


What happens when the credit card company is unwilling to resolve the issue? This occasionally happens and it’s not your fault. You can do everything right and the company may decide you are liable. Luckily there’s a government agency designed to handle this, namely the Consumer Finance Protection Bureau, which is designed to assure financial institutions follow the laws and treat you fairly. They have a process where you can file a complaint against a financial institution if you have a problem with your credit card, mortgage, student loan or any other issue involving a lender.


How do you file a CFPB complaint?

The CFPB has a unique process for filing a complaint. Once a complaint is filed they become a liaison between the consumer and financial institution.

  1. You file your complaint on their website. You can log in to check or update the status at any time.
  2. The CFPB reviews your complaint and all the documents you provided them.
  3. They contact the financial institution on your behalf to settle the dispute.
  4. The credit card company responds to you and the CFPB.
  5. Your complaint is updated when it’s resolved and the CFPB publically publishes the results.


Whether you file a complaint with your credit card company or with the CFPB, you shouldn’t be anxious about addressing an issue involving your credit card, student loans, mortgage, or any other loan.

The Hidden Tax: Transaction Costs

Living a frugal lifestyle sometimes lends to a false sense of security. We take all the financial precautions to increase our savings rate and invest in broad-based index funds. Before long the net worth starts reaching for the stars and we feel good about ourselves.

Now, we decide, might be a good time to get a second car or trade for a new one. Moving to a smaller home, across town or to another state or country, sounds tempting and easy to do with your nest egg growing faster than you are spending.

Your habit of caution is well defined. There will be no stupid tax in your future! Careful planning leads to good decisions. You look before you leap.

Then it happens and you never even saw it coming. You paid a stupid tax without even realizing it was there.

How the Government Robs Smart People

Smart people know how to avoid spending half their income on taxes. They fill their retirement accounts and use index funds for non-qualified accounts to keep the tax burden low. Using the tax code can really put a dent in your income tax liability. But the government has insidious ways to pry your hard-earned cash from your wallet.

Selling an old car and buying a new or newer vehicle has an obvious hidden cost: sales tax. When you sell your current vehicle the government collects some coin from the buyer; when you buy a replacement vehicle the government collects sales tax from you. In Wisconsin, where your favorite accountant lives, the sales tax is 5% with most counties tacking on a ½% or more. (I am aware a few counties have a 5.6% rate, but we are trying to keep this discussion clean.) If you buy a $10,000 car you are required to pay at least $500 in sales tax, more in most counties. The value of the car hasn’t changed, but your net worth took a 5% ding on the purchase price. New vehicles are even worse with the higher selling price and non-tax fees crammed down your throat by the dealership.

Buying a piece of real estate is the worst. We will use your favorite accountant’s state in our illustration.

Sales tax isn’t due on the purchase of a home, rental property, land or commercial property. (Can you imagine paying sales tax on a $400,000 home?) There are far worse things than sales tax when it comes to purchasing/selling real estate.

Local governments love when real estate changes hands. In Wisconsin there is a $3 per $1,000 transfer tax. Don’t forget title insurance and both the buyer and seller get a bill.

As a seller you pay realtor fees or pawn your property pro se. If you go it alone you will invest time and money advertising the property and running to show the property. You still need an attorney (and last I checked they still invoice for their time) to handle the legal documents when you have a buyer.

Rather than bore you with the myriad fees associated with real estate I will stop here. All you need to know is real estate, as the buyer or seller, has lots of fees/taxes connected to the transaction.

The transaction fee is the most voluntary tax of all. The more you spend the more you pay.

Reducing spending and saving/investing a majority of your income has many financial benefits. We hear plenty about reduced taxes based on retirement accounts. What none of this savings rate considers is the amount of money wasted on merely the transaction.

Taxes are not the only culprit! Sure, the government has its hand out whenever an asset transfers. But so do sales reps, attorneys, and (gulp) accountants. Everybody gets a piece of the action. You have no guarantee on how the new asset will perform for you. The rental property could sit vacant; the new car could be a lemon. But all the, ahem, professionals are getting paid. If you ask me to consult on a transaction know up front I am the only guy in the room guaranteed a profit.

Reducing the Tax Grind

Taxes will consume over half of everything you earn in a lifetime if you are not careful. Income and sales taxes are only the beginning. Payroll taxes take a bite and realized capital gains put a grin on Uncle Sam’s face. Before you blink, when is the last time you filled the tank on the car and thought, “Oh yeah, I just paid an excise tax.” Excise taxes are everywhere and hard to spot for a reason. It makes it easier for the government to get more of your wealth.

Property taxes are relentless. If you rent the landlord adds the property taxes to your rent; it’s built in. If the landlord didn’t include this major expense she would be broke quickly and the new landlord will not be so lax.

And did you forget you pay corporate taxes, too? You do. Corporations include their tax liability in their cost structure and pass it along to customers. The end user get stuck holding the bag.

Even when you die the government takes a slice in the form of the estate tax. It never ends even if you do!

You can fight back and regain control of your financial future. We have discussed visible (income, et cetera) taxes at length in the past. Now we want to gut the terror of the hidden tax: the transaction fees.

Fee’d to Death

When a simple phone bill has more individually listed fees than you actually make phone calls it is time to consider fees, transactions fees and how they affect your wealth.

We will focus on the two big ones: real estate and vehicles. Of course you already know if you increase your savings rate you will automatically reduce the transaction fees chewing into your life. Buy less stuff; pay less sales tax. You understand the concept.

Cars are a different story. Transportation is a necessary part of life. Even people who bike and walk everywhere they can frequently also own one or more vehicles. And each vehicle owned is a wasting asset.

The more often you buy a vehicle the more often you pay the stupid, ah, hidden tax. If you buy from anyone other than a “for sale by owner” there will be a profit built into the price. This doesn’t make the seller a bad person, just a business person who will survive.

No matter who you buy from you will pay a sales tax. Every sales tax paid is an instant reduction of your net worth. I have a powerful allergic reaction to any event that molests my net worth. There are times I come out swinging it is so bad.

There are two things you can do to massively reduce the transaction costs with vehicle ownership: buy as few vehicles as possible over a lifetime and pay less for the vehicles. Finding the lowest priced reliable vehicle to get the job done for the longest period of time creates the greatest savings. When I buy a car it will be in the family for a very long time. Most of my vehicles are purchased 2-5 years old and I run them for another 15-20 years. I don’t care what they look like! They only leave the family when they no longer can do their job.

A typical sale of an auto in my household is purchased by a local kid looking for a vehicle to enter into the local demolition derby. “Gi’me five hundred bucks kid and this beauty is all yours.” They buy it every time.

You may also consider forgoing vehicle ownership. Ride sharing and public transportation coupled with a good bike can keep transportation costs low. For those few times you need a vehicle for a longer trip I suggest renting. There are still transactions costs, but they tend to be minor in these situations compared to auto ownership.

The other big purchase that chomps a serious chunk out of your net worth is real estate. It drives me crazy when I see clients think they can trade houses like day-traders trade stocks. Of course you can make money flipping houses, but the transactions costs will kill you. Remember who is always guaranteed to turn a profit: the professionals (sales rep, et cetera). One bad deal and it all goes south quick.

Before someone points out I flipped a few houses over the years I want to point out I never went into an investment property with the intention of doing a quick sale for some easy greenbacks. We bought many properties and improved them all. If a rundown property cleaned up nice and we were offered a price we couldn’t refuse, we didn’t refuse.

I own homes like I own cars: for a very long time. I’ve lived on my current farm for 22 years. Before that I owned a home in town and before that I owned a mobile home because I didn’t want to live with my parents anymore. As far as I’m concerned, the mobile home was a vehicle (it has a license and everything) and is a wasting asset. The home in town was nice, but I always wanted to move back to the country where I could raise animals and till some land.

Warren Buffett still lives in the home he bought in 1958. Smart man. Bet he has money.

I’m not telling you you can’t buy a car or a property. If you want to own income property you have to buy it first. There is also nothing wrong with owning your residence. All I am pointing out is that you want to own as few of these big assets for personal use over your lifetime. Doing this one simple lazy thing (not buying/selling/trading your car/house on a regular basis) could increase your net worth by a million dollars or more over a lifetime if invested in an index fund.

Or, you can keep doing what you always do. My brethren in the legal and sales fields are happy to take you money.

So am I.

Manufactured Spending Without the Factory

Start your rewards card search here.

The biggest problem most people have with credit card bonus programs is meeting the spending requirements for the bonus. Business owners have an advantage. Landlords do too. Meeting a $3,000 spending requirement in 90 days is a snap of the finger for even a relatively small business or side gig.

But not every side gig has enough spending that can go on a credit card and if you only own a few rental properties and maintenance is not currently required you will need another source of spending to earn a bonus.

Readers of this blog tend toward the frugal side. Spending for the sake of spending for a bonus is crazy and you guys know it. Your personal spending is probably too low to earn many bonus cash awards or miles. Travel hacking gets harder when you save most of your income.

Manufactured spending is the solution bandied around the blogosphere. It sounds so simple at first. Find a source where you can recycle fake spending into cash and miles rewards. Well, how do you do that?

There are two problems with manufactured spending. First, it frequently requires a lot of running around and effort. It boils down to time and what you value your time worth. Running to the store to refill a debit card or jumping through hoops to add a few more dollars toward a spending requirement is a poor use of precious time.

The second problem with manufactured spending is cost. Recently I wrote a post on using the IRS and taxes as a way to manufacture spending. It’s a great idea to create massive amounts of spend, but it has a cost. The cost can be small, but costs, even small ones, add up. The cost of manufactured spending digs into the value of your rewards.

Turning Manufactured Spending Into a Cash Cow

I have never been a fan of manufactured spending. Recycling spending through a program to generate benefits is a fool’s errand. As fast as you can find a program to game the rules change. Siphoning off value costs somebody somewhere something. That somebody soon discovers the issue and changes the rules. Then you get to start the hunt for another source of spending to max out credit card rewards programs again.

There has to be a simple way to increase spending without real cost to the budget. To maximize the value of manufactured spending, the costs of creating this spend must be reduced or eliminated. Cost in this instance is more than just money; it is time, too. To be effective it must be fast, simple and no or low cost.

The ultimate manufactured spending would allow you to buy a large value amount of gift cards of a general use credit/debit card—a Visa gift card, perhaps. This in effect would extend the spending deadline, as required spending to meet reward qualifications are met, while the true spending could happen at a future date using the purchased gift cards.

Top Cash Back (affiliate link) has a unique program where you can buy American Express and Visa gift cards and get cash back. Buying a gift card frequently has fees attached and this case is no different. However, in this instance the cash back covers most, or all, of the fee.

Step-by-Step Process

Let me walk you through the process before I let you get on with your day.

Step 1: Research a credit card with a high cash back or miles reward that meets your goals. You can use this link to review just about any credit card reward program imaginable here. (If you use this link as your gateway into the CardRatings site and apply for a credit card and are approved this blog will receive compensation.)

Step 2: Apply for the card best fitting your cash back or travel goals. Maybe you are looking for a large cash back reward. Maybe you have a miles goal with a specific airline as you plan some travel. You can hone your efforts to any credit card you want without concern over meeting spending requirements.

Step 3: Once you have the credit card use it for all spending, as you have in the past, to get as much of the required spend used within the timeframe required by the credit card. Do NOT spend extra just to meet spending requirements for a reward. That kind of defeats the purpose of the program.

Step 4: As the deadline for bonus rewards required spending approaches, review your spending to see if you are short of the required spending.

Step 5: Go to Top Cash Back and order Visa or American Express gift cards to complete your required spending to earn the reward.

Step 6: You can either cash out the gift card (Visa only) immediately (there is probably a cost to this) to pay off the credit card bill or you can use it to cover future spending needs.

Many of the best rewards programs have daunting spending requirements. This no longer should be a concern for you.

There are many ways to manufacture spending. This is one additional tool to add to your workbench. No one program fits everyone’s personality or needs. The more ways you have to meet spending requirements the better and the more rewards you can earn.

Please consider using the links on this page to support this blog.

Bookmark this page for future reference and as a starting point in your research for additional rewards cards.

Please share this page on your social media. My ego needs the boost.

Share additional ideas in the comments section below.

Frugality the Right Way

My last blog post was a disaster. In an attempt to gain some breathing room I accepted my first guest post without proper vetting. An astute reader quickly realized the guest was promoting a debt consolidation service. I should have known better.

My reasoning was sound; execution needed work. Tax season is getting long in the tooth and I am exhausted from the long hours. Hoping to divert some time from writing to tax work, I allowed the enemy behind the lines. My promise to you, kind readers, is to up my game. I like the idea of guest posts, but I think it would be best if I invited bloggers I know and trust to do the writing.

That said, I have no intentions of reducing my writing output. You come here to listen to my stories and glean my words for valuable advice you can take back home.

Success is a poor educator. When things are going good—and life has been very good to me—I/we start to believe we are smarter than we really are. It takes a solid kick to the crotch to focus attention. As bad as the last post was, a lesson was to be learned you are not aware of: my traffic was rather good! For a terrible guest post I had a high level of traffic. I take that to mean people were attracted to the title: frugality. I decided I should write the guest post intended for you.

Today I am going to share some frugal habits I have. A word of caution. Don’t try to emulate what I do. Rather, use my frugal lifestyle as a starting point to reduce spending in your life without sacrificing quality. Also, many things I talk about are ideas only. For example, I am considering an auto purchase and I will share my thinking as I go through the process. It is very different from what I did only a few years ago.

Before we start I want to point out debt consolidation is not always a bad thing. Depending where you are financially, refinancing can make sense. Moving a student loan to SoFi could be a smart money move for you. If you are loaded with debt for whatever reason, consolidating debt at a lower rate might be a good move. What the guest post promoted was more along the lines of “bilk’em with fees and screw’em.” I have zero tolerance for that kind of finance.

The Frugal Accountant Comes Clean

Frugality is not a destination, it is a journey. Cutting costs also means intelligent planning. You can save a few dollars today by not changing the oil in your car or delaying medical care only to suffer serious consequences in the near future. When I prepare taxes I always consider the consequences of my actions on future tax returns. Saving a dollar today in tax only to pay two dollars next year is a thinly disguised high-interest loan. I am not interested in that kind of stupidity, ah, I mean, frugality.

Let’s talk cars first. My oldest daughter is in the market for a car and I’m thinking it might be time to retire the 2000 Honda, too. (The Honda Accord runs nice, but Wisconsin winters do a number on the body after 15 or so years. She ain’t pretty and she is starting to rust in the wrong areas causing safety issues. <sniff> I’m going to miss that girl.)

In the past I bought all my cars from the bank, as in bank repos. The days of buying a car for $4,000 under Blue Book are over without additional work. Local banks no longer sell to the public, opting to sell all repossessed vehicles at auction. They get less, but have less hassle. I considered getting a dealer license so I could bid on used vehicles at auction, thereby getting the wholesale price. The time and effort to do this for the few cars I buy has held me back. I have no interest in starting a small used car business either.

Even if banks still sold their repossessed vehicles to the public, I am starting to debate the intelligence of buying a used car. Don’t get me wrong. I still love used vehicles. A two-year-old car has shed plenty of depreciation while retaining most of the usage value. New car smell is expensive.

Buying a used car from a dealer is depressing. The prices are waaaaay over Blue Book and they do a great job of putting lipstick on pigs. It is hard for most people to know a pig with lipstick from a quality vehicle. I am one of those people. My interest in cars is limited to turning the key and expecting the darn thing to start and taking me where I want to go. I put gas in the thing and change the oil. That’s it. Enough thinking about the wasting asset in the garage.

But that wasting asset can drain serious ca-ching from your wallet if you let it. Thinking frugally about a car is best before you buy said car. I assume you only drive when necessary. Short trips around town only require a pair of shoes or a bike. No auto expenses required.

The purchase price of a vehicle is small compared to the expenses it creates over its useful life. Fuel, tires, brakes, insurance and other maintenance will add to a higher number than the original cost. (Don’t let a car salesman dazzle you with that investment bullshit, either.)

Time to listen in on some conversations inside the Accountant household. My daughter is struggling with her first car purchase. Now 22, it is time for her own set of wheels. She grew up watching her dad buy a used car from the bank once a decade for well below Blue Book. It always worked and was cheap. The for-sale-by-owner (FSBO) offerings are not encouraging either.

Watching my daughter go through the process I started thinking of new ways to game the system. I am not talking about cheating; I am talking about getting the best value for the outlay of cash.

Since the initial cost of the car is small compared to expenses over the life of the car I started thinking about these costs. In the past, new cars did not offer nearly as much advantage over used vehicles. With new models offering lower operating costs (more miles per gallon; lower maintenance costs), a new or at a least newer, vehicle might be a better way to go.

Example: If a used vehicle costs $15,000 and a new vehicle cost $30,000 (This is an example so don’t tell me cars cost different amounts. I know.) you need to think about operating costs to find the “real” cost of owning the vehicle over its expected lifetime of 10 – 20 years. In my example I assume you run the car until it is worth nothing. In reality you might get $500 to unload the beast as it nears the end of her life.

The first thing you have to remember is that the act of buying a car is when you take the biggest hit, so no buying cars on a regular basis.

In our example we will assume the used vehicle market has a variety of reliable cars in our price range that get 25 mpg. We will also assume a new car (maybe a hybrid or other high mpg ICE offering) gets 40 mpg. I normally drive several hundred thousand miles before my mode of transportation becomes less than reliable. We don’t want to buy cars any more often than necessary so mpg is an important consideration.

Assuming $3 a gallon gas, the 25 mpg car will cost $12,000 for each 100,000 miles driven. The 40 mpg car will cost $7,500 per 100,000 miles, a $4,500 reduction in fuel cost for the new car. If you run the car for 200,000 miles your fuel savings will be $9,000 over the older, used car.

Paying $15,000 extra for $9,000 in savings still doesn’t add up. A quick check around the internet will help you determine if the model you are looking at has mechanical issues. We will assume each vehicle considered has a good track record. We don’t want to get bogged down on make and model issues.

Electric vehicles don’t need an oil change. Newer cars go longer between oil changes. The cost of tires varies depending on the tire required for the vehicle. Assume 80,000 miles before tires need replacement. I’ll let you do the math in these areas. The differences make a modest difference only in most cases.

The biggie is insurance. The cost of insuring a vehicle is serious business. Depending where you live, insurance can cost more than a car payment. Because insurance varies widely based on location we will let you do your own math.

Three more issues to consider before buying your car. New vehicles frequently have manufacturer incentives. The $30,000 car might have a $6,000 rebate and 0% financing. Even if you don’t need financing you still get use of the money at 0%, which has value.

Finally, certain vehicles have federal and/or state tax incentives. The new vehicle, when manufacturer rebates and potential tax credits are added, can reduce the upfront cost of the vehicle to only slighter higher than a newer used car. You also have the manufacturer’s warranty.

To sum up the car talk, a $30,000 new vehicle with a rebate can drop the initial cost to near used car prices. Add in fuel savings and the choice to buy a new car might be the right choice. Counter-intuitive, I know. But you have to consider all costs when making a decision. Of course, you also want to consider time value of money and other issues pertinent to your situation. Vehicles are to transport you or to haul stuff. You can apply the same thought process to a truck.

More Frugal Ways to Live

I am all for lowering expenses, especially when nothing is sacrificed. I recently talked about a better way to get internet service. Where I live this is a major improvement in quality and price. Mix in the bundled services sold from many providers to get a lower internet price only adds to the total cost for services you don’t really want (think commercial-filled cable TV bundled with phone and internet). Sometimes a better deal allows you to dump unwanted services adding to your real cost. Those companies play mind games and rape your wallet in the process.

Cell phones are another growing expense in most households. People tell me they pay $80 and more per month per phone. Insane! The missus and I (and the oldest junior accountant (the youngest doesn’t have her own cell phone yet)) use Google Fi. For $20 a month we get great service and coverage. You don’t need any more than that.

Utilities always drive this accountant crazy. The truth is that after a while there is a diminishing return on additional efforts to reduce electric use. My home doesn’t have a furnace, hot water heater or air conditioner; we have a geothermal unit to handle all that. The geothermal gulps electricity when it is running. We never run the AC in the summer and keep the house 60 degrees F in the winter. In the near future I see a certain accountant running the numbers on a solar shingle roof, Powerwall and electric car. Elon Musk and his Tesla Corporation might consider me a client before long. I need to see numbers first. Eventually the initial costs will come down to where it does work. Then this accountant will swing the bat.

We prepare most of our own meals and grow much of our food. I ferment my own wine. Meat we don’t raise ourselves is purchased from the farmer, cutting out layers of middlemen.

Entertainment is the library and Netflix. Long walks with Mrs. Accountant are a hot night out. We visit with neighbors and family. Your favorite accountant enjoys a German card game called sheepshead. We play for dimes. A bad night could set me back as much as a buck and a half. Sad times in frugalville.

Last Thoughts

Frugality is a mindset. I don’t go around thinking about being frugal. I live frugally because I am naturally frugal. Waste irritates me to no end. Too much stuff drives me crazy because I have to store and work around stuff I don’t want or need.

A natural frugal nature is healthy. You can go too far with frugality, too. It’s not about living with less; it’s about living right.

Hidden Value in Homeowners Insurance

img_20161031_201350Insurance is for the mathematically challenged. Insurance companies have the largest buildings in town for a reason. What other company do you write a check to for a thousand dollars and get nothing more than a promise to cover some bills in the event of certain losses? Commissions to the salesperson can reach or exceed 100% of premiums in the early years of some life insurance policies. Many credit card companies offer free extended warranty insurance at no additional cost when you buy with their card. You can guess the real value of the extended warrantee offered at Wal-Mart on $88 headphones.

Warren Buffett built an empire funded by insurance premiums at Geico. Some insurance is required by law. In the U.S., auto insurance is required for liability. Health insurance is also required since the Affordable Care Act passed.

Insurance is about risk management. Insurance companies are masters at it. The goal for the insurance company is to bring in as much as possible in premiums and pay out as little as possible in claims. Insurance always has a built-in profit for the insurance company. This is the house advantage.

Most insurance claims are for stupid small stuff. The cost of insurance to cover claims under $10,000 is massive. The processing of a claim is expensive. That is why higher deductible can save so much. But even better is not buying insurance at all and pocketing the cash.

When Insurance is Important

Auto insurance is required on the vehicle itself if you have a loan on said vehicle. Required auto insurance is for liability only, regardless of loans. The liability portion of the auto insurance bill is small compared to the cost of collision. This should tell you something. Liability claims are rare. Most auto insurance claims are for fender benders. The reason liability insurance is so important is because when the rare occurrence arises, the claim gets really big.

A new trend is emerging among the FIRE (financial independence, retire early) crowd. To cut spending to the bone, these people pay off their mortgage and then forego homeowners insurance. I understand the concept, but worry about the consequences. Homeowners insurance runs from $500 a year into the thousands. As long as you have the financial resources to manage any physical loss the insurance is an elective, maybe.

I agree that all small claims should be handled without the help of an insurance company. Even a higher deductible homeowners policy doesn’t save all that much. Claims on a home are rare and the claims that do come in are related to smaller issues rather than a complete loss of the structure on the property. Still, homeowners insurance premiums have skyrocketed.

My office building is in a floodplain. Actually I am surrounded by a flood plain so I am considered an island and if I had a loan on the property I would be required to carry flood insurance. Flood insurance would set me back over $2,000 per year. Insane! My office building has no encumbrances and no flood insurance either. I have owned the building 21 years. That means I saved at least $42,000 in premiums. In the last 21 years there was only one incident where there was a flood. The sump pump died at the same time and some old books were destroyed. Value: $0. I did have an afternoon of cleaning out the office basement so I guess if you count my time as worth something there was some out of pocket cost in 21 years.

I still have insurance on my building, however. And that is where this story is going.

The Old Reliable HO-3

The HO-3 homeowners policy is the most commonly sold today and is required by most lenders. It covers all the things you would expect: fire, tornado, or any direct damage to the home or surrounding buildings. The insured is covered for replacement value without depreciation. There are a few notable exceptions to the HO-3. Flood and earthquake, for example, are not covered; additional insurance purchase is required to insure against loss from these events.

Having casualty insurance increases your costs. Many years ago I hit a deer coming home from work during tax season. Back then my attitude was to have collision coverage if the car was valued over $5,000. (Today I only carry liability regardless the value of the vehicle.) I filed a claim and started looking for a shop to repair my car. All the quotes kept coming in around $4,000 and I had a $1,000 deductible. This was crazy. Finally I decided to get a few more quotes and tell the shop I was uninsured. Now the quotes were all under $1,000! The final bill was $800 and the guy gave me a $50 discount for paying cash. It was the last time I had collision coverage on my autos.

All this is good and well. But, since you know the odds of making a major claim are small, bypassing insurance is a calculated risk insurance companies take every day. The cost of repairing or replacing a vehicle is rather small when you think of it. If you can’t afford to replace the car, you can’t afford the car. I have pocketed a small fortune since I dropped all but the liability coverage on my autos.

Back on the farm I have homeowners insurance. I have to. My only debt in the world is the farm mortgage and I could easily pay it off in cash, but I am reluctant since the interest rate is under 2 ½% and my investments do better than 2 ½. That isn’t a problem at the office. The office building is debt free and I still carry insurance. Why?

You are Liable


Life insurance commissions are huge! So where is the value to the policyholder?

The real value (the only value) insurance has is protecting you from the big one, the one that would destroy you financially. A $10,000 loss is an inconvenience; a multi-million dollar lawsuit could easily change your life for the worse. Even if you win the lawsuit, the legal bills to win could reach into the six figures. A family member was caught uninsured and paid over $75,000 to fight a lawsuit he eventually won. He was still out 75 grand. I’m a fast learner. Lawsuits are the real risk. Especially frivolous ones.

The office is covered by an insurance policy. No one requires I carry the insurance. There is no mortgage on the building. However, my office is on a corner where a lot of moms and kids cross my parking lot on the way to a park and beach. Drivers sometimes cut through my parking lot to avoid the stop sign. If a driver broke the law by racing through my parking lot and injured or killed one of those kids I would also be sued. In Wisconsin wrongful death is $500,000 for children and $350,000 for adults. That means even if I am not at fault, maybe it was just an accident or the driver’s brakes failed, I would be on the hook for a minimum of half a million dollars for wrongful death if a child is killed. Then the attorneys can get serious about getting the rest of my net worth.

The HO-3 policy covers liability. (Always check with your insurance company or agent to understand what coverage you really have. The blanket statements I make here are for illustration only. Also read your policy and ask questions if you don’t understand something.) That is the one reason why I recommend homeowners insurance even when you are not required to have it.

Piddly claims don’t concern me; I can handle those on my own. The big, take’em out behind the woodshed lawsuits, is what I want protection from. Even if I am so rich I can write a check and walk away, it isn’t that easy in a lawsuit. Lawsuits take time and money. It’s the time I have a limited supply of. Living without money is fine if it ever came to that; I grew up poor and am none the worse for it. But spending years fighting a mega-lawsuit would damage the one thing I value: time.

There are bloggers out there acknowledging they have no homeowners insurance because they reached FI and can easily handle a complete physical loss of their home. I agree on that part. Besides, it will cost the insurance company a lot more than it will me to rebuild my home. I disagree because of the liability protections involved. I never encourage a client to go without homeowners insurance. Extended warranty, auto collision, disability, and life insurance are all things you can take a pass on and still get my blessing. Not the homeowners insurance.

Frugality and responsible spending are quality traits. If taken too far it can cause more harm than good. At some point you cross the line from frugal into becoming cheap at the risk of spending serious amounts of time and money defending yourself.

Life is too short to fight those kinds of battles. A small amount of insurance assures you can keep living the quiet comfortable life you have grown accustomed to.

Renting a Car is Cheaper

img_20161002_101217The debate rages on over renting versus buying a home. Location determines the correct course of action; buying in one city might be a wise financial move, whereas, renting could be better two states over or even across town. Within the same city the best financial course can be different over time.

The debate of buy versus rent is heavily discussed with home buying because of the huge investment. At the end of each discussion someone always says they prefer owning (or renting) so the “best” financial move is not always the course chosen.

What surprises me is how the discussion never moves to other major purchases. Automobiles, for example, are a major investment and are significantly worse expenditures because the car will go down in value, whereas, real estate tends to rise in value, following inflation trends.

Buying a new car might be a good idea with all the current incentives and, in some cases, massive tax credits for electric vehicles. In the cases involving vehicles with tax credits you need to consider your personal tax situation. Generally, tax credits of this kind are non-refundable, meaning you need a tax liability to reduce before the tax credit has value. State credits also play strongly into the decision. For the rest of us, purchasing a car should not be a simple “yes, I need one” decision.
A Tale of Two Employees

Let me introduce you to two employees in my office who saved thousands of dollars and untold grief due to a minor consultation with The Wealthy Accountant, aka, the boss. We will start with Tabatha. (She recently was married so give her a shout-out next time you see her.) Earlier this summer she had a road trip vacation planned with her fiancé and family. She owns an old Jeep perfect for getting around town, but not reliable for long trips. The mileage sucks and the vehicle is old. The limited miles driven locally make a newer vehicle a poor financial decision unless the Jeep dies.

The scramble was on to find a vehicle for their vacation. At first she considered upgrading to a newer vehicle with the higher insurance and depreciation costs involved. For a 21 year old woman, the goal is to keep expenses low and pack as much away into investments as possible. A newer vehicle would be contrary to her plan.

The conversation around the office did not include your favorite accountant until I overheard my team discussing the issue during a break. With my usual finesse I interjected my opinion.

My argument: Buying a newer car will cost $200 or more per month in payments or lost opportunity cost, and insurance will be more expensive. You only need the newer car for two weeks.

My suggestion: Rent a vehicle for two weeks and pay for it with your credit card.

My reasoning: Since Tabatha will need a loan on a newer vehicle she will be required to carry more insurance than necessary. By renting, the car will be delivered to her home and if the car breaks down along the way, you call the rental company and have them bring you a new car. No repair costs, no depreciating vehicle, no oil changes. Only fill it with gas and you are ready to go. I had two additional recommendations. Check with you regular car insurance to verify your car insurance extends to the rented vehicle and check with the credit card company to learn how much auto coverage is automatically included if you pay for the rental with the card. This negates the need for insurance at the rental company.

Tabatha rented the car for just over $200 per week and had no problems. She was able to get a larger vehicle so they could travel with fewer cars (her fiancé’s parents also drove their car) and carry more supplies (food, so they did not eat out as often). Insurance was covered at no additional cost by the credit card company.

Dawn of a New Day

Last month another employee, Dawn, had a similar situation. Her car was fine for around town, but the transmission is touchy and a long trip could leave her stranded. Around town a car issue means a quick call to a friend or family member. On the road it is a major problem! Dawn recalled the Tabatha situation and asked my opinion. It was the same. Her one-week vacation included a $200 car rental fee without the risk of her personal car dying. She doesn’t need another bill and a forced vehicle purchase is not in the cards.

Why Own a Car?

The story of Tabatha and Dawn started me thinking about auto ownership. When does it make sense to own a car? I live in a rural area. A car is a necessity to get anywhere. The same applies to the open areas of the American West. But living in town is a different story. Living close to work is ideal and should be a goal. By living close to work, most of your driving needs disappear; a bike or walking handle that.

The few times you need a car in town are handled cheaper in two ways: Uber and a rental car. One-time, across town trips are relatively cheap using Uber. Longer trips should utilize a rental car. Now the decision is when do you own a car versus renting.

Is there ever a time when renting a car full-time is cheaper than owning a car? I am talking about never owning a car, but having a rental car in your driveway every day. Let’s run an example to find the breakpoint.


To find the breakpoint where renting a car every day is cheaper than owning, we need to figure the full cost of car ownership. I tend to buy used vehicles and run them for forever and a day. I like to buy cars a few years old when a large part of the depreciation is off, but the car still has plenty of life in her. To keep this simple I will use a $20,000 vehicle for our example. I understand you can get a used car for a lot less, even a two year old one. The math is for illustration purposes only.

Car: We need to make some assumptions when we consider the cost of the car. For our example we will assume you paid $20,000 for the car and in five years you want to upgrade to a newer car. The value of the car in five years is $7,000. Monthly cost of depreciation: ($20,000 – $7,000)/60 = $216 (I rounded down.)

Insurance: Insurance costs are all over the map and depend on where you live. I am going to use $100 per month.

Fancy Old Car (5878919049)Repair/Maintenance: This includes brakes ($400), oil changes ($750), and tires ($850). We will include some miscellaneous maintenance (light bulbs, windshield wipers, et cetera) of ($500). The costs listed in parentheses are the five year cost. Monthly miscellaneous auto costs are: ($400+$750+$850+$500)/60 months = $41 rounded down again.

Our example considers no bank loan on the car. We also will assume your rental car is paid by a credit card that includes insurance and pays 2% cash back.

The breakeven point for renting a car over owning in the above example is: $216+$100+$41 = $357 per month.

Renting the same car for $400 per month covers all repair issues, upfront cash or a bank loan, insurance from the credit card company, and $8 cash back from the credit card. The rental company can swap out cars every so often to handle oil changes, regular maintenance, and car washes. If there is ever a problem you call the rental company.

Renting is still more expensive and renting a car for $400 per month might not work, but the example illustrates the thought process before we move forward.

Where It Will Work

There are two situations where the above example will work. If you are buying a new car every few years the depreciation costs are higher. Also, in certain areas insurance costs can be very high and could change the formula radically. Loan interest is also a consideration if you don’t pay cash for the auto purchase.

Swapping full-time auto ownership with a rental car probably does not work. But, what if you are retired or semi-retired? If you drive only a few times a month, Uber probably is cheaper and you get the driver for free. Renting a car (or truck if you have a project) for periodic travel needs makes renting a viable option.

My goal is not to convince you to rent a car over owning. I want you to consider additional options that are better financial choices when spending your hard earned money. Today’s discussion covered cars, but you can easily use the template offered on any major purchase. Building a deck requires tools you may only use once. Borrowing or renting is a lot smarter than buying in those cases. My final recommendation: Always bring a calculator. Your phone already has one built in.

Rotating Frugality

img_20160910_202211Back in my college days I had a friend who was more frugal than I was. Bill never went out, socialized, or partied. A good night out was the museum if students were allowed in for free or the college library or cafeteria. Spending was off the list.

Bill became such a good friend I asked him to stand in my wedding. He accepted after considering the cost. After college we went our separate ways as life took over. I already had a small tax practice up and going while Bill went . . . I don’t know where Bill went. The last time I saw Bill was when he was on the local news protesting the Iraq War, the first one. It has been a while.

The newscast interviewed Bill for less than a minute. He looked happy and alive wearing shabby clothes and a million dollar smile. He looked as frugal as ever and willing to fight for a cause if it promised to make the world a better place. Whatever happened to the man who stood in my wedding, I’ll never know. I performed a cursory internet search and could not find him. Oh, and he loved the movie, Fiddler on the Roof. His parents had the movie on VHS. (Remember those things?) He never stopped singing If I Were a Rich Man. It was annoying. He is lucky to be a living man.

Regardless of what happened to Bill, I learned a lesson from his rotating frugality behavior. As frugal as Bill was he periodically let down his guard and went on a spending binge. It only happened once or twice a year, but when it did all his frugal behavior the previous six to twelve months was for naught. If Bill were a rich man he would piss the whole thing down the drain. Months of saving was blown on a lavish vacation, car, or other depreciating asset. The worst part is when he partied hard for a few weeks he did so until his reserves were all squandered. For the man who would not party he was the life of the party.

One Moment Can Undo a Whole Plan

Spending responsibly and less than you earn is the only secret you need to build wealth. The frugal muscle is well developed in my life. I watch expenses like a hawk, investing first and spending what is left. Retirement plans and the Health Saving Account are priority expenses in my life. They are not real spending, of course; it is saving and investing. But it illustrates my priorities.

We all have a bit of Bill in us, however. My frugal ways sometimes give way to stupid spending I regret almost as fast as the money leaves my hand. Age has helped smooth out those moments of spending insanity, thank god.

My home is a prime example. I bought my current home in 1995. It was a shotgun shack by Wisconsin standards. I paid $120,000 for the property with 10 acres and a few outbuildings, including a barn. I spent a year remodeling before I moved in; it was that bad.

Before starting a major renovation and additions a few years later I paid the mortgage down first. Once the mortgage was nearly retired Mrs. Accountant and I started planning our home updates. The first draft was a wish list. It was unreal. Mrs. A wanted a big kitchen, but I explained what she was asking for was not even reasonable. Finally I stepped off the kitchen dimensions she designed so she could see how big it was in relation to what we currently had. She changed her mind fast when she understood how much work it would take to maintain such a large area.

Mrs. A was not the only dreamer in the house. I had a massive plan for lots of windows to the north so I could spend the winter months stargazing in the comfort of my home. That was a half million dollar addition right there. That may not sound like a lot to folks in California or other costly real estate markets today, but in 2002 in NE Wisconsin it would have given me one of the pricier homes in the county. The heating costs would also have been devastating. Sanity ruled as I tossed my idea on the same heap Mrs. A’s kitchen plans went.

In the end we settled for a more modest home. We still have 3,000 square feet with more creature comforts than are healthy for human beings.

Two more ideas were tossed into the mix by family members (okay, my dad): dig a pond and remodel the granary into an office.

Good Intentions, Stupid Ideas

People like to float their ideas as something you must do. Spending on a vacation they think would be awesome is stupid if you have no desire to travel there. Buying a car the neighbor thinks is cool or to impress your friends (or a girl, guys) is something an idiot does.

And I have been an idiot a time or three in life. The granary was never remodeled. Spending $25,000 for a fancy office next to the barn would be nice, but unnecessary when I have 3,000 square feet available in the house. Maintenance and utility costs would have added to my baseline spending just to keep the granary in good condition. Then I would have to spend time out there to justify the spending. I would rather spend more time in the house with Mrs. A instead.

The pond is a different story. A low area of the 10 acres required some work. A slough ran from one end of my property to the other. I cleaned the waterway so the water flowed better. My dad kept pounding the idea of a pond. I relented and $20,000 later I have a pond. That was twelve years ago. Sure I had the cash to pay for it, but now I have fish I need to feed (I don’t farm or sell fish). The additional cost is negligible, but constant and takes time. I get razzed for not fishing more. People act like it is so awesome to have a pond and if they were as lucky as me they would fish every day. Fuck! I don’t like fishing that much. It’s just a goddamn job. Cleaning fish is a pain in the ass. For me. You might be different.

During moments of impending depression I pull out my handy calculator and tally how much the pond has cost me over the years, including lost opportunity cost, as in, how much would that money be worth now in an index fund? God, I can be a dumbass sometimes!

Admitting You Have a Problem Is the First Step

It has been a long time since I bellied up to the bar of stupidity at that level. Still, when I feel a bout of honesty bubbling to the surface I start drinking heavy, no, I mean I reflect and learn from past mistakes. I track my spending and only pay cursory attention to income. Income, in my opinion, is easier to get than to control spending. When you stop tracking spending, expenses start creeping higher.

There was a time I wanted to have all the Star Trek episodes on my shelf. Wasted a small fortune to realize that goal. They are all available on Netflix now at no additional cost. The library has the whole series, too. Does not matter; I don’t watch Star Trek much anymore.

Rotating frugality is something I see often with clients and friends. Everyone knows they need to keep their spending under control so they take steps to spend responsibly. Then a brief lapse of IQ sets in and fucks up the whole works. Before you know it you have a pond stocked with perch and bluegills, and a shelf in the living room packed with VHS tapes of Star Trek: The Next Generation and the original series. You can’t give away VHS tapes so the landfill is the only option.

As intelligence would dictate, I keep the movies on the shelves next to where I write most of this blog. It is a reminder of how rotating frugality can destroy a lifetime of responsible money habits with one stupid spending decision.