Get Rich Slick

The last time I had a long decent holiday in Europe was a visit to France almost a decade ago.   The euro was coming into play and at parity with the US dollar.   I remember my flight cost about $600 and the hotels for my entire stay was fairly affordable.  I visited the wine country in Angers.    We decided to take a European holiday this year visiting France, Italy and Spain and the price tag so far is over $15,000.    The air flight alone were about $6,000 and the hotels are pretty pricey in euros with the current exchange rate about 1 euro per $1.30 but still it will be worth it to enjoy a nice time in Europe.

The biggest problem Europe has though is that most hotels only accommodate 3 people and then require you to book a second room if you have four or five people with you.  European hotels are the most anti-family friendly places on earth!    Given that problem, we opted to rent a house in one spot and other accommodations elsewhere.

I am really astonished at how much going to Europe costs and reminds me why we’ve largely stayed away.   Of course I recently had my roof replace for 13k then my son’s tuition for school came due with first payment of 10k and now another 15k for Europe.   So I’ve easily spent 38k in about 3 months and that doesn’t include any of the extras for the trip like new digital camera to take great photos, the tux, or my upcoming MBA tuition for the Fall or the 20k I plunked down  on my mortgage to get down to less than 10k.  I decided I would take surplus cash and eliminate all debt by the end of the year.  Even with interest rates at 3% it doesn’t make sense to carry debt even at this low interest rate when cash is sitting not earning any real interest.

If all my goals hold, by the end of the year I won’t have a single dime of debt except for a student loan that’s now at 1.85% interest due to some fancy debt arbitrage.   I guess this time next year I’ll go on a really nice Australian/South Pacific vacation!

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So I walk into a retail place called “The Men’s Warehouse” looking for a tuxedo.  I wasn’t trying to rent one but rather buy one that was somewhat “disposable” for an upcoming event.   The sales woman quickly measured my size and grabbed a tux and asked me to try it on.  It was a Calvin Klein Tux and it fit nicely and looked great.    The moniker, “you’re going to like how you look” seemed to be a great fit for the store.   That was until I saw the price tag for the tux which came in at a whopping $649.   This was the cost for just the tux not the shirts, shoes, cufflinks or other items.

While I wouldn’t have thought twice about plunking down $649 for a tux, the fact that I needed a more “disposable” one weighed on me so I decided to do a quick price check on Amazon.com.   I typed “Calvin Klein Tux” on Amazon and lo and behold…..the exact same suit for $349!

After the sales clerk came back, she asked me how I liked the suit….I said I loved it but didn’t love the price and did a price check on Amazon and saw I could get the exact same suit for 1/2 off!    She said she couldn’t lower the price but offered me a two for one option.  Buy the tux and get another suit for $100.   I laughed and told her the exact same suit is on Amazon for $349 and another sales clerk overheard me and said, “yeah everything is cheaper on Amazon.”

So it became clear that I would be probably not be taking the tux and order it from Amazon, she went off and came back with a nearly identical clone of the tux with a different brand name for the low cost of $249.   I really couldn’t tell the difference except that the Calvin Klein tux had a brighter sheen to it than the clone but paying $400 extra for some sheen didn’t make too much sense to me so I told her I’d take it.    The price point was lower than Amazon and I could get the needed alterations there to ensure a perfect fit.

Next, the sales clerk took me to try on some shirts then began to pull out cummerbunds, cufflinks and other stuff.  I quickly looked at the prices of everything (usually $49.99) for just about every item and did a price check on Amazon.  Sure enough, Amazon had every single item for half of the cost.   I did feel bad for the clerk because she spent a great deal of time getting items for me to try on so I went ahead and ordered two overpriced shirts ($120 for two) where I could have purchased them at Amazon for about $30 a piece.   But spending $60 extra for whatever tiny commissions or kudos she might get from the store seemed fair to me.

So the lessons learned here is that the Men’s Warehouse is a great place to go get measured, try out some brands and pick the one that fits best then go to Amazon.com and order your merchandise at half the price!   I wonder how long it is going to take for retail stores to ban cell phones and instant price checks.

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My oldest child will begin high school in the fall.   He applied to various schools and was accepted to a few and rejected from a few.  These were all private schools obviously and the one he has selected has a tuition of about $22,000.  The other $3,000 are for extracurricular activities (i.e. sports) and field trips which aren’t included as part of the tuition.

Given that he’ll be in high school for four years, we’re looking at a total tab of about $100,000 for high school.  It could of been worse, he applied to a prep school in the northeast that would have cost twice that!   I’m sure we’ll face maybe another $200,000 for college depending on which school he’s admitted to but perhaps we’ll get lucky and he’ll  get a scholarship.

So why pay the high cost?  We live in the city and wouldn’t even consider sending him to one of the public schools around here and you’d be surprised to see how many parents are scrambling to put their kids into these private schools – it’s highly competitive!

As an alternative, we’ve contemplated moving out to the x-burbs and find a school there however when factoring in the lost time to traffic to get into the city, higher property taxes, and other expenses such as fuel, it ends up being a wash financially but worse off when it comes to free time so we stay put.    My mortgage is now down to $9,000 (yes nine thousand not a typo) so I’m living on 85% disposable income now and the 25k isn’t too big a deal but still I cringe at the thought of having to write a check for $22,000 in a few weeks.

My son, someday when you read this blog, I hope you will appreciate the amount of money we’ve spent on you to get you where you are today.

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When generation iPhone 1 and 2 were out, I thought they were a waste of money.   The device just wasn’t powerful enough for what it wanted to be and I figured I’d wait until they got a little more powerful before I bought one.    iPhone 3 was a great improvement and when iPhone 4 rolled out, I knew it was time to buy but AT&T still had a lock on it so I waited until an “unlimited” plan was available (via Sprint) before I bought one and that was the 4S model.

I am still amazed however at some people’s attitudes toward smart phones.  Seriously, a smart phone is a portable computer, it is a video camera, it is a camera, it is a music player, it is a flashlight, a navigation aid, and so many other things that adding the value of one smart phone against a stack of peripherals isn’t even close!

I honestly can’t live without my iPad and iPhone, they are my first go-to devices when I want to do something on the internet.   My laptops and even large iMac are there when I need to do some multi-threaded work like opening multiple documents and spreadsheets at the same time to do some work but that’s only about 20% of the time now.

So no, SmartPhones aren’t a waste of money if you want to live in the modern era and have a lifestyle that warrants the use of such a device.  I gave my kids iPhone to give them a leg up on using the new mobility computing platform so yeah, they’ll be way ahead of your kids.   The only caveat is to make sure you have an unlimited data plan to really maximize the value of your device.   Don’t have the money for one?  Cut the cable TV cord and you’ll be way happier!

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In just 6 months, we’ll be celebrating two years of Cable TV Free life.   We cut the cord when I gave my kids an ultimatum:  choose between your iPhone or Cable TV.  The kids choose their iPhone and we cut the cable TV cord.

To compensate for the elimination of Cable TV, I subscribed to NetFlix $8/mth, HuluPlus $8/mth, and had Amazon Prime $3/mth  at a student discount rate (still doing my MBA until December).   I purchased a couple of Roku boxes and off we were on the path to true IP TV.   For $20 per month, I get more content than I can ever watch and more is added daily!  In contrast, I was paying about $180 for 400 channels of which I only watched 3 to 4!

The family watches nearly all the TV shows off of our Roku now using HuluPlus or Netflix or Amazon and it’s a good thing because none of us could tell you which day of the night any particular show comes on anymore.    This was my largest pet peeve of broadcast TV, you watch a show on Friday nights and the broadcasters suddenly move it to Tuesday or Wednesday or some other date/time and it’s impossible to ever watch it again.

Now, I can miss three or four shows and simply get on my Roku and catch up on the shows I missed when I want, not when the broadcasters want.    Of course, this has now become a way of life for my kids.   They don’t watch TV with an antennae, they hook up their iPhone to the Apple TV wireless and stream shows to it or they watch TV right off their iphones or iPads.

Oddly enough, the kids have even stopped asking for TV’s in their room (something we’ve always denied) because their devices are now portable televisions.

I read today that Dish is trying to buy Sprint and that makes some sense since kids these days will more likely watch TV over cellular data network than satellite but I’m not sure it will make much difference.    I get weekly mailers now from Comcast, Dish, Direct TV, and AT&T to get service but why bother?

Just like VHS tapes and compact disc went the way of the dinosaur, I think Cable TV will be obsolete in about 10 years unless something changes such as a-la-carte programming that can compete for $20/month but I doubt the cable providers will come up with anything that compelling.    Of course, the final nail in the coffin of cable TV will be when google deploys their fast fiber everywhere.

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I was catching up on the pf blogosphere and read a few interesting frugal ideas.   The thing that caught my attention was the inordinate large amount of time these people seem to have on their hands.   Perhaps I live in a different world because I work for a giant corp that keeps me busy 50 to 60 hours per week then I’m working on two MBA degrees on top of that then of course I have an active family involved in community services, sports and other activities.

When frugal people suggest things like make your own soap, make your own soda, go to three different grocery stores and calculate the per unit cost of everything you buy…really?  If I buy 40 items at a grocery store, calculating the unit price of EVERYTHING becomes an exercise in wasting time to save a few cents.

For me, and it seems too few people in the pf blog world, I try to do things that give me the biggest bang for the buck.   Because I’ve been pursuing two MBA degrees, I’ve already gotten a promotion and decent raise (my employer is probably fearful I’ll move on) so they took preemptive action to keep me.   Additionally, I’m constantly looking at investment opportunities.   If I can score a 3% return on a 100,000 investment  after a couple of hours of research then I’ll make an easy $3,000.   This one investment opportunity (perhaps a stock or option trade) will automatically pay for all the frugal  things in one easy swoop (dish soap, soda, rags, etc).

I can already here the detractors though….(using Droopy voice)…”it doesn’t matter if you make $3000 in a few hours because if you’re spending $3001 dollars on stuff every few hours you’ll go broke.”   Well if you’re stupid, you will go broke no matter what you do but that seems to be a cheap excuse for not trying harder and achieving more.   There seems to be a fundamental lack of ambition in these groups of people and it bother me greatly.  Which would you choose?

Spend two hours researching an investment or spend two hours making soap.

Spend two hours learning a new language you can leverage overseas for a firm or spend two hours making rags by cutting up old t-shirts.

Spend two hours collaborating starting a business or spend two hours clipping coupons.

Am I missing something here?  Which of these choices will lead to vastly more amounts of money in your pocket?   There is a fundamental opportunity cost in everything we do and that whole thought process seems to be broken in the frugal mentality.  Why?

I just don’t understand it…

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I was reading Money Beagle’s sad story about not being able to find a roofing company to rebuild their roof.   Just this week, I’m getting a brand new roof installed on my house.    Fortunately for me however, I have had great success because I drafted a 4 page list of specifications I wanted on my new roof.

I’m posting a copy of the bid letter I sent out to various contractors I found on Angie’s List in my area.  Perhaps it will help others, sorry the word numbering formatting got messed up when I copied and pasted the doc into WP.   I only selected those contractors with many positive reviews then checked the Better Business Bureau for complaints.   Please note that these specifications are for my roof in the area I live in and you need to do your own homework on the best materials/type of roof for your living conditions.   It makes no sense to install radiant barrier if you live in an area with little sun as an example.   While I sympathize with Money Beagle I also see the roofer’s point of view.   The roofer is going to have to spend hours explaining to the client what kind of roof he/she could get and with 3 to 5 other bidders it makes no sense for the man running a business to waste that time!  I know that sounds counter-intuitive but I spend at least 10 hours researching my own roof.  If I use a rough estimate of $100/hour for labor of my time x 10 hours then I’ve already invested $1000 in my roof selection before I’ve even selected a roofer!

If the roofer has 100 people calling him and he needs to invest 10 hours per client, he’ll go broke in no time.  Why is anyone really surprised by this anymore?  We used to get our gas pumped for us at gas stations and we now all do it ourselves.   We used to have an operator connect our calls but now we dial it ourselves.  This is what our society is all about now – do the leg work yourself and have a vendor provide the finished solutions.

I had the entire 20 year old roof removed and installed radiant barrier, new decking, new underlayment and new shingles.  Total cost is $13k and the work has been exceptional.

Roof Replacement – Request for Bid

The following request for a competitive bid to replace the roof of residential property located at XXXXX  (“the property”) is being solicited to licensed roofing contractors.   The following criteria are requested to be incorporated into your bid.

Bid deadline is February 28, 2013.
Bid award will be no later than March 3, 2013 or sooner.

Home owner available for site visit and inspection of property as scheduled in advance by contacting  XXXXXXX at XXX-XXX-XXXX to schedule time for site visit.

PAYMENT:  Payment will be made with American Express Credit Card on a pro-rated basis.  *Home owner will be happy to procure and stage all materials needed for roof replacement.

BID PROPOSAL:  Roofing contractor can bid on a labor only basis or labor and materials basis provided contractor provides itemized material listing and bills of lading during work activity daily and/or weekly.
1 Contractor Selection Criteria
The roofing contractor should be licensed to operate in the State of XXXXXX and provide copies of the following documents:
General Liability certificates from Roofer’s insurance company
Workers compensation certificates
Be in good standing with the Better Business Bureau
2 Scope of Work
The scope of work will consist of the complete roof replacement of  “the property” and incorporate requirements of the items listed in sections 2.1 thru 2.15 below:
Roofing contractor will complete all required city, state and home owners association (HOA) permits & forms.
Roofing contractor will be responsible for ALL required inspections.
Roofing contractor will provide list of ALL suppliers with name, phone, fax.
Roofing contractor will provide list of ALL materials and bills of lading used in the roof replacement of the property.
Roofing contractor will assure that ALL materials for roofing should meet ASTM E-108 Class “A” rating or better for fire and ASTM D 3161 for wind.
All nails used in roof replacement should be stainless steel or galvanized stainless steel nails.
Roofing contractor will replace ALL roof decking
Roofing contractor will utilize 3/4″  (23/32)  plywood or better for roof decking, No OSB will be accepted!

Roofing contractor will install Radiant barrier as part of the roof replacement and bid should incorporate labor cost for this activity.
Home owner prefers Enerflex ($289 per 1000 sq ft roll) radiant barrier materials for roof replacement

Roofing contractor will install synthetic waterproofing underlayment (W.R Grace Tri-Flex Xtreme preffered by home owner)

Roofing contractor will assure adequate ventilation is considered when replacing roof.
Roofing contractor will install ALL new shingles
The home owner prefers
GAF Lifetime Timberline Natural Shadow Weathered Wood Shingles $30/bundle (general estimate)
Home Depot Model # 0603737 Store SKU # 775940

Number of bundles per 100 sq. ft.   3
Number of pieces per bundle     21

Roofing contractor will install ALL new flashing with preferred material to consist of stainless steel or copper in all areas including
Chimney (replace all)
Vents (replace all)
Soffits (replace all)
Drip edge (replace all)
Ridge vents (replace all)
Galvanized Steel Drip Edge Flashing is preferred on roof edges.
Roofing contractor will remove Guttering System however is NOT required to re-install system.  Home owner will retain gutters.
Roofing contractor will replace ALL Fascia but only Soffits as needed.  For clarity
Replace ALL fascias
Replace sofffit as needed
Roofing contractor will facilitate ALL disposal and removal of ALL refuse and discarded materials on a daily basis
Note: Home owner will retain guttering system.
Roofing contractor will provide ALL lien releases from all parties (e.g., sub-contractors, material suppliers, consultants) involved in roof replacement and must be submitted before final payment.  Homeowner desires to limit suppliers to one or two suppliers if possible to facilitate this request.   Homeowner will be happy to source ALL materials.
Roofing contractor will adhere to appropriate safety protocols and standards in conducting all work activities on premises.

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The good folks over at cockeyed.com did a summary of the change in cost of fast food from some major chains from 2002 to 2013.  It’s interesting that this hasn’t been reported in major news outlets because I think it’s big news on the rate of inflation.

By now if you ever tune in to see any type of federal reserve hearing, you’ll often hear Ben Bernokio (fed chairman) pat himself on the back for keeping inflation low but just look at these numbers!

Fast Food Inflation

On average, the cost of fast food has increased 5.44% year over year since 2002.  How many of you got a 6% raise every year for the last 10 years?   Why?  Because that’s what you would need to earn to keep the same level of fast food purchasing power than you had in 2002.  Minimum wage in 2002 was $5.15 and hour and today it is $7.25 and that’s a 41% change over that time period but only 3.71% per year on average.   Do the math, if fast food prices are averaging at 5.44% per year and you’re on minimum wage at a growth rate of 3.71% you’re falling behind 1.73% every year!

Personally, I don’t eat fast food too often but I am always shocked by the cost when I place an order, it is usually never less than $8 or $9 for a single meal!   You may be saying the same thing…”What do I care about fast food” but the real problem is that it applies to everything else!  IF basic food staples are going up this much, how much do you think everything else is going up as well?

Many have chosen to not eat out anymore because the cost has gone up and they can’t afford it however the real problem is fractional reserve lending, a federal reserve and US Treasury policy of printing endless money.   You won’t see this reported on government statistics because there are so many useless hedonic changes in the numbers that they don’t mean anything any more!

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So last night, I had to help a friend go pick up a trailer.  At first I didn’t think anything of it but once we kept driving for about 20 minutes I realized that this would now be at least a 40 minute trip and possibly more like an hour.     My vehicle only gets about 20 miles to the gallon and we were traveling at 70 mph so you can easily start doing the math or at least, I do in situations like this as I calculate the dollars in my head on a mile by mile basis.

40 mile trip @ 20 miles per gallon = 2 gallons.

2 gallons x $4.00/gallon = $8.00

Two tolls $2.50

SubTotal: $10.50

This is just scratching the surface too.  If I factor my hourly wage or what I value my time at, we are now into the $110.50 – $160.50 range but it gets worse!

I still haven’t factored in maintenance, insurance or other vehicle expenses into the equation.   You may say that this is irrelevant because if I’m going to own a car I have to maintain and buy insurance but I believe in the very near future, insurance plans will charge by the mile as will the gas tax eventually be replaced by a mileage tax so those factors will need to play a role.

In any event, if I forgo my labor, maintenance, insurance and other expenses, it cost me $10.50 to help a friend.    If you’re not doing these calculations when you’re doing your charity work, going to the mall to shop, or helping out friends then you may begin to understand the unknown part of your money problems.    This is also a key reason why I purchase about 80% of my stuff online at places like Amazon, Newegg, Overstock and others to avoid taxes, tolls, fuel waste and time waste.

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Just read it….

http://www.cnn.com/2013/02/20/us/california-hotel-water-corpse/index.html

I travel a great deal for business and the first thing I do when I land in a city and BEFORE I head to the hotel is stop off at a Walgreens or CVS or other shop and buy a six or twelve pack of bottled water.   I rarely use the water from the faucet but do use the water from the shower head to take a shower.   I guess bathing in soiled water isn’t as bad as drinking it!

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