The book by Tim Leffel looks at how to get more out of your (international) vacations while spending less. Who wouldn’t want that?
I have read through the first two of three sections in the book. In section one, Tim talks about the big expenses associated with travel and how two hypothetical families, the Smiths and the Johnsons, waste and save money on airfare and lodging. The second section talks about dining, ground transportation, and souvenir shopping.
The essence of Tim’s travel philosophy is that the best trips and cheapest trips happen when we avoid the American pretense of travel. If I asked you to name a good beach destination, you would probably respond with Florida, Hawaii, or the Bahamas. The reason why those places come to mind is that they are heavily marketed. Those big budget ad campaigns come out of the pockets of tourists. In one example given in the book, a resort in the Bahamas got caught red handed publishing pamphlets of their resort with images of beaches found in Florida. Their response, “beaches all look the same anyway”. So if beaches all look the same, why spend big bucks to go to a well marketed one?
The theme of getting off the beaten track, avoiding the herd, and walking/talking/eating like a local is repeated frequently in the book. In many ways it reminded me of our recent trip to Mexico where we stayed in local apartments, ate at a food truck and other hole-in-the-walls, and swam in the local swimming hole.
I would recommend that you pick this book up and give it a read if you have ever only stayed at resorts or chain hotels, use tour buses, and never stray far from the touristy areas. If that doesn’t describe you, then you could probably skip this book.
Do you want to save $50-$100 bucks in five minutes? Of course you do! Keep reading to learn how.
Did you know that you can shop around and choose what company you buy energy from? That’s right, you don’t have to purchase your electricity or gas from the company that pipes it to your door. Our municipality just negotiated a new two year contract on behalf of residents for electric and after seeing the results of said negotiations I was left with more questions than answers.
The new two year fixed opt-out rate is for 5.6¢ per kilowatt hour (kWh) plus an additional 0.1¢ city imposed fee on top of that for managing the aggregation program. That rate is for raw energy, and that energy still has to get from where it is generated to your house, and that is the distribution charge that you pay to your electric company. In our case, we have Ameren. Ameren’s website has a list of suppliers that you can purchase from so I did what any good nerd would do and opened up a blank spreadsheet and got to work.
Here is the result of a lunch break’s worth of internet sleuthing (click on it for a PDF version).
Most of the suppliers were more costly than the negotiated aggregate rate. I would kind of hope that the collective bargaining power of 30,000+ households could beat an anonymous internet quote. With that said, there were two suppliers that offered better one year fixed rates than the default Homefield Energy.
MidAmerican Energy offers a 4.54¢/kWh one year fixed rate with no cancellation fee. Viridian Energy offers a slightly higher 5.49¢/kWh one year fixed rate with a cancellation fee. Both options beat the city negotiated rate.
Apples to Oranges
I hear you saying, “Okay Andrew, this isn’t a very good comparison.” These lower rates are one year vs two year, and that is true. In order for it to balance out, rates in the second year would have to increase to 6.7¢/kWh for MidAmerican Energy. A number that is hardly even seen on the price matrix as of today. I would peg the probability of such a rate increase in one year’s time as very small.
“Well, what about the environment Mr. Smart Guy?!” Each energy supplier has their own breakdown of how their energy is generated (MidAmerican, Homefield Energy). Coal, one of the worst polluters is also one of the cheapest forms of electric generation. So how do Homefield Energy and MidAmerican Energy compete in terms of ‘greenness’?
Taking coal and natural gas together (arguably the two worst polluters) pins Homefield Energy as the dirtier supplier with 72.33% of their electrical generation coming from those two sources. So in this case, it is not a matter of paying more to Homefield because they offer cleaner electrons. In fact, MidAmerican has about 30% renewable energy (in the form of wind) compared to Homefield’s dismal 6%.
A Penny or Two Matters
So MidAmerican is cheaper and cleaner, but does it really matter to John and Jane Doe consumer? I mean, it is only 1.06¢ difference per kWh. According to U.S. Energy Information Administration, EIA, the average U.S. residential utility customer used 10,908 kWh in 2013. Multiply that usage by the cost difference between these two suppliers (.0106) and you end up with $115.62 in savings per year. Not too shabby for spending 5 minutes on an enrollment website. We personally stand to save about $58 based off our usage (5514 kWh) in 2014. Alternatively, we could spend an extra $50 and go with Viridian’s 100% renewable one year rate at 6.49¢/kWh.
At the end of my hour traipse through different electric supplier’s websites I am still left with the question of why our municipality agreed to the contract that they did. There are cheaper options available and there are greener options as well. Heck, for a cash strapped city that is always claiming to look for more revenue, it doesn’t take much creativity to set the opt-out rate at MidAmerican’s low price of 4.54¢/kWh and then add on a surcharge of 1.06¢/kWh to bring it up to their current contract rate. The city would pocket about 3.9 million dollars!!
The precedent for adding a surcharge is already there, they currently add one and nobody has raised a fuss. A spokesperson for one energy supplier said that less than 10% of customers opt out of aggregate contracts. Most people simply don’t care.
Perhaps MidAmerican couldn’t generate enough electricity for 30,000 households. That still leaves the possibility of using Viridian’s one year fixed rate @ 5.49¢/kWh. Not only is it 50% renewable, quite an improvement over 6%, but if the same money raking strategy was employed here the city would still be able to generate over $400k in revenue.
I may be missing a piece of the puzzle, but it seems to me that there is a drastically better solution available than the one that has been presented to the public. The current 0.1¢ surcharge to manage the aggregate program is estimated to generate about $370,000. I spent a lunch break and found a better rate.
Yesterday I mailed off our federal and state tax returns. 2014 was a good year for us, both in income and reducing our tax burden. Reducing the amount of taxes that you pay is in my opinion, the best way to increase savings. You don’t have to work any harder (more hours, second job, etc.) and you don’t have to decrease your spending (i.e. being frugal).
Our marginal tax bracket was 25%, but by contributing to tax advantaged retirement accounts, like a 401k, we were able to drop down into the 15% marginal tax bracket.
Our effective tax rate, what percentage of our income we actually had to pay after all of the deductions and credits was 10.96%. In other words, we had to earn $1.12 in order to spend $1. You can figure your own effective tax rate by dividing your total tax (line 63 of form 1040) by your total income (line 22 of form 1040).
The following chart from 2010 shows effective tax rates (AGI instead of net income) grouped according to the income earned. Our rate is high for our income because it includes the self employment tax (social security and medicaid that is normally paid by your employer). If we fiddled with our numbers and took out the self employment tax and used adjusted gross income instead of net, our rate would be 6.2%
All in all, I feel like we are successfully managing our tax burden.
Some other points of interest
Our effective rate dropped about 1% point from 2013, thanks largely in part to Frugal Boy. The extra deductions and credits that come with having a dependent make a sizable difference in your tax bill.
Here are some previous blog posts about reducing one’s tax burden:
While I was picking up Frugal Boy from the baby sitter the other day I noticed that the turn signal indicator was blinking faster than normal. That is a good indication that one of the bulbs is burnt out and needs to be replaced. Sure enough, when I got home I verified that the rear turn signal bulb was no longer working.
A trip to the parts store and $6 later and I had a pair of replacement bulbs. You should always replace bulbs in pairs.
While every car is a bit different the steps are probably very similar. The only tool that I needed was an adjustable wrench.
To make the replacement I first had to pop the trunk so I could get access from the inside.
There are two black caps that have to be removed. They hold the fabric in place. In the above picture I have already unscrewed the upper cap and the lower cap remains.
Once the caps are off you can pull the fabric away from the chassis of the car. There was two nuts that I had to unscrew. I was able to do one by hand and the other was just a bit too tight so I needed the wrench.
With both bolts undone, the entire tail light assembly should slide out from the exterior of the car like so.
Somebody had put a little adhesive (maybe the factory?) so I had to put a little muscle into it.
With the tail light assembly dangling by its electrical connections, find and unscrew the bulb mount that you want to replace. Our car had labels underneath the dirt and grime.
As you are installing the new bulb, take care not to touch the glass with your hands. Oily residue from your skin will cause the glass to retain more heat and that will lead to premature failure of the bulb. Installation is the reverse of taking it all apart. I like to check that everything works before I fully assemble it all. You can save the good bulb for later.
Finally, it is a good idea to keep a record of all your car repairs. Not only is it easy to do with a simple spreadsheet, it also will make resale a bit easier when you can show a history of maintenance to potential buyers.
I started logging our repairs last August. I know we are due for an oil change soon and also brake pads/rotors. I’m just waiting for the weather to warm up!
Whew! It looks like August finally caught up to Central Illinois this week. The forecast for the next 6 days calls for highs in the 90s (mid 30s for the rest of the world). So how is one to stay frugally comfortable? Here are some of my suggestions.
Turn the thermostat up or turn the AC off completely
(un)Fortunately our home’s AC is not working. So the temptation to even turn it on is not an option. If you are in a more tempting position consider this. Not only will a higher setting save you money, the outside won’t feel quite as startling hot when you have to step outside. Air conditioners also act as dehumidifiers. Lower humidity levels decrease the apparent temperature. We discovered last month that our ~13 year old central AC unit not only did not function properly, it also bumped up our electric bill by $20 for only 4 days of use. If we had run it for the entire month that would have cost us an extra $150!
use someone else’s air conditioning
Chances are pretty good that your place of employment has AC. If you are in my boat and work from home, then you can probably take advantage of the local library or Starbucks.
Open windows, especially at night, for a breeze (if you aren’t using the AC)
A good breeze can do wonders to cool you down. As human beings, we are covered in fine hair that traps heat against our bodies. Air flow helps to remove that heat.
Close curtains, blinds, drapes to block out the sun
We are still working on making curtains for our house, a topic for a future post, but the ones that we have up so far make a HUGE difference. There are over 20 windows in our house so the sunlight has a lot of different paths it can take to dump some radiate heat into our living space.
Not only is it fun for all ages, it is also a fantastic way to lower your core body temperature. Keep in mind that swimming during the middle of the day poses some extra challenges (namely sunburn). I like to go swimming an hour or so after dinner. Not only is the pool nearly empty that time of day, I also don’t have to worry about getting burned and it cools me off before going to bed.
Put a pitcher of water in the fridge
We have a no thrills top freezer refrigerator without a water or ice dispenser. A gallon pitcher of cold water though helps to keep us cool and keep the refrigerator running more efficiently.
Last but certainly not least, one of my favorites…
take a siesta
Spanish culture has perfected beating mid day heat by resting during that time. It is understandable that some jobs won’t permit this, but if you are in a position that allows for some rest in the middle of the day I highly encourage it!
Write a comment with your favorite ways to beat the heat without breaking the wallet.