Smarter Frugality: The Little Things That Make a Difference (Part 2)

Often I try to postpone or avoid purchases altogether.  However, there are some areas where I have realized spending money for quality is really the most frugal thing to do.

• I'm sure my tenants think I must work for Filtrete, because my #1 pet peeve is finding a dirty A/C filter  in one of my properties.  I routinely carry new filters with me when I visit my properties.  At home, we always change the filter before it gets very dirty, and we avoid buying the cheap $.99 green filters because they only trap the big stuff.  Trust me, this is an investment you should make.  Dirty air filters make your HVAC system work harder, which will prematurely age the parts that keep it humming.  Besides, breathing cleaner air is better for your health.
• I used to buy cheap K-Mart shoes.  Then I discovered Allen Edmonds.  This has been a recent revelation.  I now have shoes that fit my feet better than ever, and the knowledge that they will last for years.  Those crappy shoes I used to buy for $25 a pair would start wearing down in just a few weeks, and the smell... ugh!  
• I spend quite a bit on dental hygiene.  In my early 20s I was a bit lazy in this area.  A couple of root canals was all it took to realize the importance of taking care of my teeth.  A couple of years ago I bought an oral irrigator, which is one of the best purchases I have ever made.  It attaches to my faucet and streams a jet of water between my teeth.  I think it cost less than $15, but it's worth much more than that to me.  Even after flossing I am surprised at how effective the irrigator is at getting my mouth clean.  I also use a Sonicare toothbrush, a Pentek dental pick, along with one-time use dental flossers that I keep in my car.  
• I stay close to the manufacturer's guidelines for servicing my car.  The Corolla has more than 172,000 miles on her and she still purrs every time I crank her up.  

Even if you are on a tight budget, there are ways to mitigate these costs.  Mystery shopping helps with my oil changes and tire rotations.  I redeem credit card points for Amazon gift cards for my toothbrush heads or for Lowe's gift cards for the A/C filters.  It's smart to know when spending extra money will save you from shelling out huge sums for preventable breakdowns.

Smarter Frugality: The Little Things That Make a Difference (Part 1)

Nothing, no matter how small it seems, should be overlooked by those seeking a simple, more frugal lifestyle.  If you aren't paying attention to what may seem like trivial matters, soon they start to snowball into bigger problems.  For example, there is no such thing as a "small" leak at one of my rental properties.  If water is coming from somewhere it shouldn't, that's an urgent issue that needs to be addressed.

Here are a few examples of "tiny" ways I am frugal:

• I used to throw my so-called dirty clothes in the laundry after wearing them once.  It didn't matter if all I had done was wear an outfit to the mall for a couple hours.  At the end of the day, the outfit went in the hamper.  As a kid, we washed our towels and washcloths after every single use.  Now that I am smarter, I use the same towel several times.  That makes a huge difference in our electric bill, plus the towels last longer.  If I wear a pair of shorts to run a few errands, I change out of them when I return home and will wear them again the next day.  I do wear t-shirts and underwear only once.  I sweat too much to get a second use out of them.
• A couple years ago one of my friends saw me applying my deodorant.  He commented about how much I use.  While I have heard of some misers who can get away without wearing deodorant at all, I still need it.  But, after that comment I began reducing my usage a little at a time.  I find that today I use about 75% less deodorant, and I don't stink.
• About once a month we try to use everything up from the refrigerator before shopping for groceries.  The last few meals get a little interesting, but doing so prevents spoiled food from hiding behind other items.
• I use my bicycle to handle local errands whenever possible.  There's a paved trail that crosses my street.  I can use that to go to the grocery store, the library, and the hardware store, among other places.  I get my exercise in this way, and save wear and tear on my car.

Tomorrow I will look at places where I spend more money than I have to.  Smart frugality, after all, is an investment that should pay dividends over the long haul.

Property Management Blues

Without a doubt, shifting the day to day management of my rental properties is the right thing to do.  Just in the last week I have experienced first hand the perils of trying to do things myself while living 600 miles away.

In the first case, I am dealing with a drug addicted tenant who also is a compulsive liar.  He started getting behind on his rent months ago.  The problem was, until the first of March he was regularly giving me part of the rent.  That, along with lie after lie after lie about what's about to change to get him caught up, convinced me to be lenient.  Since the last week of December I was promised that the tenant's tax refund would be given to me in its entirety to make us square.  That never happened.  This was the first townhouse I selected to hand over to a property management company.  While I have signed all the paperwork to get started, I promised them an empty house before we kick things off.  Unfortunately, my problem tenant isn't budging.  The latest excuses have been about why he has yet to move.  Around the first of April, he was packing everything and promised he would rent a moving truck when he got paid on the 10th.  Then when the 10th came and went, the new landlord had yet to install the toilets in his new place.  Once the fictitious toilets were  installed, my tenant came down with a mysterious illness that kept him bedridden for days.

Last week I filed an unlawful detainer lawsuit at the courthouse.  It sucks that I have to pay $263 to get this thief out of my house.  That's $263, plus more lost rent until he finally decides to get out.

On a lighter second example, one of my tenants wishes to move a few months before her lease ends.  This is a mutually agreed upon move.  My tenant is current with her rent, so I hate to lose her, but I also understand why she must move.  She agreed to help me place my next tenant, so I have been able to show her condo without even being present.  The situation has worked out nicely - my new tenants were able to tour the condo, ask questions of the current tenant, and communicate with me by phone.  I emailed a lease, which they signed, scanned and emailed back.  So far, so good.  They are supposed to make the deposit to my bank account today and pay the first month's rent before the lease takes effect on May 15th.  Hopefully there are no surprises I have overlooked with doing things this way.

I do have a couple of concerns with hiring a property management company for my lower end properties.  First off, with lower end properties, you will rarely find a tenant with flawless credit.  These tenants also tend to live month to month with no emergency funds, so when they lose their job, chances are an eviction will follow shortly.  Because I've been flexible, I've kept vacancies minimal.  A vacant home is a money loser for me.  Will the property management company hold out for several months in search of a tenant with better credit?  The other concern I have with turning over the keys is the loss of control I have over repairs and maintenance.  Perfect example:  I've had one of my higher end properties under professional management since I bought it in 2009.  One of the toilets broke early last year.  The management company was going to charge $250 to replace it.  I paid $68 for a new toilet and replaced it myself.   Will this be a recurring theme when I use a management company for all my properties?

Ch-Ch-Ch-Changes

With my grandfather's passing my own life is about to change.  I debated whether I should discuss this on the blog, but since I am mostly anonymous, I figured, "Why not?"  It would be hard to keep posting my finances without full disclosure.

What I am talking about is my grandfather's estate.  While he wasn't a savvy investor, he was certainly a dedicated saver.  Even after 18 months of private-pay nursing home care, there's a meaningful amount left in the bank.  My brother and I are the only beneficiaries of the estate.

The process of probating a will is unfamiliar to me.  Our mother was not left anything in the will.  She and her father had not spoken in 20 years.  While I've mentioned before that my own relationship with her has been strained, I don't plan to discuss why.  I'm an open book when it comes to money, but I won't re-live my upbringing in a public forum and why things are the way they are.  The only reason I bring this up at all is because Mom plans to contest the will.

Based on the research my brother and I have done, she has no grounds to contest it.  The will was written many years ago and signed in front of three witnesses.  My grandfather had a sound mind at the time.  In fact, he left us supporting documents, letters and photos in a safe deposit box to back up the "why" about why he excluded our mother.  That stuff was hard to see.

Still, a will contest only serves to delay the distribution of assets.  Some of his accounts were set up with beneficiary information listed, and those accounts can be excluded from the probate process.  But a significant part of his estate will go through the probate process.  It could be quite some time before this is done and over.

You, the reader, will see my inheritance as it trickles down to my daily finances.  I am about to pay off some debt, so the interest expense I have every month will go down.  I will probably invest some of the money, and hope the income side of my balance sheet benefits as well.  I promise to stay "smart frugal" by paying for quality and avoiding waste like the plague.  I won't be giving up mystery shopping, but now I might be able to make smarter choices about which companies I work with and how much I'm willing to be compensated for my efforts.  Finally, I've had some ideas about simplifying my real estate obligations, and now I will have some flexibility to pursue those ideas.  Specifically, I want to seriously consider hiring a management company to take care of rent collection and day-to-day maintenance.

The Evolution of a Thrifty Miser

Last week my grandfather passed away.  His demise was not a surprise to my brother and me.  We placed him in a nursing home in 2011 after his dementia started threatening his well-being, but since the start of this year his health started declining rapidly.  At 86, he lived a long, productive life.

My frugal ways have been heavily influenced by how my grandparents lived.  One generation removed from their German roots, a strong work ethic was always obvious when we visited as kids.  My grandparents moved to a small lake town in Alabama from a rural town just outside Omaha when my grandfather's company offered him the supervisor position at the local feed mill.  They built a house and stayed in that house their entire lives.

After his day job was over, my grandfather did side jobs.  Lots of them.  He was the maintenance supervisor at the local marina, building docks even though he couldn't swim and was scared of the water.  He also was the maintenance person at the shopping center his lawyer friend owned.  He cut grass for most of the neighbors on his street.  He wasn't afraid to put on a new roof, build a shower, or add an enclosed deck to a house.  When I bought my first house at the age of 18, he came down to Birmingham nearly every day for two weeks to help me remodel the bathroom.  I use the term "help" loosely:  other than handing him the tool he needed or driving to the hardware store for supplies, I was mostly an observer.

For fun, my grandfather loved to bowl.  The vacations my grandparents took were usually to attend tournaments.  Granddad won hundreds of competitions over his career.  I'm sure the prize money helped to subsidize their trips.  Eventually, in the late 80s, my grandfather and three of his friends opened a bowling alley. It was awesome going there growing up.  There were the batting cages, the go cart track, the mini golf and the arcade.  We didn't use the driving range.  By investing in his hobby, my grandfather was able to enjoy bowling whenever he wanted at minimal cost.

Now that I have had a few days to reflect on his life, I realize where my own habits started.  It's funny that it never occurred to me before.  Between my own father and my mother's father, I learned how to live a good life that doesn't cost much to live.

Where do you get your inspiration?

Making a Vacation From Mystery Shopping

Mom and I are headed to Gatlinburg

I don't have a close relationship with my Mom.  I moved out when I was 15 and over the years ours has been an on-again, off-again relationship.  So when I had the opportunity to sign up for a timeshare mystery shop in the Smoky Mountains, I jumped on it.

Quality time with Mom doesn't have to mean extravagant spending.  It's about our time together; not how much we consume on trinkets and themed restaurants.  Fortunately, I've been able to assemble a number of mystery shops to mitigate the cost of our trip while adding a little entertainment.

• The timeshare is a simple shop:  I have to attend and record a two hour sales meeting.  Our stay is for four nights, and the rest of the time there belongs to me.  There is no property or customer service component of the evaluation.
• I've been assigned three entertainment shops:  a miniature golf outing, 4D theater showing and museum.
• Some but not all of the gas will be provided from shops and audits.
• At least one of our meals will be provided by a shop at a themed restaurant in Gatlinburg.

Our trip looks to be a relaxing getaway.  I am not spending entire days working, but instead chose to carefully select a few jobs to add to the fun.  I leave for Birmingham on Thursday but spend the night in Georgia shopping a mid-range hotel, which includes dinner and breakfast the next morning.  We check into the resort this weekend.

My Frugal Miser - March Expenses: $3,897

My total expenses in March were $1,000 more than in February.

It was only a matter of time before my car started needing service.  I spent $471 last month on a few repairs.  As long as it costs less to maintain the Corolla I will keep it.  I also had to pay an annual maintenance fee of $210 for my self-directed IRA.  This IRA allows me to buy real estate and I like the returns and control versus stocks or funds.   Then there's the more discretionary stuff.  I splurged on a nice pair of Allen Edmonds loafers.  They were originally $345 but were marked down to $166.  The company has a "recrafting" program that will allow me to send in my worn shoes as needed for repairs.  Finally, I splurged on a Samsung Chromebook that will eventually replace my laptop, which has been acting funny - freezing up, crashing, overheating, etc.  I wanted to be proactive about replacing it while it still works.

March Personal Expenses ($2,264)

$515 Auto ($471 for 6 months insurance, $44 for fuel)

$210 Bank Fees
$166 Clothing
$18 Entertainment (movies, gambling, alcohol)
$102 Food
$0 Gifts Given

$844 Household/Housing/Home Repair
$159 Health and Dental Insurance

$92 Medical/Dental
$76 Miscellaneous
$0 Personal Care

$0 Subscriptions
$0 Taxes

$82 Utilities
$0 Vacation and Recreation

March Business Expenses ($1,633)

$1062 Mortgage Interest (rental properties)
$148 Interest on Debt (not including Mortgage Interest)
$423 Rental Properties - Maintenance and Repairs


Total March Expenses : $3,897

Notes

• I don't include principal payments in my expenses, only the interest portion of the monthly mortgage bills.
• I expect Auto Service expense to continue to rear its ugly head.  The Corolla has nearly 170,000 miles on it.

My Frugal Miser - March Income: $8,154

March was a good month, but I expect April to be even better for two reasons.  First, I am evicting a deadbeat tenant.  It is possible I will have him evicted and a new tenant found by the end of the month.  Second, I did so much mystery shopping in March that my out of pocket spending negatively affected my income last month.  That spending will be reimbursed in April and the number will be a good bit higher.


March Income

$931 Mystery Shopping
$7,146 Rental Income

$77 Other Sources

$8,154 Total Income for March

Notes:.  

• I don't include transactions in my retirement accounts.  This includes rental income, dividends and capital gains and losses.
• I include merchandising and hospitality work in the mystery shopping category since the companies that I shop for provide this extra side work.