Monthly Archives: October 2016

Info Frivolous Spending Cost

Have you ever stood behind someone in line at the convenience store and watched them pay hard-earned money for a lottery ticket? Or walked through a busy casino, with people at the machines literally giving their money to the house all in the name of a little fun? Or what about watching someone inhale their future retirement through the ashes of a nasty smoking habit?

When I see these things, it gets me thinking about what it actually costs me to spend money on frivolous things. I’m not immune, of course. For me, it’s not usually gambling or cigarettes, it’s usually fast food because I am too busy to pack a lunch that day. Or sometimes I’m just dropping a few dollars on a snack that I don’t really need, just to have something to munch on. (For related reading, see: 5 Things the Wealthy Can Teach Us About Money.)

I’m not saying these things don’t bring a little bit of happiness in the moment that we buy them, but at what cost? So, being the finance nerd that I am, I pulled out a calculator and got to work to find out.

We All Only Have so Much Time

First things first. We all only have so much time. I’m sure you’ve probably heard that before, but have you really broken it down and looked at how little it really is?


That’s about how many days most of us will have on this Earth, based on an 80-year lifespan. The first 6,500 or so will be spent in mandatory education, while the last 1,800 or so (or approximately five years) will probably be hampered by the problems of old age. Now add in the approximately one-third of our lives that we will spend asleep, and the other one-third that we spend at work, and precious little time is left to enjoy. Using these simple assumptions, I came up with only about 8,000 days worth of time in the average lifespan that is actual free time an adult can choose to spend how he or she wishes. And of course, that doesn’t include time spent on chores, caring for children or family, and other important duties.

So only about a quarter of our short lives are our own to control, at best. Time is short!

What Is Your Time Worth?

If you’re paid by the hour, this is obviously a pretty straightforward calculation. And those paid on salary can simply convert their wage into an hourly number without too much trouble. This is the amount of money that we willingly trade those precious few hours of our lives for. When I look at it like that, it changes my perspective. If I saved those precious few dollars each week that end up going to mindless purchases, how many more days of freedom could I buy before old age sets in?

Working 29 Hours for a Pair of Jeans?

Here’s where we have to do a little math, but it’s not as complex as you might think. Applying some reasonable assumptions about long-term rates of return (10%) and inflation (3%) and a 30-year compounding period, I get a ratio of $71.89 for every $10 spent today and not invested. (You don’t even need a financial calculator for this, just use a free site like

So, let’s say you want a new pair of jeans that you don’t really need, and they cost $100. That’s $718.90 of retirement nest egg down the drain, in today’s dollars (e.g. after accounting for inflation). If I make $25.00 per hour, that’s about 29 hours of work that I just exchanged for a pair of jeans. Or to put it another way, if I had saved that $100 instead (again, assuming the long-term rates of return and inflation) I would be financially independent 29 work-hours earlier than I would otherwise (almost a whole work week!).

Now, sometimes you need to buy a pair of jeans. I’m not trying to beat anyone up here; that’s not my point. In fact, I just bought a new pair of jeans, and don’t feel guilty at all–I needed them. But the point is that by breaking the cost of something down into hours of your life, it’s easy to put into perspective the trade-off you make with frivolous purchases.

The Younger You Are, the More Expensive Your Time

One of the key variables in this little formula is the compounding period, or the number of years from your current age until retirement. For someone who is younger than I am–I’m in my mid-30s–things start to get really interesting. If we assume a 40-year compounding period, all of a sudden the cost of $100 spent is $1,387.40, not $718.90.

In addition, we might want to assume a lower hourly rate, because obviously the younger you are the less you generally earn. So if we assume this person makes $15.00 per hour instead of my arbitrary example rate of $25.00, that’s 92 precious hours exchanged for a $100 piece of cloth that will probably go out of style in a few years.

Ninety-two hours?! That’s over two full work weeks!

The Bottom Line

Hopefully this is as helpful for others as it is for me. Every time I have the temptation to buy something that I really don’t need, I can use this little formula to ask myself, is it really worth that much of my life? (You can use the chart above to find the formula most applicable for your situation.) And while most of us know, at least intellectually, that the more we save while we are young, the better off we will be, I find it’s helpful to actually think about the hours of our lives that are lost by these choices.

It is actually possible to retire early, and it’s not as hard as you might think. But only if you get started early and save as much as you can.


This Bizarre Airline Rules

If you’ve never heard of a “contract of carriage,” you’re not alone. It’s a legalese-filled document that states what airlines will and won’t do for passengers, plus rules for your behavior, refund information and much, much more. These regulations are not all that easy to find but they are tucked away somewhere on airline websites (look for the fine print at the bottom of the site). They’re worth a read because some of the information included is a bit bizarre.

Many airlines have similar rules; we cherry-picked from a bunch of U.S. carriers to present the following examples:

1. No emotional-support service ferrets, please.

United is very clear that service animals are welcome on their flights but they don’t get their own seat, and they may not pose what airline calls unavoidable safety concerns. But not all creatures make the cut. United will not accept “snakes, other reptiles, ferrets, rodents and spiders as Service Animals.”

But say you’re boarding with a service monkey – and this is no joke. These creatures, particularly capuchins, are said to be very helpful and United allows them onboard (as long as they fit under your seat). But don’t plan on sitting in the spacious emergency-exit row because that’s a forbidden zone for service animals. Maybe a calm capuchin could help direct frightened passengers during an evacuation, but I’m having trouble picturing it. And so, clearly, does the airline.

2. Did you shower today?

You’ll be glad to know that most airlines won’t transport travelers who stink, or as Delta delicately puts it, passengers who have “a malodorous condition.” If this sounds far-fetched, it’s not. In 2010, a man flying Air Canada was asked to get leave the plane because of so many complaints about his “unpleasant aroma.” In 2014, a Parisian man was allegedly kicked off an American Airlines flight and told to take a shower because he exuded an impossible-to-ignore stench. How bad is too bad? Apparently, you know it when you smell it.

3. Wear the right clothes.

Southwest (and other airlines) usually state that they can refuse to transport anyone whose “clothing is lewd, obscene, or patently offensive.” The good news is, most of the time, travelers wearing offensive T-shirts are merely told to cover it up or turn it inside-out (if indeed it gets noticed at all). But there have been exceptions, including a 2015 incident in which a New York college student’s F-bomb emblazoned shirt kept him off a Southwest flight.

By the way, airlines focus on your feet, too. Most of the contracts of carriage I’ve seen say no bare feet are allowed for anyone over the age of five, and I have personally witnessed flight attendants telling grown-ups to “put your shoes on!”

My personal favorite in the clothing category is courtesy of Virgin America, which warns customers that they must absolutely wear “both top and bottom apparel.”

4. Odd carry-on regulations.

Many discount airlines, such as Spirit and Frontier, charge a fee for a carry-on bag. But unless you fly basic economy , the bigger airlines usually give you this cabin bag for free. Did you know how much leeway you have in what you can bring? Alaska is happy to let you carry on a human organ, but it must be properly packaged and stowed.

Ditto for your pole-vaulting equipment and antlers, but these items must be checked in cargo (and antlers must be as “free of residue as possible and the skull must be wrapped”).

4. Don’t stash valuables in checked bags.

You probably already know not to pack things like diamonds and furs because valuables can get lost or stolen, but American takes it a step further: No art or jewelry is allowed in checked baggage. You’re also forbidden to pack cameras or books or even house keys in bags you check. It’s the airline’s way of saying, we are not liable so don’t come complaining to us later.

5. You might get a free hotel room. You might not.

First of all, Delta (and other airlines) want you to known that flight schedules are not guaranteed. If a flight is delayed or cancelled outside the airline’s control, the company has no liability. If the problem is the fault of the airline and it’s nighttime, the airline will offer you a hotel room at a Delta-contracted facility, if there’s room. If no rooms are available, the contract of carriage says vouchers will be offered for the amount of the room (up to $100) that are good for future travel on the airline.

Final note on airline/hotel policies: When a problem crops up, go ahead and ask if the airline will stand you a free hotel room. It might say no, but I’m aware of plenty of times when carriers paid all or part of the cost. It depends on the circumstances, but you won’t know if you don’t ask. Politely, of course.

Steps of Budgeting for Young Families to Follow

Are you parents that struggle month to month to stick to a budget? Are you stressed about being able to pay the bills even though your income is good? Are you wondering if there is a better way? There is and it starts with a philosophy. Here are the five steps to that philosophy of budgeting for young families.

Budget Step 1: Understand What You Need to Live On

Calculate how much money you need to live on. Your necessities include your utilities, rent or mortgage payment, groceries and gas for your car. For us it also includes diapers for the one-year-old and my wife’s new lighting equipment for her videography business. I think you get the picture. Write down how much you need by looking over your past expenses. Then add these up and see where you are. The total number may be smaller than you think, which will give you a more flexible budget.

Budget Step 2: Treat Savings As a Needed Expense

I encourage you to treat savings as a needed expense in your budget. My wife and I use this thinking and it has helped us make sure we are building up our emergency fund each month. I recommend 10% of your income to start with. And if you can’t do 10% then try 5%. I know it’s hard since you are wondering how you will have a social life, but think about what happens if your car breaks down or your toddler breaks your phone. By having cash on hand for the unexpected, you are able to still afford the necessities of life.

Budget Step 3: Don’t Forecast Income

If money is not in your account, you don’t have it, so don’t plan on using what you don’t have. It just doesn’t make sense. Something that I have learned recently from YNAB (You Need a Budget) software is that you should be using money that is aged. In other words, using money that you already have. This can be hard to do when starting out, as you may have to cut back on your fun expenses before your money is aged. But once it has, your stress drops significantly because you can be confident you have money for the next month’s expenses already. Saving consistently enough to build up a month’s worth of living expenses allows you to afford things like a new water heater without blocking your cash flow. (For more, see:How to Create an Effective Budget.)

Budget Step 4: Don’t Fool Yourself

Everyone knows that you may need to save for some house repairs, pay for a children’s museum membership or renew your Amazon subscription. Why not budget for these a little bit each month instead of trying to figure out how to pay for them when they surprisingly come up. This part takes a little bit of work but setting aside $20 bucks a month for Christmas presents starting in January prepares you for Christmas in December. Understanding your annual expenses allows you to do something about them and be proactive when it comes to planning for them.

Budget Step 5: Your Budget is Liquid Not Frozen

We all know that every month presents different needs financially. For me, one month we may eat out more and buy fewer groceries or my daughters may need new clothes. Because different months present different scenarios, we need to be adaptable within our budget to afford it. Having a flexible budget means finding an area in your budget where you may have wiggle room in one month but are maxed out the next. It is not saying we can splurge a little more. You just end up hurting yourself more if you do that.

In the end, having a working budget can be done. You just have to be proactive about it and it may take some sacrifice in the beginning. But it is well worth it. You will feel less stressed and more comfortable with what you are spending your money on. There are many great tools available for budgeting but my favorite is YNAB.

The Most Common Financial Mistakes

Here we’ll take a look at seven of the most common financial mistakes that often lead people to major economic hardship. Even if you’re already facing financial difficulties, steering clear of these mistakes could be the key to survival.

Mistake No. 1: Excessive/Frivolous Spending

Great fortunes are often lost one dollar at a time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you’re enduring financial hardship, avoiding this mistake really matters – after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever. (For more insight, see Squeeze a Greenback Out of Your Latte.)

Mistake No. 2: Never-Ending Payments

Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio and video games, cell phones and pagers can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning your from financial hardship.

Mistake No. 3: Living on Borrowed Money

Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don’t be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you’ll spend more than you earn.

Mistake No. 4: Buying a New Car

Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years, and lose money on every trade.

Sometimes a person has no choice but to take out a loan to buy a car, but how much does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. Unless you tow a boat or trailer, or need an SUV to earn a living, is an eight-cylinder engine worth the extra cost of taking out a large loan?

If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive. You might need one, but if you’re buying more car than you need, you’re burning through money that could have been saved or used to pay off debt. (To keep reading about this subject, check out Car Shopping: New Or Used?)

Mistake No. 5: Spending Too Much on Your House

When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget? (For more on buying a home, see Mortgages: How Much Can You Afford? and Downsize Your Home To Downsize Expenses.)

Mistake No. 6: Treating Your Home Equity Like a Piggy Bank

Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you’ll end up paying way more for your home than it’s worth, which virtually ensures that you won’t come out on top when you decide to sell. (For further reading see Mortgages: The ABCs of Refinancing.)

Mistake No. 7: Living Paycheck to Paycheck

In November 2016, the U.S. household savings rate was 5.5%, but other countries had considerably higher rates of personal savings. For example, France, Germany and Japan personal savings rates average around 10% or more, according to the latest data. Clearly it is possible to enjoy a high standard of living without financing it with debt.

The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you’ll have very few options. Everyone has a choice in how they live, so it’s just a matter of making savings a priority.

The Bottom Line

To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn’t the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.