Debt Side Savings – the smarter, not harder way.

I was doing some thinking about how managing your debt puts you ahead financially. We often talk about the smarter ways to invest money and different strategies therein. Managing your debt side payments can often be a bigger upside than your investments in terms of total benefit. This is because what you might be paying in interest is greater than your investment savings on the same value.

In this example, lets examine the case where you are given $5000 through a windfall. How do you use it effectively to give you the most benefit?

You have the following options in front of you.

1) Pay into your credit card that sits at 19.2% and you owe $5000 on it. Your minimum payment is $100 per month.

2) Pay into your medical debt of which you owe $9000.

3) Add to your taxable investment account of which is heavily invested in “tax exempt” funds with a nice MUNI CEF at 5%.

Analysis:

1) Over the lifetime of your credit card, to pay back the 5k you owe on it with minimum payments, you would be forking over a cool $20,313. So, for that 5k debt making the minimums, it ended up costing you $15,313.

2) A lot of folks end up with medical debt that has no interest accrued on the account. If it does have interest, it is often very low. So with this debt, we could say that you would ultimately pay between 9 and 15k. Max cost here for the debt side is around 6k, but it might also be nothing and varies by local laws. Some states have a maximum rate that can be charged for medical debt.

3) Assuming the 5% payout rate for the MUNI CEF, it would take you 29 years assuming a flat rate with a drip to get you to that 20k mark ($20,580.68).

For my money, I would go off with paying the credit card debt as it has the highest benefit and allows you to get cash positive quicker in the overall picture. I am personally on a track where I double my credit card payment to push it down as fast as I can. The high cost of taking loans and credit cards is a lesson we could all use and one that I am painfully too aware.

Mr. SNH.

Good Morning

I thought I would give a brief list of the things that have happened over the past few weeks.

  1. We bought a house! It is a bit more inland that our island living arrangement of the past few months. Good Bye Covid Garden. We have about a 1/3 of an acre now and I no longer throw money away by renting.
  2. Our investments during the pandemic are already bringing returns. If you follow the financial posts you’ll know that I am interested in investment. The thesis that investing post crash seems to be holding up pretty well so far and has fully recovered. The allocation of how that recovery happened was completely upside down in how I thought it would play out though.
  3. The new garden space be about 8 times the size of the Covid garden. I’ll post some videos soon, but we need to get through the hot August first. Our first task will be to section off the yard for the new garden area.
    1. We already have some of the following from the previous homeowner: Moringa, Papaya, Banana, Turmeric and Ginger growing in the yard!
  4. Tropical Storm/Hurricane Isaias is bearing down today. We don’t expect any damage here, but it will be rainy all day.

Investing: Taking a look at metrics: Beta

I haven’t done a financial post in a while due to the depressing view of how Covid has changed the market landscape. I am back on the horse and thought I would examine how some of the metrics work that you may see in your stock analysis profiles in your investment and retirement accounts.

The Covid effect on your retirement portfolio was an alarm bell for me regarding risk. Most advisors qualify stocks and people into 3 risk groups: Sometimes, you see some designations in between these 3.

  1. High Risk
  2. Moderate Risk
  3. Low Risk

These risk profiles help an advisor define the portfolio that you should adhere to for your financial goals. I fall in between the High and Moderate profile since I have a good recovery time. If you’re in the same boat, don’t fret over the Covid dip. I believe this represents a buying opportunity for long term investors. Since I don’t have a fiduciary to assist with our goals, I wanted to examine how some of the metrics like Beta might be an indicator of risk. For reference, Beta is a measure of how much your stock choice varies against the stock market as a whole. So, if the idea is true, then those low risk stocks will have a low beta, but also return a lower percentage of gain over time. Conversely, when the market is in a big dip, it is also likely that they will swing further that the market as a whole.

I took data from my IRA provider and graphed return vs beta for large and mid caps with a beta between -1 and 2. 574 stocks were returned in the filter. It looks like there is a pretty decent correlation between the total return (5 years) and the beta value as stated above. Of course, we should consider that we have been in a Bull market for quite a bit of time and this data also represents the current drop due to Covid 19.

With concern to risk, those who move less in the market also tend to have less total return (under 300%). Those stocks who have a beta above 1 largely represented the largest gains in the last 5 years.

There is some caution though as you examine beta vs risk. There are multiple factors that should go into making decisions about how you invest. I was surprised at a few really strong performers on the list like Microsoft who had a Beta rating of .95 and Ascendis Pharma (.94), but had one of the best returns of all the companies. This tells me that Microsoft and Ascendis are still a great play for both those with lower risk and maybe* those who want to see the potential for a very high return. On the flip side, some like Darden Restaurants have only returned 28% over the last 5 years and maintain a higher Beta at 1.2, but would not likely be considered an investment in my book due to the low return in what was a strong bull market.

The conclusion here is that Beta is a good metric to judge how your stocks might perform relative to the market as intended, but it doesn’t dictate what the returns will be. It also warrants further investigation since there are clearly outliers that might indicate very weak companies with low returns in largely positive markets such as Darden. I think that Beta will be a go-to indicator for stock selection, but needs to be combined with many others to form a personal score factor.

–Notice–

I am not a professional investment advisor and use this blog to examine ideas on my own accord. Do not use these writings as professional investment advice. I do not currently hold a position in MSFT, DRI or ASND.

Corona, Corona, Corona

Greetings SNH’ers,

It has been a while since a post, mostly because a lot has been happening in real life! As the corona virus makes it’s mark upon the world, it is undoubtedly affecting you or someone you know. Since this blog focuses on finances, gardening and eventually the occasional fishing report it might be time to explore how I and the SNH family are dealing with it.

You may have noticed that food is in short supply at the grocery stores due to the panic caused by corona virus. It seems a run on toilet paper is in effct and you might not have gel alcohol based hand sanitizer. What are we to do!

Hopefully you had a great planting of winter vegetables and are seeing a harvest from your cold frames if you are in a cold climate. If you are in a subtropical as I am here in Florida, the oranges are in harvest and your spring garden should be in full swing! I am not yet harvesting anything out of it, but still maintain the goal that when we get to our permanent house we will produce about 1/3 of our own family food needs. In the meantime, find out if there are local farms that you might be able to get some fresh produce instead of your typical grocery channel. They can have great deals, don’t gouge and it supports your locals. We were able to score some great Oranges the other day from an ex-sunkist farm.

Just for fun, these are things we have growing: Bell peppers, Italian sweet peppers, blueberries, turnips, cantelope, a single zuchini, tomatoes, a few failing bush beans and cabbage. Oh, there are also a few bulb onions growing in a bin that we planted the other day as well as a handful of bunching onions that I threw into a grow bag with a blackberry bush. The truth is that the volume of these items is very small and we have poor soil, so if there was a genuine food storage issue, we would not be able to cover the need for the 6 people in our house. It is good practice for the next time. I’ll continue to learn how to read plants and ammend soil when it is “go time” for the bigger effort.

On the upside, the stock market crash has taken a huge tumble which represents a great buying opportunity! I can’t wait to get a big discount on some my steady dividend REITS and equity REITS. I am personally looking at putting into OHI, STOR or STAG as great stocks that kick out high dividends and have good upside potential. I also thought about O or FRT, but I still think O is overvalued even with the dip and FRT while attractively valued doesn’t match my growth need. Those two will make great income generators when I get close to retirement, but not now with my 30 year horizon to market exit. You might also be able to get into a good solar stock since solar is now a requirement in California for new buildings and you get to buy in at a low low rate!

While CV19 might be on your mind, remember to keep your wits about you, keep building, investing and growing. Think of fun ways to stay busy if you are on lockdown and help others when you can.

Wash your hands and say your prayers because Jesus and germs are everywhere.

Mr. SNH.

Passive Solar Heating

Greetings SNH’ers,

I am back with another good way to do things just a bit smarter. Passive solar heating ideas have been around for a long time. If you are new to the concept, then this might spur on a great idea for you!

Passive solar heating uses the sun to heat something without a 3rd party interruption. For example, a passive solar pool cover will help heat the water in your pool by focusing energy from the pool cover directly into the pool. A non-passive method might be using your electric pool heater with energy generated by the solar panels on your home.

Do you have a location around your home that is consistently a few degrees cooler that other portions of the home that you want to heat during the day? You can build a low cost passive heater for these kinds of spaces whether they be a garage, outbuilding or a spare bedroom. All you will need is a 2×4 frame, some clear plexiglass or clear corrugated plastic sheeting, black tubing commonly available at your local hardware store and a bit of time with your construction skills.

Step 1. Build a frame that can sit on the outside of your building that you want to heat.

Step 2. Cut a hole at the top and bottom of your building to support the in and outflow of air from your solar heater. The top will serve as a location for hot air exit, the bottom will serve the cool air entry into your heater. Some folks like to install a mechanical fixture to open and close the vents when they want to “turn on” passive heating in cool weather and “turn off” when weather is warm.

Step 3. Put your tubing into the frame. Weave the tubing from the bottom entry and wind it up to the top of the entry. This will allow the air to heat from the base. As the sun energy heats the air in the tubing it will rise through the tubing gaining additional heat through the frame. Once the tubing is affixed inside the frame, seal it with your plexiglass at the edges of the frame. If you are using the corrugated plastic method, ensure that the ends are sealed. “Great Stuff” sealant can be used for this purpose.

Step 4. Attach the cool side entry of your solar heater with another section of tubing to bottom entry of your building. Do the same for the top.

Step 5. Enjoy the great free heating you get during the daytime. The size of your frame and the volume of the space you intend to heat will determine your performance. I would recommend that an 8’x4’ passive heater frame be used for a 10×10 space for moderate gains. This is a very smart way to save some heating costs on your home during the cool spring and cool fall weather. It can also give your heating system a bit of help in the winter.

One great site with some good examples of a passive solar build can be found here: https://greenpassivesolar.com/2013/06/passive-solar-air-heater/. I like that they take the basic construction a bit farther and make the frame look like it belongs to the home.

This site, a bit more advanced, examines the incorporation of passive heating techniques in building design. This is a great read if you want to take the passive method up a notch. https://www.wbdg.org/resources/passive-solar-heating.

If you have any pictures of a passive solar heater that you have built, please share them!

MrSNH@snhliving.com.

Speed up your meals and get more free time

                I was realizing today how much more time we have during lunch breaks if we use what we have in the fridge for a quick meal.  For example, this weekend I used a crockpot for some delicious adobe style chicken which fed the family a great dinner on Sunday.  On the flip side, we were left with about a pound of chicken in leftovers.  I simply wrapped those in a tortilla for a quick lunch yesterday and wrapped 2 up for a late-night dinner tonight.  The amount of time saved by having such a quick meal was great!  I got to spend more time with my 4 year old at lunch after she returned from preschool and I got to spend some extra family time with the kids this evening by opting for a delayed burrito wrap with the leftovers after the little SNHers were in bed.

                The savings is two-fold too!  Not only do we gain the time, but also save on our food costs.  We are nearly at crisis level with how much food we (Americans) throw out in the trash each year.  According to this article (https://www.marketwatch.com/story/this-is-why-americans-throw-out-165-billion-in-food-every-year-2016-07-22) we waste about 40% of our food!  That is simply astonishing considering how much we pay for that food.  In my household, our food budget is about 30% of our monthly spending.

                The more we eat our leftovers, the more we do for our food system, our time and our wallets!  Have a good night.

Go green with Geothermal!

Greetings SNH’ers,

‘Going Green’ seems to be a topic on a lot of minds lately. I have always been fond of using the available energy we have to maximize the comfort in our homes and maximize the long term dollar in our pocket. This is the geothermal heating and cooling article!

There has been a lot of focus on Solar lately as groups like Enphase build smart charge controllers for your panels, solar panel costs are coming down, installation is getting easier and there are many tax-advantaged incentives for installing solar in your home.

I don’t often see much regarding tapping into the huge thermodynamic heat bath we have sitting right under our houses! Most geothermal heat pumps for homes have nearly double the lifespan of modern heating and cooling equipment according to many manufacturers, but it also takes significantly less power to operate a geothermal heat pump than it does to run other traditional heating like forced air with an electric heat pump or an electric baseboard system.

Geothermal installation may be suited better to new buildings as piping must run either vertically or extend horizontally from the base of your home into the heat battery of the earth. Older homes may require additional costs to retrofit as additional work in the slab may be necessary. The heating and cooling potential for your specific climate does change, but all areas across the United States see a benefit. According to Energyhomes.org, the payback period is between 2 and 10 years. A system that requires vertical duct-work deep beneath your home will have more labor associated than a system installed with a horizontal trench.

https://en.wikipedia.org/wiki/Direct_exchange_geothermal_heat_pump

So if you are interested in learning more, I would check out energyhomes.org and talk to a local supplier of geothermal installations. Not only will you have a system that uses 40-60% less energy than a traditional HVAC solution, it also helps you sleep better night knowing you made a change that has a lower environmental impact in terms of fossil fuel generation from the electric company and it will give you money back in your wallet to put towards your retirement!

You can watch a great video here:

https://video.nationalgeographic.com/video/00000144-0a29-d3cb-a96c-7b2d99240000

Have a good night!

Micro Monthly Costs

Have you ever looked at your bank balance every month and wondered where all the money went?

Good Afternoon SNH’ers,

Have you ever looked at your bank balance every month and wondered where all the money went? You know you make enough to cover your monthly costs, even have enough to save for your emergency fund and retirement, but somehow, you still end up with no play money at the end of the month.

We started noticing micro costs, you know, the kind of subscription services, daily trips to the convenience or coffee store and that dollar app that you get charged for every month to send you new cat videos. Yep, adding those up really put a dent in your monthly and yearly savings.

Today, I thought I would pass on a few recommendations for smarter ways to handle those monthly creepers.

  1. Try to use apps that are “buy once cry once” so you don’t have recurring monthly costs to use them.
  2. Use computer software that is run solely on your pc. Sorry Microsoft, for daily office use, open office and libre office are excellent alternatives.
  3. You really don’t need to buy that 20oz mountain dew before work. If you buy it at the grocery store, you’ll save about 60% of the cost. Don’t get it in the refrigerated section by the checkout counter, get it on the isle…in the 6 pack. Better yet, use a thermos and buy 2 liters.
  4. Review your monthly subscribers once in a while. Why use both Amazon and Pandora at the same time. I bet you don’t need both.
  5. If you have a cell phone plan and a very close relative, see if you can jump on their plan for a few more dollars in your pocket. Also, check to see if you employer has a cellular discount with any of the vendors.

That’s it for tonight. Be sure to like and share with your friends.

Mr. SNH

Keeping more money by cutting costs at home.

Greetings SNH’ers, a while back when Mrs. SNH and I really needed to clamp down on our expenses after the short sale of our house. We examined the day to day activities that we did and what they were costing us. One of the biggest costs was paying for “traditional” cable tv service. It was running us about $80 per month for a service that provided us with many channels that we just didn’t watch. Doing the math, over the course of a 2 year contract with cableco, that nets us about $1920 out of our pocket. I decided to purchase a low cost antenna for local news and take advantage of the services offered inside of a Roku streaming unit.

We now pay about $160/year in add-ons and have netflix/amazon and some shared content with relatives. Talk about savings! We have now been a cord cutting family for at least 6 years. While I do occasionally miss the Gold Rush show on discovery, the sheer quantity of apps for the roku as well as the savings more than make up for it.

If you’re interested in finding out more about putting up an antenna, check out the following website: https://www.fcc.gov/media/engineering/dtvmaps to get a brief idea which channels are available with a decent antenna. We currently get about 12 reliable channels which include ABC, NBC, FOX and PBS.

As for Roku, here is a sampling of some of the apps we use on a regular basis:

  • Amazon Music
  • Amazon Video
  • Netflix
  • Starz
  • Vudu
  • Pluto TV
  • Sling
  • NewsOn
  • and the roku channel itself.
  • Have a great evening.

The high cost of Blue Apron, just go to the grocery store!

Greetings SNH’ers

I was listening to a millennial rave about how much money they are saving when using Blue Apron to cook their meals. Having gone through a revelation in cooking with my family (1 gluten free child, 1 vegetarian) in recent years, we really had to start analyzing our eating habits and how much impact it had on our budgets. We no longer eat out like we used to and we also started to cook “real food“.

The Blue Apron does have some great meal ideas, but the reality is that these meals are extremely expensive at the estimated $9.99 per serving. These meals are largely dinners and after looking at our budget for the family on a monthly basis, we are at about $3 for our dinners and $7.50 per person per day.

Here is an average family Friday night meal. 2 pizzas serves us pretty well with little waste. Now, these days, we may make a gluten free crust, but you’ll get the idea with this info-graphic.

As you can see, the $1.69 per person for this recipe is an excellent way to suggest you roll your own with your local grocery store and forget the boxed meal services. At 9.99 per serving, they are 6 times more expensive. They are costing you massive amounts of money that could otherwise be put into your IRA or other investment vehicle!

I am not saying that you shouldn’t enjoy those meals, just don’t do it as part of your regular meal plan for the week unless it brings you a certain satisfaction that you can’t get by heading to the grocery store and sourcing the ingredients yourself. They do often have unique ingredients and flavors that you may not stock in your pantry. I find however, that as you cook more, your pantry grows with many of the items that are used in those recipes.