Well, if you’ve ever wanted to feel good about your spending vis-a-vis my spending, then THIS is your month!!! April was absurdly expensive around here. ABSURD, I tell you. As I shared the other week, Mr. Frugalwoods and I finally broke down and bought a used truck in April, and since we paid cash for the full amount of the truck, that accounts for the vast majority of our spending. I have several posts detailing why paying cash in full (and buying used) is the most financially sound route to car ownership, so I won’t rehash all the details here. Suffice it to say that by taking this approach, we avoid incurring the interest rate and the massive depreciation that accompanies new vehicles (or used vehicles bought with financing). While it’s a lot of money to pay all at once, buying used and avoiding a car payment generally costs much less overall (which allows you to save more every month, which allows you to fund this type of purchase).
Folks have asked how we manage our cash flow for large purchases, such as the truck, and the answer is that when we’re anticipating a large purchase like this, we maintain a fairly large cash reserve in a checking account, from which we automatically invest in low-fee index funds on a regular basis. The amount of our cash reserve fluctuates based on whether or not we’re planning for a big purchase (like a truck) or if we’re just cruising along at our normal rate of spending. You want to have at least three to six months’ worth of living expenses held in a checking or savings account that you can easily access in the event of an emergency (which is why this is called an emergency fund). In order to know how much you need in an emergency fund, you need to track your expenses on a regular basis. I use and recommend Personal Capital for this task because it’s straightforward and–best of all–free!
Beyond an emergency fund, in order for money to make money, it needs to be invested–either in real estate or the stock market (I use and recommend low-fee index funds) or some other vehicle that delivers a return. However, it’s also true that if you plan to pay cash for something large–like a car or a downpayment on a house–you need to keep enough of your money liquid in order to cashflow this purchase. It’s a balancing act for sure since you don’t want to sacrifice potential gains in the market by keeping too much money in cash, but you also don’t want to lose money you’ll need in the near term in a market downturn.
Things That Fit In A Truck
As soon as we bought our truck, we then bought a veritable flood of things that can only be hauled in a truck. We’ve been waiting on all of these purchases until we had the means to transport them home, so this buying spree illustrates our pent-up demand for a truck!
Topping the list at a whopping $1,200 was something Mr. FW has wanted for years: a used Sawstop table saw. He’s had a Craigslist search saved for this table saw for over a year and a half and this was the very first one to pop up. Since they’re $1,800 new, this was a decent savings. Sawstop table saws are designed to stop if they sense something electrically conductive, such as human skin. This means it stops sawing before you accidentally saw off your fingers!
Table saws are generally considered to be the most dangerous tool in a wood shop and Mr. FW personally knows several people who’ve lost fingers to table saws. Hence, although the Sawstop is twice as expensive as other table saws, we decided we can’t put a price on keeping all of your fingers.
Next up, at $299, is a gigantic tool chest for Mr. FW to organize all of his tools in the barn. He’s been collecting tools–mostly used from yard sales and thrift stores–over the years and they were strewn around the barn in various little boxes and compartments. Not exactly efficient for keeping track of things. Although he always calls me the organized half, my Mr. FW is secretly extraordinarily tidy and organized (not so much of a secret now… ).
And finally, rounding out our binge of truck-hauling stuff was lumber. Good old lumber, the raw material for just about any project I can dream up. Now that Mr. FW’s wood shop is finally taking shape, I’ve started commissioning various woodworking projects, so I wonder if he’s regretting buying all those tools… ;). I’ll share all the details (and photos!) of what he has built so far in my upcoming installment of This Month On The Homestead.
The Baby Tent
How jazzed am I about my new baby tent? So jazzed. And yes, I bought it new, but no, I do not regret it at all. I love it! What is a baby tent? It’s a micro tent designed to keep sun and bugs off of babies while outside. It even has an insect net zip-up cover! When Babywoods was an infant, I struggled to find a way for her to be outside in the summertime without the sun glaring down on her and bugs menacing her (unfortunately, we have a lot of ticks here). We don’t have any shade in most of our yard or our veggie gardens, so I was forever trying to rig up a blanket or umbrella to shade her (or in one memorable instance, the table umbrella from our patio furniture… ). As you might expect, the umbrellas (large and small) always blew away, as did the blankets. Not ideal.
I carry Littlewoods in her infant carrier most of the time, but she gets restless being cramped in there after awhile and wants to kick, kick, kick her little legs. Enter… the miraculous baby tent!!! It initially seemed silly to me to buy something new that we’ll only use for two seasons, but since we’re outside a lot in the spring and summer (usually every day), the baby tent is an ideal way for Littlewoods to enjoy the fresh air. She seems to like it and I love it. I find it also works fabulously well at playgrounds with no shade. Hooray for the baby tent!
Another item in the kids’ gear genre this month were these toddler ear protection headphones for Babywoods. Since she loves to ride on the tractor and observe loud machinery in progress (I mean, who doesn’t?!), we thought this was a prudent investment in protecting her hearing.
Before buying something brand new, I like to follow three steps:
- First, I see if something I already own will suffice (which is what I tried with umbrellas and blankets to no avail).
- Next, I try to find the thing used (no luck).
- Finally, I wait at least 72 hours before making the purchase.
I find that when I follow this three-step process, I often end up not buying the thing at all. But when I do decide to buy something new–a la my baby tent–I am super jazzed about the purchase and know that it was made thoughtfully.
Estate Plan and Will
A lot happened this month apparently! We finally had a lawyer create an estate plan and will for us, which was way overdue. If you have dependents, or complicated assets, or both, then it’s a wise idea to have a formal estate plan and will prepared. I’ve seriously had this on my to do list for YEARS. Shameful. There’s no excuse for my negligence!
Thankfully, I went into a frenzy of organization prior to Littlewoods’ birth and creating a will was part of that frenzy. It’s comforting to know that our children and our assets are all squared away in the event of our dual untimely demise. Having a will is a lot like having an emergency fund saved up: you hope to never need it, but if you do need it, you need it desperately and will be SO glad you have it. For the record, I’m just glad I can finally cross this thing off my list.
Credits Cards: How We Buy Everything
Mr. Frugalwoods and I purchase everything we possibly can with credit cards for several reasons:
- It’s easier to track expenses. No guesswork over where that random $20 bill went; it all shows up in our monthly expense report from Personal Capital. This prompts me to spend less money because I KNOW I’m going to see every expense in detail at the end of each month.
- We get rewards. Who doesn’t like rewards? Credit card rewards are a simple way to get something for nothing. Through the cards we use, Mr. FW and I get cash back as well as hotel and airline points just for buying things we were going to buy anyway.
- We build our credit. Since Mr. FW and I don’t carry any debt other than our mortgages, having several credit cards open for many years (which are fully paid off every month) has greatly helped our credit scores. By the way, it’s a dirty, dirty myth that carrying a balance on your credit card helps your credit score–IT DOES NOT. Paying your cards off IN FULL every month and keeping them open for many years, however, does help your score.
If you’re interested in opening a credit card, I highly recommend using this site to search for a card that’ll best fit your needs. And if you’re interested in travel rewards cards specifically, check out this list curated by my friend Brad from Travel Miles 101. I respect Brad’s work in the travel rewards space and I trust his advice on which cards will reap the best benefits.
Huge caveat to credit card usage: you MUST pay your credit card bills in full every single month, with no exceptions. If you’re concerned about your ability to do this, or think that using credit cards might prompt you to spend more money, then credit cards are not for you–stick with using a debit card and/or cash. But if you have no problem paying that bill in full every month? I recommend you credit card away, my friend!
Personal Capital: How We Organize Our Expen$e$
Mr. Frugalwoods and I use Personal Capital to aggregate and consolidate our transactions from across all of our accounts. We then drop them into a spreadsheet to provide the below analysis for you fine people.
Tracking expenses is, in my opinion, the best way to get a handle on your finances. You absolutely, positively cannot make informed decisions about your money if you don’t know how you’re spending it. Sounds harsh, but without a holistic picture of how much you spend every month, there’s no way to set savings, debt repayment, or investment goals. It’s a frugal must, folks. No excuses.
Personal Capital (which is free to use) is a great way for us to systematize our financial overviews since it links all of our accounts together and provides a comprehensive picture of our net worth. If you’re not tracking your expenses in an organized fashion, give Personal Capital a try. Here’s a more detailed explanation of how I use Personal Capital for my expense tracking.
Where’s Your Money?
One of the easiest ways to optimize your money is to use a high-interest savings account. A high-interest savings account gives you money for nothing. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources–your money is just sitting there doing nothing. Don’t let your money be lazy! Make it work for you! And now, enjoy some explanatory math:
Let’s say you have $5,000 in a savings account that earns 0% interest. In a year’s time, your $5,000 will still be… $5,000.
Let’s say you instead put that $5,000 into an American Express Personal Savings account that–as of this writing–earns 1.70% in interest. In one year, your $5,000 will have increased to $5,085.67. That means you earned $85.67 just by having your money in a high-interest account.
And you didn’t have to do anything! I’m a big fan of earning money while doing nothing. I mean, is anybody not a fan of that? Apparently so, because anyone who uses a low (or no) interest savings account is NOT making money while doing nothing. Don’t be that person. Be the person who earns money while you sleep. Rack up the interest and prosper. More about high-interest savings accounts, as well as the ones I recommend, is here: The Best High Interest Rate Online Savings Accounts.
How To Read A Frugalwoods Expense Report
Want to know how we manage the rest of our money? Look no further than Our Low Cost, No Fuss, DIY Money Management System. We also own a rental property in MA, which I discuss here.
Why do we save so much and spend so little? It’s all in service of our goal to reach financial independence and move to a homestead in the woods (which happened in May 2016).
For us, embracing frugality is a joyful, longterm choice. We prefer a simple life to one filled with consumerism and we spend only on the things that matter most to us. Our approach isn’t one of miserly deprivation; to the contrary, we live a luxuriously frugal existence.
If you’re interested in the other things I love, check out Frugalwoods Recommends.
A Note On Rural Life
Since we live on 66 acres in rural Vermont, our utilities and expenses are slightly different from traditional urban and suburban dwellings. We don’t pay for water, sewer, trash, or heating/cooling because we have a well, a septic system, our town doesn’t provide trash pick-up, we heat our home with wood we harvest ourselves from our land, and we don’t have air conditioning.
For more on our rural lifestyle, check out my series This Month On The Homestead as well as City vs. Country: Which Is Cheaper? The Ultimate Cost Of Living Showdown.
But Mrs. Frugalwoods, Don’t You Pay For X, Y, Or Even Z????
Wondering about common expenses that you don’t see listed below? Our August 2015 expense report has the answers you seek! Plus, as I explained here, we pay bills in full the month we receive them–that’s why you won’t see monthly payments for things like car insurance or property tax.
If you’re curious about how we handle charitable contributions, check out How We Donate To Charities Like Billionaires and also How We Make Meaningful And Tax Efficient Charitable Donations.
Alright you frugal money voyeurs, feast your eyes on every dollar we spent in April:
|Read all about it here
|Will and Estate Plan Attorney fees
|Used Sawstop table saw
|Investment in keeping fingers
|Cordless Tools Set
|Big Tool Box
|Also on sale!
|This includes thrilling items such as toothpaste, toilet paper, laundry detergent, shampoo, soap, sunscreen, medications, baby items, etc!
|Preschool for Babywoods
|Our last month of preschool before summer vacation :(.
|Gasoline for cars
|Lumber for shop projects and misc. hardware
|Lumber for tables, saw horses, and shelves
|Doctor visit co-pay
|We took a family trip to town and had lunch out (our first meal out as a family of four and I’m pleased to report that we all survived and did not get kicked out of the restaurant)
|Pre-purchase Inspection of Truck
|As I shared in the truck post, we had our mechanic inspect the truck before we bought it.
|A refill C02 canister for our hacked Sodastream system
|Replacement Blade for our 10 year old food processor
|The blade on our food processor broke and, since they no longer make our model, the replacement blade was pretty expensive (but still cheaper than buying a whole new food processor)
|These are for securing cargo in the bed of the truck
|The one, the only: BABY TENT!
|Cell phone through BOOM Mobile
|For building a ramp to load items on and off of the truck bed
|Toddler Hearing Protection
|Since Babywoods loves to ride on the tractor (and generally observe loud machinery around our property), we got her these hearing protection headphones to keep her little ears safe and sound (I’m hilarious).