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We all know that the secret to getting insanely rich is to accumulate assets and avoid liabilities. The tricky part is knowing in advance which asset gets us there faster.

Before the technology boom, some may have picked San Francisco Real Estate and gone all-in, enabling them now to do a Cash-Out Refinance.

Others may have picked a relatively new asset like Bitcoin before the meteoric rise.

There are several success stories involving real estate, collectibles, and other assets that are not liquid or do not have a large trading market. Most of them involve a one-time buying decision and then a long holding period.

It is rare to consistently beat the market by trading over a long period, predominantly liquid markets such as stocks or commodities.

What if you could invest in a fund that had compounded annually at the rate of 63.3% over the last 30 years?

Welcome to the secretive world of Renaissance Technologies and the Medallion fund.

Who Owns Renaissance Technologies?

Jim Simons founded Renaissance Technologies, a former Cold war code breaker and a famous mathematician. He is known in the scientific community for co-developing the Chern–Simons theory. Simons also received the Oswald Veblen Prize of the American Mathematical Society, which is geometry’s highest honor.

In 1988, the firm established the Flagship Medallion Fund.

What Is the Medallion Fund?

Simons and algebraist James Ax started a hedge fund and named it Medallion in honor of the math awards that they had won. The Medallion fund used mathematical models to explore correlations from which they could profit.

In 1988, Simons had decided to base the company’s trades entirely on the models. However, by April 1989, peak-to-trough losses had amounted to about 30%.

Simons turned to Elwyn Berlekamp, a mathematics professor from UC Berkeley, to overhaul the trading system. Berlekamp was instrumental in evolving trading to shorter-dated, pure systems driven decision-making. Initially, the focus was on bonds, commodities, and currencies.

In 1993, Simons hired Bob Mercer and Peter Brown, who were working on speech recognition and machine translation at IBM research. This partnership proved highly successful as they cracked the equities market. For the fund to grow, many more assets were required. Equities had proven difficult for the Renaissance team to break. The addition of equities allowed the Medallion fund to scale to thousands of assets.

Performance of Medallion Fund

The performance of the Medallion fund has astounded everyone. If you had invested $1,000 in the Medallion Fund, after 30 years, you would now have $20 million (after fees). To put these numbers into perspective, a similar amount invested in the S&P 500 would be $20,000. And if you invested in Berkshire Hathaway, it would have grown to only $100,000.

No one in the investment world comes close to Jim Simons and his flagship Medallion fund. Warren Buffett, George Soros, Peter Lynch, Steve Cohen, and Ray Dalio all fall short.

Bradford Cornell analyzed the Medallion Fund and published a brief paper in the Journal Of Portfolio Management. He considered the Medallion fund as the ultimate challenge to the efficient market hypothesis.

“The performance of Renaissance Technologies’ Medallion fund is like I saw a T. Rex in my backyard. I just don’t get it.” -Bradford Cornell, Professor Emeritus UCLA

Furthermore, during the entire 31-year period, Medallion never had a negative return despite the dotcom crash and the financial crisis. Despite this remarkable performance, the fund’s market beta and factor loadings were all negative. So the Medallion Fund performance cannot be interpreted as a premium for risk-bearing.

To date, there is no adequate rational market explanation for this performance.

How Does Medallion Fund Work?

The Medallion fund embodies the “will robots take my job” sentiment prevalent on Wall Street.

Data

Since the early days, Renaissance has been collecting and curating vast data archives of everything. From economic metrics to the weather to trading sentiment and a million other variables. The interaction between these data sets and the direction of the security movement forms the base of their secret sauce.

Strategy

Medallion’s strategy involves holding thousands of short-term positions, both long and short, at any given time. The fund makes high-frequency trades but has also held positions for up to one or two weeks.

Algorithmic Trading

The Medallion Fund has employed mathematical models to analyze and execute trades, many of them automated. The firm uses computer-based models to predict price changes. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions.

Leverage

The trades are made using a lot of leverage, which amplifies the gains. The only challenge with using leverage in trading is to manage risks appropriately. I believe Real Estate is still the best way to obtain a leveraged return without margin calls, as long as you know how to evaluate real estate deals.

Position Sizing

Depending on the conditions spewed out by the model, the size of the trade varies. That is an essential factor to note because I have personally made many bad investments. Keeping the position size of my trades as a fraction of my Net worth; ensured that my four worst investments did not ruin me.

Combining Several Small Wins

Robert Mercer, the former co-chief executive of Renaissance Technologies, allegedly told a friend that Medallion was right 50.75 percent of the time when it came to its millions of trades. “You can make billions that way, doing potentially hundreds of thousands or millions of trades. Even a small amount of profitability per trade turns out to be a big amount.”

That is similar to how a Casino makes profits. The house has a slight edge, and over some time, the volume of money adds up.

How Big Is Medallion Fund?

The Medallion fund manages roughly $10 billion in assets. The secret to their outperformance also lies in the fund size. They have never let the fund get too big. Whatever profit they make is paid out. That enables the firm to stay small and nimble.

How Do I Invest in the Medallion Fund?

If you are wondering how to invest in the Medallion Fund, the bad news is that you can’t.

The Medallion fund has been closed to outside investors since 1993. It is available only to current and past employees of Renaissance Technologies and their families.

Working at Renaissance Technologies only for the ability to invest in the Medallion Fund; is the ultimate example of improving human capital to accelerate Financial Freedom. The firm bought out the last investor in the Medallion fund in 2005, and the investor community has not seen its returns since then.

By 2012 Renaissance was granted a special exemption by the United States Labor Department, allowing employees to invest their retirement money in Medallion Fund, arguing that Medallion had consistently outperformed their old 401(k) plan. Imagine the tax free growth of all the pre-tax contributions!

Renaissance Technologies has strict rules that bar former employees from using their intellectual property at rival firms.

Simons told a New York conference last month that the company has almost no turnover among its 300 or so employees, many of whom are based on a 50-acre campus near Stony Brook University on Long Island, where Simons formerly headed the mathematics department.

We don’t have any turnover. We’re cautious. -Jim Simons, Renaissance Technologies

Performance of Other Renaissance Technologies Funds

While the pandemic caught everyone by surprise and even humbled Warren Buffet into selling his airline stocks at a loss, the Medallion Fund continued its outperformance. It gained 10% in March and 39% (before fees) through mid-April.

However, the other Renaissance Technology funds open to the public have not fared as well.

The Medallion fund employs a short-term, quantitative trading strategy across many asset classes. These include global equities, futures, commodities, and currencies. It also tends to have high turnover and significant leverage.

The Renaissance Institutional Equities (RIEF) Fund only trades in stock. The fund holds stocks for long periods.

The Renaissance Institutional Diversified Alpha (RIDA) Fund trades equities, derivatives, and various instruments in the global futures and forwards markets. Like RIEF, the RIDA fund holds significant individual positions, usually for long periods.

The Renaissance Institutional Diversified Global Equities (RIDGE) Fund trades equities and derivatives. It seeks to be market neutral by maintaining low levels of beta, or exposure to the broader market.

The lackluster performance of other Renaissance Technology funds could be due to the different strategies.

Final Thoughts on Medallion Fund

It is possible to beat index investing even over the long term. But it is such a rare occurrence that research papers and entire books are written about it.

Medallion Fund has had outsized performance, but would it continue is something no one knows.

Since the Medallion Fund is out of reach, I have decided to embark on Moonshot Investing. That is an asymmetric risk strategy where a portion of my Net Worth is invested in companies that, I believe, will outperform the broader markets over time. Instead of going all in, I dollar cost average to reduce my price entry and risk.

Dollar-cost averaging executes purchases weekly or more frequently as desired. I also exit positions once particular securities have an outsized gain in a short period.


John came from a third world country to the US with only $1,000, not knowing anyone, guided by an immigrant dream. In 12 years, he achieved his retirement number.

He started Financial Freedom Countdown -https://financialfreedomcountdown.com/ to help everyone think differently about their financial challenges and live their best lives. He resides in the San Francisco Bay Area, enjoying nature trails and weight training.


Source: yourmoneygeek.com


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I am not a money genius. I’ve touched many proverbial “hot stoves,” and the Best Interest is part of my scar tissue. Today, let’s dive into seven of my money mistakes and the lessons I’ve learned from them.

Not an Arrested Development fan? Huge mistake.

Money Mistake #1: Not “Renting My Fun”

I once heard radio host Colin Cowherd say, “Buy ‘normal life,’ but rent your fun.”

It makes sense to buy healthy groceries. It makes sense to buy comfortable shoes. It makes sense to buy a reliable car. You need those things every day of your life.

Life is a constant.

But fun might be seasonal or weekend-only. Does it make sense to buy a snowmobile that you’ll only use eight weekends a year? Maybe. It might fall high on your bimodal passion graph.

Does it make sense to buy a boat? I have coworkers who sail every weekend during the summer. They plan sailing vacations on Lake Ontario. They love sailing. A full purchase makes sense for them.

But for the rest of us, renting a boat or snowmobile makes better financial sense. It’s too easy to overspend on a shiny object you’ll underuse

I’ve discovered a second category of “fun objects”: those that are fun only due to confounding factors.

Is a hot tub fun? Or is a hot tub fun when you’re hot tubbing with other people? That’s the lesson I learned…and the money mistake I made because of it. It’s a story I’ve written about before here on the Best Interest.

I bought a hot tub. It’s great, especially on cold winter nights. But my rationale for buying the hot tub was, “Hot tubs are great!”

We checked the record, and that rationale was determined to be false.

Hot tubs aren’t great. Hanging out with other people in a hot tub is great. Oops.

I could scratch my hot tub itch with a few trips per year. The rest of the time, I should just try to hang out with my friends more often. Thankfully, I didn’t use credit to buy the hot tub. I didn’t borrow money for it.

But it was an impulsive purchase. It didn’t mesh with my financial goals. The hot tub is nice, but buying my fun (rather than renting it) was a money mistake.

Money Mistake #2: Decrease Spending vs. Increase Income?

In this world of credit card debt and budgets and dwindling emergency funds, it makes sense to spend less. That’s the easiest way to save money. We can enact it today. Just spend less!

But is it the most consequential improvement? I say no.

Over the long term, you’ll be much better off making efforts to increase your income. Why? Let’s do some quick math.

Sadie makes $50,000 per year. Of that, she saves $10K. The other $40K goes towards bills—that’s $3300 per month.

Real life Sadie. She’s not a human.

If Sadie needed $500 extra this month, she could cut her $3300 monthly budget down to $2800. Scrimp and save.

If Sadie needed an extra $1000 this month, she might be able to cut that $2800 monthly budget down to $2300. Do you see where this is headed?

At some point, Sadie can’t cut any more fat from her budget. She’s limited by her survival needs. Frugality and cost-cutting have lower limits. They are bounded.

But increasing your income, technically speaking, is unbounded. The upper limit does not exist.

In reality, we’re not all going to be billionaires. We will eventually hit an income ceiling.

But Sadie can make a plan to increase her salary. She can look for promotions within her company. She might be able to switch jobs and leverage a raise that way. Making more money is possible for many people in many professions.

For my first few years of personal finance stove-touching, I focused on reducing expenses. And it worked! But I eventually hit a lower limit.

Then I looked for ways to increase my income. The results were fast and fantastic. I found a new job, negotiated my salary higher than offered, and secured the easiest 30% raise of my life.

Cutting spending is fine. Start there, it’s ok. But it’s a money mistake to neglect ways to increase your income.

Money Mistake #3: Listening to Mr. Market

I read a lot of information about personal finance and investing. I’ve done so for years. And there has always been someone calling for a crash, a burst bubble, or a bear market.

See—here’s an example from 2015. Meanwhile, how has the stock market actually performed since 2015?

Up 100% since September 2015…did someone say “impending crash?”

We’re risk-averse, over-developed monkeys. Fear is normal. But we should try to delineate between irrational reactions to fear and rational reactions to facts.

Ben Graham’s famous Mr. Market parable personifies this irrational fear. If you’re not familiar with Mr. Market, follow that link and read up.

When I was new to investing, I listened to Mr. Market. And that was a money mistake! I let my investing choices be controlled by irrational fears.

As a result, I didn’t max out my investing accounts (which I’ve changed now). I estimate that I under-invested by about $20,000 in 2014 and 2015. It’s an opportunity that I’ll never get back.

Fast forward to today, that $20,000 mistake is worth about $40,000. Keep going to 2040, and that mistake is likely to surpass $100,000 in value.

There’s no use crying over spilled milk. It doesn’t keep me up at night. I’ve learned my lesson, and I won’t make that mistake again. And I hope you learn from my money mistake too.

P.S.—if you’re worried about an impending market crash, I 100% empathize. I get it. I recommend you read this and let me know if that helps.

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Money Mistake #4: Caring About the Joneses 

We’ve all heard it before. “Keeping up with the Joneses.” Buying nice things simply because your peers—the Joneses—have those nice things.

But as I pointed out on the Rochester Business Connections podcast:

“The Joneses might be broke.”

-Jesse

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It’s easy to forget that fact. The Joneses might be stretching—and stressing—their budget to a near-breaking point. Are you sure you want to keep up with that?

I worked at a software company after university. They hired tons of 22-year olds like me. And I immediately noticed that many of my peers had nice stuff.

They drove $50,000 cars. They wined-and-dined most nights. They planned cross-country trips on a whim—what’s a round-trip flight, $1000? Chump change.

I know that pang of envy. I wanted those things too! How were my peers—ostensibly on a similar salary as me—living these lavish lives? There are two obvious answers:

  1. They had different budgets and different priorities.
  2. They had alternate sources of income.

#1 makes will always be true. Everywhere you look in life, people will spend differently than you. My coworkers made conscious choices to spend on nice items. I put my money to different uses. That’s neither good nor bad. It’s just different. Each person spends differently.

And #2 is something I have zero control over. Some people are born on third base. Others are born in the ditch. It’s not fair. It’s just luck. I enjoy writing about the role of luck in society.

(But I certainly shouldn’t feel bad that some people are luckier than me. I’m very lucky in my own life.)

Once I’d convinced myself of these truths, my money mistake became obvious. Let the Joneses do their own thing. They’re on their own path. I have my path.

Money Mistake #5: Hunting Mice, Not Gazelles

Why don’t lions hunt mice? What chance does Mickey have against the lion king? Lions could hunt mice in spades!

But the energy gained from that small mouse isn’t worth the lion’s effort. The lion is better off hunting gazelles.

We can—and should—apply a similar thought process in our lives. It applies to time management. It makes sense at work. And yes, it makes sense in personal finance.

Don’t hunt the field mice in your money life. It’s a common money mistake. My favorite example is this classic:

“I’ll drive across town to fill up my gas tank…gas is 20 cents cheaper at that gas station!”

This is quintessential mouse-hunting. Driving 5 miles (which has a cost) over 10 minutes (what’s your time worth?) in order to save, let’s say, 20 cents/gallon * 15 gallons = three dollars!

You are spending—both in time and money—more than you’re saving.

I’m not saying, “Don’t go after free money.” I would certainly pick up three dollars if it was lying on the sidewalk. That’s because sidewalk money costs me two seconds of time and one solid bend of my back.

But this gas savings had a real cost. That cost completely negates the benefit. The $3 gas savings is not free! To ignore that fact is a money mistake.

It’s the same reason lions don’t hunt mice. Some “easy prey” simply aren’t worth the effort.

Money Mistake #6: Servant or Master? 

Various philosophers are attributed with saying:

Money is a great servant but a bad master.

This is certainly a lesson I’ve learned the hard way, and continue to learn—both through normal life and through my blog & podcast projects.

Money is nothing but a tool. Nothing more, nothing less. Tools help us build. But you probably know some people who classify as ‘tools’—and you don’t want them to be your master!

Jokes aside, there’s a slippery slope towards letting money control you. I’m pretty transparent here on the Best Interest. I’m in a healthy money situation and have been for a few years. But I still stress periodically. Without fail, that stress is due to my letting money become more master than a tool.

Perhaps my favorite articles to write are the ones that involve the psychology of money. Stuff like the fulfillment curve and the aforementioned “bimodal spending.”

There’s a pattern in my articles. That same pattern is borne out when other financial writers discuss the psychology of money. Namely, we all ask: how do we optimize money as a tool and minimize its role as a master.

Money Mistake #7: No Budget, No Clue 

For many years, I operated without a budget. It’s true.

Yes, now I’m a budgeting fiend. But there was a time when I had zero clue where my money was going. And that, no surprise, was a massive money mistake.

I’d check my bank accounts occasionally. I knew—roughly—what I spent on groceries and gasoline. But I couldn’t tell you for sure. And I certainly couldn’t have found any good ways to improve my finances.

It’s funny. Because of my lack of knowledge, I can’t even tell you the opportunities that I missed! That’s scary in-and-of-itself. As I wrote in the “Budget Basics” article, all of the experts I spoke with budgeted. They all monitor their spending in some way.

Readers, you don’t have to be a zealot like me. As I outlined in my 2019 review and 2020 review, I budget like a maniac.

But you can’t just “do nothing” when it comes to budgeting.

No More Money Mistakes?

No, no. I’m sure I’ve made tons of other money mistakes. But we’ll stick with those seven today. Quick recap, they were:

  1. Not “Renting My Fun”
  2. Decrease Spending vs. Increase Income
  3. Listening to Mr. Market
  4. Caring About the Joneses
  5. Hunting Mice Instead of Gazelles
  6. Letting Money Be My Master (Instead of Servant)
  7. No Budget = No Clue

Feel free to chime in with some of your money mistakes below. It’s ok. We’ve all messed up before 🙂

Thank you for reading! If you enjoyed this article, join 6000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

Want to learn more about The Best Interest’s back story? Read here.

If you prefer to listen, check out The Best Interest Podcast.

Source: bestinterest.blog

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I know there is something about a mosquito, an albino, and “feeling stupid” but, to be honest, I have no idea what the lyrics in “Smells Like Teen Spirit” even mean.

However, the nonsensical lyrics and simplistic melody didn’t stop Kurt Cobain and his grunge band Nirvana from creating one of the most memorable songs of the century, dominating the airwaves when it was released in 1991 and only increasing in popularity over the past twenty years. Wikipedia even calls the song “one of the greatest rock songs of all time.”

While I don’t understand the meaning of the song, every time I hear it I think of one thing: my retirement.

Let me explain.

Living Like A Rock Star

Immediately after marrying the girl of my dreams, I began looking to buy a home. Neither my wife nor I made a lot of money but we had decided that it would be cheaper for us to buy a home than to rent (and far better than living with family.) We began to look at our options and discovered a small duplex that was in our price range. This property consisted of two separate homes crammed onto one small lot. We bought the property, cleaned up both homes, moved into the small one-bedroom home in the back, and put a renter in the home in the front.

Soon after our tenants complained of “flashes of light” coming through their front windows. I thought nothing of it.

Several years went by and various tenants moved in and out. I heard the same story several times and assumed the flashes were the county or the city doing some kind of analysis. Finally one day the tenants got a knock at the door and opened it to several tall, blonde Swedish tourists.

They wanted a tour of Kurt Cobain’s house.

I knew Kurt Cobain was originally from my city (Aberdeen, Wa) but little did I know – my duplex was actually his first home. I discovered later that Cobain had actually lived in both homes, moving from one house to the other during the first year of his life. His parents moved again to a new location before Cobain was even two years old – but his brief residency at the two homes was enough to put my little duplex on the tourist route of those looking for a glimpse of Cobain’s past.

Despite the cool background story- the “Cobain connection” is not my favorite part about that duplex.

It get’s better.

“What could be better than a rock star living at your home?” you ask!

…well, a lot of things.

  • Jesus
  • A new Star Wars movie
  • “DoubleStuf” Oreos
  • Kittens

You get the point. It’s not that great compared to a lot of things.

However, what I’m talking about is the freedom that duplex provided.

Starting Out Is Hard

Life is expensive and your first few jobs probably don’t pay a lot. Sure, there are a lot of great tips for saving money, but most tips don’t make rent any cheaper or help you earn much more money.

However, buying that duplex did both.

The total cost of the duplex was $80,000.00. With a 3.5% down payment through the FHA loan program (well, it was 3% at the time) the total down payment was just under $3,000 and our monthly payment (including all expenses) was just $600.00 per month. The front home rented for $600.00 per month.

Free living!

My wife and I now lived in our own home for absolutely free. Granted, I needed to fix things when they broke and I had to learn the ins and outs of being a landlord – but we were living for free.

A year later we moved again to a different home (purchased a larger home just one block away) but we still owned the duplex. We simply rented the back house out for $500 per month and now that duplex creates positive income each and every month. Sure, there are maintenance issues that come up every so often (which I usually hire out) and I’m not going to say I always love being a landlord – but starting out with a duplex was one of the best decisions I have ever made.

The Benefits Of A Duplex

I’m not one of those gurus who is going to tell you buying a house is the best thing for you to do.

In reality – buying a home is not right for everyone.

I’ve purchased a lot of properties over the past several years (including single-family homes, multifamily properties, and even an apartment complex) and I spend a lot of time teaching people how to invest in real estate and buy their first home – I recognize that this isn’t the right path for all. I love real estate and especially in the financial leverage real estate has for investments – but others might hate the idea of investing in any type of real estate.

However, if you’ve weighed the options and believe that home ownership is a path you want to pursue, buying a duplex is an excellent option for your consideration. Let me explain a few reasons why:

  1. Easy to Qualify For: Qualifying for a small multifamily property (duplex, triplex, and 4-plex) is exactly the same as trying to qualify for a single family home. You can often times get into a property like this for as little as 3.5% down payment using the FHA loan program. The FHA even has programs that will allow you include “rehab” money into the loan so you can fix it up nice. Additionally, some banks allow you to use the income you’ll be receiving from rent to help you qualify for the loan.
  2. More Money: Obviously, if you “buy smart” – your duplex can provide extra cash to help pay the mortgage, cover you during hard times, or even live for free. This is also an excellent way to pay down your mortgage faster (by applying the rent payment toward paying down your loan.)
  3. Less Risk: One of the most significant benefits of having multiple units is the decreased risk you have of losing your home if something bad happens to your income situation. This benefit increases if you buy a triplex or a four-plex, as the risk is more diversified.
  4. On the Job Training: If you are considering using real estate as part of your future investment strategy, a duplex that you live in can be a great way to learn how to effectively manage rental property. Being a landlord is not always fun, but 80% of the hassle can be eliminated by simply buying smart and managing effectively. Most “burned out” landlords I know became so by treating their rentals as a relaxed hobby rather than a business. By starting small, you will learn how to grow your investment portfolio in a smart, scalable way that won’t make you hate your life as an investor.
  5. Jump Start for your Financial Future: Chances are you don’t want to live in a duplex for very long. However, your first home is seldom the home you stay in. By purchasing a duplex with a long term, fixed rate mortgage (the only type of mortgage you should ever get) you are able to control that property for the rest of your life. Because the property is your personal home, you get to take advantage of the incredibly low interest rates for your primary residence – which translates to low monthly payments that stay the same while rent climbs higher year after year. Purchasing a duplex can be an excellent jump-start to your retirement planning, even if that event is years away.

You Don’t Need To Be A Rock Star To Buy A Duplex

As I said before, owning property is not for everyone. However, making your first home a duplex (or other small multifamily property) can be extremely advantageous for you and your financial future. Not every duplex (or even most) are worth buying, but finding a good deal using math that makes sense is the key to success in real estate. I highly encourage you to take a look at some duplexes if you are itching to buy a home. It might be the difference between success and just wishing for a home. The “Cobain Duplex” is not my favorite investment property because of it’s unique history – it’s my favorite because of the financial helping hand this home gave me when starting out and continues to give me every month.

Have you considered buying a duplex? I’d love to hear your thoughts (positive or negative) on making a duplex your first property or any other real estate questions or comments you might have. Please leave me a comment below and let’s talk about it!

Brandon Turner is an active Real Estate Investor, Entrepreneur, World Traveler, Guitar Player, and Husband. He is located in Grays Harbor, Washington and enjoys finding killer Real Estate deals, leading worship at his local Calvary Chapel, bonfires on the beach, backpacking Europe, and speaking in third person. If you’d like to get a free copy of “7 Years to 7 Figure Wealth,” Brandon’s first eBook and personal manifesto regarding the quickest and most stable way to financial freedom through real estate, please visit his website at www.RealEstateInYourTwenties.com.

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Here at GRS, we’ve briefly covered different daily tasks that are cheaper to do yourself, but sometimes the frugal-minded want some dollars and cents to tie to these decisions.

Today, I’m going to take a look inside the heart of the frugal home, the kitchen, and at a few delicious staples for the average foodie. I’m going to compare prices for making food yourself versus buying it in the store. Unless otherwise noted, these average prices were retrieved from the website of Vons, a West-Coast grocery chain, so prices may vary in your part of the world!

Which is Cheaper: Homemade or Store Bought Bread?

For those of us raised on peanut butter and jelly sandwiches made of thin, white, butter bread, discovering the world of thick, crusty baguettes and pungent ryes might have been something of a life-changing experience.

Since there are literally hundreds of different types of bread, both to buy and to make, our recipe is for your average simple yeasted white bread. It also does not take into account extra purchases like bread-making machines that might lessen the time burden but increase the base cost.

The Common Shopper: Store Bought Loaf
Safeway Butter Top Wheat Bread 22 Oz – $1.99
Natures Own 12 Whole Grain Bread 24 Oz – $4.99
Open Nature 100% Whole Wheat Bread 24 Oz – $1.99

The Alternative: Homemade Bread
Milk 2 Oz — $.16
Butter 2 Oz — $.48
Sugar 1 Oz — $.07
Flour 24oz — $1.44
Salt ½ Oz – $.02
Dry Yeast – $2.19

Total cost approximate 28oz – $4.36

Which is Cheaper?
Winner: Store Bought! Though as you can see, the price ranges on bread are wild. Your bakery might have better specials, so price it for yourself and gauge the final cost according to how much free time you like spending in the kitchen. If you have a few hours and some yeast on hand, make yourself some delicious cheap bread. I guarantee it will improve your sandwiches!

Which is Cheaper: Homemade or Store Bought Yogurt

Yogurt is an incredibly versatile food that is palate pleasing for breakfast, a snack, and —in a pinch—a creamy sour cream replacement that can do wonders on tacos and in mashed potatoes in its unsweetened plain form.

So imagine how exciting it would be to be able to make gallons of it at a time that, in its cultured state, will last for weeks in the fridge. Yum!

The Common Shopper: Store Bought Yogurt
Dannon Light N Fit Vanilla Yogurt 32 Oz – $4.99
Chobani Greek Yogurt Plain 2% Fat 32 Oz – $5.99
Mountain High Plain Yogurt 32 Oz – $4.19

The Alternative: Homemade Yogurt
Milk 32 Oz — $2.49
Starter Yogurt 6 Oz – $.80

Total cost 32 Oz – $3.29

Which is Cheaper?
Winner: Homemade Yogurt, especially if you consider the ease at which you can double or quadruple your recipe without an extensive cost increase. If yogurt is a snack or breakfast staple, you can greatly reduce your costs by preparing it at home by the gallon. Find a recipe that works for you and get cookin’!

Which is Cheaper: Scratch Cake or Store Bought Cake

Queen of birthday parties and weddings, the traditional cake might not be a daily or weekly treat, but for the sake of your emotional happiness you might want to incorporate one into your diet at least quarterly.

For the purpose of keeping it simple, our homemade scratch cake is a simple white cake with white icing.

The Common Shopper: Store Bought Bakery Cake
8 Inch, 2 Layer White Cake – $15.99
8 Inch, 2 Layer Carrot Cake – $9.99

The Alternative: Homemade Scratch Cake
The Cake:
Sugar 8 Oz – $.56
Butter 4 Oz – $.96
Eggs 2 – $.55
Vanilla Extract ½ Oz —$1.43
Flour 12 Oz — $.72
Baking Powder ¼ Oz — $.06
Milk 4 Oz – $.32

The Icing:
Butter 8 Oz: $1.92
Powdered Sugar 32 Oz: $2.79

Total cost 12 Oz – $9.31

Which is Cheaper?
Winner: Scratch cake! But even without doing the math, I think we all know the cheapest method of all: boxed cake mix. That said, if you like control of the ingredients and want to get a lot of compliments, making a cake from scratch might be the way to go.

Which is Cheaper: Homemade or Store Bought Granola

The basics of granola are simple, but the magic that happens when combined in a bowl with milk or yogurt is far from ordinary. So, you’d think that lightly-sweetened baked oats plus combination of fruit or nuts would be the cheapest thing around, right? Read on!

The Common Shopper: Store Bought Granola
Bear Naked Fruit And Nut All Natural Granola 12 Oz – $3.99
Open Nature Granola Cranberry Nut Goodness 12 Oz – $3.00
Cascadian Farm Organic Granola Fruit And Nut 13.5 Oz- $3.99

The Alternative: Homemade Granola
Honey 2 Oz – $.41
Coconut Oil 1 Oz – $.74
Vanilla Extract ¼ Oz – $.72
Dried Apricot (Fruit) 2 Oz – $1.26
Butter 1 Oz – $.24
Quaker Oatmeal 10 Oz – $1.30

Total cost 13 Oz – $4.67

Which is Cheaper?
As you can see, a batch of homemade granola falls right within the range of purchasing it in the stores. But much like yogurt, it is easy to exponentially increase the prepared granola, especially if you have a simple homemade granola recipe to follow. This one is a coin-toss.

Final Thoughts

You can tweak any recipe to be cheaper or more expensive depending on where you source your ingredients, but if cooking is not a fun recreational experience for you, you might also factor in how much money your time is worth.

Overall, it would appear that store bought food is right on trend with the cost of homemade preparation. But if you take it a step further and take into account production costs, packaging, and advertising, it becomes clear that the cost of the food in the package does not go right into the food itself. Homemade food items have the benefit of being fresher, (usually) more delicious, and full of ingredients you know and love.

The choice is yours in the kitchen: homemade or pre-made, and especially if you use items that are on sale, both appear to be frugal options.

Source: getrichslowly.org

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I’m a long-time vocal proponent of higher education. For me, it’s personal. I was raised in a poor family with parents who had briefly attended college, but never with any real gusto. (I’m not sure my father had a plan. My mother studied home economics. Not kidding.)

My uncle got a math degree from a now-defunct community college, and his son (my cousin Duane) went to school back East. I’m not sure if he got a degree, though. (I’ll ask him tomorrow when we get together to bake Christmas cookies!)

But from a young age, I knew that I wanted to go to college. I knew I was a smart kid, and I viewed college as a Way Out. It was an escape from the trailer house I grew up in, an escape from menial labor.

Too bad then that I squandered my college education. I entered Willamette University intending to be a religion major, but eventually ended up with a psychology degree — chased with an equally useless English minor.

My college degree hasn’t really proved useful in my life. Well, I guess I apply both the psychology and English education in my career as a money writer, but I don’t make direct use of the things that I learned. And that’s the rub.

College degrees are valuable — but not if you choose the wrong one.

Although it’s popular in some corners to bad-mouth college degrees, according to the U.S. Census Bureau your education has a greater impact on lifetime earning potential than any other demographic factor. Education matters more than age. Education matters more than race. Education matters more than gender. When it comes to making money, education matters most.

So, I’m always interested when I see knew reports and/or research regarding the value of college. In October, the Foundation for Research on Equal Opportunity (FREOPP) released an excellent report entitled “Is College Worth It? A Comprehensive Return-on-Investment Analysis”.

I like this report because it goes beyond averages. Sure, FREOPP says, the median bachelor’s degree is worth $306,000 for students who graduate on time, but…

…the median conceals enormous variation. Some fields of study, including engineering, computer science, nursing, and economics, can produce returns of $1 million or more. Others, including art, music, religion, and psychology, often have a zero or even negative net financial value.

FREOPP argues that “the decision to attend college is less important than the choices that come next: which school to attend, and which subject to study.”

The analysis reveals that a student’s choice of program is perhaps the most important financial decision he or she will ever make. Most bachelor’s degree programs in engineering, computer science, economics, and nursing increase lifetime earnings by $500,000 or more, even after subtracting the costs of college. But most programs in fields such as art, music, philosophy, religion, and psychology leave students financially worse off than if they had never gone to college at all.

Differences in ROI between programs can amount to millions of dollars.

The FREOPP report — which is very long — includes plenty of interactive stats and charts and graphs. Readers acan compare the value of college majors, expected earnings, and more.

The FREOPP report echoes some of the findings of Georgetown University’s 2015 report on “The Economic Value of College Majors”. The Georgetown study found that engineering majors earned a median starting income of $50,000 per year. Folks with an art degree started with annual salaries of around $28,000. And high-school graduates who didn’t go to college? Well, they had average starting salaries of $22,000 per year.

The bottom line? FREOPP says there are three main messages to draw from their report.

  • First, major is the most important factor when predicting the return-on-investment for a college education. Degree subject accounts for half almost half of ROI variation alone.
  • Second, elite colleges can pay off, but not always. FREOPP found that there is a weak correlation between the cost of a school and how much a degree from that school is worth. But, as with majors, there’s plenty of variation. A film degree from Harvard is likely to be worth less than an engineering degree from a “no name” university.
  • Finally, there are a lot of bachelor’s degrees that don’t make sense from a financial perspective. You might want an art degree or a religion degree for other reasons, and you might be fulfilled with those degrees, but they’re poor choices when viewed through the lens of money.

Here’s what I always say when I write about this subject: The more you learn, the more you earn. And it’s true. No, a college degree isn’t a guarantee that you’ll earn more, but it never has been. But, generally speaking, the more formal education you have, the more money you’ll make during your lifetime. This report only reinforces that conclusion.

[“Is College Worth It? A Comprehensive Return-on-Investment Analysis” at Foundation for Research on Equal Opportunity]

Source: getrichslowly.org

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Rent control apartments can be rented by anyone, and the rent increases are usually low and predictable. This is because the annual adjustment is based on the Consumer Price Index CPI plus somewhere between 2%-10% of your rent. The combination of CPI + the % increase can never exceed 10% total. The law also sets that the landlord may only increase your rent once in any 12-month period. So, if in 2022 your rent was $1500 upon your anniversary/lease renewal, your rent could have a maximum increase of $93. Because the CPI was 4.2% and the city allowed an additional 2% increase, your rent would be $1593 upon renewal.

We wrote a whole blog about it it if you want to Read more…

Or if you want, just check out the rent control buildings below and score yourself some new digs!

One of the worst things about renting is the inevitable rent increases that you get every year. But don’t worry, there are ways to combat the impact of those rent increases – like finding a rent controlled apartment!

Rent control apartments have a cap on how much your rent can be increased each year, so it’s a great way to avoid sticker shock when your lease comes up for renewal. How rent increases are calculated can be a little tricky, but we’ve got all the details right here. So if you’re looking for some peace of mind when it comes to your monthly housing costs, take a look at our list of Washington, DC rent control apartments below.

1673 Columbia Road, NW
Washington, DC 20009

Simple elegance. The best things in life don’t have to be bragged about. They can be simply appreciated each time you arrive home. The Calverton Apartments are in in the heart of the Adams Morgan neighborhood of Washington, DC. An array of restaurants and grocery options are within minutes of your apartment. Inside, you’ll find updated kitchens with energy efficient appliances, grand living rooms and large windows for natural light to pour in. Whether you choose to rent a studio, one-bedroom or two-bedroom apartment, you will be treated to beautiful hardwood floors and ample closet space. This is thoughtful living.

Hilltop House

1475 Euclid St NW
Washington, DC 20009

Hilltop House is a hidden jewel of the Adams Morgan neighborhood. This community offers studio and one-bedroom apartments for rent. Each apartment has large windows and breakfast bars; creating a cheerful, open, and bright atmosphere. To keep apartment living and budgeting easy, all utilities are included with your rent. Hilltop House faces Meridian Hill Park, where residents may take in a variety of social and cultural events. Every Sunday the park is activate with kickball leagues, yoga classes, Frisbee sessions, and drum circles. Just a couple of blocks from the Hilltop House apartment community is the Columbia Heights Metro station with access to both the green and yellow like. Hilltop House Apartments have the perfect location to take in all that Washington, DC has to offer.

Meridian Park Apartments

2445 15th Street, NW
Washington, DC 20009

Enhance your interaction with your home and its surroundings. Meridian Park offers spacious and affordable studios, one and two bedrooms apartment homes for rent. Featuring updated kitchens with stainless steel appliances, new cabinets, and countertops. The neighborhood is comprised of iconic Meridian Hill Park on its western boundary, booming 14th Street Corridor in the neighborhood’s core, legendary U Street corridor to the south, and row house lined streets lined in-between. Meridian Park is just a quick walk from the Columbia Heights Metro station. Your key to the city is here.

Clarence House Apartments

4530 Connecticut Ave NW
Washington, DC 20008

Looking for a studio, one or two-bedroom apartment? Want to be walking distance to the metro, the Giant, Whole Foods, pharmacies, dry cleaners, restaurants, shopping, and great schools? Start your apartment search at Clarence House apartments! Living here means having access to all of our neighborhood’s hidden gems. Stroll to a concert at the Austrian Embassy, enroll in a music class at the Levine School; become a regular at the iconic bookstore Politics and Prose or visit the Hillwood Museum.

4550 Connecticut Ave NW
Washington, DC 20008

The Frontenac is nestled in the heart of elegant upper-Northwest. The Frontenac boasts spacious apartments with updated kitchens and bathrooms. Its classic architectural style, evident in our grand lobby’s high ceiling and in our apartment units’, arched doorways and traditional wainscoting, attracts tours of local art history students.You can meet your neighbors or take advantage of WiFi on the Frontenac’s peaceful roof deck or in its spacious laundry room. Take a stroll to the Van Ness metro station, Giant, Whole Foods, pharmacies, dry cleaners, restaurants, shopping, and great schools for students of all ages. Our neighborhood is full of hidden gems..

Sherry Hall Apartments

2702 Wisconsin Ave NW
Washington, DC 20007

Located on one of DC ‘s primary arteries, Sherry Hall is nestled in Glover Park between Georgetown and Cleveland Park. Many of Wisconsin Avenue’s most popular restaurants are within walking distance. Inside your apartment home, beautiful hardwood floors, brand new kitchens, and large windows enhance and brighten your living space. New kitchens are equipped with stainless steel appliances including a gas range, granite counter tops, and light wood shaker cabinets. All utilities are included so you know exactly what your monthly expenses will be: no surprises, no math!

2800 Woodley

2800 Woodley Ave NW
Washington, DC 20008

At 2800 Woodley, you’ll find large and varied floor plans, all of which include abundant closet space, central air and beautiful hardwood floors. Unique features, such as huge windows and a secretarial desk, lend a sense of charm to your new home. The building is situated on a quiet side-street, yet it lies only steps from the heart of Woodley Park. Some of D.C.’s most popular restaurants and trendy shops are within easy walking distance. Or, if you can’t find what you’re in the mood for at home, hop on the Metro and explore the city. The Woodley Park Metro station is only two blocks away. 2800 Woodley is city living made easy.

Naylor Overlook

2633 Naylor Road, SE 
Washington, DC 20020

Completely renovated one, two, & three bedroom apartments and duplexes for rent. These spacious floor plans feature stainless steel appliances, microwave, dishwasher, lots of cabinet space, ample closet space, brand new bathrooms, and hardwood flooring. Located in the Randle Heights area of Southeast you have the city in the palm of your hand. Take advantage of having  grocery stores, restaurants, clothing stores, pharmacies, nail and hair salons in close proximity. You ‘ll never have to leave your neighborhood!

Wakefield Hall

2101 New Hampshire Ave NW
Washington, DC 20009

Wakefield Hall’s decorative facade gives way to just as beautiful apartments. Hardwood floors, updated kitchens, and walk-in closets create a charming and comfortable living space. Wakefield Hall is located near U St./Cardozo Metro Station, giving you access to all DC has to offer via the yellow and green lines. You can step out your front door and experience the cultural vibes within your neighborhood.

The Shawmut

2200 19th Street NW
Washington, DC 20009

Classic style and modern amenities are the perfect combinations to make you feel right at home. This pet-friendly building in the heart of Adams Morgan, just across the street from Kalorama Park, creates a comfortable living space for all. The Shawmut’s elegant, New York-style exterior gives way to beautiful one and two-bedroom apartments featuring hardwood floors, 9′ ceilings, and updated kitchens.Step outside and you are in the heart of a vibrant, thriving community. From the bustling 18th St Corridor down to Dupont Circle, you are never far from the energy of Downtown DC. Want to get away? The L2, 42, 43, and H1 bus lines are right outside your front door with direct connections to the Green, Red, and Yellow metro lines.

1380 Fort Stevens Apartments

1380 Fort Stevens Drive, NW
Washington, DC 20011

Located in the Brightwood neighborhood, 1380 Ft. Stevens boast comfort and affordability. Spacious one and two bedrooms apartment homes with updated kitchens and baths. Less than a five minute walk from your front door you can find over 15 casual dining options including Julia’s Empanadas, Serengeti Restaurant, and Sabor Restaurant. When it’s time to head to the grocery, Safeway is only .4 of a mile down the road. Commuting is a breeze with bus routes 52, 53, 54, E2, E3, E4, S1, S2, and S4 stopping right outside the property.

1400 Van Buren Apartments

1400 Van Buren NW
Washington, DC 20014

Located in the Brightwood neighborhood of Washington, DC, you’ll find this charming brick building offering spacious one and two-bedroom apartments. Less than a ten-minute walk from 1400 Van Buren’s front door you can find over 15 casual dining options including Julia’s Empanadas, Serengeti Restaurant, and Haydee’s Restaurant. When it’s time to head to the grocery, Safeway is only .4 of a mile down the road. Commuting is a breeze with bus routes 52, 53, 54, S2, and S4 stopping right outside the property. The Takoma Metro station is just under a mile away.

Penn View Apartments

2515 R Street, SE 
Washington, DC 20020

Design cannot be defined by one component but rather the artful intersection of style and function. Located just minutes away from Capitol Hill, Penn View apartments offer affordable efficiencies, one, and two-bedroom apartment homes for rent. Penn View’s luxurious kitchens and functional floor plans are just a few of the features you’ll find at this community. Quality is always on trend.

Eddystone Apartments

1301 Vermont Avenue, NW
Washington, DC 20005

Logan Circle and the 14th Street corridor are becoming the homes of some of DC’s most exciting new restaurants. Live one block away from the excitement at the Eddystone apartments in Logan Circle. The impeccably maintained community has a reputation for top quality service. Combine that with gorgeous efficiencies boasting sunrooms, stellar views and huge walk-in closets and you have your ideal new home. Close to the action…far from ordinary.

Hillside Terrace Apartments

1812 23rd Street, SE
Washington, DC 20020

Looking for an apartment to rent, but want to live in a quiet neighborhood? Fall in love with Hillside Terrace. Our apartment community is nestled in the tranquil neighborhood of Randle Highlands. Randle Highlands is best known as a small residential neighborhood in Southeast Washington, DC. Hillside Terrace’s garden-style apartment buildings are charmingly situated on professionally landscaped grounds. The studio, one, and two bedroom apartments feature updated kitchens and baths, as well as ample closet space and some of the utilities are included with the rent. The Hillside Terrace community is just a short car trip from all of downtown Washington, DC’s entertainment and shopping.

1818 Riggs Place

1818 Riggs Place, NW
Washington, DC 20009

Built-in 1920 1818 Riggs Place is nestled off the beaten path but yet it’s in the heart of Dupont and all it has to offer. 1818 Riggs boasts hardwood flooring, open floor plans, and walk-in closets. 1818 Riggs truly is a walker’s paradise with countless dining options, everything from Five Guys to Thaiphoon and Lauriol Plaza right at your doorstep. The Dupont Circle Metro station only steps away as are the following bus routes 42, 43, H1, L1, and L2. 1818 Riggs, Dupont Circle’s hidden gem is your gateway to all of Washington, D.C.

Chatham Courts Apartments

1707 Columbia Road, NW
Washington, DC 20009

Feel the pulse of the city in the center of Adams Morgan, outside the hustle and bustle of the thriving city awaits. Inside Chatham Courts find a quiet serenity from the moment you come in the front door, you will know you’ve found somewhere special. At Chatham Court, you will find apartments with spacious closets, remodeled kitchens, high ceilings, over sized floor plans, and hardwood floors that make a dramatic impression. The building is conveniently located within easy walking distance to the heart of Adams Morgan.

Cortland Apartments

1760 Euclid St, NW
Washington, DC 20009

Come to the Cortland Apartments in Adams Morgan; you’ll find your choice of affordable studio, one-bedroom, and two bedroom apartments for rent in Washington, DC. These large apartments in one of Washington, DC’s most popular neighborhoods, offer multiple closets, foyers, beautiful hardwood floors, and large windows to welcome in natural light. The building is conveniently located one block from a Safeway grocery store, Starbucks, and countless dining options. In addition to Adams Morgan’s active social scene, The Cortland’s location is enhanced by its convenience. Living here means you are within walking distance of Dupont Circle, Woodley Park, and U Street metro.

Looking for something different?
Search available apartments in the Washington, DC area now.

Equal Housing Opportunity

The housing provider will not refuse to rent a rental unit to a person because the person will provide the rental payment, in whole or in part, through a voucher for rental housing assistance provided by the District or federal government.

Amazon and the Amazon logo are trademarks of Amazon.com, Inc, or its affiliates. Rental providers will not refuse to rent a rental unit to a person because the person will provide the rental payment, in whole or in part, through a voucher for rental housing assistance provided by the District or federal government.

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Source: blog.apartminty.com

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For the past six weeks, I’ve been hard at work writing my “introduction to financial independence and early retirement” project for Audible and The Great Courses. It’s been challenging — and fun — to rework my past material for a new audience in a new format.

Naturally, I’m emphasizing two important points in this project: profit and purpose.

  • I believe strongly that you need a clear personal mission statement in order to find success with money (and life).
  • I also believe that the most important number on your path to financial freedom is your personal profit, the difference between your income and your spending. (Most people refer to this number as saving rate. I prefer the term “personal profit” because it’s, well, sexier.)

That last point is important.

Too many people want magic bullets. They want quick and easy ways to get out of debt and build wealth. They believe (or hope) that there’s some sort of secret they can uncover, that somehow they’ve missed. Well, there aren’t any secrets. Money mastery is a combination of psychology and math. And the math part is so simple a third-grader could understand it. Wealth is the accumulation of what you earn minus what you spend.

There are only two sides to this wealth equation — earning and spending — but a disproportionate amount of financial advice focuses on the one factor, on spending, and that’s too bad. Sure, frugality is an important part of personal finance. And if you’re in a tight spot and/or have a high income and still struggle, then cutting expenses is an excellent choice. But the reality is, you won’t get rich — slowly or otherwise — by pinching pennies alone.

The Biggest Lie in Personal Finance

Recently at his excellent blog, Of Dollars and Data, Nick Maggiulli wrote about the biggest lie in personal finance. What is that lie? He writes:

While there are lots of people who are in financial trouble because of their own actions, there are also lots of people with good financial habits who just don’t have sufficient income to improve their finances.

That’s why the biggest lie in personal finance is that you can be rich if you just cut your spending. And the financial media feeds this lie by telling you to stop spending $5 a day on coffee so that you can become a millionaire.

With charts and graphs and data, Maggiuli demonstrates that the problem facing people with low incomes isn’t their spending — it’s their earning. If you’re living at the poverty line — currently $26,200 per year for an American family of four — you’re not going to escape through thrift. Thrift is an emergency measure, a stopgap. It’s a bandage on a major wound.

Here’s the bottom line:

  • If you’re poor and hope to be not poor, your attention should be focused on increasing income, not on cutting costs. Your expenses are likely already very low.
  • If you have an average household income — currently $63,179 according to the U.S. Census Bureau — your path to building wealth will probably include both frugality and income enhancement.
  • If you have a high income but still struggle to make ends meet, your attention should absolutely turn to cutting costs. You need to rein in your lifestyle. But you won’t accomplish this with frugality; you’ll do this by optimizing the big stuff.

Maggiuli is fed up with the Biggest Lie. It “triggers” him.

“This is the same financial media who write stories about how people save money by living in a trailer, making their own dish soap, or reusing their dental floss,” he writes. “Yes, it’s that ridiculous. But what really gets me is how these examples are provided as ‘proof’ of how cutting spending can make you rich.”

From my experience, this sort of stuff is perennially popular because it’s easy. It’s easy to write and it’s easy to read, even if it doesn’t offer any real solutions. It’s more difficult to write about boosting your income. And, it’s more difficult to act on that information because it takes time, effort, and actual sacrifice.

Real-Life Examples of the Biggest Lie in Action

Just this morning, Trent at The Simple Dollar published an article about optimizing dishwashing for money and time. Trent writes:

If I can invest some time and thought and effort into optimizing a routine I do three times a week, and that optimization trims off five minutes of effort and $0.50 in cost, I’m literally saving 13 hours per year and $78 per year for the rest of my life.

Trent isn’t wrong. If his math is correct (and his discipline too), he will literally save 13 hours and $78 each year by optimizing how he does dishes. This isn’t a lie. In this case, the lie comes from what is implied: Do this and you’ll grow rich. You’ll reach financial freedom by becoming a smarter dishwasher.

Here’s the truth: You don’t reap the thirteen hours and $78 annual benefit as a one-time win. You’re saving five minutes and fifty cents per day. This may seem like a niggling point, but it’s important. If you gain thirteen hours or $78 at once, that’s something real and tangible, something you can work with. But an extra five minutes and fifty cents per day? Not so much.

I’m not saying that you shouldn’t optimize your dishwashing routine. Do it! But don’t expect it to make you rich. Because it won’t.

Here’s a bigger example of the lie in action.

Elizabeth Willard Thames writes at Frugalwoods, which is one of my favorite money blogs. Recently, especially, Liz has been publishing lots of amazing stuff. I look forward to each new article. (Those of you who make use of the Spare Change list of links on the GRS front page have probably noticed that I bookmark Frugalwoods frequently.)

As you might guess from the name of her blog, Liz focuses (almost?) exclusively on thrift. She and her husband practice extreme frugality. She wrote a book, Meet the Frugalwoods [my review], that documented their journey from poor college students to achieving financial independence on a 66-acre farm in central Vermont.

Now, there’s no doubt that Liz and Nate are thrifty. They practice what they preach. But their frugality is not the reason for their wealth, the reason they were able to retire early. You can’t buy a 66-acre farm in Vermont simply by optimizing your dishwashing routine. Or clipping coupons. Or hosting potlucks. To do this, you also need a high income. And that’s a part of the story that Liz doesn’t share with her readers. She and her husband made a lot of money, and that’s how they got rich — not through frugality.

I’m sure Liz doesn’t mean to obfuscate the truth, but that’s the net effect. She’s complicit in “the biggest lie in personal finance”.

To her credit, Liz seems to be incorporating more of the truth in her writing. Today, for instance, the About page at Frugalwoods acknowledges their high incomes. This didn’t used to be the case.

Now, I don’t mean to dog on Liz and Trent. They’re both good people and fine writers. But I think they do their readers a huge disservice by covering just one aspect of the wealth equation, by rarely (if ever) mentioning income. They’re active participants in Maggiuli’s “biggest lie”.

And I’ll confess: For a long time, I was guilty of the same thing. Sometimes, I still am. Hell, I’ve spilled a lot of words lately about my quest to optimize my food spending, haven’t I? I’m not claiming to be any better than Liz or Trent. But I want to at least acknowledge the lie — and the reciprocal truth.

The Biggest Truth in Personal Finance

If frugality isn’t the path to riches, what is? The answer is simple: Big Wins. Big Wins are the quickest way to wealth.

You can scrape your dishes and rinse them in cold water every day for the rest of your life, and you still wouldn’t match the benefits you’d obtain by purchasing a cheaper home. Or choosing a more fuel-efficient car. Or negotiating your salary.

The best way to spend less is to cut back on the big stuff.

If the average American family were to trim their housing costs by 10%, they’d save roughly $150 per housing payment — more than twenty times the benefit of optimizing your dishwashing routine. Transportation offers similar opportunities. According to the American Automobile Association, the average driver spends just over $9000 per year on her vehicle. Reduce this spending by less than one percent and you’ve accomplished the same thing as a year of diligent dishwashing.

But, as Maggiuli notes in his article, income is the elephant in the room, the subject that too many writers ignore.

You can only cut costs so far. There’s no way to reduce your spending below zero, and most of us can’t come close to that. As I mentioned earlier, the U.S. poverty line for a family of four is currently $26,200. (For two people, it’s $17,240.) Not counting his business, Mr. Money Mustache (a famously frugal fellow) spent $13,068 in 2019.

If you’re living like this and want to escape, you shouldn’t look for ways to cut costs. That stuff is useless to you. If somebody tells you otherwise, they’re lying. In these circumstances, you should be trying to increase your income. And even if you have a standard middle-class salary, boosting income is usually the best way to meet your goals.

There are three primary ways to earn more money.

  • First, become better educated. Despite the dire details in the gloomy mass media, one fact is undeniable: The more you learn, the more you earn. In the U.S., education has a greater impact on lifetime earnings than any other demographic factor. It’s more important than your race, your religion, your gender, your location. (In fact, the Census Bureau says education has five times the impact of gender on annual earnings.) That’s great news because while you can’t control your age or race, you have total control over your education.
  • Second, become a better employee. I read a lot on Reddit (and other places) where people piss on their employers, complaining about how their boss (or company) is out to screw them. This stuff is counter-productive. Sure, there are some shitty employers out there, but most are happy to promote and reward their best workers. If you want to earn more, work longer and harder than others will. If you’re in a situation where hard work goes unrewarded, switch jobs.
  • Finally — and most importantly — learn to negotiate your salary. Study after study shows the same thing: Failing to negotiate your salary can cost you over half a million dollars during the course of a typical career. Half a million dollars! For over a decade, I’ve been pushing Jack Chapman’s book, Negotiating Your Salary: How to Make $1000 a Minute. Let me do so again.

“You can’t frugalize income you don’t earn,” Liz writes in Meet the Frugalwoods. She speaks the truth! The biggest truth.

I’m no enemy of thrift. Yes, absolutely, pinch your pennies, if that makes you happy. Frugality is an excellent way to build good habits. Over the long run, many frugal habits combined can make a big difference to your financial situation.

But if you have a low income, do not focus on thrift. It’s a red herring. Instead, turn your attention to Big Wins. And, especially, to increasing your income. Because this is the biggest truth in personal finance: You can’t get rich through frugality alone.

Source: getrichslowly.org