Cost of Living Makes a Big Difference

Where you live, and how much it costs to live there can make a huge difference in what your finances look like.  The differences in the cost of living between someplace like Seattle, or San Francisco and where I live, in North Dakota are stark.  Oftentimes, when you see someone using a calculator of some sort for your retirement “number” there are some assumptions that get made.  People simply assume that they are talking to people who have the same economic circumstances.  They also assume that a 20 year old male is going to need the same amount in their retirement account as the next 20 year old male.

Now, let me tell you something that will knock your socks off.  At least, it will if you live in one of those bigger cities.  Me and my family of 4 (+1 dog) do just fine on less than $70,000 a year.  We’re not extremists, living in a small trailer in a campground somewhere, eating only rice and beans all the time either.  Could we survive on less?  I know we could.  We have debt; student loans, car loans, medical bills, a mortgage, and your regular monthly utilities and such.  But, the cost of living here makes it not only doable, but affordable to live on that amount.

There are some things that cost about the same everywhere.  New and used cars, for instance.  A new pickup here still costs about the same $40,000 (depending on model and features, of course).  Other, more universal goods, like books, computers, and pretty much anything you can buy off the internet, still cost about the same.  But, for many of the other standard items, we’re a lot closer to the source.  A pound of hamburger is only about $3.50.  A pack of cigarettes is only about $4.50.  Compare that to the prices in someplace like New York, and you start to see the benefits.

Where the real difference is, is in the local goods.  Property being the big one.  I’ve compared a few times in different markets.  After the real estate crash a few years ago, prices have gotten a little better, but still aren’t all that close.  We own a 2+1 bed, 1 bath, house with no garage on a good sized city lot.  When we bought it, back in 2004, we paid a little over $46,000.  Some of you reading this likely drive cars that you paid more for.  The houses value has gone up some over the years, but the last time we had it valued, which was in 2011, it was worth $57,000.  I truly hope there aren’t too many of you driving cars that you paid more than that for, but I’d bet there’s one or two.  Comparable houses in some of the larger markets usually are priced closer to $250,000.  If I do the quick and dirty math on that, the mortgage payment would be $2,040 more in one of those larger markets.

I don’t have any real way to compare the utilities, but I have the suspicion that we pay less there too.  Our house is older (c. 1950), so it’s not the most energy efficient house out there, but we still only pay about $90 a  month for our electricity, and about $35-$40 for our natural gas a month.  Water, sewage and garbage are lumped together, and usually end up around $50 a month.

Another huge way that our cost of living is different is in travel costs.  I don’t mean vacations.  For most of that, we’re far enough from a major travel hub that it is usually a little more expensive.  What I’m talking about is commuting costs.  Last week, I slept through my alarm.  I’m supposed to be at work at 8.  I woke up at 7:55.  I skipped the shower, but I was able to get up at 7:55, get dressed, quickly help get the kids started getting dressed, and still made it to work at 8:15.  How many of you would just call in sick because you’d have missed the whole first half of the work day?  When I time my drive to work, it’s somewhere around 5-10 minutes depending on traffic.  And, when I talk about traffic, what I really mean is if there’s anyone coming when I have to make a turn onto a  street and I have to wait ’til they pass. I usually have to fill my 12 gallon tank with gas about once a month.  Sometimes I stretch it to 5 or 6 weeks.  And then there’s the savings on wear and tear on the vehicle.  I rarely put more than 12,000 miles on a car in a year.  That makes it really easy to keep a car for 10 or more years!

Now, I’m not telling you all of this just to boast about how cheaply I can live here.  Really, I just wanted to make you aware of the differences.  What you perceive as “normal” sometimes isn’t.  The same is true for me.  What is a good paying job here, would be considered a poorly paying job in a big city.  People who live in those big cities usually have a lot of amenities that come along with those extra costs.  Choices in movie theaters.  Professional sports teams.  Entertainment venues that can hold more than 30,000 or so people.  They pay for those extra amenities in extra costs that aren’t always monetary.  Crime rates, crowding, and more competition for jobs to name a few.

How does your cost of living compare?  How big is the city that you live in?  (for reference, the city I live in is about 15,000 people.)

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Dollar Cost Averaging; Not Just For Stocks

Most of the time, when you hear or read the phrase “Dollar Cost Averaging”, it’s being applied to the stock market.  It’s the practice of buying a set amount of stock at a regular interval whereby the average cost per share of stock ends up normalizing.  So, if you buy stock high one time, and low the next, and then high, your average cost is going to be lower than the high cost and more than the low cost.  So long as the stock doesn’t pull an Enron, and slowly increases in value, you come out ahead in the long term.

But, does it have to apply to just stocks?  Absolutely not.  It really can apply to anything that you buy on a regular basis.  Gas for example.  A couple of weeks ago, I filled up the car at about $3.89 a gallon.  Today, as I drove by the gas station, it was at $3.69 a gallon.  I filled up at $3.89, so I don’t really need any gas right now, but I seriously considered stopping and topping off the tank to bring the overall cost of the gas I bought over the last several weeks down a few pennies.

There might be some argument that dollar cost averaging doesn’t work very well for consumables.  After all, if I had bought a few gallons at $3.69, my overall reserves of gas would not increase.  I’ve already consumed those few gallons that I paid $3.89 a gallon for.  But, I would have increased the total amount I had bought, and the average price would have been less than $3.89.

Dollar cost averaging works especially well for things that regularly fluctuate in price.  If you’re building a stockpile of food in your basement, it’s chili bean season.  There’s sales all over the place for chili beans.  Now, you could buy 50 or so cans at the sale price, but you might be tight on storage space.  Or, they might expire before you get to use them all.  Instead, you can use dollar cost averaging to buy slightly more than you might normally buy, and bring down the average cost of the ones you have to buy later in the season when they aren’t on sale any more.

O.K.  This does seem a little silly.  After all, who’s going to go out and figure out the average cost of a can of chili beans in the basement?  But, there’s a point in there.  There’s a certain rationality in buying things in set increments over time rather than trying to time the market (or chili bean sale) and buying a whole lot of the item at once.  How many times have you bought something only to find that it was on sale the next week?

And, don’t forget that the same principle goes the other way.  There are many normal things that we do on an everyday basis that can apply to the stock market too!  When we shop, we tend to stick to the brand names we know.  Even if those brand names are generic names.  Go far enough out of town and stop at a grocery store and try and convince yourself that the generic brand at that store is the same as the generic at home.  It takes a bit of thought!  Sticking to companies (brands) that you know when investing can be beneficial too.  More often than not, those brands and companies are companies that have been around for a long time and built a certain amount of trust in the marketplace.  They’re unlikely to just be an overnight sensation, or to quickly fall from favor.  In short, they’re stalwart investing options.

What other everyday habits do we all have that can be carried over to the stock market?  And what other stock market habits do we have that can carry over to everyday life?

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Stacking Discounts for the Win

I’m a bit of a geek when it comes to shopping for stuff.  I like to get the best price (don’t we all?), so I often find myself shopping around a lot when it comes to buying anything that’s higher priced.  And, so long as my patience holds out, I usually do end up getting a good price on whatever it is that I’m shopping for.

Most recently, I needed to buy a new set of tires for our Suburban.  Now, if you’ve bought tires for anything recently, you know that they aren’t very cheap.  In fact, they can be downright expensive.  The bigger they are, the bigger the price tag too.  Winter is almost upon us, though, so it was time to bite the bullet and get shopping.  I looked around locally first, wanting to keep money local if possible.  That was silly.  $150 a tire?  That’s crazy.

So, geek that I am, I went looking online.  There’s several online tire dealers and they usually have decent prices.  I found one that had a good price on a good tire.  Closer to $120 a tire.  That’s better, but still not great.  I noticed that a different model of tire had a nice rebate attached to them.  $75 off a set of 4.  Getting better.  Closer to $100 a tire. The rebate didn’t expire until November 6th, so I had some time to shop around.

Then I got an email from eBay.  eBay has a program called eBay Bucks where you get a certain % of your purchase back as an eBay certificate to use on your next purchase.  In the email, they told me that there was a 48 hour special.  Buy from a list of select shops and earn 20% back in eBay Bucks.  The tire shop that I had been looking at was featured right on the front page of that special list.  Rock on!

After a bit of searching through their store, I managed to find the exact same tire I had been looking at, for the exact same price that they had it for on their website.  Except, now I get 20% back from eBay too.  The deal just got a whole lot sweeter!

Not to be outdone, and wanting to save as much as I possibly could on the tires, I went looking for extra deals that I could stack to save even more money.  Which is where Discover comes in.  Each quarter, Discover runs a bonus program for their cashback program.  Instead of the normal 2% cash back on purchases, they bump it up to 5% on certain categories.  In the third quarter, the category was hotels and travel.  I used that when I went to Denver.  In the fourth quarter, the category is online shopping.  I’m assuming that’s a clever ploy to get people to pay for their online holiday shopping with their Discover card.  Well played, Discover, well played. But, I’m just buying some tires today. ;)

Discover card in hand, I went on over to the eBay store, and bought some tires!

  • 4 Tires: $472  (with free shipping)
  • Rebate: -$75
  • eBay Bucks: -~$94
  • Discover Cash Back: -~$24
  • Total: $279 (or about $70 a tire.)
  • Stacking discounts, cash back, and rebates for the win: Priceless

Taking my time, making sure I checked for all the possible discounts and rebates I could, then stacking them all where possible saved me a ton of money!  Granted, most of that is in the form of cash back.  The eBay Bucks must be used on eBay but we actually buy a fair amount of stuff on eBay because it’s generally far cheaper than anywhere else.  We haven’t bought hardly any Christmas presents yet, so I’m sure we’ll find a good use for it, and we’ll save on that stuff too.  The Discover cashback can be redeemed for gift cards and such, but I prefer to build it up over $50 and then use it as a credit on my account.  And, the rebate, when it comes (why does it take forever to get those?), will likely be used to buy some groceries or something that we would have already been buying anyways! Plus, we needed the tires, so we were going to be buying tires anyways.  (I don’t suggest you do this for frivolous things you don’t need!)

One other note, that’s probably specific to this purchase and not, necessarily, others is that some tire places will charge you a bit extra to mount the tires if you buy them elsewhere.  I’m aware of that, and will probably try and bargain that down a bit, but it makes some sense.  There’s a new local (not a chain) tire shop in town, anyways, so I’ll likely take it up there and pay the small premium to give the local guy some business.  Even if they charge me $25 a tire to mount them (I think it’s closer to $12), the total cost per tire will still be well below what the original price would have been.  And, if I had paid that original price, I still would have had to pay to have them mounted, so I still win!

Do you try and stack discounts?  When was the last time you had a win in discount stacking?  What was it for?