Remember that wood that I fished out of a dumpster a couple months ago?  Now it’s a pantry.  Our laundry room is just off the kitchen, and it had a closet in it.  There was one high shelf and a hanging rail, but other than that, it wasn’t a very useful space.  We didn’t need it as a closet, but we did need a pantry.  So we transformed it.  We used the wood that I diverted from a landfill to make shelves, and I scrubbed them with vinegar before we put them in.  My husband took out the hanging rail and mounted it under a set of cupboards in the laundry room – right where a dryer would go if we had one.  Now I have a place to hang things like shirts as soon as I take them out of the washing machine, and everything else can go out on the clothesline or onto my drying racks.  Here’s the pantry, which will be a lot more crowded after I pick up our first bulk food order this evening:

Dawn at Frugal For Life has written an article about overcoming frugal fatigue.  Given the economic problems of the last couple years, chances are a lot of people have been frugal by necessity for a while now, and Dawn’s article is aptly timed.  Ever since I was a child, opening my first savings account, I’ve gotten more of a thrill from saving than from spending, so I’ve never had a problem with frugal fatigue.  But I do remember the early years of our self-employment, when we were deeply in debt from starting our business (a combination of business debts and debts incurred to buy things like groceries while we were earning diddly squat for income).  I had huge amounts of debt fatigue.  I had all of our debt amounts listed on a yellow legal pad, and I would sometimes just stare at them for ten minutes, wishing that I could get the numbers to go down faster.  Each month was like a puzzle, and I would figure out how much we could put towards each debt, and where it would make the most sense to put extra cash.  We were completely focused on paying off our debts, and it absolutely resulted in fatigue.  I would imagine how amazing it would feel to see zeros all across my legal pad, and mentally fast forward ahead a few months to picture reduced debt.  On one hand, being so focused was what got us out of debt relatively quickly (we paid it all off in about three years), but it sure was mentally tiring.

These days, our only debt is our mortgage.  While it’s a much larger debt than our business debt was, it doesn’t feel as oppressive – although we still want to be rid of it, and are working to pay it down as fast as we can.  But the mortgage is just one aspect of our long term financial goals now; the rest is focused on retirement savings, cash savings, college savings, etc.  We’re just as focused on saving now as we were on paying of debt several years ago, but saving feels like fun.  There’s no fatigue from working to grow our nest egg, the way there was when we were digging out of a hole.  Both are satisfying, and both have the effect of increasing our net worth, but what we’re doing now feels a lot less stressful.

If you’re feeling fatigued by frugality – especially if you’re focusing on paying off debts – maybe it would help to divert a little bit of your extra money away from debt repayment and into a savings account.  For the first year that we were paying off debt, we didn’t save a dime – no emergency fund, no IRA contribution – everything went towards debt.  I wonder if maybe it would have been less exhausting if we had opened a savings account and put a little money into savings at the same time.  In the end, it all evens out, but if you’re considering giving up on frugality because you’re tired of it, taking a mini break now and then might do the trick to keep you on track long term.  Same goes for debt repayment:  As long as we keep the long term goals in sight, a little deviation now and then might be just what we need.

Apparently I’m a bit behind on reading personal finance blogs, because I just came across a couple of articles from February of last year.  They’re old, but make some great points and are very interesting reads.  Trent at The Simple Dollar wrote an article about how a media interviewer called him a cheapskate.  And then Him from Make Love Not Debt wrote about his thoughts on the topic.  I found both articles very interesting, along with the comments from readers.  It seems like everyone has an opinion, and two people can see another person’s frugality in very different ways.  My personal opinion – and we’re all entitled to one – is that I’d much rather hang out with Trent than Him.  I think Trent’s values are a lot more in line with my own, and from the articles I’ve read on his blog, he seems very happy with his life and choices.

But the articles brought up a deeper point than just the choices we make in our own lives and whom we choose as friends.  There was a lot of talk about judging others and self-righteousness – from both sides of the frugal – spendy spectrum.  I think that it’s somewhat natural to tend to think highly of others who are most like ourselves.  Most people tend to choose friends with whom they have a lot in common.   I would say that I’m probably the most frugal of my friends, but they’re all pretty focused on saving for a rainy day and for retirement, and none of them think less of me for shopping in thrift stores and driving an old car.

I do think of myself as frugal.  And I am happy almost 100% of the time.  For me, the connection between those two things is strong, and I believe that the simple life my husband and I have created for our family plays a large role in our happiness.  But I don’t think less of people who make different choices in terms of how they spend their money.  As long as those choices don’t impact the rest of us.  If a person chooses to spend all of their income each month (and I’m not talking about someone working for minimum wage who barely has enough for rent and food), that is none of my business.  But when I started hearing about mortgage bailouts after ARMs began to reset a couple years ago, I’ll admit to being irritated – especially when I read article after article about people who purchased houses that they could barely afford, even at the low introductory interest rate.  Bankruptcy is another example of something that drives up costs for everyone else, and it’s frustrataing when the bankruptcy is caused because a person consistently made choices to spend instead of save.  Yes, there are lots of cases where bankruptcy is caused because a person became too ill to work or suffered some sort of catastrophic circumstances, but there are also plenty of people who live paycheck to paycheck (despite having a good income) and are thus putting themselves in a situation where they have no ability to weather even the slightest financial storm.

What do you think?  Do you agree more with Trent or with Him?  Do you care about how other people choose to spend their money?  Are you more or less frugal than your friends?  Do you friends care?

We recently bought a hanging plant for our dining room, but it came in a cheap plastic hanging basket that was both ugly and non-functional, since it had drain holes in the bottom but no tray to catch drips.  Inspired by the Thrifty Chicks, I went shopping for a lightweight enamel pot, and found one at Goodwill for three dollars.  A few holes drilled in the bottom turned it into a planter, and the lid turned upside down worked as a catch tray underneath. 

To hang it up, I used an old pair of my husband’s jeans that he had donated to my fabric stash.  I cut strips out of the legs, folded them over to make them double-strength, sewed strips together to get the length I needed, and then threaded them through the handles on the pot and the lid.  I sewed loops in the ends of the strips and threaded them through a carabiner that I found in the garage. 

Here’s the finished product, which cost a total of three dollars since all of the other supplies were things we already had:

Recently I got an email from a long-time reader, asking me if we still keep track of our monthly expenses.  I guess the answer is both yes and no.  We do pay close attention to what we are spending, and I check our bank balances and credit card transactions on a daily basis.  But we no longer keep track of every penny, nor do we break our spending down by category anymore.

We paid off the last of our non-mortgage debt in 2007.  Our income has slowly increased over the years without an increase in our living expenses (actually, as we paid off debt, our expenses went down).  And neither of us liked keeping every receipt for every purchase.  It was interesting to keep track of our expenses, and it did provide some motivation for keeping our spending down.  But we’re pretty far along on our frugal journey at this point.  Frugality is second nature around our house, and we never spend money mindlessly.  We ponder our purchases, buy used whenever possible, and avoid buying much of the time.  We use homemade cloth diapers, prepare pretty much all of our food from scratch, ride our bikes instead of driving, read books from the library, and we don’t even have a TV anymore.  Our cars are nearly 20 years old (no payments, and very inexpensive insurance and registration fees), and everything we wear comes from thrift stores.  We’re spending so much time trying to turn our little plot of land into a mini farm that we don’t have time to go out and spend money (we have spent money on things like fruit trees and berry bushes, but we planned for those expenses).

So we stopped keeping track of every penny spend quite a while ago.  Instead, we use a pay-ourselves-first approach that we like better.  Our only debt is our mortgage.  That means that each month our bills amount to current living expenses plus the mortgage.  In addition to that, we’ve created “bills” for several savings accounts.  Some are automated, some are not, but they are all priorities.  We have our son’s 529 plan, our HSA, our IRAs, and our emergency fund.  We also pay an additional amount towards our mortgage principal each month (it varies, but we try to make sure that each month we pay a little more than we did the month before).  Once we pay all of those “bills” we can use whatever is left over for current living expenses.  If there is a higher-than-usual amount left over, we tend to stash it in one of our savings accounts – we don’t spend it just because it’s there, but that’s probably a result of being frugal for so long that the habits are ingrained.

This is what works for us.  It guarantees that we keep making progress with our savings goals, but it also allows us some flexibility with how we spend our money.  Now that our checking account is paying more interest than our on-line savings accounts, we’ll be keeping more money in checking.  This means that we’ll have to do a little more keeping track, since money that is in our checking account will technically count as savings, and thus be untouchable for day to day expenses.  I do like having our savings in a separate place (out of sight, out of mind), but the extra interest in the checking account is enticing, and we’ll make it work.

What about you?  Do you prefer to keep track of every penny? (my mother started doing that in the early 70s, and still does to this day, even though she and my dad don’t need to anymore)  Do you use the pay yourself first method?  Do you have a budget at all?  Have you started keeping more careful track of your money since the economy headed south last year?  I’m curious to hear what other frugalites (and not-so-frugalites!) do.

We spent the whole weekend digging, and our little homestead is coming along nicely.  On Friday, we went to an end of season sale at the local tree nursery.  We had been waiting all summer for that sale, and were there as soon as they opened.  All plants were 25% off, and when you’re putting in an orchard and berry patch, that 25% amounts to a pretty good savings. 

We ended up with 11 fruit trees (cherry, peach, apricot, and apple) and eight berry bushes (raspberry, grape, blueberry, gooseberry).  We also got some weed blocker, peat moss, and drought-resistant decorative plants for areas of our front yard that we plan to cover with mulch and/or rocks – all for 25% off normal prices.   I normally hate to spend money, but we had been planning that shopping trip all summer (and saving for it), and were thrilled with what we got. 

We spent all day Saturday planting trees and bushes.  By the end of the day, we were sore all over, but our orchard and berry patch are now in place… they just need to grow a bit.

Sunday was devoted to planting some grass seed around our back patio in order to reclaim a bit of the yard back from the industrial weeds, and moving gravel from one side of our front yard to the other.  It’s like going to the gym but with an added bonus of getting stuff done.  We were exhausted by the time we went to bed last night, but it feels great to be making such good progress towards our goals.

I’ll leave you with a picture of diapers drying on our new clothesline.  The clothesline was rescued from a scrap metal bin by my husband, and he did a great job of making it new again.  I love looking out the window and seeing our laundry drying on it, and I adore seeing our son’s little homemade diapers flapping in the breeze on the line.

I was catching up on some blog reading this evening, and came across an article on Frugal Zeitgeist’s site that kept me reading until the very end.   She included a link to a story about an economics reporter (of all people!) who, despite his impressive background in covering all sorts of financial ups and downs, got himself into a predicament when he stretched way too far to buy a house that cost nearly half a million dollars.  At the time, his take home pay was $2777/month.  And his mortgage payment came to $2500/month.  He followed it up with one bad decision after another, and the article reads like a cautionary tale about what not to do – EVER.

FZ pointed out that she has a hard time drumming up much sympathy for this fellow, considering the decisions he made over the last few years.  I agree, although I do think that it took a lot of courage for him to write such a personal article and put it out there for the world to see.  Hopefully it will have the effect of reinforcing the idea that we all need to be living within our means, and will keep another family from ending up in the same boat.

Don’t worry… I’m not going to do it.  Not now, anyway.  But I am thinking about it.

Ever since I found out that my credit score wasn’t as perfect as I thought, I’ve been pondering changes I could make to improve it.   I know my score is still really good, but it’s not excellent.  My payment history is spotless, my ratio of available credit to credit in use is very high, and I’ve had credit established since about 1997.  I have a mortgage, credit cards, and a couple store credit cards.  The one thing I’ve never had is a car payment.

My husband’s credit score does fall into the “excellent” category.  For the most part, we have the same credit history for about the last 6 – 7 years, as we started combining our finances in 2002.  But he had a car loan when I met him, and it still shows up on his credit report.  He hasn’t had a car loan since the summer of 2002, so I assume that will be coming off of his credit report sometime this year.  But for now, we think that is what is giving his credit score a boost compared with mine.

I’ve always been proud of the fact that I’ve never had a car loan.  We bought my 1991 Civic with cash ($2300) in 2003, and it’s still cruising along.  Before that, I had a 1989 Hyundai Excel, which my sister still drives.  I just can’t get my head around the idea of paying interest on a depreciating asset like a car.

But I’m wondering if having a car loan might be worth it in terms of boosting my credit (our credit, since we would get the loan together, and I think that my husband’s old car loan won’t be on his credit report much longer).  We’re currently putting money aside so that one day when we need to replace one of our cars, we’ll be able to afford it.  Both of our cars are closing in on 20 years old, and we know they won’t run forever.  Our plan had been to just pay cash for another car one day.

But now I’m thinking about perhaps getting a loan instead.  We would pay it off quickly – perhaps making a total of 10 or 12 payments.  This would minimize the amount of interest we had to pay, while still building an auto loan segment of our credit history.  If I look at the interest as a fee paid to increase my credit score, it doesn’t bother me as much as the idea of paying interest on a car normally would.  If we went this route, we would still only finance as much car as we could afford to buy with cash.  But instead of paying cash, we would make payments for a while.

Right now, both of our cars are running just fine, and we have no intention of replacing either of them until they aren’t running at all.  We put very few miles on our cars, and don’t anticipate having to buy another one for at least a few more years.  So there’s plenty of time to mull this over (and build up our car replacement savings account).  And who knows – maybe there will be zero percent interest offers again by the time we need another car.  One of my girlfriends bought a car in 2002, paid it off in 2007, and never paid a dime of interest.  A deal like that would definitely make me reconsider my “never finance a car” stance.  (Although I think that those offers were limited to new cars, and we would only be interested in used vehicles).

Any thoughts on this?  We don’t often need our credit score, since we rarely apply for credit.  But since we’re preparing to sell our house and buy another one, it’s been on my mind a bit lately.  Anyone have any experience with changes in their credit score following a financed car purchase?

Regular readers of my blog have probably figured out that I’m a pretty liberal gal.  On just about every social issue, my views are pretty firmly on the left.   I support the stimulus plan, primarily because I believe that its proponents in the government are honestly trying to do what’s best for America.  I’m not an economist, and I don’t pretend to understand all of the nuances of how the stimulus will impact the country and individual Americans (to be frank, I think that most reps and senators don’t fully understand it either, but that’s another story).

And yes, on a broad level, I support the idea of stopping the flood of foreclosures and helping people stay in their homes.  I know that this is what has to be done in order to shore up the economy – the housing woes were the start of this whole economic mess, so it makes sense that something has to be done to fix housing in order to fix the economy in general.  And yes, I understand that if the government steps in and helps people who are in danger of losing their home, and if that in turn helps the economy recover, all of us benefit.

But I’m still frustrated by a lot of the chatter that I hear online these days about housing and foreclosures.  ACORN’s efforts to get homeowners to refuse to leave their foreclosed homes bothers me.  Come on, people.  Owning a home is not a right.  There is no guarantee that home values will always increase.  If you buy a house and hang onto it for 30 years – without refinancing and pulling out cash – you’ll probably be able to sell it for a pretty good profit.  But if you’re looking for a guarantee that you won’t lose money, don’t buy real estate.  And I would say that only a life or death emergency could justify taking cash out of your home in a refinance.  Refinancing a mortgage and taking cash out is basically trading the security of staying in your home for whatever it is that the money will be used for.  Life or death emergency – fair enough.  Anything else – is it really worth losing your home over?

I know that there are lots of people who were duped by unscrupulous lenders during the housing bubble in the first half of this decade.  There were appraisers who fraudulently set the values of properties far higher than they should have, and unsuspecting buyers were underwater from day one.  There were lenders who got people who didn’t speak or read Engligh to sign for ARMs that they didn’t have a prayer of being able to pay once the interest reset.

But there were also lots of people who just bought more house than they could afford.  And people who refinanced and pulled out money, using their homes as ATMs.  And people who bought houses they couldn’t afford using “creative financing”, counting on the idea that prices would continue to rise and they would be able to refinance a few years down the road.  It’s frustrating to me that my tax dollars will be used to bail out these homeowners.  Yes, I’m a bleeding heart liberal, but I still find this pretty hard to swallow.

My husband and I bought our house in 2003.  Back then, loans were handed out like candy on Halloween.  I don’t remember the specifics, but I know that we were approved for a more expensive house than we bought.  The median house price in our town is $450,000.  We bought a house for $190,000.  Could we have bought a house for $300,000?  Sure, but it wouldn’t have been very responsible of us.  Could we have bought a more expensive house, financed it with an ARM, and tried to refinance after a few years?  I suppose so, but I’m glad we didn’t.  We chose to just stick to what we knew we could afford, even if our financial situation didn’t improve over the years, and even if our house didn’t go up in value.  In the first few years after we bought our house, we struggled to make ends meet.  But we never missed a mortgage payment (or any other payment, although there were times when we only made minimum payments on our credit card).  Our cars are nearly 20 years old, and just about everything in our house was purchased second hand.  But we now own about 25% of our home.

It’s frustrating to me that people are talking about bailing out homeowners whose houses are worth less than they owe on their mortgages.  Tell me – if you buy a house and then it appreciates dramatically over the next few years, would it be fair for the previous owner to demand that you give them a share of the value gain?  Of course not – that’s what real estate is all about.  You buy and you sell – everyone hopes to buy low and sell high, but that’s not always the way it works.  And if people aren’t comfortable with the idea that a piece of property might lose value after they buy it, they should probably stick to renting.

I’m a little bitter about the whole housing bailout situation.  But I’m also hopeful.  I’m hopeful that this whole situation will teach people about the value of living within their means.  I’m hopeful that people will realize the importance of saving and of buying less than they can afford.  I’m hopeful that the stimulus bill will be successful and that the economy will bouce back.  I’m hopeful that this whole mess will not repeat itself.

As for me and my family, we will stick to our frugal lifestyle and feel fortunate that we didn’t take one of the many wrong turns that led so many homeowners into situations that require a bailout.  I know that we’ve worked very hard, but I also know that we’re lucky.  We were lucky to both be raised by parents who understood the value of a dollar and passed on that knowledge to their children.  We were lucky to be born into families that valued education and encouraged us to go to college.  We are lucky to have each other, and our son.  See – it worked.  I was feeling frustrated about the idea of foreclosure bailouts, and then I reminded myself of how lucky I am, and now I’m feeling all mushy inside.

What do you think?  Should the government write down the amount owed on mortgages where borrowers are underwater?  Should the terms of loans be changed to make it easier for people to pay their mortgages? (like the idea of setting a mortgage payment at 1/3 of a borrower’s income).  Do you have any ideas for how the government could intervene to prop up the housing situation in the fairest possible way?

As a follow up to the post I wrote a few days ago about the new consumer protection laws and the possibility that thrift stores would have to stop selling children’s items, I was happy to come across this article tonight.  Looks like second hand stores will be ok.  Now we just have to make sure that the same is true for mom and pop businesses that make clothing and toys for kids… call your congressional reps!

And now for my two cents on credit scores.  Since we’re considering buying another house, we decided to take a peek at our credit scores.  We get our credit reports every six months or so, but have never paid to see our credit scores until now.  We went to the annual credit report site and picked Experian.  Credit scores were $5.95 each, and the credit report is free (we normally just get the free report).  We got my husband’s score first, and it was great.  It put him in the “super prime” category, which is what Experian calls their best credit scores.  No surprises there.  Then we pulled my credit report, and I was in their “prime plus” category.  I was two points below the cutoff for super prime, and my credit score with them is still considered very good.  But I’m a bit of a perfectionist, and when there’s a super prime option out there, I don’t want to be prime plus (pout).  My husband, who is very good at finding humor in just about any situation, thought it was quite funny that I (Miss Frugal Babe, and household money czar) somehow had a lower credit score than he did.

Just about all of our accounts have been joint for at least the last six years.  But I’ve never had a car loan, and he had one when we met.  He hasn’t had a car loan since 2002, but it does still show up on his credit report, and I’m sure that’s giving his score a bit of a boost.

But here’s the part that gets me.  Experian gave me a list of things that are lowering my score.  Of course time was a factor (when will this not be the case?  I’ve been in their files since 1997).  But the number one reason they listed was “The average loan amount across open, recently reported real estate accounts, such as a mortgage, is too low. Having low loan amounts has a negative impact on your credit score.” Are you kidding me??!  After the mortgage debacle that has ripped through the American economy over the last year or so, that is still considered a valid reason for a credit score to be lowered?  Maybe someone should let them know that people are defaulting on mortgages all across the country right now, and a big reason is that mortgage lenders approved people for loans that were too big (and used creative financing to seal the deal).

Ugh.  I checked my report closely, and everything is in order.  And I gotta say, I’d rather have a credit score that is two points below what Experian considers “super prime” than have a higher score and a higher mortgage balance.  Mostly I’m just amazed that any credit reporting agency is still encouraging bigger mortgages right now, and penalizing for smaller ones, considering the state of the mortgage industry.

Have any of you ever paid to see your credit score?  Ever been surprised by what you saw, or by the explanations given?