Dealing with Home Insurance Shenanigans

Earlier this week, I was combing through some old documentation at my desk, throwing away irrelevant papers when I came across a copy of my home owner's insurance policy.  I looked it over and saw I was paying about $57/month.  Being the ever inquisitive deal hunter, I had the great idea to call them up and see if I could get re-evaluated since I now have more information about my home.  You see, I first applied for the insurance policy before moving into my house with only limited knowledge.

After talking with the very nice customer service rep, she warned me that there was a chance that after all is said and done, my policy could go up do to the additional information.  I thought, "that's fine, as long as everything is accurate".  I walked her through all the additional information, vinyl siding, detached garage, etc.  Finally, she tallies all the results into her company's calculator and she informs me that my new policy will now be $97/month!!!  The rest of the conversation went something like this:

Rep: "Now I told you this could happen, and we have to charge you for this price.  I know that I will sleep better knowing that your house is covered."

Me: "What is that supposed to mean?  Why did the price go up so much?"

Rep: "You see, your house was previously only covered for $310,000 of coverage in the case of completely rebuilding it.  That is less than 80% of the coverage needed based on our calculator.  You will instead need $480,000 worth of coverage.  On top of that, you also need $250,000 worth of personal property replacement insurance."

My home upon first moving in.

Me: "Hold on here.  I paid less than 1/3 of the value you are covering with this insurance.  This is completely absurd.  I can also tell you I have probably less than $20,000 worth of valuables in the house even when you include all our clothing, appliances, and nick-nacks at current values.  This just doesn't make sense."

Rep: "Well sir, your previous coverage was only 70% of our estimated costs, which means we can deny you coverage.  At minimum, it has to be 80%."

Some more arguing went on:

Rep: "Well, if you don't like the price, feel free to shop around."

And that was a great point she made.  In less than 20 minutes, I went to one of their competitors websites, typed in the same information I had given her, and came up with a great policy for only $46/month.  This was even better than I had hoped for.  I quickly called up the new sales rep and accepted their policy.  I informed my bank so that the escrow company knew who to pay, and I was all set...headache gone!

If there is a lesson to be had here, it is to ask the questions and always look around.  Modern technology has made it incredibly easy to comparison shop.  I unfortunately settled on my first try with home owner's insurance, but I now have a great deal!  If you think you're paying too much, try doing some quotes with additional companies online.  It never hurts to ask.

Wonderful Moment of the Day: Realizing I just saved $132/year on home owner's insurance!

How I saved Myself over $500,000!

My handy and faithful mower

Yep, you heard me right, I just saved myself $500,000 and it involved very few life changes.  So, am I going out to buy a brand new boat or new car...well not really.  You see, I don't exactly have that money right now, but it is something I will have.  Let me explain further.

I hate spending money in most situations, but I do not consider myself cheap.  When guests arrive or company visits, I often treat them and have a grand old time.  However, I have found places in my life where spending more money is just not necessary.  Here's a list of all the places I've saved a boat load of cash.

1.) Having 1 car ($1,900/year)- when you think about the wear and tear, gas, insurance, and other costs, having another car can really start to add up.

2.) Basic Internet and no cable ($720/year) - I think too much TV is bad for the brain plus I just don't want to pay for it.  Having just basic Internet provides hours of entertainment.

3.) 2 Basic feature phones ($1,440/year) -  Smart phones are wonderful technology, but when I recently went over to my friendly Verizon store and asked how much it would cost, I was stunned to find out that the bill would be close to $100/person/month.  No way!

4.) Salvation Arm ($120/year) - I don't do a bunch of shopping at the Army, but I do get about 4 dress shirts and a pair of pants from them every year.

5.) Manual lawn mower ($28/year) - I have both a manual lawn mower and a gas powered push mower, however I only use the gas one once every 3-4 weeks.  In between, I use the manual mower which is quite, fun, and saves on gas and wear and tear to my other mower.

6.) Paying off debt ($1,040/year) - My wife and I have taken a pretty aggressive stance on paying off our debt from student loans and our mortgage.  We save about $1,040/year (probably for the next 5 years) in interest.

7.) Buying generic store brand groceries ($1,040/year) - We have a really great store in our area where the generics taste just like the name brands.  I estimate we save about $20 per shopping trip just by switching to them.

8.) Bringing my lunch to work ($520/year) - I figure it costs me about $2/day more to buy my lunch then to bring in some leftover dinner.

In total, this brings me to $6,788 per year in savings...but I said I saved $500,000.  Well, this is where you have to start thinking in terms of retirement.  I mentioned it in this article, but if you take $6,788 (less than this after 5 years when my debts are paid off) per year and apply an inflation adjusted 4% return each year, you will end up with $566,000 in retirement income.  Not too bad for just applying some good frugal habits to my life.  You can do this too; just find some areas where you are spending your cash everyday, and see if there are ways you can spend less.  Besides, who doesn't like half a million dollars.

Wonderful Moment of the Day: Realizing I only have 1 egg in the fridge and invent a new food for myself called the egg omelet wrap.

The Pursuit of Creativity

While creating this blog, I struggled with the idea of self promotion; the thought of shamelessly using this avenue of communication to spread my own fame left a sour taste in my mouth...but damn it, it's my blog and I'll do what I want to!

Which brings me to my next invention: The Hydra.  Essentially, I wanted a garden hose with many heads.  At minimum, it seemed like a great idea.  We'll see if the Quirky community likes it.  But that's all fun and games, and there is actually a lesson to be had in today's self promotion.  Do you have a pursuit of creativity?

As with most people, my normal weekday is rather routine...I get, go to work, come home, cook dinner, etc...However, I've learned that setting aside some portion of my day for creative purposes is essential to enjoy the spice of life.  The Artful Genius has an interesting article on the benefits of being creative, and I'm a firm believer that expressing your creative side can have great lasting impacts on you for the rest of your life.

I've spoken much about the creative process already in this blog; from finding your own muses to developing your inventive ideas.  The important thing to keep in mind is that you will not succeed if you never try.  I'm a firm believer in the American Dream and if you think hard enough, try hard enough, and strive for success, you will achieve it.

Wonderful Moment of the Day: Harvesting my first beans from my garden.

The Seven Wastes: Transportation

Awhile back, I had the opportunity to work in Washington DC for about 2 years.  It was very exciting and I was but a bleary eyed young P-Money.  I was so proud to say I worked in the Nation's Capital and I definitely got to see some pretty cool stuff.  From bowling with Congressmen, to watching political convoys or marine one pass bay, the excitement never ceased to amaze me.

The first apartment I had was sharing a bedroom with a roommate in a 5 bedroom townhouse in Georgetown.  My rent at the time was $900/month.  To put this into perspective, there were 7 other people living in this house and sharing just 1 kitchen and 2 bathrooms.  Total rent = $4500/month...ouch!  Georgetown wasn't even that convenient, and I had to walk awhile while also taking at least 1 bus.

Next, I moved to a suburb in Maryland close to the metro in Rockville.  Luckily, with this apartment, I shared a 3 bedroom condo, 2 baths, with 2 other guys for about $2100 per month.  Not to shabby considering I still had about 30 minutes worth of walking on top of a 30 minute metro ride.

My Old Rockville Apartment on the bottom floor.

Finally, for that reason and many more, I had enough of the big city life and instead moved to a smaller city in the north (some might consider the "rust belt").  I got an efficiency downtown for $500, and walked to work (about 20 minutes).  When I think about it, switching cities to a lower cost of living and reduced commute allowed me to have much more of my life back.  On average, my DC commute was 1 hour per trip, 2 hours per day, 10 hours per week...about 20 days of my life per year after vacations, and would have amounted to  2.2 years of my life if I had maintained this commute until I retired.  I was even one of the lucky ones in DC!

It always amazes me how much time people can waste just through their daily commute, which brings me to my next series: "The Seven Wastes" which focuses on the lessons learned via the Toyota Production System or (TPS).

The first one pertains to my own wasted time from the past, and that is Transportation.  Basically, every time a product is moving between places, it is wasted time because nothing productive is being done.  Eliminate the transportation costs while keeping all other costs equal, and you will save big bucks.

This concept directly applies to our own lives.  In the world of expanding suburbs, and exurbs, the less than 30 minute commute is becoming a thing of the past.  Since moving to my current city, I bought a house within the city limits, next to a subway stop in which I get free fare, and still have a commute less than 30 minutes.  I even live in a very nice area.

You have to ask yourself how much of your life are you going to waste for the sake of commuting.  It's true that some of us simply don't have much of an alternative, especially if your spouse works in the opposite direction.  However, it pays to do the homework and consider transportation routes to and from work.  Google maps does a magnificent job calculating routes by car, public transportation, and even walking.  Consider these concepts the next time you decide to move.

Wonderful Moment of the Day - Doing some manual labor and feeling the satisfaction of hard days work accomplished.

Your Own Personal Terra Nova

Temple of the Blue Moon Tree House at Tree House Point

You may have heard the words "Terra Nova" used before throughout your life, especially most recently from a hit TV show bearing the same name.  In Latin, Terra Nova means "New Land" and has been used throughout history as a beacon for new found adventure and freedom.

Marred in the early days of the Roman Empire, this term was used to describe new "unknown" lands.  History flew bye, and subsequent empires used the term to designate places such as North and South America.  These were lands fraught with danger, however many would traverse the violent Atlantic to have a chance and achieve their own fortune and fame.  Many times, they would come to ruin, however a few of them managed to establish lasting settlements and achieve what they had so anxiously wished.

When it comes to our own personal lives, "Terra Nova" may mean very little, but I'm here to change that.  I'm hoping to inspire you to seek out your own Terra Nova as a source of inspiration and happiness.  At minimum, you should break out of your comfort zone and experience new life adventures in places you thought you'd never go.

Most recently a couple months ago, my wife and I had the privilege to travel to Seattle for my sister-in-law's wedding.  It was a great time filled with family, food, and friendship....let's not forget the dancing!  However, we desired something a little bit more on our trip.  For most of the weekend, we had been busy with wedding related events, and had not really taken the time to explore the area.  It is exactly for that reason why I booked a stay at Tree House Point.  Much like a bread and breakfast, visitors have the chance to stay in a beautiful old growth forest next to a dashing brook, however there's a catch...you are sleeping up in a Tree House!

The chance for adventure and a story to tell was definitely worth the higher than normal hotel price (and who says I'm cheap).  We had a wonderful time and it made a memory out of the whole situation.  The whole point I'm trying to get at hear is that you need to find your own Terra Nova whatever that may be.  Travel to new places, meet new people, try something that you have been putting off, or even learn a new hobby; these are all examples of new lands that you must explore.  What I don't want to happen to you is to work as hard as possible only to realize that you have worked your life away.

Wonderful Moment of the Day - Walking to the subway in the morning through an otherwise perfect and sunny day.

Economics 101: The Power of Beta

I once took a Finance class during my MBA program in which the professor asked the students if they knew what the beta (or risk) of their investment portfolio or 401K was.  He was happily nodding his head in approval for two reason; 1.) he knew it is usually almost impossible to know what beta of your portfolio is, and 2.) he knew most of the students didn't even know what beta was.  Now being a good little P-Money that I was, I rose my hand and said "mines 1".  He was shocked and congratulated me on my financial success.

Now, what the heck does all that mean?  Well, the beta score of a given stock or portfolio is essentially a measurement of risk in terms of the overall market.  You see, the Dow Jones Industrial Average or the S&P 500 (you might have heard these being quoted on the nightly news) are each a collection of stocks that serve to mimic the US economy.  We therefore establish that the risk of the overall US economy is 1.  Now say you owned stock in Google (who so kindly hosts my humble blog).  If you were to look up its beta , it hovers around 1.08 which means that the stock is approximately 8% more volatile (or risky) compared to the overall US economy.  Likewise, if a stock was 0.9, than it is 10% less risky or volatile than the US economy.  Now let's look at an economic model called the Capital Asset Pricing Model (or CAPM).

The above model describes a relationship between a return on a portfolio and the subsequent risk.  The tangency point is the point where the market risk and return line up.  Generally speaking the S&P has returned somewhere between 8% and 9% per year.  Now the efficient frontier is the absolute best a portfolio can get.  The yellow dot towards the top of the red line indicates a portfolio where the return is higher but takes on far more risk.  If it were to be above the line, more people would invest in it, the portfolio would become sluggish and migrate back towards the red line.  

Now how does this relate to me?  Well, this type of information is very important when choosing what type of fund to use in a company 401k.  Usually a company will offer a series of funds and then some kind of index fund.  I highly recommend choosing the index fund for two reasons; 1.) You will almost never find a portfolio that has a higher return for the relative risk, and 2.) the expense ratio is minuscule.  In case you didn't know, the expense ratio is how much it costs to manage your fund.  Some more managed funds are 1-2% which means they take away 1-2% of your return each year.  A general index fund is usually around 0.05% making it well worth the value.

Now that you know a little bit about beta, you can wow all your friends and tell them P-Money is awesome!!!...just kidding.

Wonderful Moment of the Day = Lying in the grass with my wife and looking up at the planes as they fly bye.

Book Review: Bringing Out the Best in People

The need for effective management in the corporate world is absolutely paramount.  I know each one of you have probably experienced a manager whose athority you quesitoned.  I know I've had my fair share, and I want to solve this issue by partly talking about a book that has impacted my life significantly: Bringing Out the Best in People by Aubrey Daniels.

I was exposed to this book via the company I work for in which its core principles are highly emphasised.  Aubrey Daniels promotes the concept of Precision Leadership and has designed his whole consultancy around this particular form.

The main point he emphasizes throughout his book is that precision leadership is all about understanding how to motivate people via the right incentives.  If you think about it, nothing we do is without some sort of positive incentive or reinforcer.  You might, for example, walk the dog, because you don't want to clean up a mess in your house.  You may cook foods your family likes, because you enjoy their appreciation.  Everything boils down to two fundamental acronyms; PIC and NIC.  The first is defined as Positive, Immediate, and Certain.  This is the optimal methodology for motivating people.  If you want to change someone's habit or encourage work they already perform, positive motivation is the best way to do it.  Even better is the second term, Immediate.  If you can give them positive incentives (whether it be a pat on the back, or some sort of accolades) immediately after your worker performed the action, it will have a far more dramatic effect than if you do it at some point in the future.  Finally, the last part of this acronym is the concept of Certain.  The employee should know that every time they do this action, they will get positive, immediate, incentives. 

Another way of managing people is through NIC's, or Negative, Immediate, and Certain.  Much like a PIC, a negative action will have immediate and impactful consequences when promoting some sort of behavior.  It should be noted that Daniel's goes into detail on how negative reinforcers serve more as an antecedent to prevent the action from happening again, but should not be the best form of motivation.  Would you want to work for a company that only provided negative reinforcers?  Sounds pretty bad.

The really great thing about the whole ideas behind precision leadership is that it is completely applicable to every situation in life.  Raising a child is all about finding out what incents them, same thing with raising a pet.  These concepts could be used in negotiations, resolving and issue with a spouse, or any number of situations; the list is endless. 

For me personally, these concepts in the book have taught me many strategies that I will use for the rest of my life.  Better yet, I borrowed the book from a friend for free...how's that for a return on your investment!

Wonderful Moment of the Day = Coming home to a beautiful salad dinner my wife made!

Economics 101: Thinking in Terms of Retirement

If you're in your mid to late 20's or 30's, retirement might seem like some mythical time frame so far in the distant future, that you need not concern yourself with it at this time in your life.  I have often thought about the money I'm saving up for retirement and what I could be doing with that today, and sometimes I even get frustrated with myself.  Going out to dinner more, spending more on vacations, or just having more fun with your family and friends may seem like a good idea now, but you have to ask yourself one question; do you want to spend the rest of your life working a day (or night) job? 

Some people honestly enjoy their employment, but for the sake of definitions, I don't consider an employment you are passionate about to be a real job.  A job is something you do for the sole purpose of making money.  You may like your job, but deep down you just know that it is not your calling. 

There is an out, however!!!!....RETIREMENT...

Depending on how well you do with your yearly savings will most likely determine how close retirement is for you, but I will get more into that in a later post.  Right now, I'd like you to focus on a simple daily habit that many of you probably do everyday; the purchase of a designer coffee such as Starbucks.  According to a study performed in 2004, the average Starbucks customer spends approximately $4 on a drink per visit.  That may not seem like much per day, but lets do a little math around this and think in terms of retirement money.

Say for example, you buy one $4 drink per day (say 15 days per month).  This results in a latte budget of approximately $720/year.  Let's also say that instead of buying a latte, you used that money to invest in an index fund that had an average yearly return of 9% (which has been the S&P average).  Over the course of 30 years, your daily work habit will amount to approximately $98,930 of opportunity cost and direct coffee expense.  Now, I introduced another concept here with opportunity cost, but all you really need to know about this term for now is that it's the expense of not putting your money towards an investment.  An example of this would be if I just leave $100 in a checking account, then in one year, I would still have $100.  In reality it cost me $9, because I could have put that money towards and investment with a 9% return and have $109. 

The point I'm trying to make with the argument above, is that each expense you create has more value attached to it than the immediate ticket price.  If I do the same analysis above with just one $4 coffee, than each cup costs you $53 in retirement money (even more if you are 40 years or more away from retirement).  So, you need to start asking yourself an important question the next time you buy a cup of coffee: is this really worth $53?  Start thinking in terms of retirement costs, and you will start saving big money!

Wonderful Moment of the Day = Lying in my backyard and listening to the birds chirp while my cat chases a moth.

Modern Day Muses: The Shower

A Muse reading a scroll

Over the weekend, I had the chance to see the new Prometheus movie, and I was wowed with the special effects, technological wizardry, and overall great plot.  Not everyone is gifted with such creative genius as those that can write amazing movie scripts, however there are places that can stir the creative gene and get you thinking in the right direction.  I like to call them Modern Day Muses, and thus named this ongoing series.

Much like the Greek mythological influences that inspired Prometheus, a Muse is also Greek concept classically defined as a goddess that can inspire a proponent of the arts.  Whereas we all know such creatures don't exist, we do see their manifestations in many parts of our daily world.  I give you my first example....the shower!  Yes, the humble shower can be an amazing place to think and gather your thoughts.

I experienced one such creative brainstorming session while showering a few days ago.  I've often desired to be an inventor, but have always confronted a sort of writers block when it came to idea generation.  Then it hit me...a concept for a new type of garden hose (more to come on this invention in a later post).  But more importantly, what is it about a shower that can cause such idea generation? If you think about, entering a shower is sort of like going through some sort of portal into another (cleaner) realm.  Psychologists have classified this as the Doorway Effect, and it usually pertains to forgetting why you were going through that doorway in the first place.  You've probably experienced this before when you enter a room and forget why you where going that way only to turn back around and go back from where you came.  I know I've jokingly chalked it up to just getting older.

It's precisely this idea of forgetting as you walk into the shower that makes it  modern day Muse.  As you enter the shower, you are forgetting all the chores, labors, and concerns that you will fuss about later in the day.  In this brief period of time, it is just you, the soap, and the soothing warm water, and you can truly let your mind wander.  Don't let your mind worry about work in this time frame.  You have all day to think about that.  Instead, use this time to think about things that strike a passion in your life whether it be family, hobbies, or other interests.  This is your time, so use it for yourself.

If you would like to be more creative, try keeping a small pad of paper and a pen in the bathroom next time you take a shower.  You might be surprised at some of the great ideas you will come up with.

Wonderful Moment of the Day = Eating an almond crescent with my wife as we walked through the rain in a local festival.

Economics 101: How much money do I really need?

Sometimes I have to sit back and think about all the opportunities afforded to me and my family.  When you really think about it, we are truly in a land where those who seize the day can succeed.  This is also the portion of the text where many of you might get a little jaded when I approach the next subject....Money!  We all need it to survive in this modern world, but how exactly do we acquire such a commodity? 

I am by no means an expert on the almighty dollar, but I've managed to get my house in order and have learned a thing or two along the way.  It is my hope to provide a blog series throughout my journey hear on some basic economics and personal finance management that everyone should know and understand.

Chinese Pu Currency

First of all, think about how much you actually need in any given year.  I'm not talking about how much you currently spend, but how much you need?  When you get down to it, you can probably make a list of luxuries or monthly bills that just aren't worth the trouble; things such as that $80 cable bill, $100 smart phone plan, or the second car in the garage.  If you were to remove just those three things, you could literally save yourself $10,000 per year in maintenance, insurance, gas, and all the other hassle that comes with the territory. 

Financial prudence isn't something we have traditionally been good at in this country, but like anything, a little practice can go a long way.  The Mrs. and myself have not had cable television for over three years and at this point, we don't even care.  Yeah, it would have been nice to see my "pictures", but was it worth the $40/month ($480/year)?...no thank you.  Instead, I've had more time for other productive pursuits and hobbies that have enriched my own life.  You may even find that after a few months, you don't even miss the old boob tube.

Here's some practical advise; make a list of all the monthly expenses you pay in a given month.  Review this list, and rank each bill as 1. necesseity, 2. convenience in life, 3. luxury.  Chances are, you can probably eliminate all the level 3 expenses and maybe even a few level 2 categories.  Substitutes such as Redbox, or general internet videos can make for great entertainment.  Congratulations, you just made a huge return on your investment!  In later posts I'll discuss what you can actually do with your newfound wealth, but in the meantime, check out some of my favorite sites in the "Life Improvers" section.

In closing, I leave you with a:
Wonderful Moment of the Day  = talking to my neighbors about my wifes hilarious addiction to ice cream truck icecream and literally running down said truck.

Day 1 - Reason to be Motivated

The creation of this blog has been a long and lengthy processes of debate within my life.  For a few years now, I thought to myself that writing a blog would be a good idea....but there were always the excuses.  Would anyone read it?  Would I have the determination to write something with some sort of consistent frequency?  Would I have a topic worth reading?  The answer is probably no for all of these but screw it, I'll never know unless I try.

Throughout your life, you've probably seen an interesting piece of art and thought, jeez, "I could do that".  In reality, you probably could, however you didn't.  There could be a plethora of reasons, but it comes down to motivation.  I found myself talking to my wife about all the hair-brain schemes I've concocted, and as a dear and loving spouse she replied with "that's wonderful dear".  And so I continued without ever really pursuing my ideas and schemes. 

The day that changed it all for me involved the first time I've ever tried an energy drink (which I won't name, but rhymes with "stock car") and realized the superhuman energy and focus it provided.  I told my wife after a nice refreshing, and idea generating (I'll get more into this in another post) shower that I am finally doing it and will aggregate my thoughts, ideas, and schemes into a blog.

Further motivation was generated through my discovery of Quirky.com and my subsequent first idea submission for a curved umbrella.  This adventure started me on a path of invention and self-discovery.

http://www.quirky.com/ideations/237723

Changing subjects slightly...I think we are all brought up with the idea that "I am special to this world" and that "I will make a difference", and I truly believe this to be correct no matter how insignificant you might feel.  For that, my own little start to higher significance continues with this blog.

Here are the ground rules and purpose for my writing:

1. Posts will be based around the ideas of grandeur and will reflect interesting and thought provoking topics (examples include inventing, small businesses, idea generation, and life improvements).
2. I will write on this blog at least once per week
3. Through this blog, I will try to help all those who it touches

With that in mind, I will do my best to entertain, educate, and hopefully inspire all of you to go out and achieve your dreams through my own life adventure.

Start your illusions!