Author Topic: A few questions as I am getting started  (Read 3108 times)

purplearcanist

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A few questions as I am getting started
« on: August 19, 2015, 08:53:23 AM »
Hello.  I have been reading this blog for the last couple of days, and I am very interested in the mindset here.  I guess I was interested to some degree by the idea of downsizing or living frugally when I saw people doing tiny houses and other options here.  However, I have a few questions for the forum-goers here to start out.

1.  What system do you guys use to manage/cook food?  It pains me inside every time I throw away some food in the fridge because I leave it there too long.  Also, I find myself eating out too often, part of it in a habit in the past out of not knowing how to cook well.

2.  Some of the advice on this website is confusing.  I am confused on when to delete loans, aren't they good for your credit rating?  And if you have loans at low interest isn't it better to make higher interest investments that pay out more and make the minimum payment on loans?  And about how much is a good idea to put into the emergency fund?

Otherwise I am very entranced by the blog and forum here, and wondering why I didn't find it sooner.  I am in a good situation at this point, almost done with debt, and the whole idea of being independent of the job sounds very appealing to me.  Anyways, thanks for your interest.

velocistar237

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Re: A few questions as I am getting started
« Reply #1 on: August 19, 2015, 09:24:10 AM »
1.  What system do you guys use to manage/cook food?  It pains me inside every time I throw away some food in the fridge because I leave it there too long.  Also, I find myself eating out too often, part of it in a habit in the past out of not knowing how to cook well.

There's not really a great website or anything like that out there, because people have different preferences, and no recipe system will know what's on sale at your local markets or what's about to go bad in your fridge. The time it takes to figure all that out yourself is less than the time it would take to feed that into a website. It just take some experience to figure these things out and some effort to stay on top of what's in your pantry and fridge.

My wife keeps a spreadsheet with links to recipes online. In the spreadsheet, she rates them, notes her alterations, and puts when we last ate that recipe. She selects recipes, makes a shopping list, I go shopping, and she makes the food.

She was not great at meal planning and preparation when she started, but she learned.

You could try plantoeat dot com or All Recipes. They both have schedulers that will create a shopping list, but that's about all they do.

2.  Some of the advice on this website is confusing.  I am confused on when to delete loans, aren't they good for your credit rating?  And if you have loans at low interest isn't it better to make higher interest investments that pay out more and make the minimum payment on loans?  And about how much is a good idea to put into the emergency fund?

The effect of maintaining a loan balance on credit rating is exaggerated. Many people on this forum advocate paying off high-interest debt but wait to pay low-interest debt on schedule, as that is on average more optimal. Some people, however, are just obsessed with paying down all of their debt. Emergency funds are good for some people, but there are other options: use the few thousand dollars a month you would have saved, draw from your taxable account, use a HELOC, or put it on a credit card. I wouldn't call any of my accounts an emergency fund.

boarder42

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Re: A few questions as I am getting started
« Reply #2 on: August 19, 2015, 09:25:04 AM »
Welcome

1. I buy food on sale in bulk.  ie chicken breasts are on sale at my local grocery store this week ... i'll buy 30lbs of it minimum and freeze it b/c its the cheapest its been this year.  keep the freezer stocked. i buy most of my fresh produce at aldi and its always affordable and the cheapest ... unless its onsale at the local grocery store.  I also stock up on all cans/dry goods - they keep forever so when its on sale i buy it in bulk and load up the pantry.

2. any loan under 5-6% IMO is good debt and i would keep it and invest the difference. 

AlwaysLearningToSave

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Re: A few questions as I am getting started
« Reply #3 on: August 19, 2015, 10:19:49 AM »
1.  What system do you guys use to manage/cook food?  It pains me inside every time I throw away some food in the fridge because I leave it there too long.  Also, I find myself eating out too often, part of it in a habit in the past out of not knowing how to cook well.

One of the best things for us was cooking enough to learn to move beyond using recipes for every meal.  When you are able to be creative in the kitchen you will do a better job using up the food you have in the fridge before it goes bad.  You will open the fridge, see the veggies that are getting old, and design a meal around them using the other items in your pantry.  If you are still beholden to recipes, it will be harder to be as efficient with your food. 

One of the main reasons we keep Sling TV is to have access to The Food Network.  We have learned a ton about cooking from the shows on that channel and I see it as a low cost investment that helps us avoid the higher cost of a bad restaurant habit.  We are now confident that we can cook meals that are healthier than most food we can get dining out, taste as good or better than most restaurants, and cost a fraction of what we would pay at a restaurant.  We both have learned to enjoy cooking, so it is a form of inexpensive entertainment and chance to spend quality time together. 

frugaliknowit

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Re: A few questions as I am getting started
« Reply #4 on: August 19, 2015, 01:14:52 PM »
1.  What system do you guys use to manage/cook food?  It pains me inside every time I throw away some food in the fridge because I leave it there too long.  Also, I find myself eating out too often, part of it in a habit in the past out of not knowing how to cook well.

First, I live alone, not sure what your situation is.  I cook something new about 3 times per week.  For dinner, I add a salad to either the freshly cooked or the leftover item.  With the exception of broiled salmon, the rest of the week, I feed off of the leftovers.  For work, 3 times per week I bring in some leftover whatever (say, a piece of meatloaf plus a vegetable...), once per week have PB&jelly (stored at work) plus a "side vegetable" which I bring with me, and once per week takeout.  I keep track of how old cooked meat is.  After day 3, I fold it in foil and place it in a freezer bag in the freezer (nothing wasted).  Every so often, I live "out of the freezer" to use up my frozen stuff.

I shop for meat and produce about once per week at an independent store (cheaper than grocery chains).  I buy extra when the discount is deep and freeze it.  Non-perishables as needed (Target or Walmart Neighborhood Market).  Raw meat that I will not use within 2 days I freeze.  I defrost in the refrigerator 2-3 days before cooking.  Salmon (individually wrapped) is partially defrosted in cold water for 20 mins, marinated, then can be broiled anytime within 48 hours.

2.  Some of the advice on this website is confusing.  I am confused on when to delete loans, aren't they good for your credit rating?  And if you have loans at low interest isn't it better to make higher interest investments that pay out more and make the minimum payment on loans?  And about how much is a good idea to put into the emergency fund?

The answer to this questions depends on how disciplined you are and how sophisticated you want to be.  If you tend to not be disciplined, the best policy is just pay off all loans.  If you want to be sophisticated, loans with very low rates (say less than 2%) can be held assuming you are investing the equivalent (theoretically earning the spread between the loan interest rate and the after tax rate of return on the investment).  If you do this, keep an "apples to apples" comparison on the risk level.  Comparing a 2% loan rate to a theoretical 12% return in the stock market is not valid, because the risk level is not the same.  Paying off the loan is a guaranteed 2%, versus the theoretical 12% return on the stock market (could end up being negative!).

As far as credit score:  I wouldn't focus on it.  Just keep it around 740 or higher.  You can get it/maintain it at that level with rewards credit cards alone.  If you are not there, just keep paying on time, you will get there.

As far as size of emergency fund:  It depends on your situation.  If you are a dual income household, there is less of a need than if you are a single income household.  The standard answer is 3 to six months of expenses (what you could live on if you lost your job, not including non-essentials like vacations and eating out).  How quickly do you think you could replace your job?  I would say 3 months to one year of expenses.
« Last Edit: August 19, 2015, 01:18:32 PM by frugaliknowit »

velocistar237

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Re: A few questions as I am getting started
« Reply #5 on: August 20, 2015, 06:13:14 AM »
If you do this, keep an "apples to apples" comparison on the risk level.  Comparing a 2% loan rate to a theoretical 12% return in the stock market is not valid, because the risk level is not the same.  Paying off the loan is a guaranteed 2%, versus the theoretical 12% return on the stock market (could end up being negative!).

My intuitive sense is that the market risk is lower for buy-and-hold, which is what most of us do. I would be comfortable holding onto 4-5% debt in order to put the savings in the market. I have not seen an analysis of this, though, which takes into account the accumulation phase, etc.

AlwaysLearningToSave

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Re: A few questions as I am getting started
« Reply #6 on: August 20, 2015, 07:07:26 AM »
If you do this, keep an "apples to apples" comparison on the risk level.  Comparing a 2% loan rate to a theoretical 12% return in the stock market is not valid, because the risk level is not the same.  Paying off the loan is a guaranteed 2%, versus the theoretical 12% return on the stock market (could end up being negative!).

My intuitive sense is that the market risk is lower for buy-and-hold, which is what most of us do. I would be comfortable holding onto 4-5% debt in order to put the savings in the market. I have not seen an analysis of this, though, which takes into account the accumulation phase, etc.

Most of the time when I see the topic of using extra cash flow to pay down lower-interest debt versus invest for higher returns, I see it expressed as a dichotomy.  People get stuck thinking they should do one or the other. 

My answer is to do both to some degree as a way of further diversifying your investments.  People generally understand the need to diversify a stock portfolio to reduce overall risk, and people also understand using bonds or other "safer" investments to further reduce overall risk.  I view using a portion of extra cash to pay down lower-interest debt as a safe investment earning a guaranteed return.  Sure, ten years from now you might look back and think that you should have invested it all and not paid extra on the debt, but there's a chance the market won't perform well and your guaranteed return from paying down the debt will look pretty good.  You never know in advance and that is why you diversify. 

purplearcanist

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Re: A few questions as I am getting started
« Reply #7 on: August 20, 2015, 09:32:55 AM »
Ok thanks for the responses.  This website looks really interesting.  Sad that I didn't find it before, even though I was into the whole concept of frugality to a certain degree.