Wednesday, October 29, 2008

Reader Question #001 - Household Outsourcing

As I receive questions (or should I say if I continue to receive questions) via email or comments on the posts, I'll do my best to answer them to the best of my ability. I can't say that I'll answer all of them, but I'll definitely try to get to especially interesting ones. If the question is asked in the comment section, it'll probably be answered in the following comments. If I think it warrants its own post, that's what it'll get!

Anonymous writes:
"I am glad to see that YFNN is back to blogging. I especially enjoy your consumer tips, whether they are about kitchen equipment or how to put together a decent budget. Could you write something about hiring out jobs (like carpet cleaning, window washing, and installing appliances)as opposed to doing it yourself? Where's the tipping point?"

There are quite a few jobs that my wife and I outsource, so to speak. Carpet cleaning and appliance installation are some good examples. We determine whether or not those household jobs should be outsourced by evaluating the total cost of doing it ourselves vs. the total cost of outsourcing. What you've got to keep in mind is that your cost of doing something is not limited to the dollars that leave your bank account. It's also the time you spend doing the job. It's the cost of the equipment needed to do the job correctly. It's the cost of the education required to do the job right. Finally, it's your mental health or opportunity cost - I like to call this the "hassle cost". All of those costs need to be considered before a prudent decision can be made.

Here are some examples:

Changing oil in the cars, motorcycles, and lawnmower.
  • Task cost - If I do the job myself, it costs about $10 in oil, a filter, and rags.
  • Equipment Cost - I've already got the wrenches, drain pan, and funnel to do the job right, so my equipment cost is $0.
  • Education Cost - $0 and zero time. Thanks to lots of experience, I've got the know-how to do things properly.
  • Time Cost - It takes me about 20-30 minutes to change the oil in one of the cars if I move at a relatively relaxed pace.
  • Hassle Cost - Low. I enjoy working in the garage and getting my hands dirty. At this point in time, the opportunity or desire to do something else is relatively low, since I have adequate time with my wife, my work, and my family already. 20 to 30 minutes in lost opportunity time isn't very critical right now.

So, my total personal cost for changing my own oil is about $10, 30 minutes, and low on the hassle cost. With the price of an out-sourced oil change up around $30 or more and close to the same amount of time, it's worth it to me to do it myself. When our child is born however, my hassle cost may increase, since I may prefer to spend that time with our family. At that point, I'll have to re-evaluate the total cost and make another decision.

Here’s another example:

Washing and ironing my dress shirts.
  • Task cost - A few pennies per shirt for the cost of water, laundry detergent, starch, and electricity to run the washer, dryer, and iron.
  • Equipment Cost - $0. We've already got a washer, dryer and iron.
  • Education Cost - $0 and zero time. I feel that I know how to launder and press my shirts adequately. No books, videos, or training is required.
  • Time Cost - I'm a slow iron-er (ironer? ironworker?). Even so, it probably takes about 10 total minutes to wash/dry/iron a shirt – 6 minutes in the washer/dryer and 4 minutes ironing (obviously, the per piece time is low when you wash a dozen shirts at once).
  • Hassle Cost - This is where my cost is high. I dislike laundry and hate ironing. Hate, hate, hate ironing. I feel like it takes forever and it never looks quite as good as from the cleaners. There are also a ton of other things I'd rather do with that time, like scrubbing toilets and reading tax law.

This means that my total personal cost for washing and ironing my own shirts is about three cents, 10 minutes, and ridiculously high on the hassle cost. The cost for me to have my shirts taken care of at the cleaners is about $1-2 per shirt. From a strictly dollars-and-cents point of view, I'm a fool not to do my own shirts; it costs 30-50 times more to take them to the cleaners! But, once everything else is factored in, that $5 to $10 a week is VERY well-spent at the cleaners for me.

Obviously, each individual person's cost for a particular task is going to vary widely. The important thing to keep in mind is that your cost is not just your out-of-pocket dollar cost. The all-important hassle costs will vary greatly from person to person, as will equipment and education costs. All need to be weighed carefully before you can make a sound decision about outsourcing a job.

What are some of the tasks you outsource and why?


Tuesday, October 28, 2008

The Importance of Communication

A short story, illustrating why it is important that each spouse share critical information pertaining to the financial comings and goings of the household:

A man is getting into the shower just as his wife is finishing up her shower when the doorbell rings. The wife quickly wraps herself in a towel and runs downstairs. When she opens the door, there stands Bob, the next door neighbor. Before she says a word, Bob says, “I’ll give you $800 to drop that towel.” After thinking for a moment, the woman drops her towel and stands naked in front of Bob.

After a few seconds, Bob hands her $800 dollars and leaves. The woman wraps back up in the towel and goes back upstairs. When she gets to the bathroom, her husband asks, "Who was that?” “It was Bob the next door neighbor,” she replies. “Great!” the husband says, “Did he say anything about the $800 he owes me?”

See? Communication about marital finances can save headaches AND unnecessary embarrassment.


Monday, October 27, 2008

Reason #435 Why I Love My Wife

When I woke up way late for work today at 5:30am instead of the regular 4:30am, I was not the only one to jump out of bed in a hurry. While I was dressing and such, my lovely bride was downstairs, making me a car-friendly breakfast, gathering my work items, and finding my car keys. She even took the dog out, something I usually do as part of my morning routine.

Because of her unselfish act (she could have easily just continued sleeping), I arrived at work just a few unnoticed minutes late, rather than nearly the hour it could have been.

Thanks, honey. I couldn't have made it so quickly without you.


Thought for 10/27/08

The following post is a YFNN rant. You may find it offensive, crude or just plain wrong. Get over it.

If there is a moral to the story of the ongoing financial bailout and the current state (and apparently future state) of politics and the country in general, it's this: it truly pays to be a loser. Irresponsibility and self-proclaimed helplessness can be very profitable.

All my life, I thought I was smart: saving my money, making prudent choices, living within my means, working hard while I got a good degree at a good school. Had I known the government would do their best to punish me for hard work and success, and reward my neighbors who sit home collecting welfare (in all of its forms) and watching Judge Judy, I'd have asked the unproductive and fraudulent to make room on their rent-to-own couch for me.

I shoulda bought a bigger house I couldn't afford with an adjustable-rate mortgage. I shoulda backpacked through Europe on credit cards to "find myself" after college rather than pay student loans. I shoulda tried to flip condos in 2004. I shoulda had kids at age 19. Man, did I ever blow those opportunities.

It clearly pays (and will continue to pay after 01/20/09, apparently) to make poor decisions and declare yourself helpless and hopelessly inept. Hard work and good decision-making is for suckers. It's time for me to stop paying our mortgage so I can get in on this free money gravy train.


Thursday, October 23, 2008

Captain Safety Glasses

I wear safety glasses a lot.

My new job has me wearing them most of the day, except for when I'm in my office. It's the metal chips and hot plastic and such. A piece of lava-hot polyethylene in the eye would be a surefire way to ruin your day. So, we wear safety glasses. I think it's a great idea.

At home, I wear them quite a bit, too. Whacking weeds, grinding lawnmower blades and sanding boards are all occasions that I think require safety glasses. So is changing the smoke detector (paint and plaster chips HURT!), changing oil in my car, and any soldering work. I even make my wife wear them when she's spraying siding wash or weedkiller (she hates me for that). From my point view, you just never know when a gust of wind or a stream splashback is going to give you a face full of Roundup. Is it so wrong to want to prevent that from blinding my one and only?

Maybe it's because I wear contacts and even the tiniest piece of trash in my eye hurts feels like a rusty steak knife. Maybe it's because I used to manage a lab and machine shop where I've seen the pain and damage that a tiny sliver of copper can do. Maybe it's because over two thousand eye injuries occur everyday and over 90% of them are preventable with safety glasses . Maybe it's because I'm just a total nerd.

Regardless, I'm definitely cool with wearing them. They're cheap, nearly unbreakable, and I don't wear glasses, so doing the whole double-glasses thing isn't a problem.

I am jealous of the guys at work that just wear their regular glasses and some clip-on side-shields, though. Those things are slick.

YFNN (aka Captain Safety Glasses)

Monday, October 20, 2008

In Defense of Sound Personal Finance

June 13th, 2008: My lovely bride and I find out that we're expecting our first child.
June 23rd, 2008: I find out that my company is closing the facility in which I work. I will be out of work in only 90 days.
September 26, 2008: I lose my job.
October 20, 2008: MLB loses her job.
Summary: In just 120 days, both breadwinners lose their jobs and they find out that a new, expensive first baby is on the way.

The last several months could have been the financial downfall of our family. In fact, with the way many people live in this country, it would be for most. But, because of the way we've decided to handle debt, income, and spending, we're in fine shape regardless of the recent shakeups.

Today, my family lost a significant portion of our earning power. My lovely wife was laid off from her place of employment. She'll receive a few weeks of severance, but then nothing (well, unemployment, maybe). Now, at first, it sounds awful, horrible, and a devastating blow to our financial objectives and plans, especially after some major life changes already. But, for us, it's not really that bad.

First, my wife is currently almost six months pregnant with our first child, due on February 14th, 2009. My wife, bless her heart, does not handle stress well. At all. Not even a little bit. Even she will readily admit that small things become big things and big things become absolutely overwhelming. Add in some pregnancy hormones, and well, you get the idea. Work was a constant source of stress for her, and under advice of our OB, she was to try to reduce her stress levels. And, since work was a large source (nearly sole source) of her stress right now, that meant reducing its impact.

We had planned on her taking leave from work (and likely not returning) around Christmas this year. We're fortunate in that her severance pays through that time period, essentially mimicking our finances as though she had been working. But, she gets the added benefit of not actually having to work until late December. Add the possibility of unemployment benefits after the severance payments run out, and we may actually be better off with her being laid off.

The only monkey wrench in the whole situation is that she carried the insurance for our family. But, even that's not a huge ordeal. My new place of employment carries the same insurance (albeit slightly more expensively), so that's not a huge hassle.

However, even if circumstances had not been what they are, I firmly believe that we'd still be fine, due to the way we've been able to handle our finances. As I've stated in the past, we maintain a rather substantial emergency fund, carry very little debt (essentially, just the house) and keep a good tab on our spending. While we certainly haven't lived a painfully frugal lifestyle, we haven't been wasteful and frivolous with our spending either.

There's definitely a lot to be said for keeping a solid financial foundation. With a well-funded emergency savings, solid debt-management, and some good career choices, you can roll with nearly any punch that life may give you.

That said, you never know what cards you may be dealt in life, so ditch that debt, cut out some frivolous expenses and save some cash!


Sunday, October 19, 2008

Today's 401(k) Conversation

I had a conversation this afternoon with a former co-worker about his 401(k), the current economy, and his future. He's a bright guy, but not exactly money-savvy, and is pretty darned impulsive. Here's how it went:


Him: My 401(k) has plummetted recently. I've lost about $35,000 just in the last several weeks.

YFNN: I'm sure. Everybody's getting hit hard.

Him: It's ridiculous. I can't stand losing that much. I'm thinking about pulling it all out and buying a rental property.

YFNN: WHAT?!? Are you crazy?

Him: At this rate, I won't have anything left in a couple months. Why not? I can try to find a foreclosure or something.

YFNN: First of all, you buying a foreclosure is a disaster. Second, pulling out of the market now is crazy. The rule about making money in the stock market is simple: Buy low, sell high. If you sell out now, you're doing the exact OPPOSITE.

Him: I just don't like it.

YFNN: So don't look at your account for a while, like six months or so. In the meantime, keep on making contributions.

Him: That's stupid. I've already stopped adding more. Why would I put money in it just to lose it?

YFNN: Because the market is LOW. Stocks, mutual funds, ETFs, they're all basically on sale for 30% off! If you continue to contribute, you're lowering your cost basis. You're buying things low, to sell them high. You've got decades to recover from this. Do you honestly think that the market won't recover by 2040 when you retire? Please.

Him: I guess. The news just drive me nuts though.

YFNN: If we were close to retirement it'd be different, but we've both got plenty of time to see some real gains. I've even stepped my contributions up in the last couple of weeks. You've just got to hang in there, regardless of what that airhead Katie Couric says to try to scare you.


This has got to be the overall attitude from most folks around me, and I can certainly understand why since the "sky-is-falling" media is playing the market woes up for all their worth. But, if you're 50 or younger, you've got to remember to be a long-term investor. That money you're pumping into your IRAs and 401(k)s and such is meant to be for retirement, not for next year. Continue to invest now, while prices are low, and be well-positioned for the recovery!


Tuesday, October 7, 2008

Anniversary Lessons

Today (October 7th) is my wife and my second wedding anniversary. Just a short 731 days ago ('08 is a leap year), we tied the knot on a beautiful evening in front of just over 200 friends and relatives. In the time since then, I have learned an enormous amount about marriage in general and how to make things work smoothly. So, today at lunch, I scrawled down a list of things I've learned that I'd like to pass on. Some are obvious, some not so much.

- Marriage is REALLY hard work sometimes. You thought they were exaggerating at the time, but when your pastor, your parents, your friends, and everyone else told you so, you should have believed them.

- When you're single, you are as happy as you are; when you're married, you're only as happy as the least happy person in the marriage. If you're not the one that's the least happy, do everything you can to make the other one happier. It brings up the overall happiness in the marriage.

- Even if you lived with your spouse before the wedding, it's different after you're married. I can't really explain why or how, but it is. In this case, different is good.

- Church and bible studies are great for your relationship. Ditto for praying together. Seriously.

- Sometimes your spouse asks for you to be a leader, without really asking. Learn to recognize this and when you do, lead. Even if you don't know exactly what to do, lead. Sometimes it's not about leading the right way, it's just about being the leader.

- TiVo and DVR save relationships, I'm convinced. Being able to temporarily pause that show on the history of beer or the Eagles game while you take out the trash or answer "Can you help me for a second?" will dramatically reduce the potential for arguments. $15 a month has never been better spent.

- Full-disclosure financial organization, planning, and communication are of critical importance. Be open, honest and completely communicative with your spouse about EVERYTHING financial. Monthly "budget meetings" can bring a huge amount of peace-of-mind to the relationship.

- It's exceptionally rare that you can be both right AND happy at the end of an argument. You can be right OR you can be happy, but not both. It may take a while, but eventually you'll realize that it's way better to be happy than right.

- If you're like me, you'll get more accomplished around the house when your spouse isn't around. Once you both come to this realization, you shouldn't feel bad for asking her to leave you alone for a couple of hours, and she shouldn't be offended for you asking.

- When your spouse presents you with a problem, she doesn't always expect you to fix it. Sometimes, she just needs to talk about it. There's no shame in asking "do you need a listening ear or a solution?" before she starts in. But be careful, even if she wants a solution, make sure you don't give it to her until she's done completely stating the problem.

- It's perfectly fine to continue to do your laundry separately. She'll enjoy not having to turn every single one of your socks right-side-out and you'll enjoy not having to separate your laundry any more distinctly than "white" and "not white".

- Eating at the dining room table together once in a while, with the TV off, is good for you both. Ditto for sitting in the same side of a restaurant booth and sharing a dessert.

- When you first get home from work, it's important that you both get a good 15 minutes of wind-down time. Being bombarded or bombarding her with "You should..." or "We need to..." or "Can you...?" statements right when you get home just gets people frustrated. Give each other fifteen minutes to settle in first. Amazingly, everything will still get done and you'll both be happier.

- If you leave the house and there's a chance you won't be home before your spouse gets in, leave a note. Yes, it seems trivial to you, but it's not to them. It only takes a second. Just do it.

- Sometimes when your spouse says "Can you help me with this?" she really means "Will you just do this for me?". That one took me a long time and a lot of frustration to figure out. I now know that when my wife asks for my help in rolling up the garden hose or take something to the attic, she really just wants for me to just do it. And that's okay. Sometimes it's faster and easier to just do it yourself than with her, ahem, help.

- Right before bedtime can be really stressful for her. I'm not exactly sure why, but apparently it is. Being helpful gets you in bed and asleep faster than just getting in bed and trying to fall asleep while your spouse stomps around.

- The hormones from pregnancy make your wife go completely bat-s**t crazy (at least the first 22 weeks...that's all the farther we currently are.) You will never cease to be astounded by the completely irrational and non-sensical things that come out of her mouth and that she does. Even she will readily admit that some pregnancy-related books that explained these things (that'll be a future post) have been the only thing that has stopped me from committing her to an asylum.

So there's the lessons I've learned. In just a couple short years, I've learned a lot. Just imagine how much I've got to go!!!