Frugal Advice: Drinking On a Budget

This is a Guest Post from my friend over at BeerNBling.com.

I met Kevin about a year ago. We both work for the same company and became friends over our common interest in living a frugal lifestyle, investing, and just general shit talking.

In 2013 I started dabbling in dividend stocks. Although my portfolio is in its infancy, I’m doing better than most single women in their 30’s. Between my Roth IRA (which I started in my 20’s), my 401k (which I also started in my 20’s), my rental property (that I’ve owned since 2006) and my E-trade account (recently created in 2013), I’m hoping to retire well below the current median age of 62.

As I mentioned before, Kevin and I have a few other common interests, one that includes my real passion, beer.

I moved to Seattle almost 2 years ago and shortly after began a mission to visit all breweries in the state of Washington. As of August 2015, I’m up to 59 and counting. In addition to touring local craft breweries, I home-brew and started a mostly beer blog called beernbling.com. I am a gemologist by trade and the blog includes pictures and reviews of the breweries I visit, food and beer pairing suggestions, fun interviews with fellow beer lovers, links to local beer events, random beer related shenanigans that can’t be categorized and last but not least, bling. Seattle is an amazing city with a strong craft beer and art culture. I am never short of content. In fact my writing struggles to keep up with my activities.

So, how does drinking beer relate to living a frugal lifestyle? Well, beer is my main hobby and what I choose to categorize as my entertainment budget. I rarely spend money on going out to eat. I make my lunch and other daily meals. I have little need for things since I’m living in a relatively small 553 sq. ft. apartment just outside of Seattle. I don’t own a car and have a short 10-minute bus commute to work. I have no debt other than the mortgage of the rental property. I make it a point to live below my means. This affords me the ability to save for retirement while enjoying my beer drinking and brewery tours. Did I mention I’m flying out to Denver this September to attend the Great American Beer Fest (GABF)!

To give you an idea of my monthly beer expenses, let’s take a look back at the first three months of the year where I spent a total of $292.66 on beer related activities. This averages to less than $100 a month. There are many different sources one can reference on the subject of entertainment expenses, including the definition, but on average sources agree, Americans spend approx. $2500/year in this budget category. This equates to a little more than $200/month.

In the month of January I spent a total of $91.99 on beer, which included 6 new brewery visits and a few happy hours.

In the month of February I spent $80.17 on beer, which included 2 new brewery visits, a couple beer tasting at a local bottle shop, and the purchase of a growler from one of the breweries.

In the month of March I spent $120.50 on beer, which included 3 brewery visits, a trip to a bottle shop for some unique beer purchases plus tastings and finally celebrating St. Patrick’s Day with co-workers for happy hour. Yes, I did pick up the tab.

It is possible to drink great beer on a small budget. Here are a few ways I make it happen.

Flights
If you’re like me and want to try everything a new brewery has to offer, check out their tasting flights. Flights are a relatively inexpensive way to try many different beers. Most flights include 3-5oz pours and range from $1-$2 per sample. Many breweries have set tasting trays. For example No Li Brewery has their “Usual Suspects” sampler which includes 6- 4oz tasters for $7.

Bottle Shops and Brewer’s Nights
The weekly tasting at The Beer Junction bottle shop in West Seattle that I attend every Thursday night costs between $4-$5 each evening. The tastings consist of 5-6 different 4-oz samples and feature a different craft brewery each week or sometimes a theme (such as Belgian Beer Week). Check local bars for their Brewer’s nights which have similar events with discounted tastings.

Event Nights
Many breweries also have special weekly discounted event nights such as “Tuesday Nights – Enjoy $6 Growler Fills.” A growler is equivalent to 64oz (a six pack is approx. 72 ounces for comparison). With a $6 growler, that’s less that $0.10/oz.  

Happy Hour
Also, don’t forget to check out local bars for their happy hour selections. A local Seattle bar, J&M Cafe offers 50% off happy hour beers (which makes most of their pints $2.50-$3.00 each) and they have a decent selection of some local craft beers as well as the usual suspects that consist of Stella, Bud Light, Miller, Guinness, Manny’s and Mac & Jacks African Amber. A pint is equivalent to 16 ounces. Pretty inexpensive way to socialize with coworkers. I also happen to be a slow drinker and can enjoy two pints within the short happy hour discount window.

Rewards Programs
If you’re a regular, check on rewards programs or Mug Clubs at local breweries and bottle shops.

Beer Fests
Another great way to enjoy lots of beer. On average these festivals range from $20-$40. If you purchase early some events offer discounted tickets or extra tasting tokens. One of my favorite events in Seattle is the Bacon and Beer Classic. The ticket price was a little higher than most beer fests at $59/ticket. But this event included all you can eat (delicious bacon inspired treats and appetizers hosted by 31 different restaurants) and beer (with 50 different breweries on tap) once inside the venue.

Trivia Nights
Trivia Nights at local pubs – Check out your local watering hole for event nights. These usually offer discounted drinks and chances to win free beer or prizes.

Free Beer Tours
Many Breweries offer tours that are free or really inexpensive. Mac N Jacks Brewery offers free beer tours. The tour includes free tastings and a commemorative pint glass. Red Hook Brewery offers their brewery tour for $5, which includes 5 tastings and a free commemorative pint glass.

Kegerators!!!
I have a friend that has a kegerator for home use. When it’s time to refill the keg, I will tag along for the tastings. Many breweries offer free tastings if they know you are purchasing a keg. Not only do I get to drink for free and sample each beer, but I have the very important and difficult job of helping to make the next selection.

Beer Blogs
Follow beer blogs for listing of other local events, giveaways for beer fest tickets and other fun and free beer related happenings. Here are some of my favorite in Washington: WABL, Washington Beer Blog & Seattle Beer News.

Don’t forget Pub Crawls
These events will be similar to a Beer Fest with either tickets to the crawl or discounted drink selection for those participating.

Frugal Advice: Games That Last

Gaming can be an expensive hobby, especially with the rise of DLC and expansions. It can be very frustrating to drop money on a game and find that it only holds your interest for a few hours. For this reason, I’ve compiled some of my strategies for getting the most bang for your buck on games.

Free 2 Play

The most obvious strategy is to play free/freemium games. The “Free 2 Play” model has been popping up more and more over the last few years, it isn’t just Facebook games like Candy Crush anymore. MMORPGs and MOBAs have been thriving on this model. These games make their money through micro-transactions. So if you never buy anything, the game stays free. The only thing to keep in mind is that some games have “pay gates” that prevent you from getting the full experience or from being fully competitive without paying.

Competitive Games

Games where you compete against other players (especially online) have great longevity and replay value. You’d be surprised how many people continue to play older versions of Call of Duty or Battlefield. MOBAs, like Heroes of the Storm and DOTA 2, are both competitive and free to play. Personally, I’ve been playing a lot of Heroes of the Storm, watch out for my Zagara!

Long Progress Ladders

RPGs tend to have a lot of content to begin with, but you can stretch that even further by working towards the high end progression goals. Trying to get every character to the level cap, and finding the perfect gear can keep you busy for days. I’ve put over 150 hours into Monster Hunter 4 Ultimate farming better gear. Randomized gear can also make the quest for perfection last longer as well, I have no idea how many hours I’ve put into Diablo 3 thanks to the random loot drops.

Make your own challenges

Another great way to get more out of your games is to replay them with new challenges. For instance, the Nuzlocke challenge in Pokemon adds a new layer of difficulty for a relatively easy game. Speed running, or trying to beat a game as fast as possible, is a way to add a layer of competition to a single player game.

The Golden Ratio

I think that when it comes to your entertainment budget, at least for media, you should aim for getting at least 1 hour of entertainment per dollar spent. So for a $60 game, make sure you get 60 hours of gameplay. For a $8 per month Netflix subscription, 1 full season has you covered.

Hopefully, this advice will save you some money and help you experience your games with a new level of appreciation.

Frugal Advice: Don’t Get Overcharged

This is the first in a series of posts on Frugal advice. I haven’t had a lot of excess money to invest lately, so I figured I could share some strategies for a frugal lifestyle. I hope you find my insights helpful.

For those who aren’t in the marketing industry, I just want to take a moment to share a trend that marketers are using as an excuse to overcharge you. This can apply to anything from plumbing services to retail video games.

The key phrase to watch out for is when someone starts talking about “the value they provide.” I used to work for a company as a developer for less than $15 per hour who resold my skills to clients for $175 per hour. These clients would often end up spending hundreds of dollars to have minor text changes and image changes on their websites. The company charged this much because of “the value provided” by these services.

The source of this phrase is from one of the world’s most renowned consultants, Alan Weiss, and his book “Value Based Fees” (Affiliate Amazon Link). The thesis of the book is to charge fees based on the value that you perceive your clients/customers will attribute to your goods/service as opposed to your cost times a multiplier, or a fee that is competitive in the industry.

If a good or service is actually unique and superior, this pricing and marketing method is justified. However, 90% of the time in a competitive market, the quality to price ratio (what most people would call value) of the goods/service is on par with the rest of their industry. When someone starts talking about “the value” they provide, they’re usually trying to convince you that the quality of the goods or service is higher than reality to justify the price. Additionally, if they’re literally using the word “value,” it’s because they can’t think of anything that actually makes them stand out to provide that boost of quality. At this point, you’re paying more so that you can fund their marketing team and sales people, and not for anything you will actually receive.

If you understand the goods/service you’re seeking, and your initial reaction is that something is over-priced, you’re not wrong. Find another provider, and get a competitive quote. A service provider who is passionate about providing excellent service, and is willing to do what is necessary to make you a happy customer, doesn’t need to tell you about “the value” they provide. It will be obvious.

If you’re being sold to, you’re also going to be charged for that sales process.

The Art of Happiness Through Frugality

We all want to be happier. This is a fact of life. The inalienable rights of all people include “the pursuit of happiness” along with life and liberty, according to the Declaration of Independence. In “The Pursuit of Happiness” (2006), Will Smith’s character mentions that it’s interesting the founding fathers chose the wording “pursuit of happiness” implying that not everyone can actually achieve happiness. The problem with our culture is that advertising has brainwashed us to think that “the pursuit of stuff” is the same thing as “the pursuit of happiness.” This confusion leads us on paths that have the opposite effect. While we think the new car / tv / video game will bring us happiness, we’re making ourselves miserable by spending long hours away from the ones we love.

Working at a job you enjoy or running your own business will hopefully lower the suffering in your pursuit. However, no matter what you do for the money, there’s always something you’d rather be doing, or people you’d rather be spending time with.

This brings me to the subject of frugality. While attempting to be frugal, you will still be miserable if you do not change your thinking. The desire of material goods causes suffering, and the happiness of getting what you want passes quickly. So if being frugal means never getting that fleeting happiness even though you are still suffering from the desire, you will be even further from happiness.

Happiness is a state of mind, which means no material object will will sustain it. You need to learn to be happy with what you have instead of what you wish you had.

I challenge you to cut your budget to the bone for a month, or even a week. This exercise will remind you of what you NEED. It will also teach you what you do with your free time, which may guide you to what makes you happy.

As a gamer, I have historically always had a game or two on the horizon that I was looking forward to. This reached its peak in 2012, and it made that year miserable for me. Lately, I’ve been focusing my time on the games I already own, many of which have free online play.

So far, this has been a rough year for me. There have been a lot of big expenses that were neither frivolous nor fun, but on the other hand, they would have been even more painful if I wasn’t already so frugal.

War Has Changed

This morning, I’m feeling like Old Snake from Metal Gear Solid 4. “The market has changed,” it follows illogical rules. I remember when I first started out, there were technical traders and fundamental traders. Those that identified opportunities based on price trends, and those that identify opportunities by the quality of the company compared to the current price.

If these were the only people trading, their actions would influence the price in a self-balancing way. Instead, it seems that the majority of the price movement is driven by what celebrity investor is buying what, or short term news with little long term implications to the business.

It can be a blessing when these market mood swings allow you to pick up a quality company at a discounted price, but it’s also frustrating to observe an irrational world in chaos.

For instance, I own YUM in my personal account. I think it’s a solid company, but my main reason is I love me some Taco Bell. Today, YUM’s stock price has jumped up 5% after Third Point announced that they bought a position in the company. This brings their PE Ratio up to 40, which is insane.

It aggravates me because this great company has had such a drastic price reaction to one opinion about the company’s future.

Perhaps I’m ranting over nothing, but as a logical person, these illogical swings shake my faith in the system being steady.

Dividend Income – Mar. 2015

I think it’s important to celebrate wins on the path to your ultimate goal, no matter how small. Sharing my dividend income results with you readers gives you some insight to what is possible as you begin your journey.

My ultimate goal is to be able to live off of the passive dividend income from my investments, so I can just stay at home and play video games. Here is the money I made in March 2015 without lifting a finger.

MCD – $9.35
CVX – $9.63
EMR – $7.52
LMT – $7.50
BP – $30.00

Total: $64.00

Compared to the dividends I earned in December ($20), I’m already seeing some serious progress. I’ve more than tripled that income, progress in an early portfolio is always so impressive sounding. Sadly, with the changes to our goals for 2015, it will be a while until we can see this grow again.

The stocks I currently own all seem to be on a March, June, September, December payment schedule. So I didn’t see any dividend income for January and February.

Why I Regret Putting Money in My Roth IRA

Disclaimer: First thing’s first, I’m the realest. I’m also not a financial adviser, so anything I say here is just my opinion, and you’re responsible for your own money and returns.

With that out of the way, My goals for this year have changed recently. Some back story: My wife has student loans that are small enough that they could be paid off within a year. In the past, I had been of the opinion that the interest rates on the loans were low enough, that we would do better by making the minimum payments and continuing to invest in dividend stocks. Over time, the growth of the stocks and dividends would offset the expense of these minimum payments on the loans.

However, these loans are becoming a bigger burden than the money they represent. In the past few years, my wife has changed her name, and we’ve moved across the country. These changes, are causing the debt collector to start pestering my wife and her family for information on a regular basis. She makes her payments on time and consistently every month, so this behavior is completely unwarranted. As a result, this small amount of debt is creating a disproportionate amount of stress to her and her family.

So, we’ve decided that instead of trying to reach our goal of saving $18,000 this year, we will make an effort to 1) pay off her student loans, and 2) contribute $5,500 to my Roth IRA.

I traditionally make all of my investments in a taxable brokerage account, so this may sound a bit surprising that I would be making this change. I decided that there might come a day that I regret not taking advantage of the yearly contribution limits. Or so I thought…

My retirement strategy is to live off of dividend income from my investments. Dividends have favorable tax treatment, if your income puts you in the 10% or 15% income tax brackets, qualified dividends are taxed at 0%. Non-qualified dividends are taxed at the same rate as your income.

“What’s a qualified dividend?”
A qualified dividend is a dividend received for a stock you’ve owned 60 days before and 60 days after (without selling) the ex-dividend date. So, if I buy JNJ today, and it’s ex-dividend date is in 60 days, if I don’t sell those shares for another 121 days, that dividend will be taxed as a qualified dividend.

This is important because it means whether I put my money in a taxable brokerage account or a Roth IRA, they will both be taxed at 0%. Since I don’t plan on selling, I don’t care about the difference in capital gains tax. (This is all on the assumption that my income in retirement is under the cut off between 15% and 25% income tax rates, and that these rules are maintained)

I’ve already made 1 contribution to my Roth IRA, and now I regret it, because I’ve put limits on the usefulness of that money, with no benefit.

Instead, I will be putting the rest of my contributions in a traditional IRA, because I’m currently in a higher tax bracket than I would be in retirement.

What about you? Are you maxing out your Roth IRA, IRA, or avoiding them all together?

Don’t Just Own It, PWN It!

Most gamers recognize the words “pwn,” “pwning,” and “pwned” or any such variations. The origin comes from a misspelling of the word “own” back when warcraft was a strategy game. Over time, pwning has started to mean much more than simple ownership.

When you pwn someone in a game, you have completely dominated them. You had control of the whole match as a result of your skill and strength of will. The difference between owning and pwning is a matter of control and confidence.

There’s an old saying “the things you own end up owning you.” This is not the case with pwning. When you own shares of a company, they start owning you when you emotionally react to price fluctuation. When you have the strength and confidence to keep your cool during price swings, then you start pwning that stock.

Pwning a stock means you won’t be the newb that gives up on some solid dividends because you sold at a low price in a panic right before the price recovered.

You should strive to pwn everything in your life.

Pwn your Job – Take responsibility and base your actions on what will be best for the company, even if that conflicts with what your boss thinks.
Pwn your Relationship – Put in the work and communication to keep your companionship working. This doesn’t mean winning arguments, it means finding solutions.
Pwn your Health – Master the art of healthy eating, and find the workout plan you’ll stick to.

So, don’t just own it, PWN it!

How Investing Has Changed the Way I Game

When I first started investing, I would use my experience with video games to try to better understand certain concepts. For example, analyzing statistics and “min-maxing” in RPGs gave me the analytic background to determine which companies would be good investments for my style of dividend growth investing. RPGs taught me how putting the time and effort in could yield greater rewards in the future. Now I’m finding that after a few years of investing in the stock market, my patience and dedication to investing time in video game efforts has increased.

The big games I’m playing these days are Pokemon and Diablo 3. I’ve noticed that lately, I’ve had the mindset of an investor when playing these games.

In Diablo 3, I’m more willing to invest more time into getting specific items, and completing sets than before. In fact, my hardcore characters from Season 1 reached paragon level 290, which is leaps and bounds higher than before. I’m also driven to farming a ring of royal grandeur with great stat rolls, and this season I’m going to put in the effort to get a Hellfire Amulet which requires a massive time investment, after which you may not even end up with a very good item at all.

In Pokemon, I’m working on breeding and training competitive level pokemon, in fact all of the pokemon in the OU metgame according to Smogon. If you don’t know what that means, don’t worry, you’re just not as big of a nerd as I am. What it means is that my bus rides for the past 2 weeks have been dedicated to this effort. But putting in the time now means I’ll have these battle ready pokemon forever.

I’m also much more stingy with what games I’ll buy. I used to take chances on new games, but now I’m only getting games I know I’ll get at least 40 hours of entertainment out of. How about you, how has gaming affected your investing or vice versa?

New purchases: LMT and EMR

A couple weeks ago I made some new purchases. The market is pretty crazy right now, so it’s hard to say when the best time to buy is. More conservative traders may want to wait a little longer. I try to make new investments every month to sort of dollar-cost average the broader market. For this investment, I bought 5 shares of Lockheed Martin Corporation (LMT) at $194.39 and 16 shares of Emerson Electric Co. (EMR) at $60.04 per share.

Since these purchases both stocks have had a price drop, so if you are interested in them as well, you can get a better deal than I did.

At the time of writing this, LMT has a PE ratio of 19.07 and a dividend yield of 3.19%. This investment adds $30.00 to my yearly dividend income, and $2.50 to my average monthly income.

EMR has a PE ratio of 18.67 and a dividend yield of 3.3%. This investment adds $30.08 to my yearly dividend income, and $2.51 to my average monthly income.

Putting me at $286.50/$500.00 for the annual passive income goal and $23.87/$100.00 for the monthly passive income goal.

It always sucks seeing investments fall 5 or more percent shortly after making them, but these are long term investments that I’ll see very little difference in outcome by the time I’m living off of them.

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