Friday, May 30, 2014

Myth: Travel to Europe is Expensive

OK, travel to Europe is definitely not cheap but for many, the idea conjures up luxurious vacations that only the privileged few can afford.  I studied abroad in Europe back in 2008 and will offer some tips here that will hopefully put traveling to Europe within reach for the average American.

The Plane Ticket

Ideally, you'd want to use Credit Card rewards or Airline Miles to purchase it for little/no cost.  However, if you are traveling on short notice or during major holidays, it may not be easy to redeem your rewards for seats.  In that case, it's best to look at Kayak, Orbitz, or other travel sites to find the cheapest tickets. is another option if you still have plenty of time before your target departure date but Credit Card rewards are not a viable option.

Foreign Exchange

Please don't be one of those idiotic tourists who simply exchanges all of his dollars for Euros or other currencies at the Airport, Train Station, or other location where tourists gather!  Get a VISA debit card from your local bank if you don't already have one and notify them you'll be traveling to Europe and using the card there to withdraw cash.  They may charge ATM or even Foreign Exchange fees but it'll still cost you less than paying the scam-like spreads at most foreign exchange dealers and banks.

Get a credit card that doesn't charge any foreign exchange fees.  CapitalONE has several cards of that type but lately, many other Credit Card companies have also been following suit.  You should always try to pay with your Credit Card first and resort to Cash last.

Although I frown upon exchanging dollars for local currency, it's still best to bring a few hundred dollars as a hedge in case something happens to your ATM and credit cards.  If you've traveled abroad previously, bring the local currencies from the other countries you've traveled to and exchange that directly for Euros; keep any Euros you have left after your trip so you can exchange them on your next overseas trip; since each time you exchange money, you'll pay fees and the forex spread, it's best to minimize this.

Beware of pickpockets!  Although Europe is safer than the US on average, pickpocketing is likely more of a problem, especially in Southern and Eastern Europe.  Consider bringing redundant bank cards, copies of important documents, and extra cash to leave in your hotel room or hostel locker.  While being pickpocketed is not a pleasant experience for anyone, it certainly doesn't help that getting replacement cards, passports, and IDs will be a much greater pain abroad, so redundancy is of utmost importance here!


If you're a young single 20-30 something, forget hotels, stay at hostels!  They're much cheaper, usually about half the cost of most hotel rooms (not to mention usually located close to the main train stations in every city.)  It's also a great way to mingle with other travelers in your age group.  Some have expressed concern that sharing a room with dozens of strangers is risky but most hostels have lockers for storage of valuables.  You can find reviews and details on hostels and hotels at


Europe has some of the most efficient public transportation systems in the world so why not take advantage of that instead of paying up the wazoo for a taxi or (gasp) a rental car?  If you plan to visit multiple countries especially in Northern Europe, consider buying a Eurail pass.  Sometimes, the Eurail pass will be less expensive than paying full price for train tickets, but there's an additional bonus: in most cases, you don't even need to buy tickets when switching trains, saving you time and headache.  Beware that some trains will require a reservation and you could be fined if you board one without getting a reservation first; these will usually be indicated in the Eurail schedule book.

It's best to check train schedule beforehand if you have Internet access.  Deutsche Bahn has a search engine for train schedules throughout continental Europe.

As for getting around in major cities, try to stick with public transportation if possible. has some comprehensive guides about subways and metro in various European cities including fares.  Buy a daily or weekly unlimited pass if you'll be staying for a while for the convenience and value.  However, do keep some cab fare on hand in case you get lost and need a ride back to the hotel or train station.


If you need to go shopping or buy food, it's best to stick to the areas that locals frequent.  Check and search your target city.  Also keep an eye out for the "Stay Safe" section so that you don't wander into a sketchy neighborhood.  If you want cheap phone service, consider installing Skype on your smartphone and using it if Wifi is available.


Many people in major European cities will know at least some basic English but please don't arrogantly expect everyone to have a working knowledge.  Even if you're visiting a country where English isn't an official language but is widely spoken (like the Netherlands or most Scandinavian countries), at least learn the basics of their language.  Learn how to say "Hello", "Goodbye", "Sorry", and some basic phrases in their language out of politeness.  There's plenty of video tutorials on Youtube in this day and age so there are no longer any valid excuses!

Got any other tips that has led to big savings in your overseas trips?  Please share in the comments!

Tuesday, May 27, 2014

Myth: You get what you pay for so there's no point in being frugal.

In general, compared to goods of the same type, a more expensive good is more useful than a less expensive good.  A $10,000 car is probably more useful than a $2,000 car because it has newer materials, is in better shape, has more features, is safer, gets better gas mileage, or any of the previous combination of features and many other possibilities not listed here.  Unless you're being scammed, in general, a more expensive good is more useful than a cheaper good of the same class (like cars.)

Economists refer to this as Utility.


Utility measure the ability of a good or service to satisfy one's needs and wants.  Utility is also subjective - the same good may have a different level of usefulness to different people.  A $1.00 ice cold bottle of water has greater utility to the runner who ran 1 mile in a hot summer day than the person who just already finished another bottle of the same water.

The saying "you get what you pay for" refers to the general notion that in most cases, a more expensive good of the same type has more utility than a cheaper good.  This doesn't mean that a person should be indifferent and not care whether they buy the $2,000 car or the $10,000 car.  Perhaps that person only needs a no-frills basic car to get him/her to places around town and a $2,000 used car would satisfy the need.  The $10,000 car will probably not have 5 times the utility as the $2,000 car.  On the other hand, if the $10,000 car is a pickup truck, it'll have more utility for someone who needs to transport his tools with him whenever he's called to do a job (i.e. a building maintenance contractor.)  The $10,000 pick-up truck will have far more utility than the $2,000 sedan in that case.

The Fundamental Rule of Frugality:

Well, unlike the physical sciences, there are no official "fundamental rules" (like the Fundamental Theorem of Calculus), so I'll make one up on the spot:

The Fundamental Rule of Frugality states that you should strive to maximize the average amount of Utility obtained per Dollar of wealth you've spent.

So if you've budgeted $1,000 of spending a month, seriously think of what your most important needs and wants are, and strive to maximize the amount of Utility that those $1000 will buy you each month.  If you can considerably increase your standard of living by spending $1,200 a month due to the increase in Utility (and Utility per dollar of your spending) and it doesn't break your budget and long-term financial goals, then definitely go with that $1200/mo budget.

Friday, May 23, 2014

How to find a cheaper cell phone plan

This will be a short post..  just wanted to share a site I've stumbled upon if you're looking to reduce your cell phone bill without sacrificing the features, minutes, and data you need.  Simply specify the minimum number of minutes, GB of data, or any other required features and it will reveal to you the least expensive plans that meet your requirements.


Tuesday, May 20, 2014

Is your car's gas mileage lower than usual? Some tricks to boost it and save money at the pump.

Note: I'm no expert at cars..  in fact, I almost always turn to a mechanic to fix problems or do routine maintenance.  But here's a list of common problems I've encountered that have adversely affected my gas mileage and caused me to spend more on gas than necessary.  Hopefully, these tips will help you get the most out of the $4-5 you're paying for gas these days.

First, you want to go to and search for your car (by make, model, and year.)  Look at the EPA estimated MPGs as well as the self reported ones.  Track your gas mileage by tracking the # of miles you've driven using the trip odometer and resetting it when you fill up.  Do this for 3-4 fill-ups, then divide the total # of miles by the total # of gallons you've pumped (don't just average all 4 which is inaccurate if you've not driven the same # of miles on each tank.)  Is your gas mileage in line with those figures or on the low side?  If so, read on.

Common Problem: Underinflated tires.

Check your owner's manual or the side of the door for the recommended tire pressure settings.  Inflate your tires to the recommended pressure or slightly higher (but below the tire's maximum pressure.)  It's best to do this when the tires aren't very hot otherwise the tire pressures will be biased up.  Slightly overinflating the tires means you can go longer before you need to reinflate your tires again.  A single tire that's vastly over or underinflated than the rest may also cause your car to burn unnecessary fuel when cruising, so try to keep their pressures fairly even.

Common Problem: Dirty fuel injectors.

Many mechanics will try to sell you this service to clean your fuel injectors for over $100.  Most of the time, it's a scam and unnecessary.  You can fix it for only about $10 to $20 using Chevron's Techron Fuel Injector Cleaner.  (If there are no Chevron stations in your area, just buy some from Amazon.)  Just run your car until the gas gets so low the low fuel light comes on or is on the "E" gauge and pour the Techron into the tank before fueling the tank to 100%.  Then run that tank to near empty again before refueling.

Common Problem: Excessive engine warm-up in the morning.

You've probably heard a cold engine gets lower fuel economy and this is true!  But you're not saving much money by purposely warming up the engine in the morning since it's gonna use up fuel in the process.  If you start driving right away, your engine will still use more fuel in the first few minutes of driving because that extra fuel is being converted to heat which warms up your engine.  Once the engine is heated, less energy is escaping as heat, so you'll be achieving normal fuel economy.  Unless temperatures are drastically below freezing, there's no harm in skipping the engine warm-up and you'll be saving some time anyways.

There are probably dozens of other tips that can boost your fuel economy but they're either dangerous (like hypermilling), expensive, or not really worth the trouble.  If you've got more tips, please share them in the comments!

Friday, May 16, 2014

How to earn at least 2.5% cash back using Staples gift cards.


If you have a Chase Ink Bold Visa card, you're already getting 5x points or 5% cash back at office supply stores like Staples.  The largest denomination gift cards sold by them is $200 for about $7 for a total of $207.  After 5% cash back, you're still spending $197 for a $200 card, effectively.

You can further squeeze more cash back by signing up at and registering your Chase Ink Bold card for an additional 1% cash back.

So you can effectively spend $195 (after these cashback rebates) for a $200 gift card, better than any arbitrage opportunities I've ever seen in the financial markets!  Just don't abuse it by generating several thousand dollars in manufactured spending each month.  Load your Staples-purchased gift cards onto your Bluebird account at Walmart to pay your rent, mortgage, car payments, student loans, utilities, etc. and other large bills that you normally need to pay anyways.

Tuesday, May 13, 2014

Compound Interest: How long will it take to save 1 Million Dollars (Pt1)?

Assuming you make 5% a year after inflation and taxes, here's how long it'll take you to make 1 million (in today's dollars):

Additional Savings Per Year: $0.00 $5,000.00 $10,000.00 $15,000.00 $20,000.00
Starting Net Worth

$10,000.00 94 47 36 29 25
$20,000.00 80 45 35 29 25
$30,000.00 72 44 34 28 24
$40,000.00 66 42 33 27 24
$50,000.00 61 41 32 27 23
$60,000.00 58 40 31 26 23
$70,000.00 55 38 31 26 22
$80,000.00 52 37 30 25 22
$90,000.00 49 36 29 25 22
$100,000.00 47 35 28 24 21

The takeaway is to start early and save as much as possible.  Your starting net worth doesn't matter as much as how long and how much you choose to save.  More on this later...

Friday, May 9, 2014

The Inflation Bully will steal your money under your Mattress!

If there's risk everywhere in the financial markets and banks aren't safe from collapse and political risks, then keeping money under your mattress is the best option, right?  In the short run, it may be fine, but due to inflation, it'll lose approximately 3% of its value over time.  I think of inflation as a bully that steals 3% of the value of the money under your mattress.  In reality, the prices of goods (assuming equal quality) you purchase every year will most likely go up year after year and this effect is refereed to as Inflation.

There's really little that can be done to predict the inflation rate going into the future but the long-term sustainable rate has historically been around 3%.  So if you keep $100 under the mattress, that same $100 will have around $97 of purchasing power in a year if inflation is 3% after prices have gone up.  Now 3% might not be a big deal but remember, inflation rates compound over time.  Here's a table of how much money you'd need to buy the same goods costing $100 today if inflation stays at a constant 3% and how much that same $100 will buy in the future (in today's dollars):

Inflation Adjusted Amount of Today's $100
Purchasing Power of $100 Today

In other words, your $100 will be worth about $30.66 in today's dollars 40 years from now and you'll need about $326.20 to buy the same goods $100 will buy today.

But if I keep money in a Savings Account, I can earn interest which will offset inflation, right?

Sometimes, yes.  In recent times (since around 2000), most likely, no.  According to, the average inflation rate from 2000 to 2009 was about 2.56%.  Since you need to pay taxes on interest on a savings account, you'll need a much higher interest rate to keep up with inflation.  If your tax rate is 30%, you'll need a 3.7% interest rate, and if your tax rate is 40%, you need 4.3%.  Unfortunately, rates have been at 0.25% since 2008 and have only exceeded 4% for only a minority of periods since 2000.  Although some investors don't include Savings Accounts as a legitimate investment vehicle, there are times when it may be prudent to earn interest in a savings account (for example, in the early 1980s when interest rates were vastly higher than inflation.)  But there exists no mandate that the interest paid on savings accounts must keep up with inflation and they have underperformed inflation for long periods in the past, so I don't think it's wise to rely on them for inflation protection.

Why don't I use TIPS instead?  They're designed to keep up with inflation!

TIPS, a government bond that pays you interest based on the inflation rate, sounds like the holy grail to our inflation problem, right?  One problem though: you have to pay taxes on the interest from these bonds.  After paying taxes, you will NEVER beat inflation.  Back to the drawing board..  almost.

Putting TIPS in a tax-exempt or even a tax-deferred account may relieve you of the above problem and actually allow your money to grow at the inflation rate.  These accounts are known as Roth and Traditional IRAs, respectively.  Unfortunately, you cannot withdraw money from these accounts until you are age 59.5 or older.  If you will be 59.5 soon, they may not be a bad idea for inflation protection, but if it's decades away for you, you might as well turn to investing with that long of a time frame.

Want to learn how to get started investing?  Please stay tuned!