The Signal and the Noise

I finished reading The Signal and the Noise by Nate Silver this week.  Normally I am a staunch advocate of borrowing books from the public library, but this is a book I own.  Each year my employer reimburses each employee up to $50 spent on educational materials.  The items must be approved in advance and a receipt must be submitted.  Although this book is only vaguely related to my job responsibilities, I was able to make an argument for it and get the book for free through this “Professional Development Fund”.  This is the type of job perk I was talking about in a previous post.  Know your perks, and take advantage of them often.

I really like people like Nate Silver.  It takes a colorful personality and a way with words to take what essentially boils down to piles of spreadsheets and make the data come alive by telling a story.  Not many of us would have the patience or the creativity to analyze years of baseball data in order to make accurate predictions about player performance, but this is precisely how Nate Silver made a name for himself.  He developed his baseball model in Excel while he was working as an accountant, which is funny because nobody could tell he was working on a personal project by looking at his computer screen!  The moral of this story is that spreadsheets are your friend.  It is worthwhile to collect data because of how much can be learned from it, but you also have to be able to analyze it and “play” with the numbers to uncover the stories within.

So far my story is one of above average (but not quite extreme) savings.  I’ve been collecting data in a home-grown spreadsheet since late November 2011.  Since then I’ve paid off ALL of my debt (over $50k between student loans and a new car) and maxed out my (early) retirement accounts by saving just over 2/3 of my take-home income.

I’ve also discovered trends in my spending that have helped me influence my own behavior to boost that savings rate.  One month I spent more on video games than groceries.  Now I try to limit the amount of money (but not time!) that I spend on electronic entertainment by borrowing games and waiting for deals.  Another month I spent three times as much on alcoholic beverages at bars and restaurants for half the volume that I enjoyed at home and with my friends in their homes.  Now I drink water when I’m out (unless somebody wants to buy me a drink/pitcher) and save a bundle!  Plus everybody loves a designated driver (which is probably why they buy me drinks those other times).  I was only able to discover these trends and track my initiatives accurately through the data I maintain.

Of course, Nate Silver’s recent book is all about prediction.  One of my spreadsheets is a year by year analysis of my 401k account.  It includes columns for year-beginning amount, personal contributions, employer contributions, returns, fees, and year-end amount.  I only have data points for two years so far, but can play around with those and other variables to predict my future assets and make informed decisions about retirement.

When I mention I’m going to retire early, many people don’t believe that I’m making an accurate prediction about where I’m going to be financially in 10-15 years.  They tend to dismiss the fact that it is entirely dependent on one variable: your savings rate.  But I’ve done my homework and you should too.  You should have more than a vague idea of the direction you want your life to take.  If you can separate that signal from the noise of consumerism, you’ll find it easy to make the choices that will really make you happy and stress-free.

You don’t even have to geek out about it like I do.  Just write down how much money you save (earn minus spend) each month.  Calculate your savings rate.  Then do it again next month.

Go on!



This has been a big week for the Green Pilgrim!  I recently proposed to my girlfriend and she said YES!  I am incredibly flattered that anybody would agree to spend the rest of their life with me, and I will do my best to provide a financially secure future for my family by following the advice I share with you on this blog.  You can expect plenty of updates over the next year (and more) on how we plan to save money on major purchases like a wedding, a honeymoon, and a house.  In this post I’d like to call out a few general strategies for making major purchases that I made use of recently while shopping for an engagement ring.  These tips would also apply to other major purchases like a vacation package or big-screen TV.


The ring! Sparkly!

  • Have a clear objective

Before you even think about leaving your home, make sure you understand exactly what you’re looking for.  Wandering aimlessly around a mall often leads to impulsive purchases like an expensive pair of shoes or an overpriced gag gift from Spencer’s for that cousin whose birthday you forgot.  Think of shopping as a quest for something specific; not just any artifact will do.  Know the specifications you are looking for.  Do you want your new TV to be LCD or plasma?  Do you want your band to be white gold or platinum?  Do your preparatory research thoroughly (the internet is a wonderful modern resource) and choose what you want BEFORE going shopping.  If you don’t, somebody else might choose what you want for you.

  • Have a budget

Consider your situation.  How much are you willing to spend on this?  This is REAL money coming out of YOUR pocket, even if you use a credit card.  Pick a number that represents your absolute maximum.  Do not go higher than that number at any point in the shopping process!  It will work out much better for you if you set that limit at home while looking at a spreadsheet of your personal finances, rather than a poster of the Caribbean in some travel agent’s office.  While you shop you will encounter one desirable option after another; if you can’t afford it, forget about it.

  • Ask for advice

Lots of people buy TVs, vacation packages, and engagement rings.  Ask the people you know what their experiences were buying these things, especially if they did it recently!  There are all kinds of special deals, tips and tricks for savings money.  It is very easy to take advantage of these deals, but the catch is that you have to know about them first.  Ask an expert, or somebody with any familiarity at all.  If they’re not trying to sell you anything, then their advice will be honest and can hopefully help you with your decision.

  • Shop around

Take your time.  Go to every store that sells the object you are interested in.  Go twice.  Prices change over time, and this will help you judge if you’re really getting a good value or not.  Check websites like eBay and Craigslist.  These websites represent the free market and will provide valuable data points to sharpen your estimation.  The more you know, the better equipped you are.  Haste makes waste, and why would you want to waste greenbacks you worked so hard to earn?

I hope this general advice is helpful to you all.  It can be daunting to resolve to buy something you have no experience with (for example, diamonds).  It can be tempting to go with the first option and save yourself the time it takes to research the subject and the anxiety of choosing out of hundreds of options discovered over time.  Hopefully your decision to make any major purchase is not made lightly.  Do you really need that TV, or that vacation?  But if you do, as badly as I needed this woman to marry me, then you should take the advice of the Green Pilgrim and be methodical and thoughtful about it, so as to reap the benefits throughout your life.

A fun and thrifty weekend

I hope you all had as fun a weekend as I did!  What I enjoyed so much basically boils down to dinner and a show, but I’d love to share the details of those activities with you and how they dovetail with my frugal lifestyle and potentially expensive tastes.

We didn’t leave the apartment on Friday night.  Home-cooked noodles, a little TV, and a one-on-one D&D session.  Doesn’t get much cheaper than that, especially when you download/stream the video entertainment (and why wouldn’t you?).  Maybe I should also mention that imagining things is always free.

The Girlfriend had a great idea for Saturday.  A local ballet troupe was performing a steampunk version of Dracula with a live rock & roll soundtrack.  Tickets were heavily discounted with a student ID, so we headed downtown in the early afternoon to buy our tickets from the ticket office directly, avoiding the irksome online “service” fee.  Never throw out your college ID!  That little piece of plastic can get you discounts well into your 20’s.  We bought our tickets together with IDs from colleges 500 miles away from the show and from each other, and the ticket agent didn’t even bat an eye.  Balcony seats were $10 each.

I'll always be a student of life

We didn’t even need to bring our opera glasses.

After buying the tickets we meandered through a few free art exhibits and finally met up with some friends before the show.  The seven-piece band absolutely killed it (that’s good), and the dancing was suitably varied by character.  We went directly home after the performance.  Downtown parking in the city where I live is $5 for 24 hours, making the total cost for Saturday only $25 for the two of us, despite all of our activity.

On Sunday I decided I wanted sushi.  I’m a bit of a sushi enthusiast; If I could only eat one class of food for the rest of my life, it would be sushi.  Can’t get enough of that fish and rice.  Many sushi restaurants offer reasonable lunch specials but eating out too often is definitely not frugal.  So why not make my own?  As luck would have it, salmon filets were on sale at the grocery store across the street.

Now I’m about to share one of my favorite money-sharing secrets: the Asian grocery store.  Not only are many common types of produce pretty well discounted there, but the variety simply can’t be beat, and I’ve almost always enjoyed the experience of trying something new.  This wasn’t my first sushi rodeo, so I already had the fundamental materials like short-grain rice, bamboo rolling mat, toasted seaweed, and rice vinegar.  I even had all the extra stuff like soy sauce, pickled ginger, and wasabi paste too.  A small container of miso can be used with green onions and tofu to make dozens of servings of soup, which goes well on the side.  My mouth is watering just typing all that.  I’ll be sure to include a picture next time; my finished product is continually improving with practice.

So I made some delicious sushi, and some California rolls for The Girlfriend.  We finished off the weekend by enjoying a quiet evening of reading.  I was engrossed in At the Mountains of Madness by Lovecraft, whose body of work is out of copyright and can be found for free online, while The Girlfriend giggled at The Casual Vacancy, which she had on loan from the local public library.

Over time I expect the effects of little frugalities like these to snowball and be reflected quite impressively in my overall account of personal assets.  On the way, I hope my EOM posts (with occasional drill-downs of specific expense categories like “eating out” and “groceries”) make such a conclusion inevitable.  And most of all, I want this post to illustrate that conscientiously saving is no great sacrifice.

You do not have to give up the things you enjoy.  You do not have to abandon your tastes, however refined or esoteric they may be.  But before you continue down the path of the green pilgrim, leave your consumerism at the door, and you will travel lighter.

EOM February 2013

I had been waiting to get my most recent travel reimbursement back before writing this post.  Now that the funds have been deposited in my savings account I can close out February and see exactly how much I saved this month!  I took a big trip to New England for 8 days that I was afraid would impact my savings rate in a big way, so I tried to be frugal the rest of the month to balance it out.  Let’s take a look at the numbers!

When I go on trips, I categorize most expenses (like hotels, rental cars) under a “Travel” grouper in Excel.  When I get reimbursed, I also include that positive transaction amount under my “Travel” grouper.  This way, by looking at my total “Travel” amount I can see everything that wasn’t reimbursed.  The total cost of my personal travel this month was just under $500.  That’s less than my rent!

My cell phone costs this month were only $10!  I love this new prepaid plan.

One of my biggest expenditure categories this month was alcohol, at $166.52.  This is because I bought a lot of drinks at bars this month, instead of my usual six-pack or two a week.  When I was in Boston and Portsmouth restaurants I bought a few $5 beers (which is a ridiculous markup if you think about it), as well as treating some friends to drinks in downtown Madison as they passed through on their way to moving to North Dakota.  Totally worth it, but way above my average monthly alcohol expenditure from 2012.  To bring my 2013 average back down I’ve decided to make do with only what is currently in my fridge and refrain from buying more until April.

Other expenses like gasoline, groceries, and eating out at restaurants remained stable.  I spent slightly less than average this month on entertainment/gaming.

So let’s take a look at my overall savings rate for February: 64%.

That’s just barely below my 2012 average of 67%, and it includes my little personal vacation which I won’t be taking every month.  It is also well below my target goal of 85%, which I am beginning to think is a little high considering that to achieve it I would have to pay my rent and nothing else.  We will see how the rest of the year goes.

How much did you save this month?  It is nice to know that with my savings from this month alone I could spend an entire month and more not working and visiting my friends in New England instead.  Early financial dependence and the freedom that comes with it is my goal, and every month brings me closer.