I’ve been slack for too long

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I haven’t updated my blog for over a month which is pretty slack.

My hiatus has been due to a number of factors: a close friend’s wife went overseas leaving us more time to drink beer; I’ve had the flu; been on holidays; had a busy period at work; the football season has started amongst a host of other bad reasons.

I could choose to get down in the dumps about it and just stop updating my site but I would then miss out on all of the positive things this site has given me. Better late than never, I say. Oddly enough, the break confirms again for me what a wonderful hobby blogging is – if I’d bought a brand new fishing boat in a fit of consumerist madness back in September instead of starting this blog, can you imagine how much I’d be kicking myself if I lost the drive to get out on the boat?

If I do permanently decide that blogging isn’t for me then I’ve lost absolutely nothing at all. After taking out the modest costs of hosting and domain registration, I’ve come out considerably ahead in my short time blogging having made some money from adsense, bluehost, Amazon and the like. All the time spent updating the site hasn’t been wasted either, because it has provided me with a real sense of accountability – the idea that people are reading about my progress is extremely good motivation to stay the course with my financial independence goals.

Speaking of advertising revenue. Something odd happened when I stopped updating my site. My advertising revenue went through the roof. I have no idea why, but I’ve made 100 times more in the month without updates than I did in the previous months slaving away writing new articles. Hopefully I don’t jinx things by writing this!

My motivation for updating might have temporarily waned, but my motivation for financial independence and frugality hasn’t. I do think that being away from the site has caused me to think through my purchases a little less though. Hopefully the knowledge that I have to update my site causes me to get back on track. I certainly haven’t been profligate, but I’ve just had less cause to think about the best frugal option in all circumstances like I used to previously.

This weekend I’m going to do my March report, and I expect spending to be up slightly, but nothing too dramatic. See you then!

    Cheap hobbies: running a blog

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    My recent post about my top 100 cheap hobby suggestions has been fairly successful, and has inspired me to post this follow up article about one of the suggestions that has been occupying much of my time of the last six months: blogging.

    My post about cheap hobbies has quickly become the most popular way for people to get to my site through Google. If you search for ‘cheap hobbies’ in Google, it’s currently the first or second result you get (at least it is for me, and is confirmed by Google Analytics).

    Blogging has most of the hallmarks of a good frugal hobby. If you have a computer and an internet connection then you can start a blog. There are a number of free services that let you host your blog on their hosting, like blogger, tumblr and wordpress. They are fine if you’re starting out and have no plans to advertise, but can be more limiting if you want your own domain name and have complete control over what is on your site.

    Given how cheap domain registration and hosting is, it’s definitely worth considering hosting your own blog so that you can control every last aspect of your site. A typical .com domain name costs around $10 per year, and hosting can be had for as little as $7 per month with perks like unlimited domain names, unlimited data transfer and unlimited data storage.

    The best hosting currently available is bluehost. There are a few similar hosts, but none that make the process of setting up your blog as easy as bluehost does. WordPress is the most popular option for blogging software if you want to go down the self-hosted path, and for good reason. It’s extremely flexible and customization - there are tons of free and professionally built themes to choose from, and updating is really easy.

    If you decide to register with bluehost, please consider using one of my links because it directly assists my blog financially when you sign up through my site. The best part is that it won’t cost you any more to sign up through this site.

    I have been running my site for about six months and haven’t been directly thinking about how to make money from it until fairly recently – I dabbled in the beginning with adsense, but only recently have I thought about different revenue streams. It’s certainly not a good way to make a lot of money quickly, but all of the costs I’ve had to run the site (domain registration, hosting, and the like) has been returned in revenue by more than double through advertising income.

    At worst, it’s a cost neutral hobby that has the potential to return some income if you stick with it, or stumble upon a popular format.

    Positives to blogging as a cheap hobby

    1. The ongoing costs are no more than about $100 per year for a fully hosted site with your own unique domain name. If you don’t care about being on your own domain name, it is a free hobby.
    2. It’s a great way to learn more about a passion or hobby in another area. For me, I’ve learned a lot about financial independence and personal finance and probably wouldn’t have learned the same lessons as quickly had I not been constantly thinking about how I could write about a particular topic
    3. It keep you accountable. If you’re interested in a blog to document your progress towards a particular goal, like I am as I move towards financial independence, the feedback you get from readers is invaluable as a source of motivation. More than half a dozen times, I’ve reconsidered a purchase because I didn’t want to include it in my monthly reports.
    4. It can lead to a relatively passive income stream. I generally don’t like referring to blogs as being capable of producing ‘passive income’ because by and large they are a lot of work to maintain and update – but they are less intensive compared to a full time job, and you can go at your own pace. Theoretically, you could build a site and then let it run on auto-pilot, while continuing to receive a small amount from adsense into the future - or hire someone else to write for you. Generally, they take quite a bit of active participation to get them to a point where they regularly provide any income at all.
    5. You can remain anonymous.
    6. You can update your blog from anywhere in the world, and unlike another hobby or job, you’re not tied to the one physical location.
    7. You can run more than one site without them being connected, and the loss is minimal if any one site doesn’t work out.
    8. You meet a great number of very passionate people who have similar interests, and particularly in the personal finance niche, there is a real sense of camaraderie.
    9. You can say whatever you like about whatever subject you like, and if you do so for long enough, you’re bound to find a group of like minded people and readers. The internet is a weird and wonderful (and huge) place, and if you’re persistent and entertaining, your blog can be a success almost regardless of its focus.
    10. Be your own boss. Only you edit your work, choose when you write and what you say. I’ve found it to be a very motivating and liberating process.
    11. You gain a number of very transferable skills, like copy-writing, editing and marketing.

    The negatives

    1. It takes considerable effort to regularly update a blog. In February, I found it hard to work a full time job, run this blog and do all the other things I want to do in my spare time.
    2. Pressure to keep writing
    3. Minimal profit early, potentially for ever
    4. Can be disheartening to not get any feedback
    5. Difficult to know if you’re on the right path

    If you think you’d like to write regularly about a topic you’re passionate about and think it’d help you stick to your goals – try writing a blog. It can be really cathartic, and doesn’t have to cost anything if you’re not sure you’d like it. If you start the next Get Rich Slowly, then you could retire in a few years, too!

      Monthly report: February 2013

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      Wallchart

      It feels very strange to be writing a report about February already. It feels like 2013 only just started last week. My partner and I both had birthdays in February which has made it a fairly expensive month – without the additional spending on birthdays we would have had another very good month from a savings rate perspective.

      This month I felt the pressure of failing to meet some of the goals I set for myself last year. I am way behind on my reading, I haven’t been running and I’m feeling less inclined to update my blog that normal. I’m confident that it’ll pass – I’ve had a pretty busy month at work which has meant that some of my other pursuits were put on the back-burner for a while. Never mind.

      I’m excited about my next DIY project for March which is to create a home gym to get back into the swing of fitness. Rather than fork out an exorbitant monthly fee for a gym, only to use a few pieces of weights equipment, I’m going to be making my own for the shed.  I’m going to build a power cage from wood to do squats, bench press, dead lifts and a heap of other exercises that I haven’t done for ages. I’m going to be using this design.

      Judging from past experience, getting back into weights will help my motivation and mood in all other areas, so it should be worth the investment. All up I should have a fully functional gym with a bench, barbell, dumbbells, weights, punching bag, mats, dipping machine, pull up bar and power cage for about $500. Well under what I could buy it for locally.

      The finances

      This was our first full month as index fund investors. We continued to add regularly to our fund and it went up a whopping 3.5%, which is very handy indeed over one calendar month (particularly a short one). We aren’t expecting it to do this regularly, but it’s nice to get some immediate positive feedback. During the down months we just have to remember that by continuing to contribute regularly, that we’re buying shares on sale and are getting more units for our money.

      Our spending was up because of birthdays, but we both got gifts we were very happy with!

      February’s financial charts

      Every month I include our financial charts as a way of keeping accountable and on track. I’m not here to be boastful or to show off which is why I keep the dollar figures out – I like to see trends rather than absolute figures. I do it to see we are going in the right direction, not that we’re earning more or less than the next person. So, here they are for February!

      Wallchart Spending rate Portfolio Non-salary Networth Mortgage Financial Independence

      Blog

      The blog was fairly quiet this month because work was busier than normal. The good news was that I had more visitors than ever, and all of the numbers are heading in the right direction. I received a fairly big payment for hosting an advertisement which was a nice and unexpected surprise. For those wanting to advertise, please get in contact with me here.

      I am finding it a bit hard to find the time to update as much as I’d like to, so I’ve settled on trying to update on Wednesdays and Sundays, to make sure I’m doing it regularly and not making excuses. Any additional updates will be a bonus – but I’m setting the bar a little lower for myself for the next few months. This project was designed to be enjoyable, after all!

      My alexa rank dropped a bit this month which is probably due to me spending a bit less time on the site. Alexa uses data from people using their plugin on their browser, so it doesn’t rank all data – because I spend more time on my own site than anyone else, I’m probably over represented in the data a little bit. Because I spent less time on the site, I think my rank dropped a little. Not concerned in the least – my eye is on the very long term.

      Subscribers
      Visitors      Alexa

       

       

        Vegetable garden update

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        Tomatoes in the garden during 2012Back in October last year I wrote about our new enclosed vegetable garden and ever since we’ve been spending a lot of our spare time there weeding, watering and harvesting vegetables.

        We now have three separate vegetable gardens, two that are fenced to protect our produce from rabbits and a raised bed for herbs. The cost of fencing and wood for our raised bed would be less than $200 and will last for a long time. Continue reading →

          Challenging the typical emergency fund

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          Personal finance blogs and sites relentlessly advocate having three to six months worth of expenses sitting in a bank account in case of an emergency. Some even suggest that you should have a years worth of expenses sitting around waiting for an emergency to happen.

          The advice is to have up to six months of living expenses in liquid savings that can be accessed immediately. Most argue that you shouldn’t rely on credit cards or other lines of credit for an emergency fund because it can cause a spiral into debt and that it teaches bad habits.

          The above is not necessarily bad advice, but it’s the ubiquitous nature of it that I disagree with. This is not a good plan for everyone, and in a lot of ways it’s not even good for the average person, if there is such a thing.

          Many of the advocates of the six month emergency fund argue that you need a liquid fund that big because of the danger of unemployment in a poor economic climate. What if you can’t find a new job straight away?

          You don’t need such a big emergency fund

          There are a number of reasons why I think you don’t necessarily need such a conservative emergency fund.

          1. Why base an emergency fund on your typical living expenses? In my view your emergency fund should be based around emergency spending levels, not typical spending levels. You won’t be going out to dinner, buying consumer goods or taking holidays if you lose your job. We should be budgeting for much less in our emergency fund.
          2. There is a large opportunity cost associated with having such a large amount of money sitting in a bank account not earning interest. For every month you’re not in emergency mode (ie 99.9% of the time) you give up income that the money could be making if it were invested elsewhere, or applied to a debt like a mortgage.
          3. An emergency fund doesn’t need to be so big or so liquid. An emergency like losing your job happens over a period of months, which is plenty of time to release money from a less liquid account like an investment account, brokerage account, or mortgage.
          4. Credit can be a useful instrument in case of an emergency until money is released from less liquid investments – credit doesn’t have to be evil, and can be used effectively to your advantage.

          To expand on the opportunity cost point – compare the two scenarios.

          Case A: Typical emergency fund

          You have a $20,000 emergency fund sitting in a highly liquid standard bank account.

          Case B: Hybrid emergency fund

          You have a $2,000 mini emergency fund in a highly liquid bank account, a $3,000 credit card with no annual fee, and $18,000 in low cost index funds ear-marked specifically for emergencies.

          The hybrid emergency fund breaks most of the rules that are commonly advocated as I explained above. It isn’t liquid enough for most according to traditional wisdom and relies in part on debt.

          The cost of having all of your emergency fund in liquid assets is about $90 per month, assuming you’re giving up $18,000 per year at 6%. That is, in normal, non-emergency times, the cost of the liquidity in your emergency fund is high.

          The hybrid model is advantageous in many cases because while there is less liquidity, there is sufficient liquidity in cash and lines of credit to get through the first week or two of almost all emergency situations, so that the less liquid investment or asset can be drawn on.

          Personal circumstances to consider

          Consider having more months worth of emergency expenses in a more liquid emergency fund if any of the following apply to you:

          1. A wildly variable budget
          2. Are self-employed, a seasonal worker, or at risk of losing your job
          3. Have children or non-working dependants
          4. Have a low tolerance to risk
          5. Can’t redraw on your mortgage
          6. Have a unique emergency on the horizon
          7. Live in the USA, Iran or North Korea or anywhere without universal health care

          Consider having fewer months and a lower proportion of liquidity if you:

          1. Are in a relationship with another income earner
          2. Are a full-time worker in reliable employment
          3. Have no children or dependants
          4. Have a higher tolerance to risk
          5. Have a predictable and regular budget
          6. Can redraw on your mortgage
          7. Live in a country with universal health-care

          Don’t believe me though – challenge me and the traditional wisdom when you’re looking at your situation. Don’t trudge through the next decade trying to save half a years worth of expenses unless you’ve got a compelling reason do to so. Instead, consider saving a mini-emergency fund, establishing an emergency credit card (only for use in emergencies, where it’s able to be paid in full within a week or two) and then applying your money to pay down debt and build assets.

          Just make sure you earmark some of those assets for emergencies and have a plan to access them in case shit hits the fan. If you can’t guarantee you’ll be able to access it in 14 days, it’s probably not liquid enough in my view. But there is absolutely no need in most cases to have the full emergency fund in cash as is often recommended.

          If you have a large emergency fund sitting under the mattress or in a 0% bank account, you should consider moving it somewhere more profitable.