50X Bank Interest Rates - Part 3 - Examples

Let me give you a few generic examples just so you get some kind of idea how this works.

40-year-old non-smoking male

Let's first look at a 40-year-old non-smoker in "normal health" such that insurers classify him as a "standard" risk.  (That is actually the second worst classification.  From best to worst, it typically goes preferred plus, preferred, standard, and sub-standard, which would be smokers and other very high risks.  Different companies use different names, but you get the idea.)

Let's assume he puts $5,000 per year into this specialized policy to maximize the growth of his cash (account) value.  That amount would buy him $388,469 in life insurance (aka "death benefit" - not a great name if you ask me because when is death really a benefit?).

Because part of his premium is actually going to cover the life insurance (his risk of dying in a given year), at first his cash value is less than he put it.  As the cash value grows with additional premiums and the "profits" returned by the insurance companies, the cash value does not exceed the premiums paid until year 10.  So it takes 10 years to "break even" if you were ever planning to completely take the money out instead of just taking a loan against it (which I do not recommend!).

After 25 years, at age 65, the cash value has grown to $450,634 and represents a 4.29% internal rate of return (IRR, which represents the average annual return) on the premiums paid.  After 35 years the IRR rises to 4.74%, and after 45 years the IRR rises to 4.85%.

It is important to realize that these numbers are not "guaranteed" as the "profit distributions" can vary over time.  Of course it is unlikely that interest rates will go down significantly from here, so there estimates are probably pretty safe right now.  BUT, there is also a minimum GUARANTEED return, which provides a much lower (but still positive) return over time.

(These numbers were from an example run with MassMutual as the insurer in May of 2014.  These numbers will vary with both insurance companies and the date of the quote as interest rates change.)

Rates of return for various examples:

After 30 years, in the example above, the IRR is about 4.5%

With another company, 35- year-old male, preferred plus rate, realized a 4.6% return after 30 years.

With that same second company, 35-year-old female, preferred plus rate, realized a 4.7% return after 30 years.

As you can see, younger, better health, and female gets you slightly better rates of return, especially in the short term, but over time, the gap narrows.  The reason for this is that the insurance company has to set aside more money up front for older, worse health, and males to compensate for the higher risk of dying.  If you don't actually die, over time, everyone gets about the same return on the insurance company's "profits."

Hopefully that makes sense.  This is a huge topic that I am not doing complete justice to.  If you have specific questions you want answered or clarified, please leave a comment and I will try and address all of those issues in a post (or several posts if necessary).

Next time, I will give you my preferred providers in the industry that you can contact to get a quote tailored to your specific circumstances.

50x Bank Interest Rates - Part 2 - How It Works

Make sure you have read about Savings vs. Investments and 50x Bank Interest Rates - Part 1 as these two posts provide the foundation for what I am about to discuss.

What's interesting about these whole life insurance accounts is that large corporations - and especially large BANKS - have billions of dollars in these policies.  Last I looked, Wells Fargo had as much in these policies (about $18 BILLION) as they had in all of their buildings and equipment.  Think they might know something you don't?

So why don't you know about them?  Well, the banks aren't going to tell you about them as they can't sell them.  Most financial advisers do not sell insurance, so they won't mention them either.  That leaves insurance agents, the vast majority of whom do not know about these specific techniques and - even if they do - they are not likely to promote them as they do not pay very well.  Oh yes, and the government dramatically restricts advertising of life insurance policies (e.g. insurers cannot advertise the policies as "alternative savings accounts").

How It Works

Insurance companies take the premiums they receive and invest them in bonds, loans, and maybe even stocks.  Unlike banks, they don't have nearly the overhead expenses in the form of branches, tellers, loan officers, etc.  This allows the mutual insurers to return most of their "profits" to the policyholders.

Whole life policies earn dividends, which would otherwise be profits but for mutual companies are treated as a return of a portion of your premiums.  As a result, these dividends are not taxable (this is how your returns compound tax deferred).

Normal policies earn returns in the 2-3% range over decades - not particularly good, but remember what savings accounts are paying right now?  BUT, you can cram additional money into the insurance policy (technically buying additional insurance) which also earns dividends and boosts your returns up to 4-5% right now (typically).  Unfortunately, the IRS puts a limit on how much additional funding you can put in before they say it is an investment and not insurance, and you would therefore lose your tax benefits, which we don't want to do!

I also promised you can get to your money at any time.  This is true, but a little tricky.  The way you get "your money" is actually by taking a loan from the insurance company.  Insurance companies are legally obligated to loan against your cash value (I will call this your "account value").  With the best companies, the interest rate varies, and is close to what you are earning in dividends - sometimes a little more, sometimes a little less.  So say you have $100,000 in cash value - you can take a loan at 5% from the insurance company while at the same time your $100,000 is still in the "account" earning 5%.  While it sounds weird, the net result is the same as taking your money out of the bank - the 5% you are earning offsets the 5% you have to pay on the loan.

Advantages

1.  Return - 4-5% is much better than other savings vehicles.  Remember to compare this to other savings vehicles and not investments - though if you do the math, the tax deferral and lack of fees does compare favorably to many investments.

2.  Grows tax deferred

3.  Access to your money (unlike 401ks, IRAs, etc) - again, not as easily as banks, though

4.  Protected from creditors (lawsuits, etc) in most states

5.  Death benefit - essentially a free "bonus" to a great savings vehicle

Disadvantages

1.  Setting up an account takes time - it takes 1-2 months usually, and involves medical history, medical exam, etc.

2.  Access to money is not as convenient (which can also be a plus if you tend to spend too much, as I have sometimes been wont to do)

3.  Long-term commitment - takes 5-10 years to break even on policy & get to point where policy can pay for itself

4.  You might be uninsurable due to poor health, etc, in which case you might need to take out a policy on a relative



Next time we will walk through an example to give you a better idea how this works.  In the meantime, if you have questions (which is likely after a very brief explanation from someone who is not particularly good at explanations), then please comment below.  Thanks!

50x Bank Interest Rates - Part 1

Want to make 50x what you make in your bank savings account?

There are a number of gimmick-y names used to refer to the same idea: Infinite Banking, Income for Life, Bank on Yourself, Personal Banking, Becoming Your Own Banker, etc.  They are all essentially the same idea: substantially increase the amount you earn on your "savings" while getting your money out of the traditional banking system.

This is an idea that has received a lot of play in alternative financial circles for a couple of reasons:

1.  Interest rates on savings accounts average less than 0.1% last I checked
2.  After Cyprus and then Greece, a number of people are nervous having their money in traditional banks.

So why all of these different names for the same concept?  Well, the names are generally trademarked, so if you want to talk about the concept you have to use a different name.  But the REAL reason for the different names, is that if you described it using the most traditional terms, most people would be turned off!

The underlying tool these concepts use is participating whole life insurance.  Now you know why they use a different name for it - most mainstream financial types treat whole life insurance like the plague!  Let's look at the two components individually:

1. Whole life insurance

Whole life insurance is more like a savings account than insurance.  Whole life insurance is "permanent," so your life is covered as long as you continue paying the premiums and cannot be cancelled.  Additionally, you build "cash value" in your account, which is essentially your reward for not dying ("congrats on not dying this year - here's your bonus!").  Over long periods of time, if the account is structured correctly, you can grow your account up to 5% annually, tax deferred.  Not going to light the world on fire, but it sure beats 0.1%!

Compare that to "term insurance," where you pay a relatively small amount to have your life insured for a limited period of time (or "term").  At the end of the term you have nothing left over if you are still alive (like true insurance).  After that, you can usually continue to buy insurance on an annual basis, but at MUCH higher rates.  

2. Participating

Participating refers to the type of insurance company: one that is owned by the policy owners, aka a "mutual company."  This is different than the companies that are owned by shareholders.  With shareholder-owned companies, any profits go back to the shareholders, whereas with mutual insurance companies the policy owners get to keep any "profits," effectively increasing the policy holder's returns.

How these accounts are different

The most common mistake I see when evaluating whole life insurance in general comparing these "savings" rates to those you would get in investments (like the stock market).  It's like comparing apples & oranges - they are just too different!  It is a much better comparison to compare these accounts to savings accounts at banks.

Some of the criticisms I have seen of whole life insurance are that your money is tied up for a long time and the returns are only 2-3% annually on average.  Structured properly, these accounts allow access to your money at any time with significantly higher returns than that.  To understand why will take another post....stay tuned!

Savings vs. Investments vs. Speculations - Definitions

Most people talk about savings and investments, but very few people (outside of the dark corners of economics & finance) actually stop to think about the differences.  Understanding the differences will be important for some of my upcoming posts on the subject.

If you spend less than you earn, most people would consider that savings.  It usually is, but not always.  If that difference is sitting in the bank, I would call it savings.  If you immediately put it into the stock market or bonds, then I would call it an investment (or even a speculation).

Savings

Savings is money you have set aside that you are not willing to lose.  Safety is your highest priority here, and you are willing to give up high returns in exchange (have you looked at what your bank account is paying lately?).  Typical places for savings would be bank accounts, CDs, mattresses, etc.

Investments

Investments are putting your money towards productive businesses with the expectation of higher returns than you get on your savings.  In exchange, you undertake some risk that you might lose some (or all) of your investment - hopefully just temporarily, but perhaps permanently.  Investing in stocks and bonds through a 401k, mutual funds, or even individual stocks where you are looking at longer-term business prospects would all be examples of investing.

Speculations

Speculations are generally riskier than investments in that you are usually taking more risk in order to get a quick or larger return.  Gambling is certainly an example of speculation, but not all speculations are gambling.  These are usually "hot stock picks" or short term guesses as to which way prices will move.  Speculations are typically short-term and not focused on the business itself, but just the price of the stock, option, etc.

When looking at your overall financial picture, it is important to understand which category above your various monies fall into.  Always start with savings, move on to investments from there if you want, and even dabble in speculations once you have plenty of savings and investments.  Many people should only ever have savings, and only a small percentage should ever be speculating (although many more cannot resist the temptation to dabble in speculations - ask me how I know!).  Even if you are very financially savvy and have all three, the majority should be in savings and investments.

2015 AMSOIL Update

If I get 7 posts in the next few days or weeks, that gets my average to a post a year for the past 7 years, which is much better than ZERO posts for 7 years :)

I got a call the other day from Sam about my AMSOIL business.  Since my last post on AMSOIL was in fact over EIGHT YEARS AGO, an update is certainly in order.

The Bad News

As many times as I have intended to, I have not become any more active with my AMSOIL business.  I read the monthly magazine to keep up on new products and potential customers.  I also keep in touch with the business accounts I have that sell AMSOIL.  I do have a couple of great ideas to grow the business both short-term and long-term but thus far they have remained only that - ideas.

I also helped a downline dealer work an AMSOIL corporate booth in Kansas City a few months ago.  Although it was certainly not as productive as previous events (where the dealers pay to have a booth), it was good experience for us both and got me thinking more about the business again.

The Good News

Despite my lack of effort in the business, my income has remained remarkably stable, mainly due to my business accounts (mechanics and service stations) and downline dealers.  Average monthly income has stayed in the $200-300 range.  If I would bother to increase my group sales 50%, my income would likely increase 100-200%, but as I mentioned in the previous post, I have so far lacked the motivation to do so.

AMSOIL remains a great company with great products, constantly innovating to improve the range of product offerings.  The fact that my income has not dropped over 8 years of neglect is a testament to the quality and "stickiness" of the AMSOIL product line.  Compare that to my NuSkin/Pharmanex business (now mostly purchases for myself, wife, and father-in-law), where 90%+ of customer sales and profits have disappeared over the same time frame, and you can see why I much prefer AMSOIL's model in network marketing / MLM for generating true passive income.  See - I don't completely hate passive income!

I'm baaaack...and a passive income hater :)

Sorry for the 7 year hiatus.  If anyone was ever following this blog, I bet they aren't after 7 years!  I can't believe it has been so long...time flies when you are having fun, I guess - and as you get older...  I don't have a good excuse (are any excuses really "good"?); I have simply been distracted by other things.

Obviously some things have changed for me over the past 7 years, but many of the most important things remain constant (church, wife, family).

I suppose the biggest reason that I stopped writing so much was a waning enthusiasm for purely passive income.  "Heresy!" you say.  Well, hear me out:

Why my enthusiasm for passive income has waned

1)  Lack of motivation for more money

First, my wife and I have a very comfortable income, and I lack the motivation to become really wealthy.  If we had more income - passive or active - it would not change our way of life significantly.  (Although we might take more unpaid vacation if our work allowed it.)  I enjoy saving & investing, so additional funds would largely go there and to the church. These are all worthy activities but not enough to cause me to lust after additional income.

2)  Active income is better than I thought

Second, active income provides more flexibility down the road. Mark Ford (aka Michael Masterson) talks about this a fair amount after his two attempts at retirement.  Passive income can be lost - interest rates dropping kill your income from the bank, you lose network marketing customers and dealers as they pursue the "next big thing," etc, etc.  Actively working for income keeps your skills sharp (and improving) in a particular field, which is useful if you want to do part-time consulting or if you need to find work to provide additional income for whatever reason.

3)  Working is better than I thought

Finally - and probably most importantly - I now believe that "work" is a significant component of a healthy life.  I think the typical American ideal of retirement - stop working and hit the golf course or simply laze about - is very unhealthy.  Work provides social interaction, purpose (if you are doing it right!), and mind & body benefits (again, if you are doing it right!).  Work can be unpaid; a lot of retirees I know do a lot of volunteering, which can provide all of the benefits mentioned above.  But I think even volunteer work should take advantage of the specifics skills and talents people have - my experience is that many organizations just use volunteers for "busy work."

I understand the urge to just be "done" with work.  I have had that urge.  Sometimes a lot.  Ideally, work is something you enjoy.  No, not every second, but you should generally feel good about the work that you do and enjoy it.  I also understand that many people work in jobs they hate just to make a living.  My question is - why do they hate that job?  If their boss is abusive or coworkers are vindictive, then try and get a new job.  But I think many people hate their jobs just because they are jobs.  If those people worked to do the best possible job they could and worked to make their workplace pleasant for coworkers, customers, etc, then I think their jobs would be much more fulfilling.

I reached this conclusion over time, so I don't expect anyone who looks forward to that day when they "stop working" to agree with me right away.  I still have one pair of grandparents living, and they used to travel a lot when they first retired (and my grandfather downhill skied into his 70s), but for the past decade or so I think most of their time was spent watching TV.  They have declined fairly quickly in this time with a lack of socializing, movement, and purpose.  I don't think they see anything wrong in what they have been doing, but it has been sad for me to watch.

If you are going to retire and simply stop working, please find something else productive to fill your time, therefore adding value to others and keeping your mind and body in shape.

More soon

That's all for now.  I will soon provide updates on AMSOIL and blog monetization - just keep in mind my waning enthusiasm noted above!

Tankless Water Heaters - Advantages and Disadvantages

For those of you interested in the bottom line on tankless water heaters, here it is. The complete story follows this list.

Advantages:

• Definitely saves on natural gas - we use 50-75% less gas. As gas prices have increased, that is worth $14-22 per month.
• You never run out of hot water - if you take showers back-to-back (at the same time does not work so well - see the disadvantages)

Disadvantages (or at least things to consider):

• Installation is very expensive - probably as much as the unit. I recommend having someone local do it all, so you can get service when necessary.
• You can only heat so much water at once - usually 4-5 gpm depending on the temperature of the incoming water. This may be enough to run a shower and something else at the same time, but don't count on it.
• Electric units my require an upgrade to your electrical system (they take a lot of power). Natural gas units require large piping all the way to the unit.
• If you lose electricity, you lose hot water. Even the gas unit requires electricity to run the fan and controls.
• More moving parts means more things to go wrong (and fewer people around to work on them). It has certainly made me appreciate the simple tank water heaters.

The Story

My wife and I live in a 4-plex (all 1-bedroom units) that we own. We are fixing up & living in the bottom two while renting out the top two.

We bought it a little over a year ago, and the water heater was 25-30 years old (gotta love those Rheemglass Fury water heaters). It was also a 40-gallon water heater trying to serve 4 bathrooms while having the additional disadvantage of being seriously corroded by very hard water.

So we decided to take advantage of the tax credits that expired last year to put in a Takagi T-K3 tankless water heater - I figured we should spend about 1/2 as much on water heating, and have "endless" hot water. That is, we could take as many showers as we wanted back-to-back (not at the same time. The previous water heater lasted barely over one shower.

Of course, I searched on the internet for the best price I could find and bought one to install myself. Little did I know what I was getting into...

Installation Location

I had planned to install it in the same place the previous water heater had been - in the middle of the basement, venting into the chimney. After reading the manual (and talking to a plumber), I realized I could not vent it into the chimney unless I lined it or bought a special stainless steel vent to run all the way to the top. Considering this vent material cost about $20/foot, I quickly decided against that.

The plumber informed me that they are best installed on an exterior wall, with the special vent piping running straight up and out. Of course that would require about a 6" hole through the wood at the top of the basement wall. I did not really want to tackle that myself...

Installation Cost

I got a quote from the plumber to install it - $800-$900 including the vent materials. That's more than I paid for the heater!

I ended up spending almost $200 for the vent piping and $100-200 to cut the hole and install the sleeve through the wall. Add in some money for the additional 3/4" black gas piping we had to run, and there is probably $400 in materials. Plus my labor to install.

Definitely more work than I had planned on...

Operation

We had some immediate operational problems that took a long time to resolve. They ended up being my fault (mostly).

Do not install an "excess flow" or "safety" gas valve in the natural gas piping! These valves are designed to stop flow in the case of a hose breaking - when the flow rate gets too high. Guess what - at max burn on the water heater, the flowrate was too high, and the valve shut the gas off. Weeee! Cold water!

Once we resolved that, we dealt with really smelly exhaust (I could smell it on the other side of the house when the water heater was on). It ended up being an easy gas manifold pressure adjustment. Except for the fact that I had to buy an $85 digital manometer to make the adjustment.

After that, we had a continous fan noise. Tech support again walked me through what to do, and I found a piece of packing styrofoam in the fan. Not a huge deal, but annoying.

Most recently, we had a REALLY loud noise periodically (and eventually got an error code). Did I mention that the water heater stopped working late at night when I tenant was trying to shower? Again, weeee - cold water! Turned out this was because of dirty combustion (and incorrect manifold pressures). We still are not sure if it is because of the wrong pressures (and therefore bad combustion) or acidic condensate in the exhaust dripping back into the burner and heat exchanger. I guess we will find out...

Conclusions

Definitely know what you are getting into before switiching to a tankless water heater - I didn't.

If I were doing it all over again, I would get a unit from a local plumber and have him install it, or just get the 50-gallon tank water heater with the best insulation I could find.

It hasn't been bad to work on, but I like hands-on things. I also like now having the knowledge to fix a number of things on my own. At the same time, I like things to work the way they are supposed to.

I will keep you updated on any future issues with the unit. Otherwise, I am just looking forward to enjoying some natural gas savings!

What is your purpose?

What is my purpose? What am I here to do? I think most of us have have asked ourselves (or God) these questions at one time or another. I admittedly envy the people who have a great answer for this question...

Your Calling

One of the ideas that was rediscovered during the Reformation was the idea of "vocation" or "calling." You see - only those in the Roman Catholic Church had a calling - priests, monks, nuns, etc. were called by God, and everyone else was not.

But in truth we are each called (by God) to do the best we can in the various roles we have in life. Are you a father, mother, husband, wife, sister, brother, son, daughter, homemaker, employee, etc?

Each of these is a calling - something that we are called to do to the best of our ability.

How different would the world be if each of us tried to be the best husband, father, or employee we could be?

Would jobs be better if owners and bosses tried to be the best owner or boss they could? What if all employees were the best employees they could be?

Most people dislike their jobs or at least have many things they would rather be doing. It shouldn't be this way. That job is one of your callings - one of your vocations. You should do it to the best of your ability (even if you aspire to other things).

If you are the best employee you can be in your current role, do you think that improves your chaces of getting a better job down the road? I do. Even if your goal is (as mine was) to get away from being an employee, that's no excuse for being the best employee you can as long as you are in that vocation.

Confessions of a Dishonest Employee

OK - confession time for me:

I was not a perfect employee. Office supplies ended up at my house. I spent time on the clock taking care of personal business.

Of course, nearly everyone does this, so it's OK, right? Wrong? Stealing is stealing. Period. It took me being able to look at this situation from the outside to figure this out.

If your wife called and said your daughter needed a red pencil for a homework assignment - could you bring one from the office, what do you do?

Now imagine that the office supplies are sold in a store at your office - the pencil is $0.10 and the petty cash box is open with noone around. Would you take a dime and use it to buy a red pencil?

The situations are effectively the same, but most people answer those two questions differently (I know I used to).

I was looking at accepting a job offer recently, and I realized a lot of the things I had done wrong in my last job, and I was thinking about how to avoid them in my new job. Would I have been perfect? No. But I like to think that I would have been a lot better and thought about my actions more thoroughly.

Vocation and Family

I really think we have lost the idea of vocation in the family.

Never before have men been so quick to abandon their roles as husband and father.

Never before have women been so quick to abandon their callings as wife and mother.

We have not taken our family vocations seriously, and this cannot help but spread outside the home as well.

To overgeneralize:

• Kids have a lot less respect for their parents than they used to.
• Husbands and wives have a lot less repect for their roles (and marriage in general) than they used to.
• CEOs have less repect for their employees than they used to.
• Employees have less respect for their bosses than they used to.

I fear that "pride in your work" and "doing your best" has been replaced with "what's in it for me" and "it's my right".

Instead of maximizing what we get, we should be maximizing what we give. The rewards follow (or maybe they don't - but that doesn't mean we shouldn't do it).

Most things I have done in my life were done selfishly. I need to start doing more for others - taking others into account in my decisions.

And not pretending like I am doing things for others by stealing a red pencil for my daughter either...

So, What's Your Point?

That's a great question - I guess I want each of us to take more pride in our various roles in life. I know I need to do this - especially in my role as husband and son (no kids yet).

And I'm not sure everyone thinks about this. I didn't think about it much until recently, and I don't think many of us do.

These little (or big) actions slide under the radar of our conscience:

• Got too much change back at Albertson's and didn't say anything? Congratulations you stole from Albertson's. (Though if you are like me you are quick to go to customer service if you are shorted change!)
• Put 5-1/2 gallons in your "5-gallon" water refill? Congratulations - you stole water from Wal-mart. (Ask me how I know about this one - just figured that out a few weeks ago!)
• Live with your giflfriend before marriage? "Everyone does it." Increasingly true but still adultery.
• Gossip about someone at work? Congratulations - you just broke the 8th Commandment (the one we never talk about).

We need to take our actions seriously. Everyone else (including God) does.

Your True Purpose

Your purpose is to perform your best in the roles you are already in.

Even if you are meant to do bigger and better things down the road, that does not excuse you from doing the best you can now.

I think we all know people that never became great in the eyes of the world but had a profound impact on many people simply by being the best mother, teacher, grandmother, or friend that they could. Always ready with a smile and a helping hand...

If each of us could be like that in each of our callings, I like to think that the world would be a much better place.

Our Gas Saving Electric Scooter!

I apologize for the delay in following up on my last post, but it took a little work to get the right price on our new toy:

This is the XB-508 electric scooter made (or at least marketed by) Xtreme Scooters, a plug-in "electric bicycle".

We got it for my wife to commute to & from her work (about 2 miles away). Although it only goes 20-25 mph (depending on wind and how many people are riding it), the highest speed limit on her way to work is only 30 mph.

We wanted something that could get her to & from work without her having to get all sweaty on a bicycle, and we figured with plug-in cars on the horizon, someone has to make an electric scooter.

Apparently, they do! Xtreme Scooters seemed to have the most economical choices for what we were looking for - light duty around town. Other scooters are more powerful (closer to motorcycles) and much more expensive.

The best price we found for the model we wanted (actually the XB-500) was at Earth Scooters, but I could not get a hold of anyone there by phone, so I wasn't comfortable paying them online. The best price we found was about $725 for a new one.

We ended up paying $600 for the next model up (barely used) on Craigslist. If you use the IRS mileage rates, this represents about a 30% annual return on investment with our limited usage, even with electricity cost (which should be less than $0.005 - half of a cent - per mile).

This thing is awesome for getting around town. You can put up to two people on it (though 300 pounds is the recommended weight limit), and it has several storage compartments. It is really quiet, and it is nice to have pedals "just in case" - the pedals are not ergonomically friendly, and I would not want to use them very much!

If you are looking for a way to save money on gas around town, consider an electric scooter. Prices have gone up significantly because of increased demand, so looking at places like Craigslist are good alternatives.

One important caveat:

Make sure you know the requirements of your city/county/state for such devices. In Kansas, this cannot be tagged because it doesn't have a license, so it is up to the municipality to determine if they allow it on their roads. I have heard of a nearby town that does not, and someone who had already bought one was out of luck.

Saving Money on Gas - Gas Rebate Credit Cards

Due to the popularity of the "Improving Gas Mileage" series, I wanted to touch on a couple of other things you can do to decrease your gasoline (or diesel) expenditures.

Today we are focusing on Gas Rebate Credit Cards.

There are a number out there that have special deals on gasoline purchases (which also apply to diesel, I am pretty sure). For a great summary of the available deals, check out:

http://www.creditcardwatcher.com/gascards/

I'd like to highlight a couple in particular because they fit very nicely with my previous post improving gas mileage with TOP TIER fuel.


TOP TIER Gasoline Rebate Cards

Shell Platinum Mastercard - 5% at Shell stations, 1% elsewhere

The Shell Platinum Mastercard (issued by Citibank) gives you a 5% rebate on Shell gasoline purchases. One catch we noted when we signed up is that there is an annual fee if you don't use it at Shell at least 9 times per year. For us that shouldn't be a problem. For more info, click here.

ConocoPhillips Credit Card - 4% at Conoco/Phillips66/76 stations

The ConocoPhillips credit card (also issued by Citibank) gives you a 4% rebate on Conoco, Phillips66, and 76 gasoline purchases, up to $50 per month. You can check it out here.

The ConocoPhillips card has a promotion right now for 10% back for 90 days, but they cap the total rebate at $35 over the 90-day period. This may be a good deal if you don't use much gas, but if you lose a lot, you could end up getting less than with the 4% rebate. Click here for the promotion page.

Now, if you've had some bad experiences with credit cards (and if you've had one, who hasn't), you might not be willing to go this route. I encourage you NOT to get one of these cards just to save money if you (being a stronger person than I) have completely sworn of credit cards or the like. 4 or 5% back on gas is not worth a financial crisis down the road :)

Very soon (hopefully) I will be talking about an upcoming purchase we are going to make to save gas...

Improving Gas Mileage - Installment 6

We come to the last of the six today, but don't worry, this is not the end (see the bottom of the post).

Improvement #6 – Lighten Your Load

Potential savings: $0 – 78 (0 – 3% improvement)

Cost: a little time

Depending on how much junk you usually carry around in your car with you, the savings here can vary dramatically.

The Department of Energy and EPA advise that, in the average car, an extra 100 pounds can decrease gas mileage by 1-2%.

I personally think that estimate is high, but make sure you aren't carrying around more stuff than you need to. I try to never let the trash in my car get above knee level for just this reason. Just kidding, but I do try and make sure that I am not carrying extra boxes, sports equipment, etc. in my trunk if I don' t need to.

The principal is simple: the less mass you are accelerating and moving around, the less energy it takes. The benefits are more noticeable in smaller cars: the mileage in my old 4-cylinder Ford Escort was significantly lower with two extra people in the car. Those two extra people add about 10% to the car’s weight.

Depending on the vehicle (engine tuning, rolling resistance, etc.), the benefits can also vary. A 10% difference in weight might make a 3% difference in the Escort mileage but only 1% in another car. Dropping 1% of the weight (about 30 lbs) may improve mileage only 0.1-0.2%, which you probably could not even measure.

Nevertheless, carrying less weight around is easy and even a 0.1% savings can add up (about a gallon a year). Just remember not to carry around extra weight if you can avoid it!

As you probably know, it is prudent to carry some emergency supplies around with you – please don't get rid of these!

So much for the improvements. Now for some products to watch out for...

Watch Out for Gimmicks

The September 2004 issue of Consumer Reports® evaluated add-on products that bill themselves as "gas mileage improvers." Unfortunately, none of them live up to their claims. The Fuel Genie, Platinum Gas Saver, and Tornado all cost around $100 but none of them improve gas mileage.

And these aren't the only gimmicks out there...

A friend of mine from church was looking into on-board hydrogen generators where the plans run $40 up to $1000 for the complete "system". After looking at the different options, I remained unconvinced of any scientific benefit (I can give you more analysis if you want, but I don't want to bore anybody...:) ).

Southwest Research Institute (a respected third-party test lab) is actually doing research on one of them right now - so I will let you know if they find anything beneficial!

Most (if not all of these) are just gimmicks like the others that Consumer Reports tested almost 4 years ago.

With many of these products, people looking to save money on gas with these products just spent $100 or more for NOTHING. I can't believe people at those companies sleep very well at night!


Well, that's the end of the six part series, but stay tuned...

Because of the popularity of this series I will be taking a look at other ways to save money on gas that do not involve improving gas mileage in the near future.

Until then, may your gas (or diesel) bills be low!

Improving Gas Mileage - Installment 5

Almost to the end of the series of improving your gas mileage! This is the fifth of six installments, and I would love to hear any other ideas that you might be willing to share for those of us looking to save money on gas (or diesel).

Improvement #5 – “Breathe Easier” – Change Your Air Filter Regularly

Potential savings: $26 – 78 (1 – 3% improvement)

Cost: $10-20 (but you should do this anyway!)

Cost of my recommendation: $12.50 per year
($50 for AMSOIL 4-year air filter)

I vividly remember at an AMSOIL continuing education class (remember, these are oil guys) they mentioned that the air filter is by far the most important filter in the vehicle because that is where almost all of the wear particles (i.e. dust) get into the engine.

That just floored me because these are guys that make mostly oil products, not air products. That revelation has really stuck with me – I took out my K&N air filter after I learned how little filtration they actually do. Most automobile makers also now strongly discourage use of oil-wetted filters because of the potential to get oil into the MAF (mass airflow) sensor and cause engine problems.

The AMSOIL air filter filters very well and flows as good as or better than any paper filters out there, but the main advantage is the fact that it does not clog up over time.

Think about your furnace filter – you know how it can get REALLY dirty over time? The dirt particles actually clog the filter and decrease air flow (like tennis balls getting stuck in the holes in chain link fence). AMSOIL’s filter is actually really fine, more like a window screen than a chain link fence. When the “tennis balls” get caught by the AMSOIL filter, it just sits on top, and the air can still go almost completely around it.

Being able to let air flow even as it gets dirty means the fuel economy improvement can actually last longer than just the first few weeks after you change the air filter.

You will accomplish about the same fuel economy improvement (at least initially) by either changing your filter regularly or using the AMSOIL filter and cleaning it off annually. I personally prefer to use the AMSOIL filter (for the one car I have that they make one for) because of the superior engine protection – I want to take to best care of the engine that I can, especially if it doesn’t cost any more!

My Recommendation:

The AMSOIL air filter are convenient, relatively inexpensive, and filter very well. Personally, I find it much easier to do all of the maintenance once a year instead of having to remember to do things at different intervals (like every 10,000 miles – a typical change interval for air and fuel filters).

Again, you don’t have to use AMSOIL to get great results. If you bought a high-quality filter like Wix and changed it according to your manual you would get similar results (though it would cost more of your money and time…).

Improving Gas Mileage - Installment 4

Here is today's installment. You have probably heard most of these before, but these are where some of the biggest improvements can be had:

Improvement #4 – Drive More “Efficiently”

Potential savings: $26 – 525 every year (1 – 20% savings)

Cost: Changing your driving habits (some will consider this too steep a cost!)

OK, this improvement is arguably the most difficult one in the list thanks to human nature, but there might be VERY large savings here depending upon your current driving habits. You can change your driving habits in several ways to improve gas mileage:

A) Accelerate slower and decelerate slower. Accelerating and decelerating account for most of the difference between city mileage and highway mileage, which is why regenerative braking allows hybrids to get comparable mileage in the city as on the highway.

Letting off the gas so you don't push on the brake as much helps just like "feather-footing" it. Just imagine that the harder you push the accelerator or the brake, the more money you are squeezing out your tail pipe...

B) Drive slower (like the speed limit). Maximum gas mileage is achieved between 45 and 55 mph in most cars. Gas mileage drops of quickly above 55-60 mph. You can improve gas mileage 5 – 10% by going 5 mph slower on the highway. Of course that also means you get there slower. I try to go the speed limit not only because it is the right thing to do but also because it saves gas!

C) Use cruise control when possible (on the highway). Keeping speed constant gives you the best gas mileage at a given speed.

D) Turn your engine off when idling. If you have a modern, fuel-injected engine, you can save gas by turning it off if you will be idling over 10 seconds. Yes, you read that right – 10 seconds! That means if you just missed the stoplight, turn your car off to save gas. Someone pointed out that this could produce additional wear on the starter & solenoid. That is true, so I don't do it for 10 seconds, but definitely for longer stoplights, train crossings, etc.

E) Combining trips. Try not to make multiple trips if you can avoid it. We live in a fairly small town, so when we go to larger cities 30 miles away, we try to combine as many errands as possible.

F) Consider alternate transportation. Considering walking, riding a bike, electric scooter, carpooling, or a moped instead of car. My wife was a little shocked when I showed up at her work one day in dress clothes after riding my bike to church and then her work. I try and bike when I can to run errands around town. Of course, it also helps to live in a small town...

Drafting also helps with gas mileage, but it is generally unsafe. If you are close enough to get a significant mileage benefit, you are probably leaving less than 2 seconds between you and the car in front of you.

There are some really large benefits here, but it is not worth the risk. I look forward to automakers figuring out some automatic systems to allow us to someday safely take advantage of drafting.

Improving Gas Mileage - Installment 3

This one is near and dear to my heart since I sell synthetic oil. In fact, the (used) car I just recently bought, one of the first things I did was change the engine and transmission oil over to synthetic.

As I mentioned before, I sell AMSOIL, so take that into account when reading this. If you are interested in learning more about AMSOIL specifically, I am providing a link here and at the bottom of the page. Consider yourself warned :)

Improvement #3 – Use Synthetic Oils

Going from conventional oil to a high-quality synthetic oil should give you a 1-4% improvement in mileage for each component (engine, transmission, and differential) that you put it in. This is based upon testing as well as my personal experience with AMSOIL. If you change all three (assuming you have a differential), I would expect about a 5% improvement.

Let’s talk about each component individually:

Engine oil

Potential savings: $26 – 118 (1 – 4.5% improvement)

Cost: No extra (for most) with AMSOIL up to $100

Cost of my recommendation:
- $0 (most people spend less with AMSOIL)

This is discussion is going to refer mainly to AMSOIL synthetic oils for several reasons:
1) I think it is the best.
2) It is the synthetic oil I am most familiar with.
3) The one-year/25,000-mile engine oil change guarantee (for personal vehicles) makes it by far the most economical option for synthetics.

Other synthetic oils will give similar benefits (though most not as much), but AMSOIL has the most independent testing done on it that I know of, and they really focus reducing friction in the engine, which leads to better fuel economy (as well as better engine protection).

I started using AMSOIL when my wife and I were each driving 25,000 to 30,000 miles a year. To find out I could change oil once a year instead of every month or two and save money at the same time made me ecstatic (well, ecstatic for an engineer). I couldn’t believe more people (like me) hadn’t heard about it, so I started selling it as well.

Starting from “scratch”, makers of synthetic oil can design it to do almost exactly what they want (if the maker chooses to do that instead of just maximizing profits), making it better at all of the jobs oil does.

As I alluded to above, synthetic oils generally reduce friction in the engine by not having the various contaminants in traditional motor oil. Reducing friction improves fuel economy by having less of the engines energy wasted overcoming friction. It also has the nice side benefits of reducing engine wear and generating less heat.

The automakers are finally starting to catch on (seeing that it helps them meet average fuel economy standards mandated by the government): many cars now come with and recommend semi-synthetic or full synthetic oil changes.

The average full synthetic oil is better than the average semi-synthetic in terms of fuel economy (no contaminants being better than less contaminants).

According to a May 2008 Lubes ‘n’ Greases article, you can also improve fuel economy by going from 5W30 or 10W30 to 0W30 (0.3 to 1.0% improvement, respectively) or 5W20 to 0W20 (0.5% improvement). 0W30 or 0W20 oils are typically only available as full synthetic oils.

Without going into technical detail, in a high-quality synthetic, there is no disadvantage in switching to the 0WXX oils.

Just the other day, I talked to a mechanic that sells AMSOIL. He had just installed AMSOIL engine oil (5W30) in his wife’s Pontiac G6 (two years old, about 40,000 miles). The mileage went from 28.5 mpg to 29.4 mpg using the mileage computer. That is a just over 3% improvement (right in the range we would expect) and will save her over $70 per year in gasoline. At the same time, it costs no more (per mile) for her oil changes.

My recommendation:

Use AMSOIL 0W30 or 0W20 premium synthetic motor oils. You should be able to get the oil and have it installed for around $100 and it lasts a year. For someone driving 15,000 miles a year this compares to 5 oil changes at probably about $30 each, for $150 total, not to mention the time involved to get it changed.

Differential fluid

Potential savings: $175 – 700 (1 – 4% saved for 100K miles)

Cost: $75 $25 for fluid
$50 to get it changed

To me this is a no-brainer for vehicles that: 1) have a differential, and 2) do not have synthetic fluid from the factory. Most newer vehicles have synthetic, but check your manual – if it states that synthetic is required, it probably had it from the beginning; otherwise, probably not.

Note: If you are changing over from conventional to synthetic and you had leaks at the differential, you will want to get the seal replaced at the same time. This would likely be done anyway, but synthetic fluid is expensive to let leak out!

If you do have synthetic from the factory, make sure you change it when required with something optimized for superior fuel economy.

My recommendation:

If you have a differential, and it does not have synthetic fluid in it, get it changed now. If it has synthetic, just make sure you get a synthetic optimized for fuel economy when the manual recommends changing it.

Transmission fluid

Potential savings: $175 – 700 (1 – 4% for 100K miles)

Cost: $220 (automatic) $120 for fluid (typical car)
$100 to fully flush out
$75 (manual) $25 for fluid
$50 to get it changed

Cost of my recommendation:
$50 – 150 (automatic – at next service)
$75 (manual – if not synthetic already)

The potential gas savings in the transmission are similar as for the engine and differential, but the cost for changing over an automatic transmission is significantly greater.

In my view, automatic transmissions are still the least reliable part of the drivetrain, so the protection a good synthetic provides against wear can help reduce transmission problems down the road. This is another good reason to change your transmission over to synthetic.

Most automatic transmissions hold 10-15 quarts, and a good synthetic transmission fluid will run around $5 to 6 per quart more than normal transmission fluid.

Note that there are two different transmission services – 1) drop the pan, clean the filter in the pan, then top off the fluid, or 2) flush all of the fluid out (after dropping the pan and cleaning the filter).

The first usually changes only about 1/3 of the fluid in the transmission, so don’t mistake it for a full fluid change. When switching to synthetic, you will want to do the second option – the full flush – to get all of the old fluid out.

Because of the expense of completely changing all of the transmission fluid, I recommend waiting until your next scheduled full fluid change so that you are only paying to upgrade the fluid. If your manual only recommends the first option above, I would substitute the full flush for the next service.

Again, I have the most confidence and experience with AMSOIL, so that is the fluid I would recommend (surprise, surprise). I have not seen significant test data published by the other manufacturers that would allow me to recommend them as well, but there may be other good ones out there. AMSOIL has their own 100,000 mile guaranteed drain interval for automatic transmissions, or they say to use the manufacturer’s recommendation if it is longer.

My Recommendation:

Automatic transmission – At the next scheduled transmission service (preferably the full change), go ahead and switch over to synthetic. The additional cost could be anywhere from $50 ($5 per quart times 10 quarts) to $150 (my $220 estimate for full conversion compared to $70 for a “typical” transmission service).

Manual transmission – Since the service is much cheaper (usually about $50 to change and $25 for the 2-3 quarts of fluid), I recommend doing this as soon as possible. As you can see, there is a very good payback on fuel savings (not to mention better protection for your transmission!).

As promised, here is a link to the AMSOIL store. Because there are lots of different kinds of fluids, feel free to call me at 816-896-6566 if you have any questions!

The next three don't require as much explanation, but are no less important. Stay tuned...

Improving Gas Mileage - Installment 2

In a deperate attempt to keep up some momentum here, I am posting

Improvement #2 – Check Your Tire Pressure

Potential savings: $10 – 78 (0.4 – 3% improvement)

Cost: $0 – 75 and time to check and fill up tires

Cost of my recommendation:
$75 one time for a compressor (if you don’t have one)

Tire air pressure has a significant impact on gas mileage. Tire pressure decreases as a small amount of air leaks out over time or as temperature drops through the year. According to the US Department of Energy and the EPA, gas mileage decreases by about 0.4% for each 1 psi drop in tire pressure.

So if your tires are 10 psi low, your gas mileage will decrease by 4%. If you are getting 25 miles per gallon (mpg), that 4% translates into a 1 mpg loss. Low pressure will also lead to increased tire wear - you will have to pay to replace your tires sooner.

At the same time, overinflating tires can be a safety issue. An overinflated tire has less contact with the road and can be more unstable in braking or turns.

You can usually find your recommended tire pressure inside one of the two front doors, the glove compartment door, or the owner's manual (NOT on the tire itself, as I used to think).

These are recommended pressures when the tire is cold, so always check your tire pressure before you drive anywhere.

The cheapest way to check your tire pressure is to carry a tire pressure gauge in your car and check the pressure in the tires once every week or few weeks.

There are a couple of good products out there that make it easier to monitor your tire pressure:

A) Tire pressure stem caps - Tire pressure stem caps screw on to your valve stems (you know - those little things you use to check tire pressure) and turn yellow or red when your pressure gets low. These are also great to keep an eye on the pressure in your spare tire.

B) Automatic tire pressure monitors - These systems add sensors inside each tire and display the pressure of each tire on your dash. A number of new cars now come with this option. They are more expensive to buy and install but much more convenient!

Because most places seem to charge for air now, I have my own air compressor to air up our tires. If you don't have an air compressor, you may want to invest the $30 or so in an air tank.

You can fill this up at your local gas station and keep it in your garage to air up your tires if you need to. You could also invest the $75 or so for small air compressor to take out the middle man.

Having an air compressor is my personal recommendation to make it easy to air up your tires. And let's face it, the reason most of us (well, at least me) don't do this as often as we should is that it is too much hassle (and most gas stations charge for air now).

There are also small air compressors that can run off your car battery - they take a long time but are great in a pinch.

My recommendation:

For the convenience (and increasing the chances that you will check your tire pressure more often), get a small air compressor for your garage. Don’t carry it around with you in your car, though (see Improvement #6).

This improvement was pretty straightforward, but there will be a lot of new information (for most people) in #3 - Use Synthetic Oils. That should be up tomorrow!

Improving Gas Mileage - Installment 1 of 6 (or so)

With gas now at nearly $4 per gallon, I just couldn’t stand it anymore. I finally had to write down the things that I know can help you improve your gas mileage.

Gas prices have certainly been in the news alot lately, and though (like many of my subjects as of late) it is not directly related to passive income, I feel it is something that a lot of people are interested in, so i am going to share my knowledge (limited as that may be :) ).

Some of these you will know, maybe some you won’t, and maybe this will help give you a reason to do some of those things you know you should!

In this day of ever-increasing gas prices, there are lots of gimmicks out there that promise to increase gas mileage. The purpose of these tips is to cut through the fluff to show you the things you can do that are PROVEN to improve gas mileage. I’m an engineer by training, and I don’t like to present facts without seeing that they are backed up with some sort of proof.

Also know that I have chosen improvements that are easy to implement, produce quick results, and are safe. There are a number of other improvements that did not make the list because they do not meet one or more of the above criteria (for example: over-inflating tires and drafting both improve fuel economy if done right, but are safety hazards).

The improvements are ordered from easiest and highest impact to more difficult to implement or lower impact.

So without further ado, here they are:

1) Maintain Your Fuel System (today's installment!)
2) Check Your Tire Pressure
3) Use Synthetic Oils (engine, transmission, and differential)
4) Drive more “Efficiently”
5) Breathe Easier – Change Your Air Filter
6) Lighten Your Load

You’ve probably heard most (if not all) of these before, but I want to put some real numbers to each of these improvements for you so that you can make a very informed decision about how to implement these ideas.

Each of these six posts will give you the details on one of these subjects – approximate costs, potential savings, and the reasons behind the savings.

I have based the savings and cost analysis on a typical year (except where noted) for the “average driver”, driving 15,000 miles per year, getting 20 mpg, and paying $3.50 per gallon (I still can’t believe that) for gas.

My Recommendations

At the end of most sections, I include my recommendations for the best bang for your buck on each improvement (where applicable). These are the same recommendations I would make to friends and family and if anything don’t go as far as I personally would.

These recommendations are based on what? My experience. That’s all I can talk about. They may not be right for you, which is why I try to provide some discussion on each topic so that you can make an informed decision for yourself. Fair enough? Great!

Onto the “nitty gritty”…

Improvement #1 – Maintain Your Fuel System

Potential savings: $39 – 184 (1.5 – 7% improvement)

Cost: $10-115 and a little time

Cost of my recommendation: $20
- $20 for AMSOIL additives
- Nothing for TOP TIER fuel (in most places)

This really falls into two parts – a) trying to restore your fuel system to its new and clean condition, and b) maintaining that cleanliness.

Not only can this significantly improve gas mileage (average of 2.3% in testing – I have gotten confirmed reports of up to 8.8%), but it can improve the responsiveness and drivability of the car – in other words, help it drive “like new” again.

A) Clean your fuel system periodically

Most gasoline sold today contains only the minimum amount of detergent additives – you know, the things that keep your fuel system clean – that are required by law. This is not enough, as many automobile manufacturers have discovered (see the second part of Improvement #1, below).

Unfortunately, over time, deposits build up in your fuel system causing inefficiencies in your engine. Not only that, the deposits tend to build up differently in different cylinders, so one cylinder might be getting too much gas and another not enough while your car thinks everything is working normally.

This usually increases pollutants considerably as well. Why? Today’s engines are actually very finely tuned to emit very few pollutants IF THEY ARE RUNNING RIGHT. Once the deposits build up and the fuel mix varies between cylinders, pollutants can increase significantly.

So what do you do?

Use a fuel additive to clean out the system periodically. I have seen testing showing 15% reduction in fuel flow in an injector in only 3,000 miles.

The problem isn’t necessarily the decrease in fuel flow (though it’s not good) – the real problem is when one cylinder is getting 85% flow and another is getting 95%. Your car assumes they are all getting the same when, in fact, one may be getting way to much and one may be getting way too little, which causes each to operate VERY inefficiently, lowering your mileage

Unless you have a brand-new car, your fuel system is not perfectly clean. Try an additive to restore power. I recommend AMSOIL based upon the extensive third-party testing that has been done. (I do sell AMSOIL products, but I only do so because I have determined them to be the best products out there based upon independent tests.) There may be other good ones out there, but I have not seen anything comparable.

AMSOIL recommends adding fuel additive every 4,000 miles to keep the fuel system clean. Depending on what kind of gas you are using and how much you care about your car, you can always either wait until you notice a drop in performance (I don’t recommend this – it is tough to notice because it happens so slowly) or try it again after 6 months or a year and see if you notice an improvement.

My recommendation:
Use AMSOIL or another very high-quality fuel additive at least every 6 months.

(For more information on the AMSOIL additive, click here or feel free to contact me directly.)


B) Use TOP TIER gasoline

OK, this doesn’t actually improve gas mileage but it theoretically helps maintain it. A group of automakers (BMW, GM, Honda, and Toyota) jointly developed these standards because they determined that the federally-mandated levels of additives were not enough. The TOP TIER designation was created to help keep the fuel system properly clean.

As of January 2008, this was the list of TOP TIER retailers in the US and Canada. All grades of their gasoline must meet the TOP TIER standards to make this list:

QuikTripChevronConocoPhillips76ShellEntec StationsMFA Oil CompanyKwik Trip/Kwik StarThe Somerset RefineryChevron-CanadaAloha PetroleumTri-Par Oil CompanyShell CanadaTexacoPetro-CanadaSunoco-Canada

As my friend Kevin Burns summarized: “Use red gas stations or Shell.” I’m not sure that works in all parts of the country, but where I am it works pretty well. Thanks, Kevin!

I try and use gas from this list whenever I can, even if it costs a couple of cents a gallon extra, but usually it doesn’t (but not if it costs 10 or 20 cents extra – then my frugality kicks in!).

Even if there is no hard data behind it, the automakers would not go through all of this trouble unless they saw significant benefit to the end user in it, so sign me up – I am sold on TOP TIER gasoline.

(Unfortunately, a similar standard for diesel fuel does not exist to my knowledge.)

Do I need to do both of these?

Yes – at least initially you need to use a fuel additive to get the fuel system clean. Then if you ALWAYS use TOP TIER gas, that should be enough.

Again, you could always check after 6 months or a year by adding more fuel additive. If you notice an improvement, then you probably ought to use the fuel additive on a regular basis. If you don’t notice an improvement, then TOP TIER gas is probably enough (at least until you notice a drop in performance down the road).

Here is what I recommend:
ALWAYS use TOP TIER gasoline unless it is much more expensive in your area or just not available.

Whew! Well, that's it for today's installment. Most of the rest will be shorter (but no less informative, I am sure!). I will plan on putting those up over the next few days so check back often!

Without health, your passive income won't mean much...

Not directly related to passive income, but an important topic for happiness in life is HEALTH.

Rebecca and I just got back from a 4-day Peak Potentials (T. Harv Eker's company) training called Extreme Health. Although there were some speakers that I would categorize as "fruity", there weren't as many as I expected.

SIDEBAR
Let me clarify that by "fruity" I don't just mean non-Western medicine, I mean the people that want you to go inside your mind to heal yourself or manipulate you to allow your soul to "breathe again". They might work; I am simply very skeptical about these types of healing.

My wife is an MD specializing in Emergency Medicine, and even she really enjoyed the conference.

In terms of specific strategies for improving your health, we looked for several things from the speakers: 1) How healthy did they look overall?, 2) How did they look for their age?, and 3) Was it a program that Harv himself used?

There were four things we bought while there:

1) Raw food - David Wolfe presented on this subject, and his passion and vibrancy really came through. We especially liked his philosophy of just adding some raw foods to your current diet.

2) Mercury test kits - An MD presented on the multitude of ways mercury can affect the body - mainly neurological, but also general fatigue and other very serious diseases. Amalgam fillings is the most common cause. More info at http://www.mercout.com/; check out the video on mercury and live nerves. We highly recommend at least getting tested for this.

3) Gene SNP - They test for 36 common mutations in DNA that can cause susceptibility to certain diseases if you don't get the right nutrients. In other words, it is a test that allows you to know what levels of nutrients are critical for you to get in order to help avoid diseases you are prone to. based upon genetics as well as your diet and lifestyle (from a questionnaire).

Rebecca majored in genetics in undergrad, so we had to get this done. The test is much cheaper than from other places - I suspect because they also provide optional supplements that are tailored to your results. I don't really plan on using their supplements, but I certainly want to know my susceptibilites and that I am getting enough nutrients. More info at http://www.genesnphealth.com/. If you have trouble getting info, you might also contact Suzanne Stradley at 503-661-5050 or suzannestradley@comcast.net.

4) The "Cellercizer" - named not because you have to exercise in the cellar (or will quickly put this there) but because it exercises all of the cells of your body. Rebecca and I were most excited about this one (and are eagerly awaiting its arrival!), so I will give a little more detail:

I first recommend you go to the website and check out the information because I am not going to be able to convey the benefits as well as the guy who developed it.

Click here for more info

It looks like a trampoline but has some important design features that I (as a former engineer) appreciate. He also had a number of testimonials that say his presentation and went out and bought something cheaper before not being able to do some of the exercises (or even hurting themselves when something broke) and ultimately bought a "Cellercizer".

The balance benefits are amazing - he did a great demonstration of this by forcing people (even a yoga instructor) to lose their balance, then not being able to after just 30-60 seconds of bouncing.

Not to mention the strength and flexibility that he can demostrate superior to yoga teachers, and the "Cellercizer" is his only exercise.

He also is incredbly strong (and ripped), but not a big as a bodybuilder by any stretch. he builds all of his muscle just on the "Cellercizer" - no weights at all.

The muscle he has built is also very "soft" - let me try to explain: When building muscle, we typically rip muscle fibers and rebuild them larger, creating a little scar tissue (which is relatively hard) in the process. "Cellercizing" works the body without ripping the muscle fibers, building muscle without the scar tissue.

Again, you can't compete as a bodybuilder just doing this, but I think most people (guys at least) would love to be as muscular as he was.

You can do cardiovascular work very quickly: 2-10 minutes of intense exercise is more effective at fat-burning than a 45-60 minute workout in most cases. (This was mentioned by several of the presenters over the 4 days).

Finally, pretty much anybody can use it. Even people in wheelchairs or walkers can start to use it and often regain mobility by rebuilding muscle, improving circulation, etc.

Moral of the story: If you want to be more fit, this is a great tool to try out - less time, more fun, and better results! (30-day money back guarantee of course)

More Cellercizer info here

Book Review: Be Principled and Grow Rich

Wow - a new post is WAY overdue! I just read a short book with some great information, so this is the perfect opportunity for a new post. And since stock investing can generate passive income if done right, the post is even on-subject.

Be Principled and Grow Rich by Kirk W. Tofte with Samuel Case

This book was a very quick read, which is perfect for me since I have a relatively short attention span (like start making a sandwich, get distracted by something - anything, really - then find the partially made sandwich an hour or more later - that kind of short).

Not knowing really what to expect, I was somewhat surprised to find that it was a study on improving stock performance using a really simple tool - what the authors call Principled Asset Rotation (PAR). You may have heard about it, but I hadn't, so it was completely new to me.

To boil it down to the bare takeaways:

1) Figure out if the S&P 500 or Russell 2000 performed better last year.
2) If the S&P 500 performed better, invest in large-company growth stocks (ticker symbol IVW if you are into ETFs) the following year.
3) If the Russell 2000 performed better, invest in small-company value stocks (ticker symbol IWN if you are into ETFs) the following year.

If you are interested in the principles behind it (like I am - I can take very few things at face value without understanding the underlying principles), definitely read the book. My brief explanation is thus:

The economy moves in cycles. The stock market is a forward indicator of the economy. Therfore, performance of stocks in certain sectors of the economy in one year predict where we will be in the economic cycle and therefore which stocks will do well.



There were a couple of things I found odd about the book:

1) The authors did not mention exchange-traded funds (ETFs) for using this investment strategy. I think they would be a perfect tool because they nearly perfectly mimick the indices the authors mention (less about a 0.2% expense ratio).

2) They propose several other strategies with historically worse returns (presumably because they get farther away from the underlying principles) because the transaction fees might be "too high" for some investors with small caps. With ETFs (or even the mutual funds they mention), this should not be an issue at all.

These things don't detract from the book, I just thought it interesting...

All of the data in the book ended in 2001. As a former engineer, I couldn't help but run the data from 2002 to 2007. The book's method outperformed the S&P 500 and Russell 2000 over that total time period (like 55% vs. 23% vs. 48%), but didn't do well at all in 2007 (based upon the 2006 indicator).

I suppose when you arbitrarily pick a calendar year, that is bound to happen, but I am certainly impressed with the overall results. (I will also mention that 2002 to 2007 was a little weird as the small-cap value was the choice every year over that timeframe.)

I plan to play with this using a small portion of my portfolio this year, then maybe move a larger portion (up to 25%) into this strategy.

If you have read the book or implemented the strategy, I (and other readers) would love to hear your feedback.

Good luck!

How you do anything...

...is how you do everything.

Everything you do matters

Harv Eker likes to say: "How you do anything is how you do everything."

At a basic level, your actions determine who you are (or, arguably, who you are determines your actions).

Therefore every little thing you do makes you more like that action

Why so I say this?

Sins - God's Perspective & Man's Perspective

Well, Rebecca and I have been going through catechism at church, and I am learning (or at least more fully understanding) interesting things about sin:

1) We sin pretty much constantly.
2) All sin is equal to God - we have put our own hierarchy on which sins are not too bad or really bad.

For example, not reporting when you are undercharged at Wal-Mart is stealing. So is taking a pen home from work and never bringing it back. So is robbing a bank. In God's eyes, you are stealing in any of these cases.

We tend to make excuses for situations like the first two or think they are "no big deal".

The Little Things Make a Big Difference

So if we want to be people of integrity, we need to demonstrate that everywhere.

If we want to help people, that should start with those we are closest to.

Every little decision you make to take action (or not take action) takes you farther down that path.

I know I have done - in all likelihood - millions of things that I wish I had not (or wish I had in the case of omissions). They did not lead me to become the person I want to be.

For instance, I haven't murdered anyone physically, but I have murdered people in my heart. That is just as bad in God's eyes.

Help!

Unfortunately, it is much easier to see someone else's inconsistent actions than your own. If you are married, you may have noticed that your spouse is painfully good at pointing out some of your faults :)

If you really care about the people you are close to, you can help them out by very gently letting them know if you see them do things that you know are not consistent with the person they want to be - help hold them accountable.

Let me stress that you want to talk about this beforehand with them and make sure they will be receptive to your help :) Otherwise, it call easily come off as overly critical or naggy.

Everything we do makes a difference - let's help each other start acting like it.

Costa Rica summary

What I left out of our detailed description of the Costa Rica trip was a summary of our Costa Rica experience and how we feel about having land down there.

What I Liked

1) The natural environment. At our lot, the water has 50% fewer contaminants than Evian. Everything is raised "organically" - just because they don't need to use chemicals, etc. All of the food we tried really tasted great. Costa Rica protects the natural environment so that everyone can enjoy it.
2) The people. Everyone was incredibly friendly. Apparently it is a fairly conservative Catholic country and they even like Americans. Can't get much better than that for international investing.
3) The way of life. Costa Rica is very laid back and family-oriented. I can't think of a better culture to spend time relaxing in (not that I know that many cultures...).

Why We Want to Live There

1) It's Costa Rica! I have yet to meet anyone that visited Costa Rica and did not like it. If you are one of those people, I would love to hear why it wasn't for you.
2) The natural food (and water). See above.
3) Plan B. In case something goes wrong in the states - economically (Social Security crisis, anyone?), socially, politically...who knows. I just like having someplace I can go if necessary.
4) The climate. Although it is slightly humid for my tastes, it is not bad. Anyplace that you can essentially go without heating or air conditioning year-round and still be comfortable is my kind of place!

As with anyplace, it is not perfect - the roads leave a lot to be desired, cars are very expensive because of duties/taxes, etc. I strongly recommend checking it out sometime. We might even have a rental villa that we can give you a deal on :)

To find out more about the properties that we invested in, check out: http://www.best-costa-rica-real-estate.com. Unless you want to spend a lot of time learning the culture and finding someone down there you really trust to help you, I think Ventana del Pacifico is a great place to buy (I suppose that's obvious since we bought property with them).

If you are serious about learning more about Costa Rica real estate, I am also happy to answer any questions I can about travelling down there, etc.

Pura vida! (means "pure life", the unofficial motto of Costa Rica)