Financial Logic: Clear as Glass

I hope you had a great Labor Day Weekend!

The roommates are gone and I spent the better part of Saturday and today deep-cleaning the entire house. It turns out that one roommate had 3.5-foot fridge in his room, which explains why the energy bill was so high. The rent terms were $400/month and all bills (internet and utilities) paid by me, so he never had to pay for the cost to run his fridge. Note to self: if I ever choose to get roommates again, I should include a no-fridge clause or change the utility payment terms. The other roommate apparently didn’t use a coaster for his drinks or a place mat for his hot plates of food and consequently destroyed the finish of the dresser (my dresser) in his room. Besides those two issues, everything ended well. It felt weird to sleep with my bedroom door open for the first time in a year on Saturday night.

I took a break on Sunday to float down the Guadalupe with an old friend and new friends. Few things are better than tipping back a couple cold ones as you float down a lazy river for six hours and soak up the sun with pals. For the cost of fuel, the drinks, and tube rental, it was $30 well-spent.

Something comical just went down and I wanted to quickly blog about it before I head to the gym. I was sweeping out my garage when a guy walked up the driveway and asked, “Hey there, do you have a minute?” I replied in the affirmative, and he went into his pitch: “I’m with so-and-so and we make extremely high-efficiency windows that’ll reduce your heating and cooling costs significantly. I’m in your neighborhood today looking for model homes for our windows. I noticed you take really good care of your  beautiful house, your landscaping looks great, and we’d really like to showcase our windows on your house. We can offer the windows and installation at 75% of our regular price.”

My paranoia shield went up double-time and my BS-detector started beeping so loudly I thought the salesman might hear it. However, everybody knows that flattery is a freshly paved drag strip roughly a quarter-mile long straight into a man’s heart, so I thanked him and asked, “How much would you charge to do my house?”

“Well, now, it’s tough to say.” Pointing towards my front window, he said, “That’s custom, and I haven’t seen how many windows you have on the sides and in the back, so I really can’t give you a price right now, but I can send somebody out to give you a formal quote this week if you like.”

“Well,” I replied, “I don’t think I can afford new windows right now, but can you give me a range?” I definitely don’t need new windows, but I was curious about how much it would cost if I were to have them replaced.

“Let’s put it this way.” The guy paused and looked off into the distance. Then he looked back at me and said, “I can probably get you down to $150 a month.”

I waited for him to say more. One beat passed. Then another. The silence was getting uncomfortable, so I asked, “Ok, $150 a month. For about how many months, would you say?”

The dude looked down at the ground then back up at me and replied somewhat sheepishly, “Uh, a lot, actually.” Wow, now there’s some refreshingly brutal honesty for ya.

And there you have it, folks! I give you Exhibit A: The reason so many people struggle to get out of debt! Monthly payments. One of my favorite quotes of all time is from a Mad Magazine cartoon: The only reason a great many American families don’t own an elephant is that they have never been offered an elephant for a dollar down and easy weekly payments.

I told the guy no thanks and wished him luck as he went on his way.

Are monthly payments the only thing that people take into consideration when they’re faced with a big purchase decision? How many customers has this guy been able to hoodwink into buying his glass? Do most people not take the entire cost of the investment into consideration?

Of course, I used to be just as guilty of this as the next guy. “Okay, I’m making X dollars per month…hmm, monthly payment on an auto loan for this car comes to Y dollars which…” Quick mental math… “Mmhmm, okay, uh-huh, carry the one…yes, yes I do believe my monthly income does indeed allow me to afford this second car! Who needs to save? Saving is for losers. Okay, LET’S DO THIS! YEAH!”

Alternatively, maybe we do like to save money but think that the energy savings will pay for the new windows. Well, that’s just a simple math exercise. Yahoo! Answers says it costs roughly $500 to replace a window. Using that logic, it would cost me $7k to replace all 14 windows in my house. (Using the guy’s approach, that’s 46 monthly payments of $150 to get to $7k.) How long is it going to take me to save $7k on my heating and cooling bill which hardly ever gets above $100 in the first place? Let’s be aggressive and say my bill is $100 each month and these windows will reduce my costs by 25% for a $75 new monthly energy bill. $25 per month into the $7k investment = 280 months or 23 years. Even if the guy can get me the windows for 75% of the regular price, I’d be looking at a 17-year break-even period. Ouch.

(And that’s a double-ouch if you consider inflation. $7k today is worth well over the $25 savings per month (or whatever it inflation-adjusts to) 17 years from now. If I take the $7k today and invest it in something earning a 5% return each year, I get back $350 every year which more than covers the $25/month or $300/year I would have saved by buying new windows, and that’s before I compound the 5% interest each year.)

Lose-lose all around. I’m going to pass on the new windows and keep the $150/month.


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50 responses to “Financial Logic: Clear as Glass

  1. Mo

    Monthly payments were precisely the reason I got rid of my car. Work on clearing the debt out first, then quickly save enough to buy a car I can afford cash. The extra $$ per month can go to great use for *my* enjoyment!

  2. matatiga

    excellent reply on the monthly payment issue. I just started reading your blog as I wanted to be free from debts.I am a single mom in Malaysia, they pay peanuts and I am a clerk. If you go through my country’s news you know that there is a discrimination. So happen I converted to Islam and didn’t adapt to Arabic and Malay culture therefore ignored. My peers do better than me just by preaching. So I took what ever job that was available because I lost my family and friends due to the conversion and so much more. The part you mentioned about savings. I was embarrassed to get a monthly deduction of RM50 permonth as other peers were saving more but I couldn’t afford it. I went on with the deduction and its been a year working I have some cash which I don’t intend to spend. I can’t think of investment and savings is the only option. For those with small income and a single mom like myself in an bias/bigotry/race based environment every penny counts. I may not be able to be a millionaire nor afford a home but savings does do miracles and help boost my self esteem. All these stories about part time, blogging, selling, writing may not be appropriate as a main source of income which many single moms are duped into. Just wanted to share a little about myself and I hope to see more articles in future. God bless


    • Welcome from Malaysia! Thank you for sharing so much about yourself; your story is so touching.

      It really does feel good to save, doesn’t it? In the face of all of the obstacles and challenges in your life right now, that’s the best thing you can do for you and your family. Best of luck to you.

  3. I could never understand monthly payments for the life of me, but that might be being from a former Soviet that is my saving grace. Back home we even buy home/appartment with cash only.
    I missed on the episodes of “3”. Did you end up dumping that blond girl, or she got disinterested?

    • Hi Olga, we’re all waiting to hear what happened with Joe and April. A bunch of us keep watching the CBS site for the latest show because Joe is staying tight lipped on this one, because he has to. 🙂 So keep your eyes out for another episode with us!

      • I can’t imaging buying a home with cash. That would be freaking sweet.

        I checked a couple of times today and was pretty disappointed/frustrated that it wasn’t up yet. Not sure what the hold-up is.

        • Sweta

          Maybe they’re waiting till next Monday to post since yday was a holiday? I hope they post it sooner though, I want to see you school April in frugality again.

          Congrats on finally being roommate free, you deserve it! Have you decided if you’re going to rent out your house or stay?

          Your Labor day sounded amazing. I haven’t been tubing in forever but I did go to Hamilton Pool, you should go if you’ve never been.

          • LUCKY! Hamilton Pool is awesome–I went only once back in 2004 during my summer internship. Sick. I want to rent out my house and get a tiny studio downtown…this place is way too big for me, but I do like havign solitude and a short commute. And places near DT are freaking $$$$$$$$$$$ 😦

      • Sweta

        @Olga, IONM the newest episode is up. IONM, get on gchat so we can discuss.

        Small spoiler: Joe isn’t shirtless 😦

        • Claire

          @Sweta thanks for the spoiler, totally not going to waste my time then. Also agree w/ a previous comment you left re: Joe looking like a gladiator. Your comments are hilarious!

  4. Alan

    I’ve said for years that the average American will easily pay $9.99 per month the same item they would balk at paying $120 per year for. Someone says this “add-on” to their cable bill is $9.99 per month and I’m like “So you’re paying $120 a year for that?” and they look stunned – like I’m some wizard of high finance….

  5. I have a small guest house on my property I’ve been renting out for ten years. I’ve had good experiences with tenants, but little things, like what happened to your dresser, happened to me (try mayonnaise to get the ring out). Whatever you do, never have a range with a glass cooktop in a rental. I swear they tap dance on it 🙂

    I also had three new sliding glass doors installed earlier this summer and they all tried to slam me with the monthly payment routine. I opted to pay cash and be done with it.

    • I’ve never had a credit card and I’ve never had a car payment. You should see the looks people give me when I tell them that. I think my favorite response I’ve been given lately is, “ have you done that ALLLL these years?” My response to that one is, “Well back in the “olden days”, my parents taught me that if you can’t pay cash then you don’t need it. I guess they were smarter “back in the day.”
      It always makes me laugh. 🙂

      • Totally see eye-to-eye with you on the car pmt thing. But have you ever considered how much more convenient it might be for you to use a CC? And there are also the points to consider. I pay my balance off every month, so the bank basically gives me a free loan, and that’s *before* they pay me a couple hundred dollars every year via the Rewards program.

        • The only time I really hate not having one is when I fly and want to rent a car. Rewards program? What is this magical rewards program you speak of? If they’re rewarding then it must be magical! I’ll have to google this.

          • rosiedancer

            A lot of credit cards have programs, like airline miles or cash back. My fiancé sent us on two international trips last year using airline miles.

        • Sweta

          Can you please share which cc you use? I pay off my balance every month too so I should really consider getting a rewards program card.

          P.S. Sending an internet hug in your direction. 🙂

          • Michigan alumni card that I got when I graduated when I was 22…I’m big on loyalty. Bank of America World Points is the rewards program. Definitely appreciate the hug…that brought back a lot of difficult memories and having that online for everybody to see has not made me feel good during the past couple of days.

          • Sweta

            I’m sorry, maybe I need to come up to N. Austin and make it an actual hug. You did something that most people, including me, don’t have the balls to do, so if people are making fun of you it’s because they’re insecure and jealous. If it makes you feel better, I think most people are on “Team Joe” and think you’re wayyyyyyyyyyyy better off w/out her.

            Another thing that might cheer you up: I listed some of my crap on CL after reading your book. I don’t have any debt but I figure if a Harvard MBA sold some of his junk, I really should be too.

    • Mayonnaise? That’s a cool trick; will have to check it out. Thanks.

    • Hey Ryan, thanks a lot for the incredibly positive review of my book. Definitely well-written and well thought out. I really appreciate it.

  6. MBA student

    I feel pretty lucky in that I’ve never had a regular financial obligation other than rent and paying off the balance of my credit card each month. It has made saving so much easier.

  7. Jordan

    My professor for one of my Personal Finance classes is having us take a look at your blog for a project. Great ideas! And I couldn’t agree more on the “payments” issue. I bought a brand spankin’ new car in July and the guy kept telling me and my Mom, “I could have your payments as low as $300”. My mother, who is excellent with money and credit, told him over and over that the payment isn’t what matters, it’s the total price paid for the car. Good advice from both of you!

  8. Joe,
    Saw your article in Fox News. Great advice on when you should or shouldn’t pay your student loans off early. I’d heard the story about you taking a flask to bars and other savings strategies and they really resonated with me. Your point about ignoring the Facebook posts about others’ lavish lifestyles also really resonated with me.

    I work at – a new type of student loan powered by alumni. Email me if you’d ever like to learn more about SoFi. ppathak at sofi.

  9. MJ

    You might be interested:
    I’m referencing the Sept 4th post that talks about:
    A place where maybe you could combine your interests/ gifts of writing, zen and a heart for others.

    • looks like the u35p focuses on loss?

      • MJ

        I think that loss is September’s focus, each month there is a new topic. It looks like at some point in the month they announce the next month’s topic so you have time to write and submit. I gather it wouldn’t be very Zen if they had all the monthly topics picked at the beginning of the year 🙂

        P.S. We live in an older home, nearly suckered by the window pitch years ago. My father brilliantly pointed out that we already had windows! We still have the old windows, they still work just fine. Most of our neighbors have the new windows….always hard to be an outlier, but getting easier.

  10. Barbara

    That was a great story, Joe……..glad your radar went upo!!!

  11. rosiedancer

    Joe, are you at FinCon?

      • Ashley

        Really surprised by this. Were you asked to go? I’m surprised your blog wasn’t nominated for any blogger awards. I know that’s not why you’re doing this but still. I nominated you for best debt focused blog through some other commenters link but you didn’t even make the running and some blogs I’ve never heard of made it.

  12. My bs detector goes up immediately after someone is trying to sell me something without initiating it first. I think in terms of recouping my initial investment and whether it really makes sense for me to buy the product / service being sold. More often than not, the answer is no.

    The repairman at our townhouse came through a referral from our realtor and the previous owner. He knew the house better than we did and saved us a big chunk of money on work that was done. Other than that I like to thoroughly review what others have to say before I make the decision to buy and shop around when able. Over time the savings really add up.

  13. This was a great story to share. I was one of those people that thought I could afford anything because of the monthly payments. My wife and I just sold our car, which we thought we could afford based on the monthly payments. We are now working on paying back our college. Feel free to follow our story at

  14. Ashley

    I saw you at Gold’s a few weeks back and wanted to say hi but that seemed kind of weird and I didn’t want to creep you out….haha. I’ve noticed you have a few Austin readers here, has anyone recognized you out in public?

    • Actually, the only two times I’ve been recognized occurred at Gold’s. One of the front-desk guys told me when I went to renewed my annual subscription that he read the Yahoo! article about me, and another girl told me while I was between sets that she recognized me. Oh, and somebody at work recognized me. Feel free to say hello next time! Just not while I’m in the middle of a squat or something 😉

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