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Why The Big Mac Index May Affect Your Decision to Travel Abroad

By Posted on In Economy, Rule of Thumb, Saving, Uncategorized

At first it sounds silly; use the cost of McDonald’s Big Mac to gauge purchasing power in different countries. What first started as a humorous approach to addressing the pricing discrepancies between countries for similar goods, has been taken more and more seriously by economists.

See for yourself which countries have the cheapest Big Mac, an indication that your dollars will go further.

Anecdotal evidence based on my experiences abroad is inline with these findings. I felt like I was getting more value in certain countries – After travelling through parts of Turkey, I discovered that I spent much, much less than I budgeted. While a trip to Europe ended with a blown budget.

Before my next trip, I will use the Big Mac Index to help create my travel budget.

My Home Heating Cost Comparison

By Posted on In Rule of Thumb, Saving, Uncategorized

Last fall, I completed a series of energy efficiency upgrades to my home – most significantly I added insulation to the attic. I’ve been curious to see if the touted claims of energy savings were reflective of my actual experience. It may be too soon to tell, but my initial results are quite promising.

My first step was to calculate how much colder this winter was compared to last winter. I found a website that could help me calculate Heating Degree Days. It’s the difference between the cold outside temperature and the desired indoor temperature. The chart below shows the cumulative heating degrees needed to reach my desired indoor temperature. In total, this past winter was about 12% colder than the winter before based on these calculations.

heating degree days

 

If I were to have done nothing to the house, I would expect my energy usage to have increased by 12% or more since more heat loss occurs the colder it is outside.

After comparing the fuel purchased during the winter and adjusted for what was in the tank at the start and end of the season, I discovered that I used exactly the same amount of oil per month as I did the year before, not 12% more.

If my assumptions are correct and the insulation reduced my heating expenses by 12%, then I would recoup my investment in less than 2 years.  That beats the rules of thumb I’ve seen of 5 years.

This gives me a warm feeling.

 

Maxed Out your 401(k) and your ROTH? Here’s What to Do:

By Posted on In Investment Strategies, Rule of Thumb, Saving, Uncategorized

If you maxed out your 401(k) savings for the year ($17,500) and contributed to your ROTH ($5,500) you may be wondering what the next best place is to save for the future.  Here are a few places to look:

  1. Open a taxable accounts.  You can open a regular brokerage account using your after tax dollars.  Every year, you’ll have to pay taxes on realized gains (dividends, capital gains, profits from the sale of anything you sold during that year), but the tax rate on these long term capital gains and qualified dividends are 15%.  That’s why Buffets effective tax rate is lower than his secretary’s effective tax rate.
  2. Self Employed? Consider a SEP IRA which can allow you contribute up to $52,000 or 20% of your self-employment income.  It operates like a traditional IRA, just with higher limits.
  3. Over the age of 50? The IRS allows you to make “catch up” contributions if you are 50 or older.  You can contribute up to $6,500 to your ROTH.