MAKE MONEY ONLINE POSTS: 07/26/18

الخميس، 26 يوليو 2018

John Lewis fails to deliver decent customer service, or the right sofa

Moneywise helps a reader struggling to get a sofa.

On the second week of January, we engaged a John Lewis home designer to visit us and plan a couple of revamps for our lounge and hall. I thought at £250 it was a bit pricey, but as soon as you spend over £1,000 the value is refunded. Two weeks later in the Cardiff store, we signed it off and placed the order on 5 February. It was for two chairs, a chaise longue, footstool, media stand and some shutters. We were given a delivery date of 4 April.

Problems began two weeks after that, when we were told that due to a fault in the leather of the chairs and chaise longue, they had to be remade, pushing delivery out until mid-May, at a time when we were on holiday.

The delivery was arranged for 26 May but didn’t happen, despite us waiting in all day. The items eventually arrived on 29 May. But when I started to put them together, I realised they had delivered the wrong chaise longue (we required a left-hand chaise, they delivered a right-handed corner sofa). After over an hour of fruitless calls, I get through to John Lewis Cardiff, finally, for it to investigate.

Tui won’t pay out over 'disappointing' cruise

It told me its suppliers had made the wrong sofa and to get the one we ordered would be a three-month delay. Many emails later, I suggested John Lewis send us the store display chaise to give us something to sit on during this further delay, rather than cancel the whole thing. It agreed to do so, but then changed the delivery dates without telling us, calling my wife while she was in hospital, despite being told that I was the one to call.

All in all, it has been dreadful. There has been no assistance, no follow-up, no responsibility from anyone to manage the process at all. Five months after the original consultation, we still don’t have what we ordered, but most incredibly, no one seems to be even slightly bothered about it.

We feel badly let down by John Lewis and the store’s customer service.

DR/Cardiff

How can my insurer withdraw cover just because I've been burgled?

What a nightmare, and all for something decent to sit on at home! Knowing John Lewis’s reputation for service, I was surprised about the months of problems and delays you faced, but once I contacted the company’s head office it was immediately apologetic.

It said in a statement: “We are extremely sorry for the delays that the customer has experienced with this order. The service that we provide for our customers is so important to us and this case falls well below the standards that we set ourselves. We are now monitoring the production of this order as a priority to ensure that the customer receives their new furniture as soon as possible.”

That is due to happen any day now (seven months after you started the process), so I pressed the company for a goodwill payment. It told me that it will look to offer a gesture of goodwill once the goods have been delivered and you’re happy with them. That makes sense and I trust it to keep to its promise.

OUTCOME: Reader to get goodwill payment for months of stress

Can my phone company make me pay this old debt?

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Understanding Prosper Loans

Want to know how to avoid borrowing from your bank? The Internet has created a new environment where it is possible to get loans without using traditional sources, like banks.

Dozens of peer-to-peer (P2P) lenders have sprung up across the Internet, offering loans to borrowers that are often under terms that are more favorable than what is available through banks.

P2P lending sites bring borrowers together on the same website with the investors who will fund their loans. It is basically removing the middleman, which is the bank, and creates a mutually beneficial financial arrangement.

The borrower makes a request for a loan, and that request is made available to investors who will then fund the loan.

Those loan fundings are typically referred to as “notes”, and an investor can hold as many notes as he or she decides to invest in. And since there is no bank involved in the process, the borrower often pays less in interest than would be the case with a bank loan. Meanwhile, the investor earns a much higher rate of return than would be possible on investments held through a bank.

The Prosper Loans Marketplace, better known simply as Prosper was one of the first P2P lending platforms established.

This Prosper review will show you how to avoid your bank for both investing and borrowing.

Since it began operations in 2005, Prosper has funded more than $6 billion in loans, and has more than 2 million members. The company is based in San Francisco, and runs its loans through WebBank, a Utah-chartered, FDIC member industrial bank.

Prosper acts as the servicing agent on the loans, handling the technical details of each loan, collecting payments, and remitting repayments to investors. Legally known as Prosper Funding LLC, Prosper is a wholly owned subsidiary of Prosper Marketplace, Inc.

Is Prosper Legit?

In one word YES! Prosper has been around for ten years now. In the world of the Internet that is an eternity.

As we cover the reviews of Prosper for borrowers and lenders you will see that this is a well maintained and viable way to invest and borrow money. Prosper is subject to state and federal regulations, just like any loan producing organization is.

To put an even more legitimate light on the company, all loans that are originated through Prosper.com are made by WebBank. This is an industrial bank that is chartered in Utah and a member of the FDIC.

On a more personal level, I have personally been investing in Prosper for several years now. A couple of years ago I started a comparison of Prosper vs. Lending Club and had very good results from both companies on my investments.

Lending Club is the number one competitor to prosper in the peer to peer loan market. I have had very good luck with them and you can use my Lending Club review to do a full comparison of the two.

I also offer other great reviews on different options to you such as the Betterment and Motif Investing Review.

What Kinds of Loans Does Prosper Make?

For the most part, Prosper makes one type of loan – personal loans. But they can be used for just about any purpose you can imagine. For example, you can use a Prosper personal loan for:

Debt consolidation
Home improvement
To cover medical or dental expenses
For business purposes
To make large purchases such as buying an automobile
To cover household expenses
For the purchase of an automobile, motorcycle, recreational vehicle or boat
To pay for special occasions such as engagement rings and weddings
To cover vacation costs
To pay taxes
“Green loans” – to purchase energy efficient equipment for your home
Short-term and Bridge Loans
And even for baby and adoption expenses

While these are specific purposes for loans, the basic loan set up remains the same. Each loan is fixed rate, unsecured, payable over three or five years, and has no prepayment penalties.

Prosper will lend between a minimum of $2,000 ($6,000 in Massachusetts), up to a maximum of $35,000. All loans have terms of three years or five years, and are fixed rate, fixed payment installment loans that will be paid in full at the end of the term.

There is one purpose for which you cannot use a Prosper loan, and that’s postsecondary educational expenses. Because of a federal law known as the Higher Education Opportunity Act, designed to protect students who take out private education loans to pay for college expenses, Prosper loan proceeds are not eligible for this purpose.

How The Loan Process Works

Applying for a loan is a simple multi-step process, that looks something like this:

Create your loan listing – you provide basic information, then Prosper will obtain your credit score and determine your rate and terms.
Based on your credit score and other information Prosper will obtain, you will be assigned a credit grade, from AA to HR.
You then create a loan listing which is your request for a loan. You will add a description of your loan purpose and financial situation. It will appear on the platform to be reviewed by investors.
Once the loan listing is fully funded and your information has passed Prosper’s verification process, you will receive your loan.
The listing will stay active for 14 days, or until the loan funds.
Loan funds are deposited directly into your bank account within days.
You begin making your monthly payments.

Open a Personal Loan Account with Prosper

Prosper Personal Loan Requirements

In order to qualify for a loan through Prosper, you must be a US resident, and reside in one of the 47 states where Prosper makes loans. This includes all US states except for Iowa, Maine, and North Dakota. You must also have a Social Security number, a verifiable email address, and a bank account.

Credit. In order to qualify for a loan with Prosper you must have a minimum credit score of 640.

Prosper uses Experian to determine your credit score (FICO 08), so if you pull a credit score on your own, and it’s from some source other than Experian, you may not be approved for a loan. Even if the score from another agency is above the 640 minimum requirement, the loan might not be approved if the Experian score is showing less than 640.

Since your credit will depend upon your credit report and credit score as provided by Experian, you will have to resolve any credit disputes through Experian, and not Prosper.

Income. Any income that you declare on your loan application must be verifiable. That means pay stubs and W-2s if you’re employed, copies of recent income tax returns if you are self-employed, or third-party documentation of retirement or investment income.

You cannot use your spouse’s income for qualification purposes. Since Prosper loans are personal loans, you cannot make joint application. Prosper does not allow the use of either cosigners or co-borrowers.

Origination fee. When you borrow through Prosper, you will be subject to an origination fee. The fee is based on your risk grade , as well as the term of your loan, and look something like this:

Risk grade AA – 1% to 2% for a three year term, 3% for a five year term
Risk grade A – 4% for a three-year term, 5% for a five-year term
Risk grade B – 5% for either a three-year or five-year term
Risk grades C through HR – 5% for either a three-year or five-year term

Collateral. All loans made through Prosper are unsecured, therefore no collateral is ever required. That includes auto loans and bridge loans, even though such loans typically are secured by collateral. Prosper makes personal loans available for the purchase of physical assets, but the loans are not specifically auto loans or bridge loans, just personal loans that you can use to purchase those assets.

Prosper Personal Loan Pricing

When you apply for a loan with Prosper, the platform determines your Prosper Rating. This is a proprietary rating system that is similar to a credit score in that it is predictive of the likelihood of loan default. Prosper uses this rating in setting the pricing on your loan.

The Prosper Rating is determined by a combination of factors, including your FICO score, the term of the loan, expected loss rate, economic environment and competitive environment.

The top Prosper Rating is AA and it comes with a low-end rate of 5.99% APR for a three-year loan. At the opposite end of the spectrum, HR is the lowest Prosper Rating, and has a maximum rate of 35.97% APR for a three-year loan. Five-year term loans are available at all Prosper Rating levels, but only a three-year term is available on an HR graded loan.

There are no application fees or prepayment penalty fees with Prosper, but they do charge an origination fee of between 1% and 5% of the loan. That fee is deducted from the loan proceeds once your loan is funded, so that you do not have to pay it as an upfront fee out-of-pocket.

If you’re not familiar with P2P loans, understand the charging origination fees is typical in the industry. As well, the range of between 1% and 5% is also the industry standard.

The Prosper Loan Application Process

Applying for a loan with Prosper is a three-step process:

You choose a loan amount, state the purpose of the loan, indicate your credit level – Excellent, Good, Fair or Poor (FYI, Poor is an automatic rejection)
Your loan is listed, which makes it available for inspection and evaluation by potential investors; a loan listing can be active for up to 14 days
Once your loan is fully funded by investors, the verification process will take place, as well as the loan review, and loan documents will be prepared

Simply having your loan listed results only in a “soft credit pull”, so your credit report will not be hit with an inquiry. During the verification process, your credit report will be pulled, and your income will be verified, as well as your identity.

Much of the verification process is based on documentation that you provide to Prosper. You can do this by uploading documents (payroll, tax and other information) to the “My Account” screen on the Prosper website, or you can email them to approval@prosper.com.

If everything checks out with the way that you disclosed it on the loan application, your loan will be closed and you will receive your funds. Receipt of funds generally takes place between two days and eight days after the loan is fully funded by investors, and all of your loan information is verified. Loan proceeds are transferred to you electronically using the automated clearing house banking network (ACH).

Multiple Prosper loans. You can have more than one loan on the platform at the same time. However, your credit score must be at least 640 when you apply for the second loan, and the combined loan limit of both loans is limited to $35,000 in total.

In addition, your first loan must be current, and there can be no late payments within the last 60 days. You also cannot have a payment that was more than 15 days late within the past year, nor can you have more than two returned loan payments within the past three years. There are other specific requirements, but they are based on your credit score.

Loan repayment methods. You will have two options to make your monthly payments. The first is electronic funds transfer, in which the payments will be automatically deducted from your bank account on the due date. The second is by bank draft, which will enable you to pay your loan directly through your bank account.

Prosper tries to discourage payment methods other than the two listed above. However, in their discretion they may accept either payments via pay-by-phone or by ground mail. Either payment option will require a processing fee of up to $15.

Site security. There should be no complaints about Prosper in this regard. Prosper equips all servers with an Extended Validation (EV) Secure Socket Layer (SSL) certificate so that you will be certain that you are actually on the Prosper website, and that all data entered will be transmitted in a secure encrypted channel. Data security is provided by a combination of firewalls, intrusion detection systems, a malware detection system and a data loss prevention system. Data is stored in a highly secure data center, that is audited based on SSAE 16 Type II and or SOC 2 Type II standards.

Speed. Prosper has worked hard to streamline their application process as much as possible. They know the loan process can be a headache, but they made it as simple as possible. For most people, they can get the whole application completed in a few days. You don’t have to worry about going to the bank every day, which means you can do it on your time.

Early payoff. If you decide you want to pay off your loan early to avoid the interest (hopefully you can), you’re not going to pay any fees. You shouldn’t be penalized for paying off your loan early.

Complaints Against Prosper

Every loan option is going to have some drawbacks. Prosper is no exception. When you’re looking for a loan, you need to consider every possible pro and con of the lender.

One of the complaints a lot of people have is having their application rejected. Of course, applicants always face the risk of being declined depending on their requirements.

We showed you the requirements for the Prosper loans, which can be a problem for some applicants. In most cases, the requirements are easier compared to other options, but some people don’t meet the credit score requirement. If you’re one of those applicants, there are other loan options, like Prosper.

Another drawback of Prosper is their limit on loans. Unlike a traditional bank, or the other loan sites, Prosper has a lower loan ceiling. They only offer loans up to $35,000.

For most people who are trying to consolidate their credit card debts, this should be enough. If it’s not, you’ll need to find another source for your loan.

There are also some complaints about uploading documents. Some users reported problems of getting their documents to go through, but those complaints were rare.

Prosper Works Especially Well for Credit Card Debt

One of the most popular purposes for Prosper personal loans is to pay off credit card debt. The most obvious advantage is debt consolidation – consolidating several credit card lines in a single loan with one monthly payment.

Here’s why that loan purpose is so popular:

Saving on interest.

Since Prosper personal loans are installment debts, you are also converting revolving loans with variable interest rates – that can go as high as 29.99% under certain circumstances – into fixed rate debt where the rate will never increase.

Converting credit card debt with an average interest rate of 20% into a personal loan at 12% will save you a lot of money by itself.

Getting off the revolving debt merry-go-round.

The fact that you will pay the loan off within five years will save you even more interest.

There’s a reason why credit card debt is set up to be revolving; it’s a revolving door of debt that is very difficult to get out of. That’s because even while you are making efforts to pay off your credit cards, it’s likely that you are re-using credit lines again and again anytime you have a need for extra cash.

The five-year time limit on Prosper loans means that your debt will be gone for good at the end of that term.

The credit score surge. There is a secondary benefit to consolidating credit card debt through a debt consolidation installment loan. Many borrowers experience an increase in their credit scores shortly after doing the consolidation.

This has to do with the credit utilization ratio that the major credit bureaus use. It is heavily based on credit cards, and it is calculated by dividing the amount of credit card debt owned by your total credit card available balances.

So for example if you have total credit lines available of $40,000 on five credit cards, and you owe combined balances of $30,000, your credit utilization ratio is 75% ($30,000 divided by $40,000).

FICO scoring models like a credit utilization ratio of not more than 30%. If you have one that is 75%, it can have a significant negative impact on your credit score.

But by paying off the $30,000 outstanding balance and consolidating debt using a debt consolidation loan, your combined credit card balances go to zero immediately. That means that you will have a credit utilization ratio on your credit cards of zero, which typically results in a sudden increase in your credit scores.

Additional improvement comes from the fact that by paying off five credit cards, you’ve lowered the number of debts where you have outstanding balances immediately as well. This is also a positive factor in determining your credit scores.

Though there is somewhat of a decline your credit score due to the fact that you have a brand-new installment loan – on which there is no history of successful payments – that is typically more than offset by the improvement in your credit utilization ratio and the decline in the number of debts with outstanding balances on them.

That’s why borrowers consolidate credit card debt through a Prosper personal loan typically see a quick improvement in their credit scores.

Should You Apply for a Loan with Prosper?

If you are in the process of applying for a loan, you will no doubt investigate several sources. If you’ve been having difficulty getting a loan from banks or other traditional sources, check out Prosper, and see if you can’t do better. I’m betting that you can.

Prosper should be one of the leading sources that you check out. Loan purposes are practically unlimited, no collateral is required, and all loans are fixed rate installment loans with a maximum term of five years. You may also find that the credit score requirement minimum of 640 is more flexible than you will find with banks and other loan sources.

Check out Prosper and see what they can offer you. There is no application fee, no obligation, and no inquiry will show up on your credit report for listing your loan.

The post Understanding Prosper Loans appeared first on Good Financial Cents.

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Is a Monthly Lyft Pass Worth the Price? It Depends. We Do the Math For You

When you can summon a car to pick you up by simply pressing a button on your phone, it can get easy to lose track of how much money is leaving your bank account.

Having one fixed cost for the month could help frequent ride hailers stay on budget. Lyft has been testing out options to provide just that.

The ride-hailing company is conducting tests where riders sign up to pay a set price each month for a certain number of rides. I spoke with Mo McKenzie, a Lyft spokesperson, who told me how the company is preparing for a potential future where we don’t own transportation but instead subscribe to it.

The company started experimenting with different versions of a Lyft Pass subscription plan earlier this year. Back in May, outlets like The Verge and TechCrunch wrote about a version of Lyft’s All-Access Plan where riders paid $200 a month to get $15 off each of their first 30 rides.

McKenzie said Lyft is currently testing a plan where riders pay $299 a month for $15 off each of their first 30 rides. If your ride is $15 or less, you don’t have to pay any additional cost to get to your destination. If the ride’s over $15, you pay just the difference. Riders pay the full price of their trips after exceeding 30 rides in one month.

Being someone who uses ride-hailing apps only on rare occasions, I was first taken aback at spending that much money monthly on Lyft. But after doing a little math, I found that it’s a pretty good deal for frequent riders — although not as good a deal as the $200 price offered in the previous test.

Paying $299 for 30 rides equals about $9.97 per ride, assuming you stay under that $15 threshold. You’d be saving just over $5 on trips that would normally cost $15.

You’d have to take at least 20 trips per month to make spending $299 on this All-Access Plan worth it. If you’re an average Lyft user who doesn’t spend hundreds of dollars a month hailing rides, you’re better off paying per ride than going this subscription route.

But riders who take 30 trips a month could save $151 by using this version of the subscription plan. This would be beneficial to frequent riders, like those who hail a Lyft for their regular commute.

Right now, Lyft’s All-Access Plan is still in the testing phase and can be accessed by invitation only. McKenzie said the company has been sending invitations to select users in waves. Lyft users will see the invites show up via email or through the app.

McKenzie said she didn’t know when all Lyft users would be able to opt in but said the company looks forward to making this plan, and others like it, available to every Lyft rider who wants one.

Lyft has also been experimenting with other ride pass promotions where riders can get discounts on a certain number of trips, like $5 off 10 rides. Rival Uber has been testing out its own version of ride passes as well.

Nicole Dow is a senior writer at The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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You Probably Pay More in Subscriptions Than You Think. Here’s How to Fix It

Quick.

You’ve got 30 seconds to estimate how much you spend on monthly subscriptions.

Count everything: your phone bill, your Wi-Fi, your Amazon Prime membership, your music-streaming platform…

What’s the total?

Most Americans severely underestimate how much they’re spending on subscription services, according to a recent analysis by Waterstone Group, a management consulting firm for technology companies.

On average, the 2,500 respondents guessed they spend $111.61 a month on subscriptions. In reality, they spend more than double that estimate — $237.33 a month.

How to Cancel Subscriptions (Because You’re Likely Underestimating)

Now that you’ve had more time to think about it, how much did you underestimate your monthly subscription spend? It’s easy, right?

Those recurring payments are sneaky little things.

Sure, you’ll see the transaction in your bank account or get a copy of your billing statement, but because you’re not actively swiping your card, you might forget about them.

And even if you do want to reevaluate your subscriptions, it’s tough. You have to comb through billing statements for various cards and accounts, then contact these companies. And you know they aren’t going to make unsubscribing easy…

Here’s a simple tip: Use a subscription-tracking tool instead.

There are a number of options out there these days, including the free Empower app.

Once you sign up and connect your bank account, Empower’s “Tips” feature scours your monthly charges and calls out all those sneaky subscriptions in one place.

With a list of recurring charges at your fingertips, you can reach out to cancel any unwanted subscriptions and cut your monthly expenses.

Carson Kohler (carson@thepennyhoarder.com) is a staff writer. She definitely underestimated how much she was spending on subscriptions… oops.

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Can You Keep Up? The Kardashians Are Hiring an Email Marketing Manager

Pack up your Kylie Lip Kit, contour accessories and selfie stick — you now have the opportunity to keep up with the Kardashians professionally.

Kardashian Jenner Communications recently posted a job opening on LinkedIn for an email marketing manager, with a focus on beauty.

This is a full-time position in Calabasas, California, so applicants must be based out of Los Angeles. No word on whether you get to crash at one of the many mansions the brood owns, but here’s to hoping it’s with the Momager herself — aka Kris Jenner.

Before you quit your job and book a one-way flight to LA, know that the job requires at least two to three years of experience in email marketing in the beauty industry. The job posting’s skills criteria also includes leadership, e-commerce, project management and process optimization.

And no, intimate knowledge of every single episode of “Keeping Up With the Kardashians” is not equivalent experience.

Become a Marketing Manager for the Kardashians

While working for the Kardashian/Jenner family conjures up images of LA decadence — Range Rovers, paparazzi, overpriced smoothie bowls and kombucha — keep in mind that this is a legitimate job. That means legitimate responsibilities.

The email marketing manager will be in charge of creating and managing email campaigns for the family’s signature brands. The position also requires audience analysis to best promote the products.

Here are some of the day-to-day duties:

Participate in weekly strategy meetings
Create,maintain and distribute the email marketing calendar
Manage multiple teams and coordinate their timelines
Run A/B testing on email campaigns and use results for improvement
Keep track of trends in the industry
Provide weekly, monthly and quarterly email performance reports

Ready to throw your hat in the ring? Check out the original job listing for more details and use your LinkedIn profile to apply!

Kaitlyn Blount is a staff writer at The Penny Hoarder. She’s actually never seen an episode of “Keeping Up With the Kardashians” but loves a good Kris Jenner meme.

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The Wisdom of Frugality: The Philosophy of Frugality in a Modern Economy

This is the sixth entry in an eight-part weekly series that provides a detailed look at the book The Wisdom of Frugality by Emrys Westacott. If you’re new to the series, feel free to hop back to the first entry.

One of the biggest arguments against frugality is that it appears to be unambitious, at least in the sense that it’s not about creating value for others and earning income, but about maximizing value within your own life and that of your immediate family and thus saving money instead. Isn’t that idea at odds with a modern economy, which is oriented around a cycle of earning money and spending it, which keeps the economy going?

In other words, is frugality outdated?

In modern societies at peace, life is far more secure than it ever has been. Thanks to enormous leaps in technology, meeting basic needs in a modern economy is as easy as it has ever been. Our supermarkets and retailers provide abundance. Our homes have infinite entertainment options and are larger than ever. Recreational opportunities have exploded. At the same time, our jobs are less physically taxing than ever (though they can be mentally taxing) and offer incredible financial rewards for many career paths if people are ambitious.

These things are seen as large positives, but at the same time, they also lead to increased dissatisfaction. It’s not a secret that many people are unhappy in the modern world. It’s something I struggle with myself.

Many of the best opportunities are very expensive, which leads to a dissatisfaction treadmill where we buy things to feel temporarily happy and then the lethargy sets in again until we can buy the next thing that makes us happy for a little while.

That dissatisfaction has, for many people (myself included), led to a strong renewed interest in frugality.

The Nostalgic Appeal of Frugality

Many people feel nostalgic for a earlier time in their lives when things felt “good” to them. Often, the past – particularly childhood – is recalled as a time of happiness and virtue. People seemed generally good and the world seemed generally good, particularly in comparison to today, where people are dissatisfied on the hedonic treadmill and are constantly bombarded with negative news.

That kind of nostalgia for the past often connects to things like a closeness to nature, contentment with simple pleasures, lack of acquisitiveness, an absence of luxury, and moral purity. I think back to my own childhood and I think of running around in the woods near my house and eating ice cream and playing with my cousin in the sandbox and having a sense that the people around me were good people and that I was generally safe. Those feelings have incredibly strong appeal.

Rousseau argues that one of the key reasons for that strong sense of happy nostalgia is unhappiness with many aspects of modern life. A simpler life is something we naturally see as more joyous. Rousseau attributes much of the unhappiness of modern life to private property and the desire to acquire it, which often causes people to be cruel to each other.

Westacott also points to themes in art, which often harkens to a simpler, natural past.

The catch, of course, is that such nostalgia is often seen through rose-colored glasses, as nostalgia hides the difficulties of the past from us. The past was harder than the present in many ways, yet when we look back, we don’t see those difficulties. We just see the good side of the simpler past.

Simplicity, in the modern sense, is really just an effort to strip away the worst of modern life, but is that itself a bad thing? Is it bad to want to strip away the worst of modernity? Is it wrong to reject materialism, hedonism, technology fetishism, and consumerism?

This digs down to what the root of frugality really is: it’s a reorientation of values. It’s about eliminating the values of modern society that you don’t agree with and substituting other values in their place.

This might be good for the individual, but is it good for the society?

Economic Growth and Well Being

There is an obvious and strong economic argument against frugality. Most modern economies continue to grow because of a cycle of constant spending of almost all earned wages, which continually cycles through the economy. If people stop spending as much money and instead save that money, that economic cycle starts to slow down. Money isn’t flowing through the economy nearly as quickly.

In other words, a mass frugality movement would have a pretty noticeable negative effect on GDP, which is the primary measure of economic activity.

The question then becomes, why is GDP and economic activity seen as a be-all-end-all measurement of a society’s success? We often buy into the notion that GDP is some sort of indicator of well being, but that isn’t true. GDP doesn’t directly line up with a lot of indicators of well being. There are many arguments for broader measures of well being and, in fact, well being indicators often indicate upcoming changes in GDP and national stability.

There’s also what’s known as the “Easterlin paradox,” which states that at any given moment in a given society, richer people are happier than poorer people. However, that connection vanishes over time and across societies. In other words, you’re not required to live a certain way in order to be happy; actual happiness depends a lot more on circumstances beyond your financial state than it does on the state of your money at the moment.

Another way to look at that: Emotional well being and happiness rises with income, but only to a certain extent. In America, that number is usually somewhere just above the average household income – income above that doesn’t really bring additional happiness.

Another challenge in all of this is that people try to project an image of happiness and well being, even if they don’t actually feel happy. Social media is full of this kind of thing, where people post things about how great their life is and how happy they are, even when they likely don’t actually feel that way. This often creates a sense that everyone else is happier in their lives than you are, which further clouds the picture.

A final factor: relative social standing is enormous in determining personal happiness. We tend to feel happiest when we’re just slightly better off than the people immediately around us, such as our neighbors or our close inner circle. We don’t want to feel like the “worst” person in the group. (The key here, I think, is to find friends that compare along metrics that you would use as guidance to improve yourself, such as a social circle that values fitness or frugality.)

What If Frugality Went Viral?

This is a question that I’m often asked in the reader mailbag, and it’s an issue that Westacott handles thoughtfully here.

In the short term, the consequences of a huge frugality movement in America would be dire. Much of the American economy centers around consumption, much of it rather unnecessary. Large segments of the economy centered around luxury goods and fulfilling desires would fall apart.

Since our economy requires so much constant economic activity to thrive, the shift of people moving away from luxury goods and lots of unnecessary purchases and experiences would cause things to just grind quickly to a halt in sectors that aren’t serving basic needs.

Why Increased Frugality Need Not Have Dire Consequences

That disastrous picture is just a short term result, however. There would be a number of benefits to a frugal society, but most of those benefits would take some time to appear.

First of all, many luxuries that cause ill health, such as unhealthy food, cigarettes, and so on, would eventually go away because they’re not really frugal expenses. This would likely improve the health of the average American, which would result in significantly lower long term medical expenses.

Second, the short-term collapse in the economy would be due to shifts in demand, but over the long term, there are more factors at work than just demand. What’s actually happening is that demand isn’t disappearing, but that it’s just changing significantly, and it would take the market some time to catch up, but it would catch up.

At first, there might be significant unemployment as the market reformed itself around the change in demand, but over time, that would fix itself in a number of ways.

Westacott predicts that one major change would be a shift to shorter workweeks or longer vacations from work. This would take care of the significantly reduced demand for nonessential consumer goods without devastating unemployment, but it would take some government intervention.

In the public sector, there are tons of jobs that need done: infrastructure repair, schools, hospitals, parks, public transportation, public research. People want to do those jobs as long as taking those jobs doesn’t lead to poverty. The issue is that we don’t define those things as a societal priority right now, and that would likely change as individuals become more frugal. Again, this points to a change in government.

All of these changes have some benefits. They would result in more people being employed, more potential income tax dollars, and healthier and happier lives for all.

However, there are potential problems, too. The biggest one is that employers would face higher labor costs. People, as always, will seek the highest wages they can earn, and if we live in an era with a shorter mandated work week, this means paying benefits to a larger pool of employees than before.

One potential solution to this is the one that Europe discovered in the process of many European nations moving to 35- and 30-hour workweeks: simply move the costs of typical workplace benefits to the government and increase payroll taxes. That way, the employer is no longer paying for things like health care packages and 401(k) packages that are pretty typical white collar (and often blue collar) benefits.

Westacott makes a pretty good argument that the current system of having employers handle the costs of those benefits is incredibly inefficient and that such requirements tie into the reason that Americans have a “40 hour workweek” but many work far more than that. This begs an obvious question…

Why Do We Work So Hard?

People work harder than ever. The reality is that in America, although working hours have declined slightly over the last century, the average worker productivity has gone way up and thus the average worker is far, far more productive than ever before at work. Many people a century ago predicted that these huge leaps in productivity would result in progressively shorter working hours. Why hasn’t that happened?

The biggest reason is that, as a general rule, Americans have a deep desire for improved relative status and capitalism inflames that desire. People want to be better off than their parents were and, as mentioned earlier, better off than people in their social circle. People want to have the latest and greatest new things.

At the same time, individuals are at the mercy of the system. Most would like to work less, but fear they can’t out of fear of losing their jobs or damaging their career. Their employer demands more and more productivity from them for their pay.

Also, cost of living isn’t going down. It’s staying nice and high, and market forces often move the cost of essentials up in price at a rate much higher than wage growth. Housing is a perfect example of this – it rises in value faster than the wages of the average American. This benefits those who already own a home because their home allows them to build wealth and avoid the increases in the housing market, but works against those who don’t yet own one. A similar escalation is happening in higher education and health care. With education, you have the same phenomenon – people who already have an education aren’t affected, but it’s becoming financially harder and harder to obtain an education for those who don’t have one yet.

Things like housing, education, and health care aren’t optional luxuries. They’re required to keep living and to have access to most career paths in America today. These things reside far closer to the “need” end of the spectrum than the “want” end. We’re not talking about luxury goods here, but basic things, and when those basic things become more and more expensive, it becomes harder and harder to make ends meet and to maintain a solid relative social status, something that’s intimately tied to self-respect, as noted earlier. Is it any wonder many people are unhappy today?

Why is this happening? One solid argument is that our technological cleverness has outpaced our moral wisdom. We know how to do a lot of things, but we don’t yet really understand all of the consequences of it and whether it’s right or wrong to do them.

In the past, when new technologies emerged, we had generations to adapt to them and figure out whether they were good for society and how to maximize the benefits and minimize the negatives. It took millennia for society to move from a hunter-gatherer state to agriculture, for example, and it took centuries for the ramifications of the printing press to be really understood.

Today, technological change is coming so rapidly that society simply does not have the time to acclimate itself to one change before other changes are already here. Complex societies are difficult to understand already, and new technologies change them rapidly. A hundred years ago, there was no real way to mass communicate at all aside from newspapers – phones were rare, radio basically didn’t exist, television didn’t exist, the internet didn’t exist. All of that change has happened in far less than 100 years, and that’s just in how we communicate and share information. We haven’t really figured those changes out yet as a society, let alone all of the other changes that seem almost constant.

What’s the solution? There isn’t one. However, Westacott points at frugality as being something of a form of resistance against this kind of rapid change. A frugal society would inherently be much more slow to adopt massive technological changes, and perhaps that would serve all of us better.

Next time, we’ll take a look at the environmentalist case for simple living.

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How (and Why) I Get Through Summer Without Air Conditioning

Summers in New York City are sticky, sweltering, and long. The sun’s rays radiate off the immense expanses of concrete and asphalt, making the crowded metropolis feel as though an evil giant might be using a powerful magnifying glass to superheat the city.

That being the case, most people in the city plug in their A/C units in June and leave them running into September.

Because I’m always looking for hacks that can save money and have potential health benefits, I’ve chosen to not use an air conditioning unit for the last two summers. Here’s why I do it, as well as some tips for beating the heat sans A/C.

You Save Money

If you use box fans to cool your place rather than a window A/C unit, your budget will thank you.

A box fan costs about one-third of a penny per hour to run, while a window A/C unit is closer to 14 cents per hour. If you figure 12 hours per day of use over the course of a month, an air conditioning unit will cost you over $50 more per month more than a fan. Over a three-month summer, you’d save more than $150 right there – not even taking into account the cost of purchasing a window A/C unit (around $200 or more).

You Build Toughness

I like that I’m not hedonically adapted to having air conditioning.

Hedonic adaptation refers to the idea that we quickly grow used to improvements in our living situation. So, if we buy a brand new car, it’s fun for a while, but eventually we get used to it and that nice car becomes our new baseline — just another vehicle.

Because my home doesn’t have A/C, I appreciate it so much more when I’m in a place that does. A trip to a coffee shop, bookstore, or a friend’s house is now all the more pleasant. I actually think my lack of A/C makes me a more productive worker in the summer than I otherwise would be, because I’m so grateful for the air conditioning in my office building.

You Help the Environment

Air conditioners suck up about 6 percent of all electricity in the U.S. and produce 117 million tons of carbon dioxide annually.

I’m not going to pretend like I’m saving the planet just because I don’t run air conditioning, but it is nice to know that I’m doing my little part, however small, to combat negative changes to our environment.

Hacks for Surviving Summer Without A/C

There are a bunch of ways to manage the discomfort that comes with forgoing A/C. Here are a few of my favorites strategies to stay cool:

Take Cold Showers

I’ve written about my love of cold showers before, and I will once again give them a shout-out. When it’s sweltering in my place, I find a freezing cold shower buys me about 20 solid minutes of feeling like I’m at a comfortable temperature. If things get really bad, you could take one per hour and, in theory, cut your time feeling overheated by a third.

Utilize Your Shades

Keeping your blinds shut during the hottest parts of the day can lower the temperature inside your apartment by as much as 20 degrees.

This one was tough for me to wrap my head around at first, as I love getting natural light whenever possible. My wife convinced me to keep our shades drawn during the hottest parts of the day, and once I saw what a huge difference it made, I was sold.

Limit Your Use of Appliances

It goes without saying that you don’t want to use the oven on hot days, but I noticed a difference by limiting the use of all appliances.

The more things you can unplug the better, as anything that’s plugged in radiates a small amount of heat. When you don’t have A/C, these little things matter.

Adjust How You Sleep

We all have our preferred bedding situation. I’m the most comfortable when I have a relatively thick blanket. But during hot summer nights, you have to get creative. I now sleep with just a light sheet.

This summer, we went a step further by removing our bed frame and putting our mattress directly on the floor. Because heat rises, the lower you get to the ground, the cooler you’ll be. If you want to take this practice to the next level, you can try sleeping on a bamboo mat, which is supposed to be much cooler than cotton.

Practice Gratitude

While it’s always good to have a gratitude practice, I find it especially helpful when I start getting bothered by my lack of air conditioning. There’s something about listing out things I’m grateful for, like my good health and my wonderful relationships with friends and family, that helps keep things in perspective.

A lot of the time I find it’s not so much the heat that is the problem, but my reaction to it. A gratitude practice reminds me that no matter the temperature, I have things pretty darned good.

Embrace the Struggle

I genuinely like brainstorming with my wife about ways that we can optimize our living situation to combat the heat. It can feel like a puzzle to solve rather than a burden to bear.

Also, there’s something to be said for embracing the seasons as they come, temperature changes and all. Studies have actually shown that all things considered, people prefer to be in places where the temperature fluctuates. This reduces the negative effects of what University of California Berkeley professor Gail Brager calls “thermal monotony.” She found that “we not only accept—we actually prefer—a wider range of conditions that float with the natural rhythms of the outdoor climate.” Basically, we get bored when things are always the same, and embracing the A/C-free lifestyle can potentially help us to live more fulfilled lives.

Finally, because I’m a health nerd, I also looked into the health benefits of sweating. Instead of seeing sweat as a gross byproduct of being overheated, I found that I could embrace it as an underappreciated bodily function. Sweat helps us detox heavy metals from our body, promotes healthy skin, lowers our stress hormones, and more. Those sound like properties worth embracing!

Summing Up

To be clear — I’m happy that air conditioning exists, and I’m sure I will one day join the 87 percent of Americans who have an air conditioning unit. But until that day comes, I’ll do my best to live in a way that allows me to thrive without relying on air conditioning. If you want to save some money, reduce your environmental footprint, and learn some new ways of living, I suggest you give it a try.

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