Posted by Dave on June 22, 2010
I had an interesting discussion with my brother about diapers on the golf course yesterday that lead to a more heated discussion between my spouse and I because she thought I was being unreasonable in my expectations of ‘other people.’ This happens fairly frequently as I don’t understand why everyone doesn’t look at things like I do. 
I had asked my brother what kind of diaper he was going to use with his new baby on the way. He didn’t even think and answered disposables.
I questioned why he made this decision, to which I received the answer “because it’s easier”.
I asked him if he had looked into the cost of cloth diapers vs. disposables or any sort of analysis beyond the simplicity factor, to which I received a negative response.
At this point, because we were at a golf course on father’s day I left the point alone – until the car ride home when I went over the conversation with my wife and noted (even though we don’t plan on having children) I couldn’t see any reason beyond the pain of cleaning the diapers to buy plastic that had to be thrown out after 1 use vs. cloth that would last for a significant period of time. I was told that most parents don’t think like that, they don’t want to deal with the messiness and inconvenience of cleaning diapers when there is a simple alternative available. These are arguments that I really dislike – I’m as lazy as the next person but like to look at the big picture on subjects like this. My arguments for diapers can be applied over many consumer products in use today, such as ziploc bags vs. reusable containers; paper towels vs. rags etc.
Tim had previously discussed his switch from cloth to disposable diapers here – rather than look at it from a quality of life stance, I’m going to look at the impact of using something disposable (in this case a diaper) to something re-usable (cloths). Most of the information I got came from here, which admittedly is a pro-cloth diaper site, however I don’t think the pro-disposable diaper conglomerate has much in the way of an argument given the following:
- Over 92% of all single-use diapers end up in the landfill.
- It’s estimated that a disposable diaper would take 250-500 years to decompose.
- Disposable diapers are the third largest consumer item in landfills, and represent approximately 4% of solid waste.
- Disposable diapers contain traces of dioxin as a by-product of the paper bleaching process, along with several other nasty toxic pollutants, which besides probably not being good for a baby’s skin is definitely not good for the land and soil during the 250-500 years this product takes to decompose.
So, rather than having to deal with some baby messes most people buy something that will have to be dealt with for maybe the next FIVE CENTURIES? Does this make sense? I’m not really sure why there’s even a product like this out there – I would have to say that in this circumstance the environmental impact isn’t being looked at, rather most people are looking at the easier choice right now, rather than the total impact that the purchase will have in the future (hundreds of years down the road).
From what I have read cost of cloth to disposable varies, but let’s say they are approximately the same on average. At the end of 2 years, approximately 6,000 diapers have been put into a landfill if you’ve been using disposable diapers. While if you had chosen cloth, you’d have some tattered rags that could be used around the house, or alternatively (because it’s made of a decomposable material) will disappear (in optimal conditions in about 2 weeks).
As a culture we have created products whose main purpose is to be thrown out in order to make things more simple for us. From a personal finance perspective longer-lasting reusable purchases tend to have a lot of up-front costs that make them undesirable to many people. What is created by the easy choice is a lot of garbage. I’m sure more trash has been created in the last 100 years than there ever has been in the past due to the invention of plastic. From an environmental perspective these products are a nightmare, but most people are not looking at the big picture.
For myself, I attempt to purchase as little as possible and when I do I tend to buy longer-lasting durable products rather than disposable goods. I will freely admit that I do own disposable products (ziploc bags, paper towels etc.) but try to limit my use of them.
I’m wondering:
- Do you think about the purchasing decisions you make beyond the initial outlay?
- If you have your child in disposable diapers did you ever think about cloth? If you chose disposable diapers, how did you come to this conclusion?
Posted by Robert on June 21, 2010
Before I started thinking about early retirement, I thought about the logical progression of my savings program. I currently spend about 50% of my paycheque and I save and invest the other 50% (including mortgage payment). The reason for spending relatively little is that I was brought up to be restrained, and not that I lack the imagination. I’d like to spend more, but I don’t want to be in a situation where I’m living month-to-month, even if my monthly spending were double what it is now.
Early on, I spent most of what I earned. As my earnings increased, my spending remained relatively consistent. When considering spending more, I felt that I would rather save and invest, so that I would have more financial stability. Finally, I realised that I was progressing toward the ability to meet monthly spending needs with investment income, which is another way of saying financial independence.
Wouldn’t it be great if my spending were sustainable? Suppose I spend $3000 a month. As soon as my investments produce $3000 a month of spendable income, my spending is sustainable. I no longer need to work to maintain my spending. On top of that, as I continue working, I can increase my sustainable spending amount. It is difficult to conceptualise a concrete plan using this approach because it has so many variables. Salary often increases over time. Investments may pay dividends, which are fairly consistent, or they may grow in market value, which is volatile. Spending can also fluctuate from month to month. But the main idea remains to increase spending only as investment returns make it sustainable.
Here is an example of how this might work. For our example, we’ll use a single man, John, who never marries or has children (to keep it simple). John starts out earning $30,000 per year (after tax). He spends $20,000 and is able to save $10,000. We will assume that dividend-paying stocks pay a consistent 5% (re-invested) and we’ll ignore market growth. After 10 years, John has $125,778.92 in investments, producing $6,289 in dividends in a year. John’s spending has increased (with inflation) to $22,000 per year, but he’s gotten a couple of raises at work and now earns $40,000, saving $18,000. At the end of another 10 years, the investments are worth $431,282.68 and they produce $21,564.13 in dividends. John is basically financially independent after 20 years.
Now John can really start to increase his spending. Let’s suppose he gets a raise of 3% per year. The next year, he’ll earn $41,200; the investments will increase by $21,564.13 just from dividends; if he were to spend the same $22,000 and save the rest, his investments would increase by another $19,200. The total increase for the year ($21,564.13 + $19,200) is $40,764.13, which can produce $2038.20 in dividends. John should spend ($22,000 + $2038.20) about $24,000 this year. The following year, John earns $42,436 and his investments (at $470,046.81) earn $23,502.34. For this year, John can increase his spending by $2,075 (using the same approach as above), or $26,000. The last year in our example, John’s investments (at $509,985.15) produce $25,500 in dividends. He’s not living the high life yet, but his spending is increasing and it is sustainable. The market value is unimportant, since his income is from dividends, and losing his job or taking a year off wouldn’t affect how much he could spend, only his rate of increase. He’ll never have to go back to spending less. He can continue to increase his spending as long as he continues working.
If a person is disciplined with their spending, they should be able to reach financial independence relatively early. Once their spending is matched by their investment income, continuing to save allows them to increase their spending in a way that is sustainable. As such, the risks of not being able to work are totally mitigated and they will never have to return to spending less money.
Does this plan seem practical to you? Is this a viable alternative for people who could retire early, but who love their jobs?
Posted by Canadian Dream on June 18, 2010
Perhaps a bit of back story is required before I tell you this tale. I just might be the only blogger out there who’s mother didn’t read his blog since the very beginning. In fact she didn’t really know the address until just the last month and I’ve been writing this blog since Nov 2006. I was a little overly self conscious about my dream to retire early so I was in the habit of just not mentioning it to family and friends. In fact other than my wife, I’m not sure if anyone I know personally has read this blog until the last few months when I’ve finally been comfortable enough to let family and friends know I write this blog.
This lead to an interesting observation the other day from a friend who read the blog for the first time and and thought it was great (That included Dave and Robert’s posts – so way to go guys!). He had commented that the blog had made him think. When I asked what he was referring to, he mentioned that he hadn’t considered early retirement himself all that realistically until reading the blog.
I admit that comment made me very proud of this blog. Why? Because if nothing else I want people to question the status quo in their lives. We all too often just settle for the way things are rather than consider what thing could be. People wonder is there more to life than this? The answer is yes.
Life can be just about anything you can imagine or dream up, if you want it bad enough. I won’t lie to you and say getting to my dream will be easy, it hasn’t been so far. I’ve spent a lot of time looking at what I do and asking why? Why do I spend this or why do I think that? So as a result I don’t just write about numbers and savings tips, I also try to touch on the ‘why’ of things.
The ‘why’ isn’t always easy to explain and it may have no appeal to you on a given subject. The end point isn’t for you to agree with the why, but rather enable you to find your own why. Why do I buy all this stuff? Do I even like it or need it? Would I rather be spending the money on something else? The answer might hold the key for you on turning your dreams to reality.
The bare bones of personal finance is easy: spend much less than you earn, use the rest to first pay off debt and then save. Plan for things to go wrong and be thankful when they turn out better. Practice delayed gratification and invest in items that will reduce your ongoing costs but don’t buy stuff you don’t need or really want. Learn about your own investments and assume everyone really is out to get your money. The rest is just knowing the ‘why’ of things. So just practice what my son is doing right now: keep asking why until you get it.
So today try turning a dream into reality. Ask yourself and others for the ‘impossible’, you might just end up getting it. You won’t know until you ask.
