A real kitchen garden

Trent, from The Simple Dollar, has posted a nice entry about starting a kitchen garden. But I am one-upping him: I have a real kitchen garden.

Now I'll admit that the potting soil in the sink takes some getting used to, and the drawer of seeds and verbena starts is where you would expect to find silverware. Fortunately, this is only temporary. Tomorrow, my kitchen garden will dwindle back to seven plants, and the geraniums, seed trays and so forth will migrage to a set of shelves upstairs by the window.

There's a lot to be said for gardening. By February, I have sickened of winter. March 1 is time to reclaim the world for human habitation. Unfortunately, the world is seldom taking my phone calls, so I have to resort to creating my own habitat. I keep a large bougainvillea plant in my kitchen over the winter, where it stabs the unwary passer-by and blocks access to the garbage can. (That's it, above, last summer.)

I am too cheap to buy herbs at the grocery store, so I also have a nice pot of basil, oregano, parsley and chives. Thyme and rosemary each deserve their own pot, as both are low-water items. I'd plant sage, but that's getting too Simon and Garfunkel.

This week, I picked up five geranium plants at the local grocery store for $3.75 apiece. They were in four-inch plastic pots, and you could almost hear them begging to be released from their prisons. They have been rescued, repotted, and are cheerfully awaiting placement on the shelf outside my kitchen window as soon as it's warm enough.

I bought a dozen seed packets on sale ($1 each) to supplement last year's stash. Technically, seeds should be planted in the year in which they were purchased, but last spring was a frenzy of moving and home purchase, and my opportunity disappeared. So I've started a flat of test seeds, using last year's packet. If they germinate, I'll plant the rest; if not, no harm's done. I still have time to get a nice bunch of seedlings before it's time to plant outdoors.

Ah, gardening. Springtime is come.

Gardening is a wildly expensive hobby. Probably more expensive than skiing, if you have a ski hill within driving distance. Not as expensive as golf--but then, what is?

But gardening is the fine art of getting something out of nothing. By nothing, of course, I mean a huge capital outlay in soil amendments, plants, sweat, tears, and dirty fingernails. On the other hand, you finish the year with beautiful plants and flowers and food, where before you had nothing but dirt. No wonder it appeals to us frugal people.

There is money to be saved, though, if you know what you're doing. Gardening abilities were part of my genetic inheritance--my mother kept us busy outside, and you can't spend years grumbling about yard work without picking up some basic skills. Here are a few important starters:

• Know your climate and soil. I will never have a hydrangea. It's sad, but I have accepted it. On the other hand, tulips flourish year after year from the same bulbs, and pink and white honeysuckle lines the canyon edge.
  
• Know your frost date. This is actually the first day on which there is less than a 50% chance of heavy frost. In my area, it's mid-May. Don't plant tender young things before that date, or you will waste your money and curse fate. Cursing fate is an integral part of gardening, of course, but you needn't set yourself up for it.
• Prepare your soil. New gardeners cheap out on soil prep, because it seems so wasteful to buy dirt. Don't do it. You may live in Eden (aka Iowa) and your soil may be rich black loam. In that case, you might be home free. But call your local extension agent anyway and see whether there are things you need to add for better drainage or production. If you want to be cheap, there are cheap sources for manure and compost--check with your local sanitation people. There is nothing more frustrating than having your pretty new plants wither up and die because they can't get their roots from the potting soil into your nasty clay backyard. I live on a rock ledge in a desert, so I have the whole regimen: compost, water-conserving crystals, little bacterial soil improvers, old potting soil.
• Spend the money to buy perennials at a good greenhouse. Home Depot has those cheap roses, or saplings, or bushes. Run screaming. A good greenhouse can sell you plants that have been kept watered and fed and properly potted. Remember the geraniums, above? They were all nearly dried out and should have been transplanted weeks ago. They will do fine, now I've got them repotted, but you don't want the quality of your long-term garden building blocks to be compromised by a poor early start. If a tree you bought three years ago starts showing signs of weakness in the base, you've lost three years and a good tree. A reputable greenhouse should offer a year-long money back guarantee on trees and other large perennials. As in, if it dies, bring it back with the receipt and get your money back. It can also provide you with the right variety of plant for your altitude, growing zone, and light.
• Go ahead and get annuals wherever they're cheapest. That flat of petunias at Lowe's may be just what you're looking for. This does require knowing how to assess the health and quality of a plant--if it dies the week after you bought it, it was no bargain. Look for heavy flats, which indicates that the plants have been watered. Avoid truly top-heavy plants, or check them for root-bound conditions. (You will want to google this if you don't know how to assess it.) Look for generous foilage and stems, not heavy blooming. Blooming weakens a plant, and a plant in a nursery flat is pretty weak already. Plant right away, and make sure you loosen the roots and plant in well-improved, watered, non-compacted soil.
  
• Plant from seed, and you've hit the cheapest method of all. Seeds are a pain in the tush, but they're (almost) as cheap as dirt, and they are a legitimate outlet for the frustrated gardener in early spring. Remember the frost date? Most seeds should be started inside 4-6 weeks before. Seeding outside has never been a big success for me with anything but weed flowers (cosmos, hollyhock, yarrow--not weeds, but non-hybrid heavy seeders.) But seed cultivation inside is fun, cheap, and gives you an excuse to get your hands dirty. I've started a bit early, but I wanted to know whether my old seeds were still viable. I also planted long germinators--the verbena in the drawer requires 10 weeks, and it has to stay in complete darkness until it sprouts. The payoff? Those little 2 inch nursery cups of flowers run about $2 apiece. Starting a dozen cost me a grand total of $2.25. That's a $21.75 savings.

The garden, the vinyard, and the harvest have long been used in parables and fables. Gardening lends itself to moral lessons on patience, investment, hard work, and personal responsibility. A tiny mustard seed grows into a huge plant. The seed that falls on rocks never grows. The one who plants the wheat, tends the wheat, harvests the wheat and makes the bread is the one who eats the bread.

Gardening is a nice money-saver if you stick to herbs in a pot. If you get more elaborate than that, the cost/savings ratio gets fuzzy. How much time did you put it? How much did you spend on water? How are we going to use all this zucchini? What did that MiracleGro cost, again? But it has huge rewards.

Gardening has a meditative and artistic aspect for its true devotees. There is no get-rich-quick option in gardening. There is no credit. There is no shortcut. Those of us who want to retrain our attitudes about money could do worse than to turn to cultivation in the natural world to remind us of the Law of the Harvest.

Besides, with all that weeding to do, who has time for golf?

smackdown: rent v buy

Squawkfox has an interesting article about good debt. Her take? There is no such thing. It's a myth marketed to us by financial professionals.

The most interesting part of the post, in my mind, was the discussion of mortgage debt. Squawkfox joins Millionaire Mommy Next Door in the devil's advocate position of saying that renting frees money for investing, which will earn returns greater than housing equity can. This is a 180 from the American conventional wisdom that home ownership is the path to wealth for the majority of us.

I agree with everyone. (I'm an agreeable sort of girl.) There are many paths to wealth. Some include home ownership. Some do not. But all of them include a strict scrutiny of the real financial picture underlying a decision.

If you decide to rent and invest your money in the cheerful expectation that you will make the stock market's historic average every year, you are gambling. You haven't done the math.

If you decide to buy and expect your home to grow in value at rates outperforming the stock market, you are gambling. You haven't done the math.

Doing the math is a burden and a chore, but no one said that financial freedom was easy and fun. I purchased a home in May of 2007. While it's still early days, I consider it my best financial decision ever. Let me take you through my personal numbers and show you why.

First decision item: Can I afford a home? Do I have the credit to do so?

Despite the ominous rumblings of the mortgage market in early 2007, I had the opportunity to purchase my home under a first-time homebuyer's program with a 1% down payment, closing costs rolled into the loan, and two mortgages at 80% and 20%, thus avoiding private mortgage insurance (PMI.) Deals like this have been recast as a seriously bad idea for both lenders and borrowers, but there were two redeeming features. The non-profit organization did months of financial monitoring and counseling before allowing a home purchase, so we didn't buy more than we could handle. They also financed both mortgages at a fixed 30-year 5.5%.

Second decision item: What is the opportunity cost of a home purchase? What else could I do with the down payment? What would it cost just to rent?

This is where I lucked out. I live in a small and rather remote town. Housing prices are traditionally horrific because there is very little buildable land. (We're surrounded by national part, pueblo land, and federal government property.) But, while the housing market has been irrationally exuberant in other parts of the country, price increases have been fairly restrained in my area due to financial uncertainty for the major local employer.

I also had an apples-to-apples rent/own comparison. There are several hundred homes in town build with the same age, materials, acreage and floor plan as mine. At any given time, there are two or three listed for rent in the paper. The rental cost for a house comparable to the one I purchased is about $1000 per month, not including utilities.

My actual financial outlay to get the home would be minimal: 1% of the purchase price and no closing costs. I knew that 1% would be less than $2,000, so I could use that number as my high number when counting opportunity costs.

My rent v. buy analysis assumed a 7 year horizon.

Renting would cost $1000 per month. $2000 could be expected to double in the stock market in 7 years, resulting in a rough profit of $2000. I could assume a rent increase of 2% per year and rental insurance at $200/year.

The total cost of renting for 7 years and investing the down payment instead would be $88,980 for rent and $1400 for insurance, with $2000 profit from the down payment funds, for a total cost over seven years of $88,380.

Third decision item: What is the home worth now? What was it worth five years ago? Will it maintain or increase its value?

After some intense house-hunting with a realtor, I had an idea of my preferred neighborhoods, home, and budget. I drove around those neighborhoods several days a week. This paid off: I was the first person to see the FSBO sign in front of the home I purchased. I actually signed a contract before the first ad ran in the paper.

Scoping out the neighborhood was an important part of the process. I bought within two blocks of an excellent elementary school. The neighborhood is settled and well-maintained. It's away from major roads. There is a municipal park (check out the photo at the beginning--isn't it rather breathtaking?) within a three-minute walk and a golf course within a five-minute walk. These features stabilize the value of the home. I had the selling prices of all comparable houses within the previous five years, so I knew what the type of home I wanted should cost.

Because I had this information at my fingertips, I knew when I had a good price and I wrote a check for earnest money immediately. Without the research, I might have missed a remarkable bargain. I ended up buying well under the appraised value.

Fourth decision item: What are the added costs of insurance, property tax, and home maintenance?

I am also fortunate to live in an area where my combined yearly property tax and insurance bill is less than 0.5% of my home's appraised value. I know that's unusual. I'm not gloating, I swear. I anticipated about 1% of the home's appraised value in maintenance and improvement costs.

Fifth decision item: Do the math. Do the math, do the math, do the math.

Ultimately, the cost of purchase broke down like this:

7 years at $990 per month for PITI and $130 per month for maintenance, which is assumed to increase at about 2% per year = $94,756.

Actual down payment: $700 (don't laugh), since the owners rented back from me for a month at $1000/mo and I crashed on my parents' couch. So the actual cost of renting goes up by $1300 (remember, we assumed a $2000 down payment invested in the market, instead.) So the real cost of rent is $89,680 over 7 years.

The cost of ownership is $5076 greater over 7 years. If that money were invested in a lump sum at the beginning of the 7 years, it might reasonably become $10,150 over the seven-year period.

However, if I sell the home after 7 years at the same price at which it was appraised when I bought it, I would have approximately $21,000 in equity, of which $8150 would go to brokers' costs, leaving a net profit from the home of $12,850.

After living in the home for seven years, assuming no increase whatsoever in the home's value, ignoring any tax benefit from home ownership, and assuming a generous and consistent market return for invested money, I am still $2700 better off as a home owner than as a renter.

These are excellent numbers for a worst-case scenario. I think they're unusual numbers; I live in a very good market for buying, and it took lots of time and effort to find such a low rate and a cheap house.

* * * * *

Lest I start sounding too self-congratulatory, let me observe that I still shoulder some significant risks as a home owner. If the major employer in this area failed, my home's value would drop significantly. If I had to move after only a short time, I might not be able to recoup the money spent on closing costs and brokers' fees.

One of the unavoidable downsides to home ownership is that it is putting a lot of eggs into a single basket. Investing all your retirement in one company's stock is courting huge market risk. The risk is lower in real estate, because you control many of the maintenance, capital improvement, and timing decisions. But the risk is still there.

To hedge against this risk, I've invested four times as much in mutual funds since buying my home than I've paid in equity. I understand the desire to retire a mortgage early, but I feel that I'm more financially balanced if most of my money is going into diversified investments. I would ultimately like to maintain a 4 to 1 ratio of investment to home equity in my net worth.

The moral of this story is not to buy a home. It's not to rent, either. It's to calculate. Every financial decision has real cost as well as real benefit. Doing something because everyone says it's a good idea is a bad way to run a personal exchequer. Americans lost a lot in the market in 2000 because they followed the leader into tech stocks, and they're losing their shirts in real estate now for exactly the same reason. No one else--no blogger, no financial analyst, no guru--can give an easy answer to investment questions. We all have to get out the calculator and do the math for ourselves.

I'll tell you what I want

Identifying your needs v. your wants is hard. But identifying your wants is easy . . . isn't it?

No. What drives the industry of consumer debt is not just a lot of people buying what they don't need. It's fueled by our inability to recognize when we're jonesing after things we don't even want.

For those of you who weren't English majors, my blog title is actually stolen from Vanity Fair (the novel, not the magazine.) It's one of my top ten fiction-for-personal-finance books.

The book's anti-hero, Becky Sharp, is the smart and unprincipled daughter of a drawing instructor and an opera singer. She's educated as a charity case in a girls' school and is expected to earn her meagre living as a governess, school teacher or companion for little old ladies. But Becky wants real money, not some pathetic stipend. And she'll do anything to get it.

Poor girl! She explains herself: "I think I could be a good woman if I had five thousand a year. I could dawdle about in the nursery, and count the apricots on the wall. I could water plants in a greenhouse, and pick off dead leaves from the geraniums. I could ask old women about their rheumatisms, and order half a crown’s worth of soup for the poor. I shouldn’t miss it much, out of five thousand a year."

It's a lovely picture, isn't it? Gentle indolence, painless charity, a quiet life governed by the seasons. Maybe it'd work for some people, but for Becky Sharp, it'd be like trying to use a racoon as a messenger pigeon. Not only is the attempt doomed to failure, a racoon's not something you want hanging out in the pigeon loft.

We all have similar mental images of things we think we want. How about your kitchen? You'd like to take out the old cabinets and the lino floor. You want cherrywood, granite, a Viking stove, stainless steel appliances, and probably a marble board for kneading bread dough. (Bakers say there's nothing better.) Perhaps you have a mental image of yourself, channeling Julia Childs. You can see the bunches of fresh herbs on that granite countertop, almost smell the peppers you're chopping as you prepare for a dinner party. Your face is serene. Your kitchen is spotless. Your kids are behaving or have mysteriously disappeared.

If you are a lousy cook and dinner parties stress you out, spending a fortune on new countertops will not change Real You into Imaginary You.

Too many of our mental images of "living well" are from some car commercial or Martha Stewart magazine. You know what? Doing nothing all day sucks. I don't like to travel, unless it means I get to play in the ocean. I don't make my own bread. I have zero interest in a graduate degree. Think of all the money I've just saved myself on trips to Europe, KitchenAid mixers, tuition and early retirement.

Here's your challenge: look over your personal List of Wants and cut out what you don't actually want or wouldn't really use. (Hint: a huge amount of recreational equipment goes in this category.) Permanently eliminate three items. I think you'll be surprised at how much you think you want but don't.

Now take those three items and figure out why they were on your list in the first place. Did you list granite countertops, when what you really want is to be the kind of person who cooks with fresh herbs and throws dinner parties? Buy a cookbook instead. Mark Bittman's How to Cook Everything is $14.93 at Amazon.com. Twenty five square feet of granite countertop will run you around $2500. Yes, you just saved $2485.07. Congrats.

Accountability

One of the hallmarks of good goal-setting is a system of accountability. I hate that.

As a single woman, I do what I want with my money. This is one of the big upsides to being single, IMHO, but it also means I can run fiscally amok. I could, for instance, buy over $500 in out-of-print Signet Regency novels in PDF form. (Not that I would do that, or anything. Oh, damn.) I suspect that a financial partner-for-life would look at me and say, "WHAT THE HELL IS WRONG WITH YOU, WOMAN?"

How did I get sidetracked onto that embarrassing confession?

Back to accountability. It seems to me that one of the purposes of personal finance blogging, from the blogger's perspective, is to encourage accountability. You see, I don't need accountability in the flesh, nagging at me in the grocery store. I already nag at me in the grocery store. What I need (what many of us need) is a place to post the goals and then post the small steps to completion, or the setbacks. By publicly declaring that we will beat the debt, save the money, buy the house or ditch the shoe habit, we have started writing our own stories for an audience. And we, as authors, love happy endings.

(And I, as someone who has spent too many years telling stories and studying literature, am very hung up on the significance of narrative creation. So I think everyone frames life experiences into comprehensible plotlines. So sue me.)

Here's the deal, dear reader. I write down how I'm doing. You read. You occasionally add a comment, such as, "$500? You're smoking crack." Validated, I write down how I'm doing. Et cetera. Thank you for joining my therapy group.