Welcome to Frugal money management blog at samoht.se! This site has grown from what started as the Frugal money management program's homepage into a personal money management blog, of which the program is still an important part. In order to visulize the change the Frugal program has moved to its own page where you will find links, user's guide and information - while the main site will focus on money management tips in general.

Maybe people would like to aquire comfort wealth. Enough wealth not to be bothered to consider money when it comes to the extra little things that makes life a little bit more special. Maybe to affort that extra holiday to the sun when the snow is thick on the ground, or not be in financial troubles when a home appliance suddenly that breaks down. The question is, how do you actually aquire that type of comfort wealth. Obviously a lottery ticket is not the way to go.

There a few strategies, of course. And some are better and some are worse in different times, some allow you to continue living comfortably during your investment period while others don't.

One of the best books that I have read on the subject to aquire wealth and at the same time live comfortable, if not the very best book, can be bought from any online book shop for next to nothing. It is called "The Richest man in Babylon" and is written by George Clason. The book dates back to the 1920s when Clason published household finanance advice pamphlets which were over time bundled together into this book.

Today there is an updated version of the book available, but I would go for the original. The basic methods to aquire wealth are the same as they always have been, and always will be. There is no new economy.

The plot is set in ancient Babylon and presents a series of stories about the babylonians. The different chapters, or lessons, may seem trivial at first sight and even a bit childish as they are set in ancient times, but it works. The message is very clear. Look through the plot and find the valuable advice and take it from there.

It should be noted that it is not all about money, it is just as much about a good life and happiness. That is, how much can you save and still have a comfortable life?

For me, it is one of the most inspiring book about thrift that I have ever read. I have even re-read major parts of the book, something that I generally never do after I have read a book once. So I would definately recommend this book to anyone interested in household finance and aquiring a bit of wealth.

Inflation, is it your friend or your worst enemy? Inflation is the rise in the level of prices over time. Thus when your grandparents say that everything is getting so expensive, they are right, at least from one aspect. What was priced at 1 USD 50 years ago is probably priced about 10 times as high today. But even though everything is becoming more expensive, your salary follows the CPI by yearly adjustments, so it's not really more costly to live today than 50 years ago.

Inflation is important. For example, if you take a loan, that loan will decrease automatically with inflation. The bank adjusts for this, of course, by setting an interest rate on your loan. But consider the opposite, what if the inflation was negative. That would never be adjusted by the bank and then the loan would actually increase over time. Then no one, person or company, would take a loan to invest in new machinery and the economy would as a result slow down and possibly come to a stand still. Therefore we depend on inflation to feed progress.

But the inflation can also work against you if you have all your savings in investments that do not adjust for inflation, for example if you invest in your mattress. All those investments will decrease over time with inflation. The stock market is automatically inflation adjusted since it is liquid. Your savings account is also inflation adjusted, but since the bank is in the business to make money, keep an eye on the real inflation rate and the savings account rate. As they may be close to each other it might be time to find new investments.

Today I have made an inflation calculator public on this site. It is available at this link. Go ahead, your 1000 SEK purchase in 1950, how much would you need to pay today? Or, find out if your year 2000 investment of 10000 has beaten inflation (inflation puts it at 11494 today).

Today's newspaper has a special section on the whole process of finding and buying your first house. I browsed the articles and one statement stood out from the rest. Something that I consider is a lie, and something that keeps those who want to buy a house in the next few years effectively outside the housing market.

To paraphrase,

The bank will require a 10% down payment on a house, something that practically no-one can afford unless they already own a house or apartment that they can sell with a profit.

Come again?! In effect, what the newspaper states is that it is practically impossible to save enough money to pay a 10% down-payment without already owning a house. Sounds like a catch-22 here. And that is the lie that I am talking about - by making this statement, and if a family believes it, it will be true for that family. But fortunately it is false.

A few of the numbers mentioned in the article are that the average price of a house is 3.3 million and that the minimum household income to own that house is 450 thousand per year. (local currency)

Let's take out the calculator. The down payment is 330 thousand. If the family saved 10% of their annual income it would take about 7 years to save enough to cover the down payment. Inflation may change the numbers slightly, but the income also increase with inflation and so does the house price - so it is not a huge leap to believe that they more or less will even out over time.

It will take approximately 7 years for the family to save enough money for the down payment to buy the house if they start from nothing.

QED. It is not impossible to save enough money to cover a down payment!

The article stated that it would be necessary for the family to own a house or an apartment with an unrealized profit – I assume that the article refers to the house or apartment as the only available investment vehicle for the family. Let us investigate. According to one source the real house prices have increased by less than 3% per annum since 1975 (adjusted for inflation). Inflation has average around 3.5% p.a. (source). Together approximately 6.5% p.a.. In the same period the S&P 500 index has averaged 8.3% p.a. (Yahoo! Finance). That is, the stock market has actually been a better investment vehicle than a house - since 1975.

Therefore it is safe to say that it is not necessary to own a house to appreciate money for a down payment. The difference is that a house provides collateral for a loan and it is probably the only way that a bank will give a 1-2 million loan to the average family for an investment. That is, the house may be the best investment for a family over time as it is bought on credit - but stocks and shares can actually give the same performance even from a smaller amount.

Back to the calculation. Let us use the historical values from the S&P 500 index.

If the 10% savings for the down payment could be invested in the historical performance of the S&P 500 index, it would take 5 years to save enough money to buy the house. 5 years!

Almost impossible for a family to save for a down payment? Quite the contrary! Of course it takes a few years - but what do people expect!? I think it is very unwise for a large newspaper to state something so blatantly incorrect. The article should have stated;

The bank will require a down payment of 10% of the house price. Not a sum that every family can pay without planning, but a sum that most families can save for over a few years.

Note: It is necessary to understand that the stock market is not a sure thing. The value of investments may increase or decrease depending on many factors. The historical performance of the stock market can not be used to predict future performance, and all investments come with the risk of loosing the invested sum or more. This is also true with house prices, which may increase or decrease over time.

Frugal is a simple yet powerful personal finance and stock portfolio management application. It provides quick on-line stock quotes and currency rates updates and easy to understand graphical and textual views of your financial situation.

Frugal version 0.23 (beta) solves a bug in the transaction history.

More information is available at SourceForge

Frugal can be downloaded from http://sourceforge.net/projects/frugal

Frugal has successfully been run in Mac OS X 10.6 - also known as Snow Leopard.

It is necessary to install one Python package (matplotlib) that is not shipped with Mac OS X by default. Installation can be done in a couple of minutes.

1. Open Safari and go to http://sourceforge.net/projects/matplotlib/. Click Download Now! to download the tar.gz package.
2. Go to Applications->Utilities and open the Terminal.
3. Unpack the matplotlib package by typing the following commands into the Terminal window
   $ cd Downloads
   $ tar xvf matplotlib-0.99.1.2.tar
4. Open a Finder window and go to Downloads/matplotlib-0.99.1.1. Double-click on make.osx and open it in the TextEdit application.
   Change the following lines
   PYVERSION=2.5
   MACOSX_DEPLOYMENT_TARGET=10.6
   In CFLAGS and LDFLAGS update the sdk file name to MacOSX10.6.sdk
   Scroll down to the bottom and update the hdiutil line with macosx10.6.mpkg
   Save the file and close TextEdit.
5. Install matplotlib by
   $ cd matplotlib-0.99.1.1
   $ sudo PREFIX=/System/Library/Frameworks/Python.framework/Versions/2.5 make -f make.osx fetch deps mpl_install

Advanced users have noticed that matplotlib was installed for Python 2.5 above, while Python 2.6 is the default Python version in Mac OS X. I chose that path as Python 2.6 runs in 64-bits mode while the Python package wx (required by Frugal) shipped with Mac OS X is only compiled for 32-bits. It is now required to run Frugal with Python 2.5.

Run Frugal from the Terminal by typing the command

$ python2.5 frugal/src/frugal.py