Monday, November 24, 2014

Quick Hits

Quick Hits
I'm feeling refreshed today, readers. The missus and I just took a little trip to Tucson, and as usual we have fallen in love with the city. We had a free hotel night certificate (thanks to the Marriot card) that was expiring and figured, what the hey. Let's leave the dogs with a friend and hit the road. The hotel room was nice, the city was fun, and the drinks were cheap. What else does a young couple in love need?

Rather than a single topic today, let's cover a few bite-size ideas that I like, but don't deserve their own blog post.

Travel Hacking, and Return on Your Dollars
For a long time, Mrs. Done by Forty were big on cash back rewards because, hey, cash can be used for anything. Getting 1% or 2% back was simple, too: if we put $10,000 on our cards in a year, then we'd get $100 or $200 we could use on anything we wanted. Two hundred bucks is a lot better than a punch in the face, after all. Then we learned from Brad at Richmond Savers that we could try something else: we could spend that same $10,000 on a few different cards, and get, say, two free flights to Europe and sixteen free hotel nights on a trip to five different countries. (A future post is coming on this trip, which we're taking with friends this spring.)

Bottom line, we could have $200 in cash and some simplicity, or manage a few cards and get a great vacation on the cheap. The value of the flights and the hotels seems to be somewhere between $4,000 and $5,000. For us, it was an easy decision, and a bit of an eye opener. Sticking with our status quo had some serious opportunity costs. Travel hacking involves a little work, but gives us a much better return on the dollars we spend.


Spending Rate, not Savings Rate
I woke up in the middle of the night a few weeks ago and wrote down those words: spending rate, not savings rate. It seemed a lot more profound at the time, but my basic point was that savings rate doesn't account for all the good things you might be doing with your money (like paying down your student loans, or, if you're so inclined, paying down your mortgage). But, typically, we financial bloggers focus on someone's savings rate. That means that a person who's putting 50% of her monthly income towards debts might not initially look that impressive, compared to some guy who's renting and is debt free, but has a 12% savings rate. In my opinion, the woman putting 50% of her income towards debt is on a much better trajectory, even if she's not saving anything at the moment. So, the savings rate metric can have some gaps.

A focus on savings rate also creates an unnecessary distinction between those of us focusing on debt repayment and those of us focusing on saving or investing. If we just assume that any dollar not being spent must be doing something good (invested, put towards savings, an emergency fund, paying down debts, or going towards a mortgage) then all we really need to know is someone's spending rate. It gives a simpler, fuller picture.


Remember, this Friday is Buy Nothing Day
This Friday, instead of leaving the company of your loved ones to stand in the cold and then compete, perhaps physically, with your fellow man for the chance to own another flat screen television, I'd ask that you avoid the apex of consumerism and just spend the day without buying anything. I'd first heard of Buy Nothing Day from Adbusters (a rag so hilariously liberal and anti-corporation that I used to love in my twenties, but now cannot take seriously). But the day seems to have taken hold internationally. This idea of buying nothing, admittedly, can be hard. You might need to put gas in your car (though that's a good reason to use a bike, walk, or, hey, just stay in). You might need sugar for cookies you're baking (though you could also engage in the heartwarming practice of borrowing a cup from your neighbor). Anyway, I don't want to judge those who are going to brave the lines this Friday. If that's your thing, do what you do. But if you're on the fence this Thanksgiving, the Done by Forty household invites you to join us in the simple act of buying nothing.

Have a great week, and thanks for being a reader.


*Photo is from Brave New Films at Flickr Creative Commons.

56 comments:

  1. Great post! I love the idea of the spending rate vs the savings rate. This might be a good idea for a post on my own blog at some point (if you don't mind). I hope you enjoy your non-spending day on Friday :) I won't be spending money that day either!

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    1. I wouldn't mind at all, Kayla. Please write about it and email me the link when you do. Would love to hear your thoughts.

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  2. That savings rate vs. spending rate sounds awesome! The shift of the logic goes so well with Cait's post today over at Blonde on a Budget.

    I love the idea of getting the flights for free with a little more work - I'd likely make a spreadsheet out of it ;)

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    1. I hadn't seen that post but will have to check it out. I'm always scared to try out a new blog as I might like it, and then my blog roll would grow even larger. I have a dilemma of not being able to keep up with the blogs I already love, and still knowing there are tons out there that are very good.

      I need a system.

      Travel hacking has been great for us, and we've seen more of the world since starting, even though it's new to us. Of course, it does not pay for the incidentals (restaurants, cabs, trains, booze) so our overall spending goes up as a result. Kind of a sneaky extra cost, but at least we get to see the world.

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  3. Nice work on the free weekend trip! I agree on the travel rewards. I'd rather get free flights and vacations at this point! It's just a matter of signing up for the right ones. I also really like the idea of focusing on a spending rate instead. We're not planning on going out this Friday. I don't like crazy crowds. =)

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    1. Hi Erin!

      Yeah, the crowds alone are enough to deter me on Friday. It's also nice to be consciously choosing to not buy something, rather than just avoiding the madness of the malls, too.

      Re: travel rewards, Brad has been good at directing us toward the right cards for our trips. He gives good, tailor made advice.

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  4. No problem with spend nothing day, well does that mean I need to skip my morning cup of coffee....the heck with spending nothing day then! I joke, maybe I'll brew a cup for the road for this special occasion.

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    1. Careful mentioning that you buy coffee here in the personal finance blogosphere. That's grounds for a flogging.

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    2. I've come to terms with buying coffee, I spend $20 a week for coffee and lunch in downtown Chicago, most people spend that each day. But you are right pf blogger police are everywhere have to be careful.

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    3. $20 a week?!

      Somebody, quick, get him! Throw him in the stocks!

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  5. I'm all for the buy nothing day!!! Yay for a nice weekend away (been to Arizona but never Tuscon) and utilizing your travel rewards for a fabu trip!

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    1. Yay! We've got someone else buying nothing with us. :) Thanks, Tonya.

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  6. OK I'm having a senior moment here. How do you put the same $10,000 on more than one card. Do you just pay off one credit card with another? At what point do you actually pay the balance off? You can tell I'm a novice, can't you?!

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    1. Hi Kathy! Not a dumb question at all.

      So, certain cards will have sign up bonuses: for example, spend $2,000 in the first three months of opening the card, and get 40,000 airline miles, or something like that. After finishing one of these "bonus" periods, we just open a new card and try to get that new "bonus".

      We use the credit card like we would use a debit card to buy our groceries, gas, internet bill, date nights, etc.: just all our "normal" spending each month. We pay off the balance every month (and in my case, every week just to stay on top of it): and NEVER carry a balance. If you put $800 or so on the card each month, that's almost $10,000 in a year...so that's the number I picked for the example.

      I definitely wouldn't advocate carrying a balance on a credit card, especially not for something like rewards. Not worth the debt.

      But if you're debt free and spend on plastic (e.g. - we used to only use debit), you can get some nice perks.

      Contact Brad at Richmond Savers if you want to learn more about travel hacking.

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  7. Glad you had a good visit to Tucson. Do anything cool while there?

    I've always preferred to think of our habits as a spending rate instead of a savings rate. We know what we aim to spend, and everything above and beyond (which we never know how much it'll be due to variable income) that gets saved/invested.

    But for some, Spending/Savings rate is sometimes a matter of semantics since a lot of folks around the PF blogosphere consider debt-paydown a form of savings.

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    1. Nothing too exciting in Tucson, but we made our own fun, as usual. We went to a good happy hour at Downtown Kitchen & Coctails with some surprisingly awesome fish tacos and fancy drinks. Then we headed over to the Hotel Congress just to check out the old-timeyness of the place. We stumbled over to 4th from there, to a little dive, Che's.

      Also had some Monkey Burger, which was yummy. Lots of food and drink related stuff, I'm realizing. :)

      Good point about the savings/spending semantics -- I do think a lot of people figure in the debt repayment as a form of savings.

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  8. Friday buy nothing day. I love it you are so right. I no longer participate in Black Friday Madness. Oh and its also catch up on sleep day and watch movies on Netflix day too.

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    1. Yes! Netflix Day for the win!

      Have a great Thanksgiving, petrish!

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  9. My parents went to Tucson last year and loved it--so glad you had a nice little trip! Out of curiosity, which travel rewards credit card are you using (apologies if you told us somewhere and I missed it!)? We have the Starwood Preferred Guest AmEx and it's been a great way to always have free hotel stays.

    I'm 100% with you on Buy Nothing Friday. There are zero appealing things about Black Friday (to me anyway). Crowds? Shopping? Supposed "deals"? Sounds awful.

    Hope you have a wonderful Thanksgiving!

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    1. So, for the trip to Europe we used two cards, each (one for my wife, one for me): the Chase United card (got the 50,000 mile bonus instead of the regular 30,000 bonus) and the Club Carlson card for the hotels. Brad wrote about the hack here:

      http://www.richmondsavers.com/best-hotel-rewards-club-carlson-hotels/

      We hacked the Starwood hotel earlier and got eight nights in Buenos Aires /Montevideo last year...it's a great card. Though once we used up the 'bonus' points we didn't want to keep the card, due to the annual fee.

      You have a great Thanksgiving, too, Mrs. Frugalwoods!

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  10. LOVE the spending rate thing, and this is something that occurred to me recently too!!! And love the Buy Nothing Day idea. We're in. :-) Have an awesome Thanksgiving, my friend!

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    1. You too, Laurie! I think the spending rate idea was probably the one that could have stood on its own as a post...maybe I'll go to that well again if I come up with a new angle.

      Glad we'll be buying nothing together. Happy Thanksgiving, friend!

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  11. I love the idea of "Buy Nothing Day" - I had never heard of that before, but it is great!

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    1. It is a cool idea, isn't it, Mrs SSC? I especially like the fact that people are working towards something (intentional non-spending) rather than away from something (the crowds and craziness of Black Friday). It's the same action, but feels a bit different.

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  12. I always thought why nobody focused on the spending rate, as it is a way to gage how the average person is managing all the marketing noise. The difference between the two rates, is that if you have a low spending rate, but never invest, that person will not get the big returns. If you have a decent savings rate, and you invest it will be better.

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    1. That's a good observation: saving and investing are definitely different things. But I suppose that distinction still exists even if you're focusing on "savings rate": people still might be putting it in a savings account rather than investing.

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  13. Travel hacking can be pretty awesome. I wish I got in on it earlier...I used to be all about cash back too because I thought that the points were pretty hard to redeem with their exaggerated value and blackout dates, etc. But if you know how to play the game, it can be a big bonus. Too bad I got in on it kind of late, and now with a little one, I don't think I'll be traveling too much. As for Black Friday, I still can't understand how we can be "thankful" for all the things we have one day and the next day go out and buy things we don't need. The only thing I might buy is a 10% off Target gift card since I go there all the time. I'll buy it online of course to avoid the crowds.

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    1. Target is my weakness. They package their brand in a way where I just feel at home in their stores, and actually enjoy my shopping experience there. I've learned that it's a blind spot for me, and try to go there only if I have a list in hand.

      I hear you on the traveling with children front. Mrs. DB40 and I predict travel will more or less stop (or at least change dramatically) once a little one comes along. We'd like to visit 6 of 7 continents prior to making a baby, but we're running out of time. :)

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    2. How many continents have to gone to so far?

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    3. Just three: North and South America, and Europe. We are going to Europe again this May, so we're not really being efficient with our choices, are we? :)

      I think our next trip is going to be Asia or Africa though (2016, I think). Beyond that, it's hard for us to plan that far out.

      But the kids are 3 or 4 years away I think so we also have some time. We might cheat and try to do one of those around-the-world trips I hear about, and get two or three birds with one stone.

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  14. Normally, I'd be with you on the buy nothing day, but my favorite meal planning site is having 50% off yearly subscriptions on Friday only (plantoeat.com). I am however, only going to click a few things and never leave my house... No way am I going anywhere near a shopping area on Friday (or pretty much until after the new year)

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    1. Yeah, there doesn't seem to be a reason to avoid a good deal just on principle. I think it's a cool idea, but no need to cut off your nose to spite your face. Hope you get some good deals!

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  15. I love Buy Nothing Day! Also, your spending rate idea could definitely use some expansion. I'd love to see a full-blown post about it some day! Thanks for the insights. Cheers, and Happy Thanksgiving!

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    1. Thanks, MSquared. I might just go to that well again.

      Have a Happy Thanksgiving, too. You guys cooking a bird?

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    2. Yup! This one: http://www.buzzfeed.com/christinebyrne/ipa-brined-turkey
      It's already brining now! I added garlic too! Hope you guys have a great one!

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    3. That sounds great. Brining poultry is an extra step, but a very good one to take. :)

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  16. Great post DB40, I like the bite-sized concept - but hopefully you all have something a little more substantial to enjoy for Thanksgiving!

    Occasionally I come across a term or perspective that really changes my thinking, and this spending rate concept is one of them. I had heard others mention before that you could consider debt pay down a form of savings, which I was never 100% convinced of, but when you flip it around and focus on the spending rate I think it tells a much clearer story! I think you should definitely elaborate on this one day.

    I did also get pretty excited for about half a second when thinking about applying this concept to my own finances, because so much will be going to my mortgage - but then of course realised that most of this is interest, which is well and truly 'spending' :(

    Awesome to hear about your trip away, hope you keep doing these things and make plenty of time for some fun with Mrs DB40, and hope you have a great Thanksgiving!

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    1. That point about debt payment not really seeming like savings is the crux of what I was trying to write about. Because it's not really savings...but the thing it has in common with saving is: it's not spending.

      Thanks for the well wishes, Jason, and I hope you have a great week as well. Does Australia have a form of Thanksgiving?

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    2. Unfortunately no real form of Thanksgiving here, which is a shame because my wife and I love it, along with most other things about the US. We occasionally try to do our own mini version ourselves, but unfortunately she's a little unwell at the moment, so this year will be very quiet... hopefully we'll make up for it at Christmas time :)

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    3. We had to skip Thanksgiving last year as we were in Uruguay and they had nothing we needed to put together a little dinner (and the place we were staying in didn't have an oven). We ended up up having a chicken dinner with fried potatoes at a restaurant...not exactly Thanksgiving, but close!

      Here's to Christmas, too! It's right around the corner.

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  17. I'm glad you guys had a good time in Tuscon!! I'm still going to spend on Friday, but I'm not a fan of places opening Thursday. I've worked retail before where they made me work Thanksgiving... it sucks and totally flies in the face of what the holiday is all about. I don't go early Friday am either... the "leftovers" in the afternoon/evening are pretty awesome and just fine by me!

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    1. I think it's kind of crappy to make employees work on Thanksgiving, but that seems to be the way things are going now. I figure not buying on the holiday is a small (and probably ineffective) way of telling the companies you disagree with that policy.

      And agreed with the afternoon/evening leftovers. That's the best time!

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  18. I am torn by the whole churning thing. logically i think i can do it. at the same time i guess having debt makes me churning averse at the moment. however, i just signed up for fidelity's cash-back card so i can put part of it in my Roth IRA. I guess I just need to read more and have a plan!

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    1. Hi Jason,

      I definitely wasn't clear with this in the post, but we never, ever carry a balance on our credit cards. We essentially treat them like debit cards, paying off the balance every WEEK, not even every month.

      Because credit cards charge merchants much higher rates, the rewards are far and away better than anything you'd see on a debit card, especially with recent legislation.

      The 2% Fidelity card is a great example of what I was talking about in the post. 2% back is nothing to sneeze at, certainly: if you put $800 on your card each month (and pay it off continually), you'll spend about $10k in a year and get about $200 back in cash rewards.

      But, I think you can do a lot better with other approaches (provided you want to travel).

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    2. I agree with you about the Fidelity card and we do travel quite a bit.My fear is that because I already have consumer debt that churning shouldn't be a priority right now. I think i want to pay off that debt initially and then start dipping my toe into the churner way of doing things, which I really like the idea of.....

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    3. I'd agree with that approach. If you're in the middle of paying off your consumer debt, it's best not to muddy the waters.

      For what it's worth, we didn't start until we'd paid off our student loans and credit card debt, either.

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  19. I agree with your points about travel hacking. It does take some planning, but it is definitely worth it. And good job on the Tucson trip!

    I am happy to participate in Buy Nothing Day on Friday. I need to work and had to pay for more expensive daycare that day because my regular daycare is closed =/

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    1. Bummer about the daycare, but I love that you'll be working that day. I'm sure you'll net enough to cover the daycare and come out ahead.

      I need to thank you, too, as you were the reason we did our very first travel hack: the Starwood Amex card got us 8 nights in Buenos Aires and Montevideo for free (in swanky places, too!). Thanks, Holly!

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  20. I can't believe how quickly the black friday mania has spread over here in the UK! Last year it wasn't all that bad, this year... the same scenes of raging hoardes of zombified consumers queuing at midnight and fighting each other over a flatscreen TV that is probably broken by the time they get it home after said fight! So ridiculous!

    Travel Hacking: Oh man... you guys are so lucky! We just don't have those sort of rewards over here.

    Spending rate: Totally with you on that one. Whilst you can't use the whole "years till retirement" calculation based on the spending rate until you are debt free, ultimately it is what you spend which determines the final number you need to hit, so that is definitely what you should focus on. The final number for me is really more important, and easy to focus on in terms of a tangible goal and progress made towards, rather than taking a percentage figure and then perhaps turning that into a years till retirement number, which is far more abstract.

    Cheers and hope you had a great thanksgiving! :)

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    1. FIREStarter:

      I remember seeing a Black Friday ad in Ecuador last year when I was there around Thanksgiving, and being really sad about it. Luckily, there didn't seem to be any shopping mania. Sorry to hear it's been adopted in the UK.

      I remembered hearing that travel hacking was uniquely the US's thing. Though if we're spreading our consumerism around...maybe that will make its way across the pond, too.

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  21. Three incredible relevant topics to me right now - thanks!

    1) I currently go the simple route. I have all my credit card spending on a card which rewards me avios points, which probably equates to about 1-2p per £1 spent. I need to have a look at this and try to benefit from more introductory offers, especially given that my credit score is pretty good.

    2) Good discussion. Tomorrow, we are launching the moneystepper's 2015 savings challenge (I'll be in touch shortly to try to get you involved!!) and in this we measure our "savings rate" as our goal. However "savings rate" is calculated as any money put towards savings, pensions, investments, etc AND any money that is put towards the capital part of outstanding debt. Therefore, this is effectively the same as 1-spending rate as you suggest.

    3) Success. On Friday, I went to the gym and worked. My only interaction with BlackFriday was to display my disgust at the videos of people fighting over a "deal" on a wide-screen TV in the supermarkets. Horrible stuff!

    Hope you had a great Thanksgiving weekend! Speak soon.

    Graham.

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    1. Hi Moneystepper!

      We have some British Airway Avios from a hack as well. I think we got 50,000 as a bonus for spending something like $2,500 in the first three months. So for at least the intro period, it's a pretty good ratio of dollars spent to rewards gained.

      Will look forward to the savings challenge. Agreed that others probably already have the concept in mind, just in different formats of "savings".

      Sorry to hear about the TV stuff on Black Friday. Deals make us do crazy things.

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  22. Great, succinct post! I hadn't heard of Buy Nothing today and love the concept. I'm sure the retail world would have a stroke if enough of us held out on holiday shopping one year.

    I did go out and buy things on Friday. Here in SLC, the estate sales traditionally start on Fridays and one company held out and opened up a sale despite it being black Friday, so we gladly purchased some neat items that may have very well been purchased on a black Friday in 1955.

    Hope you had a wonderful Thanksgiving!

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    1. Hi Emily! We had a fun Thanksgiving, full of carbs and board games. How was yours?

      I think you get a pass on Buy Nothing Day if you're buying cool, used items, don't you? At least there's no environmental impact then.

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  23. I might have missed the memo, but is Mrs. DbF back for good?? If so - hooray!! And so glad to hear both of you had quality time together. :) I agree about Buy Nothing Friday, and was a little disappointed to see a lot more stores open on Thanksgiving day. Where are our priorities? :(

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    1. Hi, Anna! Yes, Mrs. DB40 is back, and it is glorious.

      It's weird seeing how retail stores are basically 24x7x365 now. Nothing's sacred. I can't even blame the stores: they're meeting the consumers' demand, and thus are reactionary. We're the root cause.

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