Downsizing our Expenses

Downsizing our monthly budget has been an interesting experience. One surprise was that by moving to Hilo, Hawaii we were able to rent a great house with a view for one third the cost of a dumpy tear-down apartment in Cupertino. In the case of housing, the quality of our life has greatly improved. Another result was that as our expenses are being downsized, some expenses suddenly stick out because they become a greater percentage of our overall expenses for the month. The cost of our electricity in Hawaii, for example, has become one of our top expenses and an area we are focused on reducing. Some expenses we can only get down so far. Our health insurance, for example, we were able to cut to less than half the cost of COBRA, but the only way to get it cheaper is to give it up entirely or get a job with health coverage.

Our motivation for downsizing our expenses is the opportunities it opens to us in replacement. Replacing a $120,000 yearly run rate is a whole other matter than replacing a $60,000 yearly run rate (by run rate I mean yearly expenses after taxes). Something that pays $40 an hour could be considered, whereas in Silicon Valley it would be considered insulting. The challenge is doing it in a way that doesn’t degrade our quality of life. The process is taking us years to slowly modify our expenses and habits, but worth the additional freedom we believe we are gaining.

$100,000 has become Trivial

We watch the “Flip this House” TV shows with amusement and concern. A typical show has an inexperienced, young person remodeling a house for a month by painting the walls, adding granite countertops, replacing carpet, and netting $100,000. The house flipper uses credit to “buy” the house and their goal is to resell it before their first mortgage payment is due. If they miss, they are down the mortgage each month (cutting into their net profit) until it sells. But in these shows they usually sell the house effortlessly (unless they are losers) and come away smiling with $100,000 or more for their month of effort. These stories create a reality that $100,000 can be made effortlessly in a short time. Since there is no money down, and minimal money invested in the improvements, the only risk to the house flipper is an impact to their credit score, which they may not care about anyway.

We've slaved for every $10,000 we’ve saved over the past 30 years of employment. To us, one hundred thousand dollars is a very large amount of money. How is it that this amount of money has come to be so trivial? How did hundreds of thousands of dollars of debt come to represent just a few house flips to pay off?

Food in Hilo

Fresh food is everywhere in Hilo, from the bananas in our yard to the daily Hilo farmer's market. Even Hilo's grocery stores carry local produce. We like eating locally grown fruits and vegetables because they are fresher, usually cheaper, and support the dream of self sustainability of the Big Island. We harvested some bananas in our yard today, which is pretty cool. But our favorite place to shop is farmers market in downtown Hilo.

Local growers bring papayas, bananas, tomatoes, ginger, avocados, lettuce, sweet potatoes, oranges, lemons, garlic, onions, peppers, cucumbers, jack fruit, bread fruit, pineapple, coffee, mac nuts, rambutans, and more. Many of the tastiest fruits are not able to be transported and therefore not even available on the mainland.

Access to this food is one of our big benefits of living in Hilo.

Lowering the High Cost of Electric in Hawaii – The almighty light bulb

The easiest and quickest way to attack our electricity usage and lower our monthly bill is with energy saving light bulbs. We bought GE Energy Smart bulbs, $15 for 5 bulbs, at ACE hardware store in Hilo. On the box GE claims you can save $59 per bulb over 5 years. After further package investigation, we found that the $59 savings is calculated based on 10 cents per Kilowatt hour. We are paying 39 cents here in Hawaii. Plugging 40 cents into the calculation, our savings will be $236 over 5 years per bulb. The package of 5 bulbs would save us $1180 over five years. Talk about a deal - $15 outlay for an $1180 return. If only our investments did that well.

We replaced our 60 watt light bulbs with 26 watt bulbs, each with the light equivalency of a 100 watt regular bulb. We were also able to remove the black heat arresters from the track lights due to the lower wattage and get additional light in our very dark living room. So in addition to the savings mentioned above, we have a great deal more light.
One more step towards reducing our monthly bills.

Lowering The Cost of Electric in Hawaii

One of our biggest monthly expenses here in Hilo is electric. Everything in our rental house is electric, as are most houses in Hilo, since gas is not widely available. The cost of electric is higher than the mainland because electricity is generated from diesel shipped long distances, not from locally produced natural gas or coal.

When we lived in an apartment in Cupertino last year, we used approximately 464 Kilowatt hours of electricity each month. Our usage was low due to gas appliances and heat. California’s PG&E electric charges increase based on usage; the first 378 Kilowatt hours (KWH) were 11 cents in 2007, the next charge level was 13 cents and so forth. Our monthly cost for electric in Cupertino was around $55 (that didn’t include our $40 monthly gas charge).

Here in all-electric Hilo, though we don’t have AC or heat, our stove, hot water heater, and washer/dryer are electric, and we run fans continuously, as well as computers and lights. Having all electric appliances has almost doubled our monthly usage to 895 Kilowatt hours. That in combination with HELCO's (Hawaii Electric Light Co.) 39 cent per Kilowatt hour has made our $350 electric bill one of our highest monthly bills. We assume the rising costs of oil will swiftly raise that rate to even higher levels.

Reducing our Kilowatt hours per month is the latest focus of our monthly expense downsizing effort. Our approach is to determine the kilowatt usage of each electrical device to identify the worst offenders and then determine if there is a way to switch them out or switch them off. Stay tuned.

Daily Walks in Hilo, Hawaii

One of the perks of living in the Hawaiian islands is the incredible weather allowing us to spend a lot of time outdoors. Every afternoon (unless there is torrential rain), we drive down to Banyon drive and park at the Liliuokalani Gardens for our daily walk. The 34 acre Japanese ornamental gardens are named for Queen Liliuokalani, a Hawaiian monarch, and dedicated to the many Japanese immigrants living in Hilo. The garden was created in the early 1900's and is said to be the largest Edo style garden outside of Japan.

The garden is planned around the Waihonu Pond with bridges, pagodas, and stone lanterns lining walking paths. Trees, flowering bushes, bamboo glades, and acres of green grass fill the park.

A traditional tea house stands in the middle of the park, used by visitors and Japanese living in Hilo.

Every day the park is different; some days bright and sunny, other days there is warm rain and sometimes rainbows hang in the sky. In my opinion, this park is one of the most beautiful places on earth and after I walk through it I come away feeling happiness and peace.

Here is a detailed photo log of our daily walk in the Liliuokalani gardens.

Doing a Startup in Hilo, Hawaii

If you are thinking about doing a startup, consider Hawaii, in particular, Hilo, Hawaii.

The State of Hawaii supports new businesses with great tax incentives and several organizations in Hilo are dedicated to supporting startups.

The Hawaii Innovation Center at Hilo is an 8000-square foot facility owned by the University of Hawaii at Hilo and operated in partnership with the High Technology Development Corporation. The facility is a small business incubator with office space, a shared conference room, janitorial services, and copy machine and offers startups a combination of subsidized facility rates and business support services.

The Hawaii Small Business Development Center is also located in Hilo. They run seminars on starting a small business in Hawaii and provide help on getting SBIR grants.

The Hawaii Venture Capital Association actively supports entrepreneurs in Hawaii by creating opportunities for networking, providing information and organizing support for state legislation regarding businesses. The Hawaii Angels is group of high net worth individuals that coach and support startups in Hawaii. There are several VC's in California and Utah that target companies in Hawaii to fund.

Hilo has a lot of advantages for a new business. It has a shipping port which is close to Asia and the west coast of North Amercia, an international airport, and trucking facilities for getting products to all parts of the island. A 31 acre parcel adjacent to the Hilo airport, zoned for commercial and light industrial uses, is designated as a Foreign Trade Zone 9 allowing small businesses to avoid customs if the product is not sold in the US and numerous other advantages for product assembly and packaging with parts from other countries. The zoning was approved in 1992 but has yet to be used by any company. Hilo also has high speed internet, computer repair stores, office supply stores, an excellent University, and a large work force near town. Hawaii has the benefit of not having severe monetary problems and is very focused on green energy and self sustainability. Its locality in the middle of the Pacific Ocean makes Asia as important to its sustainability as North Amercia creating unique market share opportunities.

And the final plug for Hilo is that it is located in paradise.

There are business resource links at Making an Income in Hilo.

Cost of Living in Hilo, Hawaii

Since we have been in Hilo 3 months now, we are focusing on how to further downsize our cost of living. We created a budget before moving to Hilo based on living here for a month last year. We learned a lot about rents, neighborhoods, food shopping, gasoline and stuff like that. But a lot of our budget was speculation based on our optimistic estimates of health care costs, insurance, auto costs, entertainment, etc. The good thing for us, is coming from Northern California everything in Hilo is way cheaper.

A budget is a great planning tool, but achieving it is another matter. Just moving to Hilo has resulted in immediate improvements in our quality of life while at the same time downsizing our monthly expenses. We rented a 3 bedroom house with a garage and incredible view of Hilo Bay for less than 1/3 of the rent we paid for an old (1960's) 3 bedroom, upstairs apartment in Cupertino wedged between 280 and 85. The foods we like are much cheaper in Hilo as well. For example, we paid $5 for one organic Hawaiian papaya at Whole Foods in Cupertino; in Hilo a $1 gets you 6 Hawaiian papayas (since they are grown here in neaby Puna). Fresh line caught fish and Big Island grass fed beef are other examples of foods that are really expensive in California versus Hilo where they are caught and raised (see Healthy Hilo for more).

Our latest cost reduction victory is health insurance. We urgently needed to get off of COBRA which is outrageously expensive for a family and mostly useless to us in Hawaii. Having any interruption in health insurance is a huge ding against you when trying to get new health care insurance, so as appealing as it sounded, we couldn't just ditch COBRA. There are really only two choices for health plan insurance on the Big Island: HSMA and Kaiser. HSMA is Blue Cross/Blue Shield for Hawaii, and although expensive, it seems to be the popular choice for local businesses. There is a shortage of health professionals on the Big Island and some urgent care facilites don't accept Blue Cross/Blue Shield so its usability is a question. We investigated just getting HSMA's more affordable catastrophic insurance but it has Hawaii residency requirements which we don't meet. Kaiser on the other hand has its own care facilities and hospitals in Hawaii guaranteeing that some health professional will actually see you if you are desperate enough. The monthly costs for Kaiser's family coverage are less than half the cost of COBRA. Yet another step toward reducing our cost of living.

Astronomy in Hilo, Hawaii

Today is a beautiful day in Hilo. The sulfur dioxide gas being spewed from our nearby Volcano is being dispersed by the trade winds which have finally come back. Mauna Kea was perfectly clear today, covered in a blanket of snow. At the top you can see a glint of metal from telescopes on the summit.

The 13,796 foot summit of Mauna Kea is the most popular spot for optical telescopes on earth because of its incredible clear skies. This UH Astronomy website has an overview photo of the scopes on the summit, managed by countries from all over the world. The weather this winter has not been favorable for the telescopes, the massive amount of snow and ice has made it difficult to open their dome shutters and windows to view the sky. Here is the JAC CAM showing how rough the conditions are up there now.

The observatories are managed in Hilo and nearby Waimea. The impact of their presence has resulted in the entire island changing out street lights to be telescope friendly , having a very active astronomy department at UH Hilo and the creation of the 'Imiloa Astronomy Center in Hilo with the world's only 3D planetarium and an incredible array of exhibits. We recently spent a morning at 'Imiloa and drove Astronomy Row in Hilo where most of the observatory management buildings are located that house the astronomers and engineers that maintain the telescopes.

Having activities, visiting scientist lectures and events about astronomy combined with fairly regular annoucements of new findings by the astronomy teams adds a special dimension to living in Hilo, Hawai'i.

Hawaii Volcano Activity

Kilauea Volcano is really acting up right now. There aren't a lot of updates for us here in Hilo. Since the Volcanoes National Park visitor alert for hazardous fumes on 2/8 we have only had cryptic daily updates from the USGS which mentions that the sulfur dioxide concentrations at the summit are increasing and the Pu'u 'O'o vent is dangerous. The CAM of the Pu'u O'o vent today showed near zero visibility presumably due to the gases and ash being spewed. The Big Island earthquake activity has picked up as well. And finally, there is some fairly significant activity with the Tiltmeter for the northwest rim of Kilauea's caldera and the Pu'u 'O'o cone on the northwest flank of the active vent.
In Hilo today, we are finding our throats sore and near the mall is smells like rotten eggs. All these signs may point to an impending eruption.
www.hiloliving.com