Beyond Paycheck to Paycheck

at May 18, 2009 in Carnivals, Cash Flow, Debt management, Investing, Media, Ranting, Retirement, Saving Strategies, Tax and Uncategorized. 3 Comments

One of the best parts of the weekly personal finance carnivals, including this week’s carnival hosted by WiseBread, it the wide variety of personal finance topics covered. In addition, I always take the time to enjoy an article or two that I’ve been meaning to write myself but just haven’t gotten to. This week was no exception, even if my post about The New Frugality made the cut. Here are my three favorites of the week:

J. Money from Budgets Are Sexy presents Paying extra towards your loans now, goes a long way later! This is so true it hurts. How much pain? As J. Money says, “It’s like kickin’ compound interest in its head and getting away with it :)” How could you not enjoy?

Another favorite: Save Money By Buying the “Good” Toilet Paper by That One Caveman. Two very important lessons from this title. First, you can never go wrong putting “toilet paper” in a blog posting title, something I learned a while back when I wrote Toilet Paper As an Economic Indicator last fall - still is a bizarre way to look at the world. Second, sometimes paying for quality is actually cheaper than paying for quantity. (Amazingly, this was also the theme of the toast my brother gave for my wife and I at our wedding, but that’s another story for another day.)

Money Lessons from Monopoly is another wonderful article. Free Money Finance reminds us that Monopoly is a great teacher not only of the importance of cash-flow (how much fun is it to mortgage our properties?) but also of luck (the frustration of your opponent consistently missing your hotels as he marches around the board).

Quick FYI: The Total Candor web site was featured in the Philadelphia Inquirer over the weekend for savings help. Did you see it? If not, see it now.

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America’s increasingly frugal habits

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at May 15, 2009 in Balance and Cash Flow. 4 Comments

A recent Time magazine cover story, Thrift Nation, demonstrates “The New Frugality” of Americans. Nearly everyone will recognize someone familiar, be it an ER doctor, a blackjack dealer, an autoworker, restaurant owner, or the unemployed; each is profiled in this thought-provoking piece that attempts to demonstrate how truly broad the impact is of our current recession.

Here are some of the statistics from the story I found most interesting:

Although people are spending 27% less on health clubs, they are spending 29% more time exercising.

Could it be that unemployed people workout more? Let’s hope that’s only one part of the equation. I know that the more I have to do, the more I get done and have often found the opposite to be true.

Less than 40% of Americans think the economy will start to recover within one year.

That’s uncharacteristically negative for the typically overly optimistic (financially-speaking) American. I love to play the contrarian, so I might be more aggressive simply in response to this survey. Clearly, no one knows when this ship will turn around. That includes me and the 60% who say more than one year. Still, if I were a betting man, I’d say we’ll at least see the beginning of a turnaround before another year is out. Heck, the WSJ reported that Fed Chairman Ben Bernanke last Tuesday said that the U.S. recession appears to be losing steam, with growth likely to resume later this year on the back of firmer household spending, a bottoming housing market and an end to inventory liquidation.

36% of people are spending less on newspapers and magazines.

Okay, c’mon. As shocking of a statistic as that is, how much of it is due to the economy vs. what’s going on in that industry due to the enormous technological shift in the way we receive media (i.e., free via the web)?

What do you think of the new frugality? Is it real in your life? Is it temporary or will it be long-lasting?

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12 Things Every Teenager Needs To Know About Money (And How To Teach Them)

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at April 15, 2009 in Cash Flow, Debt management, General Financial Planning, Guest Posts and Investing. 3 Comments

This is a guest post from Grant Baldwin, the author of Reality Check, a book about helping students transition into the real world. His new website, BrokePiggy.com, answers questions from teenagers about personal finance, savings, and all things money.

This series “12 Things Every Teenager Needs To Know About Money (And How To Teach Them)” is a community blog experience. This post is only one of the 12 points in the series so to view the other 11, please visit the list of links below.

Living On A Budget Isn’t An Option

Ah, it’s time to discuss the dreaded ‘B’ word. Not that ‘B’ word you filthy animal…get your head out of the gutter!

In order to be successful with money, you really need to have a budget. It becomes a roadmap to guide your decision-making and your spending habits with your finances.

But I’m sure like most people, you and your teenager probably aren’t math nerds who stay up late into the night coming up with new ways to solve expert-level Sudoku puzzles.

I don’t do that either just so you know!

But whether you’re a math whiz or you still count on your fingers and toes, you need a budget. Most teenagers are more like free spirits who prefer not to live in the confines of a budget (I wonder if they learned that from their parents…hmmm…I’m just saying). So how do you teach a teenager to budget? Let me help young grasshopper…

· Start Now With What You Got – Budgets aren’t just for millionaires or people who make over minimum wage. Budgets are for anybody and everybody who has ever had a dollar (that would be all of us in case you missed it!). Same with the concept of giving, if you don’t budget when you make $100 per week, you’ll never budget when you make $10,000 per week (don’t forget about me when you do). I know expenses are limited and income is small, but establish that habit now to make a budget.

· Do It On Paper – I like gadgets and gizmos. And oddly enough, I kind of like spreadsheets. Spreadsheets are great for creating budgets, but don’t start off there. Start with good ole’ fashioned pencil and paper. Why? Something changes when you have to do the math by hand and see where your money is going. It forces you to really think it all through and make better decisions with your finances.

· Use The Envelope System – If you’re unfamiliar with this idea, basically the concept is to pay for as much as possible with cash. After you’ve helped your teenager to establish their budget, find categories that can be paid for in cash. Things like gas, eating out, movies, etc. Make an envelope for each of those categories and put the budgeted amount of cash in each. Then pay for items from their respected categories out of these envelopes. Paying with cash is tougher than swiping a piece of plastic and will also help your child to better manage their money, because when that envelope is empty, their spending is done.
Here are the rest of the articles in the “12 Things Every Teenager Needs To Know About Money (And How To Teach Them)” series:

Money Doesn’t Grow On Trees @ Bargaineering.com
Two Words: Compound Interest @ PoorerThanYou.com
Delay Gratification To Succeed @ GatherLittleByLittle.com
Credit Cards Will Steal Your Lunch Money @ PTMoney.com
Should You Earn A College Degree @ TheDigeratiLife.com
Spend Money Based On Needs Not Wants @ MoneyNing.com
There Is More Free Money Than You Realize For College @ FreeFromBroke.com
Taxes Are A Necessary Evil In Life @ MoneySmartLife.com
Do What You Love, Love What You Do @ GenXFinance.com
Don’t Be A Tightwad: Give Generously @ CashMoneyLife.com

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On the Geithner resignation

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at April 1, 2009 in Cash Flow and Saving Strategies. 0 Comments

April fools. Did I get you?

Today’s topic is:

Spending less on technology

Until recently, upgrading your computer every two or three years was a virtual necessity. Now, many people have learned that the PCs of a few years ago can be made into practically new machines by adding memory and hard-drive space. Furthermore, the total cost to do is often less than $200. (As a sidenote, my 3.5 year old Mac iBookG4 doesn’t appear to have such improvement opportunities and is moving slower and slower - if you have ideas to improve it’s performance, I’d love to hear from you)!

Back to the issue at hand. In 2004, after about five years of solid performance, I finally dumped my grad school Dell Latitude laptop. It had been a solid performer - worked great for about five years until someone (an individual who looked like me and had my initials) accidentally spilled a teaspoon’s worth of water on it. Turns out the water limit for that machine was zero.

Crazy to think of now, but I had paid over $2,500 in 1998 for that machine (Imagine spending that kind of money on a computer today! I believe machines that cost $3K can launch missiles.)

When I began the shopping process in 2004, I was told about Dell Outlet, which saved me about 30%. Yesterday, I saw How to Save $7,500 on Your Technology Purchases It got my attention. I hope it gets yours. Why pay more for the same?

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Friday Frenzy: Twitter, saving money on a phone bill, girl scout cookies, and the credit markets

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at March 27, 2009 in Cash Flow, Ranting and Saving Strategies. 0 Comments

After a bunch of requests, I finally got my act together and I’m now on Twitter. So, as the saying goes, feel free to follow me on twitter. I have many ideas for using this (relatively) new medium (to me) some of which I think are going to be fun, so hop on over there.

My brother, ever the negotiator, forwarded me a how-to guide to saving money on your cell phone bill.

Like I’ve said before, the dread of such tasks can easily exceed the reality of the undertaking. For the woman in this example, her efforts were worth over $500/hour. Better yet, her total time invested: 12 minutes. Most of us will dwell making the call for far longer than the actual call will take. But even if you do, you have no chance to save money until you pick up that phone. Your hourly earnings are zero dollars per hour. So: no more dwelling! Start doing and you’ll begin saving month after month on those recurring minor expenses, key current users of your precious cash-flow.

On a completely unrelated note and as I posted on twitter yesterday,

If the girl scouts can sell cookies to every American during a recession, why don’t we see if they can get the credit markets moving?

I welcome your thoughts on all of these topics. Have a great weekend.

"financial education"

Extended Warranties - Are in-store warranties a good idea?

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at March 20, 2009 in Cash Flow and General Financial Planning. 0 Comments

You: Are in-store extended warranties a good idea?

No.

You: Why not? They seem pretty cheap and they extend the warranty significantly.

Actually, they’re fairly costly and they don’t do much.

You: That’s not what they told me in the store.

I know.

You: So what’s going on?

Good question. Regardless of how an in-store warranty on a new television, printer, or other gadget is presented, you ultimately face a question about your risk tolerance.

You: My risk tolerance?

Yes. At a very high level, your risk tolerance is how you feel about subjecting yourself to the possible loss of money. So, in the case of an in-store warranty, you are presented an option of insuring yourself against a possible future dollar loss later due to the damage or breakage of the item you purchase. But to get this protection, you voluntarily choose to pay an additional cost today (the cost of the warranty).

If you’re more of a “Nervous Nelly” type, you’ll probably highly value the security of the additional coverage and minimize the cost of that protection. Those who are the “All in” types are likely to conclude the exact opposite.

You: What’s the right answer?

While that ultimately depends on your risk tolerance, I believe the overwhelming majority of in-store extended warranties are bad purchases.

You: Why?

First, these warranties are often eagerly sold, and anything that is that eagerly sold should raise a caution. Second, these warranties are among the most highly profitable items for sale at the retailer. They’re so profitable because there is so little cost to them.

You: Little cost to the warranty?

When all is said and done, the retailer selling the warranty has to pay out very little in claims. This is due to the numerous exclusions, the existence of a manufacturer’s warranty, people forgetting they have purchased the extended warranty in the first place and, of course, the realization by many customers two years from now that they don’t feel like paying to pack up and ship a 2 year old printer to some fulfillment center when a new one, which is much better than the one the one that just broke, cost just a few bucks more.

So, in general, I’d say pass on extended or in-store warranties. For more information on in-store warranties, check out one financial journalist’s experience when he was presented the option of an extended warranty for his cell phone.

What do you think about in-store warranties? Have you ever bought one? DId it pay off? Other thoughts on the matter?

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Quicken podcasts are available, Carnival too

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at March 4, 2009 in Cash Flow, Debt management, Investing and Media. 0 Comments

I recently recorded a second series of podcasts with the Quicken team. Topics included:

You can also listen to them on itunes by searching for Quicken. Or download them and listen to them later, like when you’re not supposed to be working.

Always welcome your feedback for new topic suggestions or anything else you have to say.

Free Money Finance hosted this week’s Carnival of Personal Finance featuring my post Economic Stimulus - What’s in it for me? where I answer the question “Is the new stimulus a big deal for you?”

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Using points or miles vs. paying cash

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at March 2, 2009 in Cash Flow. 1 Comment

I’m on vacation.

You: Well I’m not.

Are you upset?

You: Not at you. Just wish I had more vacation time.

What would you do with it?

You: Go somewhere.

Where?

You: Don’t know.

Would you use points, miles, or pay cash?

You: Never sure what the right thing to do is. Hey, how do you evaluate it?

Personally, I try to make sure that I get maximum (or at least not minimum) value from my points.

You: So what did you do for this trip?

I paid for the airfare and used points for the hotel.

You: Why?

I was all set to use points for the airfare. The cost was to be 35,000 miles per ticket. Then I checked the cost to pay cash and saw that by moving the trip up by a day, the price was about $250 per ticket. In my mind, getting less than one cent per mile was poor value for all those late nights flying around the country earning the miles. So I passed on the free ticket.

Still, I admit that I occasionally wonder if this airline will one day just completely disappear and take my miles with them. But so far, I haven’t lost any sleep. Or any miles.

You: What about the hotel?

The hotel was a different story. First, I have so many hotel points that I just don’t value each one quite as highly as I do the miles. Second, there are always great deals with hotel points for their higher tier (those who travel frequently) customers. So I get more bang from my hotel points in comparison to my perceived cost of acquisition (sleeping at night seems so much easier than connecting at O’Hare) so I use my hotel points more liberally.

# # #

Agree with my approach? Not so much? How do you decide when to pay for something vs. when to use points? Do you do math or simply take the free whenever it is available?

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Working smarter - not harder - for money

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at February 24, 2009 in Carnivals and Cash Flow. 3 Comments

I frequently offer an opportunity for my seminar audience members to receive $35 by participating in a 30 minute focus group to occur immediately after the presentation. I’ve always found it oddly humorous that almost every hand goes up to volunteer when I make the announcement. When I subsequently reveal that the focus group (and the $35 is only a hypothetical demonstration) to groans and smiles, I know my point is made.

You: What point is that?

Few people are willing to take just 10 minutes on the phone to call their cell phone, credit card, or cable companies to see what savings they might be able to achieve. Often, these savings are on recurring monthly charges that far exceed the one-time $35 folks could make by spending 30 minutes of their free time with me.

Think about it.

Have you ever volunteered to work overtime just for the extra money?

You: Why else would I work overtime?

Fair enough. Figure out how much you actually made after taxes from that additional hour. Compare it to the savings you might get by shopping around for gym memberships or reviewing your credit card statements for other monthly charges. Are there places you’re spending more money than necessary? It won’t take nearly an hour or your time to do this exercise and the savings are yours, often monthly, and are received after tax.

I was reminded of all this as I read through this week’s Carnival of Personal Finance hosted by Broke Grad Student and read Happy Rock’s post Removing Finance Charges From My Chase Freedom Credit Card, a quick story about the notable dread (which I share) about making such phone calls. It’s well worth the effort (in his case $26 for a few minutes of “work”), but the anticipation stops many people short

Don’t be one of them.

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Do you know Bill Creep?

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at January 29, 2009 in Cash Flow and Saving Strategies. 0 Comments

There was a pretty good article in yesterday’s WSJ called In the Fight Against Bill Creep, Every Extra Fee Is the Enemy. You’ve probably heard me talk before about the importance of the recurring minor. While I don’t believe every financial problem can be solved by destroying coffee shops (Your problem isn’t Starbucks.) I passionately believe people spend a ton of money on automatic expenses that don’t make sense.

You: Why do people do that?

Often, the expense made sense at the time they made the decision. But their situations have changed. You move, you have a kid, get a new job, enter or leave a serious relationship. For whatever reason, your gym, Netflix, cell phone, and cable bills no longer reflect your true needs. In the interim, you’ve probably added services to reflect what you need now.

# # #

Isn’t it interesting how we’re really quick at adding features we need (and paying the corresponding fees) but kind of slow to remove them when they’re no longer relevant. What expenses have you removed that you should have killed months earlier? What’s still on your to-cut list? How’s your Bill Creep?