“Pay on the installment plan. Don’t pay now; pay later. Five easy payments of $39.95.”
When businesses offer to split up the payments in a large purchase, it usually brings them more business. If the pain of buying (the cost) is lower, or appears to be lower, more people will buy.
Businesses, of course, don’t offer this out of the kindness of their hearts. They want extra money. Paying through installments almost always costs more — either through payment fees, or through interest.
Most installment loans are expensive
My wife and I haven’t gone into many retail furniture stores together, but I remember one visit in particular. Within twenty seconds of entering the store, we were greeted by a salesman who told us about the specials going on.
I don’t remember the brand, or even the amount, but I do remember that he quoted the amount per month. We didn’t spend a whole lot more time in there after he did that.
Most consumer loans are either (a) expensive, or (b) 0% for some period of time but get really expensive if you miss a payment. The low payment, or the low payment and the promise of low interest, are there to get you to seal the deal. And they must work, or businesses wouldn’t continue to offer installment plans.
There are costs to paying in full, though!
The expense of most installment loans can’t be ignored, but, as always, there is the other side of the coin to consider.
Paying cash, on the whole, is often wiser than paying in installments.
But is it always wiser? It’s certainly not unwise to pay when you owe people as soon as you’re able. Of course not. I would argue, though, that it’s not always beneficial to pay the whole amount of something up front.
There are a few main costs to paying cash (or cash equivalent) in full:
- More constrained cash flow. Paying $10,000 cash for a car ends up costing less than borrowing the same amount at 6% for 48 months. Nearly $1,300 less. All well and good, but now you’re out $10,000, instead of out only $234.85, which is the first month’s payment. If you had $65,000 in the bank before making this purchase, it’s a no-brainer. Lots of cash left. But if you had only $12,000? Probably a bit risky, because your reserves are way down now.
- Opportunity cost. Paying $10,000 cash for a car means that, although you own the car free and clear, you no longer own the $10,000. Is that a problem? It is if you had another use for a large chunk of that money.
- Lost earnings on that money. In today’s environment that’s utterly punishing to savers — 0.25%? Anyone? Anyone? — this admittedly is a minor consideration for most people. At some point, though, the interest rate on the loan gets low enough that there may be an investment out there that beats it. In that case, it doesn’t make a whole lot of sense not to take the loan!
Two times you should pay in installments
This isn’t going to be an earth-shattering list. (Heck, is it even considered a proper list if it has just two items?) But these are the times I recommend paying in installments instead of all at once:
- When there is no cost savings for paying in full. Or, when there is no extra cost for paying in installments. If you don’t get some kind of break for paying in full, why do it? Our county’s real estate taxes and personal property taxes are billed twice a year for precisely half of the total tax each time. Paying it all in full just means that we’re out the second half six months ahead of time, with no benefit to us.
- When the cost of the installments is acceptable in a reasonably thought-out context. I’m such a weasel, I know. But there could be any number of reasons why you’d pay in installments, even though it costs more. Maybe things are going downhill fast for aging parents, and you’ll need more cushion for the next year. Or maybe you can cash in on a teaser rate that makes the cost of the installments barely noticeable. But whatever the reason, if you’ve looked at the numbers, and understand the costs, then who am I (or anyone else) to judge?
In lots of cases, especially in high-cost-of-living areas, having a family with both parents working is a necessity.
But along with the extra income come extra stress, financial and otherwise. On the financial side, there is child care, and a host of other services that get done what needs getting done. On the non-financial side, it’s just more hectic: more fitting in errands, more eating out or fast food, more running around.
My wife of twelve years has been stay-at-home for the entire time we’ve been married. A couple of nights ago she forwarded this article and asked me what I thought about it. I encourage you to check it out. The premise that I took away was not only should stay-at-home spouses not feel guilty for being stay-at-home, they should recognize that their staying at home is a gift for the working spouse.
In other words, my wife’s staying at home is a gift to me.
All of those loose ends
When I went to talk with my wife about this, I didn’t know what the deal was going to be. I didn’t assume that she had a hidden agenda for sharing it with me, but I still asked.
No, there was no hidden agenda. She just thought that I could get a post out of it. (Indeed I could!)
I completely agree with the article. I see what a gift it is every day to have my wife at home. (Actually, it’s three times that gift, because her parents live with us as well, and they’re similarly unencumbered.)
Many days, I know she’s working harder than I am.
I admit that I didn’t agree as enthusiastically during the first part of our marriage, but that was my failing, not hers. In many ways, it was good never to have gotten used to living on two incomes.
Having someone available to take care of the gazillion loose ends of life is a gift. Things like:
- Grocery shopping and other errands. This takes time, of course, and it’s probably better that one person do it rather than both, because bad things can happen.
- House stuff. All kinds of house stuff: cleaning, repairs, yard work, gardening, painting, raising chickens. (My wife is far handier than I.)
- Holding down the fort. If the cable company makes an appointment to stop by during one of its two incredibly-convenient-for-them blocks — “sometime between 8 and 12″ or “sometime between 12:30 and 5″ — she can be there.
- Homeschooling. With all of the utter nonsense and horror stories I hear surrounding the public school system — not the least of which is common core — I am so thankful that we are able to homeschool. Hooray for homeschooling!
- General frugality. I can see how dual-income families would tend to spend on convenience. A day at work is tiring. Throw a commute on top of that (not my commute, but a longer one) and I’d be downright whipped. Having the energy during the day to make meals, make clothes, etc., is much more in the cards. The little money-saving things add up.
As the working spouse, these things listed above are largely off my plate. And that is a huge gift. It’s not that I can’t participate, but I know that they’ll get done, and not under extreme duress.
If you’re in the same situation (able to have one spouse at home) what other gifts does this bring to the table for you?
Today I had the pleasure of paying a visit to the dentist to have him look at a tooth that failed last night. These kinds of visits will be regular occurrences for the rest of my life, because I’m a dental cripple.
The dental office graciously made room in their schedule for me, and built up the tooth in preparation for having a crown put on. Since my appointment was short-notice, it took a bit longer to get in and out than if I had scheduled it a few weeks in advance. When they called me this morning, they asked me to be patient as they fit me in, so I knew going in that it would take a bit. Overall, though, they really did bend over backwards (and have for years!)
Networks come and go
Because of my dental crippleness (crippletude? cripplacity?) we have elected supplemental dental insurance through my workplace. It usually takes supplemental insurance to get cost breaks on anything more costly than cleanings, sealants, and fillings.
And I now make it a point to verify that the dentist not only accepts my supplemental dental insurance, but also that they’re in-network. I learned the hard way that not asking both of these questions can be very costly, because a dentist can accept the insurance, but not be in-network. Translation: expensive stuff isn’t covered at all.
When I asked today if they’d be continuing to be in-network with our current insurance next year, they said no. Then they gave me a list of the ones which would be in-network. We’ll go through this list soon, because open season for our medical and dental plans is coming up.
Checklist for evaluating your coverage
Here are a few things that it will pay to consider if you’re now able to make changes to your coverages:
- Ask the provider which networks they’ll be in next year. This is to evaluate whether you’ll need to change insurance, change providers, or change both. Or, you may be able to keep things just as they are, as we have for the past few years. Plan to ask a few months before the end of the year.
- Ask again just prior to making the election. Things change, and you wouldn’t want to make a decision based on outdated information.
- Discuss the current arrangement with your spouse (if applicable). This decision is just like any other joint money decision. A while back I requested of my wife that she and our daughter go to the same dentist I was going to, because their visits were covered more than at the dentist they had been going to (who was nearby). If changes need to be made, then discussing as a couple leads to a good solution for everyone.
- Review the options available. Specifically with regard to covered expenses, and providers.
- Make the election in plenty of time. I (foolishly) waited until the last minute a couple of years ago, and by all accounts should have missed the deadline. Not again.
With a few specific questions and a small amount of planning, you can make sure that you’re getting your money’s worth from your medical and dental coverage.
The post Will your medical and dental providers be in-network next year? appeared first on Mighty Bargain Hunter.
At FinCon14, I handed out a lot of business cards. Over and over again I spoke about what Mighty Bargain Hunter is about.
Eventually, my bumper sticker came down to this: Good Deals in Context.
This site is more than just a few more percent off at Kohl’s (check rebate). (Though that’s not a bad thing, is it?)
It’s about all of the bargains and trades we make in life, from big to small.
Self-improvement is a wise bargain to make …
A bit over a year ago, our county got a Toastmasters Club for the first time in a couple of decades. I was one of the charter members of the new club. Toastmasters does require a large time commitment, but financially it’s one of the biggest public speaking and leadership bargains out there; the monthly dues are about the cost of a pizza.
Initially, the club meetings were on a night that I didn’t have something else going on regularly. Things went well for a while, but then membership started to flag. We moved our location, and also had a harsh (for us) winter that led us to cancel three meetings during the first part of this year.
In a move to attract more people, we changed the meeting night from Wednesday to Thursday. I have a weekly commitment Thursday nights (praise team practice at church), but the Toastmasters meeting ended in time for me to get to that rehearsal. It made for a long Thursday, but it was workable. I told the rest of the officers that I had to leave the meeting immediately at the end, and they were fine with this.
… but not at the expense of your passion
This time change didn’t help as much as we had thought it would, so the officers of the club decided to move the meeting time back an hour. Now, I had to make a hard decision, but in the end I knew that it was the correct one to make. I wrote the officers an email that started like this:
I think moving the meeting time back will open new doors and will work for more people, as well as attract more new members.
However, I personally cannot do later than 6:30 on Thursdays. This is the time praise team practice starts up [...]
As much as I want to improve my public speaking and leadership, my involvement in music is more important.
That’s where my passion lies.
It’s often said that if you want to get something done, ask a busy person. But, maybe it’s taken me longer than others to realize that I can’t be all things to all people. Nor do I have the time to contribute 100% to every organization that I’d like to.
We all have to pick and choose, and we all have to learn to say “no.”
If an activity is taking time away from your passion, cut it out.
Frugality, by definition, deals with the economical uses of resources. This includes not only money, but also time, and anything else that can be consumed or used.
Closely related to being careful with how we use our time, we also need to be careful with how we use our attention. We have evermore bright-and-shinys competing for our eyeballs and our process cycles, and we’re expected by society to keep on top of things. One task, one project, one relationship blurs into another, and we get to make sense out of the blur.
Close calls because of divided attention
A good friend shared this post by Jennifer Meer of ScaryMommy.com on distracted living. With her husband on travel, she was holding the family together (no doubt very well, as mommies have a knack of doing). In the course of bathing her four-year-old daughter, she leaves the bathroom to tend to one of her other children, and responds to an email.
She returns two minutes later to find her daughter asleep in the tub. Her daughter was all right, but she herself was a wreck after that.
After reading this, my reaction was that the mom was being a bit hard on herself, and that her daughter would have been fine. My thinking was that a typical four-year-old would have plenty of strength to pull themselves up after their brain reflexively and soundly woke them up after they tried to breathe in water.
But Google proved me wrong. Bathtub drownings at this age happen all the time.
Yeah, it was a close call.
Multitasking shortchanges us
This kind of distraction can have tragic consequences. Some distractions only take a few seconds to have tragic consequences: texting while driving. I know first-hand that it only takes that length of time to blow through a red light and T-bone a minivan. Close calls are a miserable way to learn a lesson, but they’re effective, for sure.
There are other less-tragic ways that splitting our attention shortchanges us:
- Job performance. This kind of split attention may be out of our control, or required for the job, but frequent context switching (going from one task to an entirely different task) results in inefficiency. And there’s evidence that multitasking decreases efficiency as well.
- Relationships. Do you know people who, although they’re not speaking while you’re speaking to them, aren’t really listening to you? Either they’re checking their phone, or watching TV, or formulating what they’re going to say in witty response to you. They’re splitting their attention. And fairly or not, this affects the relationship with this person. Even if the other person isn’t completely tuning you out, they appear to be partially tuning you out, and that appearance can be enough to affect the relationship. As I mentioned before, since my daughter responds to quality time, she will be especially tuned to when I’m not paying full attention to her.
- Calling. This is the one I struggle the most with personally. There are no shortage of good ideas, but there is a shortage of time to implement them. Trying to do too many at once will shortchange the impact I, or anyone else, will have in the short lifetime that we’re all given. Matthew Paulson, former personal finance blogger turned entrepreneur and angel investor, and author of 40 Rules for Internet Business Success, has a number of profitable businesses, but he built them one at a time, not all at once. I think this is why some of my blogging contemporaries sold for beaucoup bucks, while I didn’t. They concentrated their attention on that one blog, and it paid off.
What other areas of life is it especially important to be frugal with your attention?
This past weekend at FinCon14 was a loooong-overdue reunion with the money media community. Great times, great talks, great eats … and great music!
One of the very first people who greeted me at FinCon14 this past weekend was Crystal from Budgeting In The Fun Stuff. She was sporting some spunky blue highlights and was every bit as friendly and gregarious as I remember her from three years ago.
After a small bit of chat she told me about her travel from Texas with Megabus.
Looks great for relatively nearby travel
At the time I was talking with her, I failed to remember that Louisiana actually borders Texas, so her six-hour bus ride was from a neighboring state.
She describes her experience with Megabus here. She had great things to say. One way, it cost her all of … $9.75. Had she not upgraded her seat and paid for text message updates, it would have cost her only $1! This is ridiculously cheap bus travel. My jaw dropped when she told me that, because I paid, well, about 160 times that for half of my round-trip airplane ticket.
I looked at the routes that were available from my neck of the woods. From Washington DC, I can get as far north as Toronto, or as far south as Atlanta, GA.
As far as restrictions go, Megabus allows one piece of luggage with dimensions up to 62 inches to be stowed in the compartments on the side of the bus. Want more? Buy another ticket.
Crystal had to work a bit to get her ridiculously-cheap ticket. They sold the last tickets for a song in an effort to fill up the bus, but she logged in often to try to catch one of them. But even the regular prices aren’t horrendous, and the ride sounded more comfortable than a coach or maybe even a first-class plane ride.
Maybe if FinCon15 ends up being on the East Coast, I’ll give MegaBus a shot!
The post Ridiculously cheap bus travel from select locations appeared first on Mighty Bargain Hunter.
With just about anything, the more you do it, the better you get at it. Consistent, deliberate practice has a way of wringing out inefficiencies and avoiding landmines.
However, for some activities, there just isn’t the opportunity for most people to practice. Or, the activities are once- or twice-in-a-lifetime events.
Businesses that cater to these kinds of infrequent events capitalize on the inexperience of the buyers. I hesitate from saying that these businesses “take advantage of” their customers or “rip them off,” because I don’t really blame them for doing so. Strike when the iron is hot.
But just by being aware that the business owners are licking their chops as you walk into the shop, you know to prepare a bit.
Here are ten types of infrequent expenses where it pays to learn as much as you can beforehand about what you’re getting into:
- Birth. The birth of the first child is brand new in tons of ways. It’s easy to buy into “it’s for the baby” and “Don’t you want the best for your child?” when that little sweet face is looking up to you, literally and figuratively. Remember that there are a lot of baby clothes out there at yard sales that are practically brand-new.
- Prom. I have yet to go through this with my daughter (or whatever the homeschool equivalent will be) but it’s not far-off at all. These occur only twice or three times for most people. The expenses can run up quickly with all of the upsells that the formal shop throws at you.
- College. Two words: student loans. Think hard about what this means for you and/or your children if this is in your future.
- Flying by airplane. For an infrequent traveler like myself, I know I’m not getting from Point A to Point B as efficiently as I might. Frequent fliers know a lot more of the tricks, though, and there are lots of travel resources available to help others learn the tricks.
- Vacations. Not an all-the-time venture for most people. There’s a good reason why some places are called “tourist traps.” Casual vacationers don’t know any better.
- Weddings. (Hopefully) once-in-a-lifetime. Very few people (if any?) enter marriage with the intention of doing it again with someone else at some point. A good chunk of the bridal industry is geared toward making that day perfect — and perfectly profitable for them.
- Buying a car. This happens several times in a person’s life. A little prep goes a long way, and as with flying, there are lots of online resources for buying a car the right way.
- Buying a house. I fell for this one hard the first time I did it. I played right into the real estate agent’s hand. Pretty much everyone in this deal is in it for themselves, and they all have gone through their part of the deal many times before. This one is hard to prepare for, I’ll admit. It wasn’t a whole lot easier the second time around, either.
- Divorce. See #6. Hopefully this never happens, but it’s tough to prep for this one in advance, and if you are prepping in advance, then there’s a problem? In cases when the divorce is amicable, it can be fairly inexpensive, but if there’s animosity? Forget it.
- Death. And we end on a cheery note: funeral expenses! But death presents the ultimate challenge for a business, really. Funeral homes get precisely one shot per cadaver at selling as much as possible, because people die exactly once apiece. If the grieving family knows this going in, they might have a chance at seeing the plot against them. (Sorry. Couldn’t resist.)
Maybe it’s enough just knowing that infrequency of expenses places you at a disadvantage. I hope so!
I don’t travel much at all. I’m very much an infrequent flier. (It’s the main reason I use a rewards credit card that isn’t tied to an airline. I sacrifice effective cash-back rate, but I know that I’ll use the rewards.)
I got my airline ticket with Travelocity (check rebates) and had absolutely no intention of paying for any upgrades. I don’t fly often enough to even care about such things. One time a number of years ago, I got upgraded to first class, and it was nice — but not so nice that I’d willingly pay for it.
Paying for exclusivity
Airlines regularly invite their first-class fliers to board the plane first. I get the reasons why they do this:
- People naturally look to who is boarding. The have-nots see what the haves are doing.
- Everyone else boarding the plane has to walk through the first-class section en route to their smaller, tighter, more pedestrian seat.
- As the proletariat trudge aft, they see that the first-class section already has beverages in their hand — some of the fun grown-up variety, which are all complimentary of course.
The entire situation pronounces overtly: “This could have been you. But, alas, not this time.”
But what about faux-exclusivity?
Other groups are allowed on the plane before others, for good reason. People who need assistance get on before others, because there’s less traffic to navigate. And many airlines will board the rear seats before the front ones to reduce traffic.
On the flights I took, though, one group the airline let on earlier didn’t make a whole lot of sense. The airline singled out people who carried the airline’s branded credit card, and let them on ahead of others.
It’s good advertising for the airline’s credit card, I guess, as are all of the different levels of frequent flier recognition. The airlines have a captive audience, so why not?
But these people were boarding in the coach section. The cheap seats, along with almost everyone else.
Maybe I don’t get the allure of boarding coach early because I don’t do it often — and I’ll concede that if it’s a blind spot. But, really? I don’t get it:
- Outside the plane is spacious. Inside the plane is cramped. Why would people want to spend more time inside a cramped space and less inside an open space? It’s certainly not my idea of a good time. Even standing in line on the ramp down to the plane is less cramped than inside the plane.
- Unless I have a window seat, it’s virtually guaranteed that I’ll need to get up again, maybe twice. I get in early, and sit down. (I can’t stay standing, because others need to get by.) Then the person (or people) in my row that are closer to the outside of the plane want their seats. Not my idea of fun, either (though indeed there are worse things to go through).
- I’ll get on the plane regardless of when I board. I do trust that the airline won’t let me onto the ramp if I’m going to play musical chairs inside the plane. There will be a seat for me, and it will be there for me regardless of whether I’m the first one on, or the last.
Again, I’ll concede some blind spots in my travel savvy. What am I missing?
The post What’s the advantage of boarding coach section on a plane early? appeared first on Mighty Bargain Hunter.
My daughter’s “love languages” are gifts and quality time. I think I do all right with the gifts, but I can do better on the quality time part.
I had planned to stop at Sheetz to pick up a large-ish Rice Krispies® treat for my daughter. Somewhere along the way, though, I decided instead to stop at Walmart and pick up the ingredients to make them. Surprising as it sounds, I had never done this before.
I remembered that I needed marshmallows. Oh, and Kellogg’s Rice Krispies, obviously. I forgot that I needed butter, but we had some at home.
So easy a beginner can do it
The recipe is really simple. I got it right on the first try with my highly limited food-preparing skills.
My daughter and I got our hands gooey with buttery marshmallow cereal, and had a great time. We even did a small little bit of math mixing it up. (I snuck it in before she noticed hehe.)
And … it’s inexpensive, too!
The cost of this? The 18-ounce box of Rice Krispies was $3.34. We used only eight ounces or so. The bag of marshmallows was under a buck. The three tablespoons of butter was less than a quarter. So we’re looking at maybe $2.50 for a full pan of Rice Krispies treats, plus about ten minutes’ prep time with my daughter, which I thoroughly enjoyed.
Compare this with the $1.29 for a single square from Sheetz (about an eighth of the size of the pan). So our treats are about a quarter the cost of the store-bought ones. (I can’t get them for free every day, after all.)
There are only so many opportunities to do these kinds of things
This past weekend, I attended FinCon 2014 in New Orleans. I don’t need to travel a whole lot for my job (thankfully!) but I’m realizing that my daughter is growing up really, really fast and that my days to do these kinds of things with her are severely numbered.
Making these treats with her took time, and the savings were probably less than minimum wage, effectively. But wishing that I had done more of these things with her now, when she’s left home, is no bargain at all.
What recommendations do you have for what I should try my novice hand at making next?
The post Well, making Rice Krispies treats is easy! And frugal, too! appeared first on Mighty Bargain Hunter.
I’m an oddball in a lot of ways. And I’m on my way tomorrow to rub elbows with a whole bunch of other personal finance oddballs at FinCon14 down in New Orleans.
I’m also an oddball because of my feet. I have a clubfoot. Thankfully I’ve been able to go for nearly 25 years without any operations, and in the grand scheme it’s a very, very minor problem. I’ve known people with this problem that would never be able to walk.
The small price I pay for my odd feet
Around a year ago, I was tagged on Facebook to share seven things about myself. Since I’m a Level 47 troll aspiring to become Level 48, I answered, but only really ended up sharing one fact about myself: that I had two different-sized feet. The other facts were deducible from that one fact. Some cried foul, but I don’t care (hehe).
The last of the seven, which I’m sharing here, gets to the small price I pay — and also to the motivation for this post:
Compared with most other people, I spend about twice as much on shoes. The store employees still feel the need to make it clear that I have to pay for both pair. Almost as if I would expect them to hold the non-fitting pair until a guy with the opposite problem — my “evil shoe twin,” if you will — happened into the store, happened to need shoes, and happened to like exactly the same style that I have. “Why, Mr. Laceheel, have I got a great pair for you!!!”
For a long time, I used to get a pretty good discount on the second pair: about a third off. Then the stores stopped discounting them at all for a while. So I stopped asking. And I ship the shoes I don’t wear off to the National Odd Shoe Exchange, which has the acronym NOSE. No, really.
Then I got the statement again …
We were at the mall this weekend, and we went to Dick’s Sporting Goods to get my New Balance 623’s, which I’ve been wearing for years. I told the store employee the sizes (plural) I needed.
“You know I can’t mix the sizes,” she said.
“You can sell me two pair though, right? I mean, I didn’t expect you to keep the other pair for someone with the opposite problem I have!” And I laughed.
… but I found out why they say it
Of course she could sell me two pair. When she brought the shoes back, she explained why she had to make it clear that they wouldn’t mix and match.
Another customer came in and had made a freakin’ scene when the store didn’t sell him one pair with two different sizes. Called over the store manager and everything. I imagine the guy left mad because they didn’t do it for him.
That’s just plain unreasonable. No, actually, it’s tacky. The mismatched pair is of no value to the store. It’s unreasonable to expect that they would sell the shoes, likely at a loss, to an occasional customer. (Now, if Dick’s actually did this for me, I would be sure to give them a whole lot of business.)
When I heard this, I sympathized with her, and told her that it was unreasonable, and made it clear that I wasn’t that kind of customer.
She came back with a $10 coupon. It pays to be reasonable.
There is no shortage of personal finance advice available. I’ve been known to produce a bit myself here and there.
There are recurring themes like “buy vs. rent,” “spend less than you earn,” “the magic of compounding,” and so forth which are the cornerstones of personal finance, saving, and retirement planning. They’re cornerstones because there’s a lot of wisdom behind them.
Checklists and more checklists
I ran across Richmond Savers today, which is run by a couple of CPAs in my part of the country. The community is local to Virginia’s capital, but they have a list of financial guidelines that they try to live by every day.
If you’ve read lists like these before, the themes are very familiar. They’re the important financial issues that most of us deal with at one point or another: credit and debt, big expenses like automobiles and houses, health and wellness, and investing.
The points they list pass the reasonableness test. None of them are that off-the-wall. Lists like these are rarely off-the-wall.
What “reasonable” and “not off-the-wall” are not
Some of the items get pretty specific. Here is a flavor (check out the website for the rest):
- “Do not buy a house if you’re planning on moving within 5 or even 10 years….”
- “Make regular contributions (we suggest twice a month to coincide with your paycheck) to your investing accounts….”
- “Always automate as much of your financial life as possible, including your contributions to savings and all your bills….”
Are these and the other few dozen points reasonable? Of course they are. To the first point: There are a number of reasons why buying and quickly selling a house costs a lot of money. To the second: By making regular contributions you can reduce the effects of market timing. To the third: You’re less apt to miss a payment if it’s done automatically.
Reasonable advice, though, is not universal advice. We moved from our first house in less than ten years, but we kept it, and rented it out. It’s less than four years from being completely paid off now. Making regular contributions to an investment account, or automating your finances, puts things on auto-pilot, but auto-pilot may not work for you, because it allows you to become complacent and forget about those monthly withdrawals.
It’s still up to you to determine what to do!
Every website that gives this kind of advice should have a disclaimer. Richmond Savers does (at the bottom of the pages) and this site does on the sidebar.
Website owners put disclaimers to protect them from liability in the case that someone follows their advice, and bad things happen as a result. Richmond Savers can say “[b]uy a reliable car, such as a Honda or Toyota, and drive it for 200,000 miles[,]” but if you stretch to get that car (which run a bit more expensive than some others) or if you pour a lot of money to keep the car running 200,000 miles, and fall into financial hardship as a result, then perhaps it wasn’t the best idea to follow that advice.
In fact, even if you pay someone for this kind of advice, it’s still up to you whether you follow it or not! Setting aside that there may be criminal intent, advice is still just that: advice. Not a command, not a sure thing: just advice.
There’s always context. No one knows that context better than you do. Which is good, because you are the one responsible for your financial decisions. As Tim McCarthy went into great detail in his book The Safe Investor, not only do you need to look at your own goals, but you also need to verify what your paid advisers are telling you. Extending this to the free advice you get from this blog and everywhere else, it’s up to you to verify the sources and cast the advice in the context of your situation.
The post The one person responsible for your financial decisions appeared first on Mighty Bargain Hunter.
Economies of scale are a wonderful thing. The more you’re willing to buy from a particular vendor, the better the unit price they’re inclined to give you. Selling a thousand items a hundred times is a lot more work than selling fifty thousand items twice. It’s less bookkeeping, less tracking, less shipping, and less labor to sell bigger chunks of your inventory at once.
Likewise, businesses buy the materials for their operations in bulk all the time. It’s part of being competitive, and profitable. Lower expenses mean that businesses can price more competitively, which translates to higher volume, and more profits.
Team up with your business-owning friends to get bargains
Local economies have a good mix of variety and personal relationship. In a mid-sized community there is a spectrum of business owners that serve a good number of customers. But the scale is not so big that it’s impersonal. Small business owners are friends with non-business owners, go to church together, have their kids on the swim team together, etc.
Your friendships with small business owners can be used (ethically) to tap into certain economies of scale, which effectively allows you to buy wholesale with the price, but not the quantity. Here are a couple of examples:
- End-of-season Italian ice. There was an Italian ice shop that was in business during our engagement and during the first few years we were married. (The owner’s wife made our wedding cake.) We spent quite a bit of money there, for sure. One of the last years he was in business, near the end of the season, we asked him if he would sell one of the containers to us for the winter. (It was near addiction-level at the time .) He sold a large container to us pretty much at cost.
- High-quality munchies. A friend of ours has a niche food business. He buys some of his food supplies by the pallet. On a whim, I asked him if he’d consider selling some of the raw supplies to us; one in particular we consume quite a bit of, and the quality of what we have isn’t the best. I knew that he bought supplies that were high-enough quality that we’d have to go to a specialty food store. The price he quoted me was about half of what a comparable product would cost from Walmart.com, and was cheaper than the “meh” grade we get now.
How to be a welcome side-customer
These were great bargains. We bought in quantity, but we didn’t buy so much that it would go bad before we got through it.
Still, I do think there are ground rules to trying this out on your business-owning friends. Follow these guidelines and you’ll be welcomed back for more:
- Don’t use the material to compete against them. Hopefully this would go without saying, but using the good deal you just got to compete against them in their market would be a really good way to ruin a friendship.
- Don’t try to get the main service they offer at a steep discount. It might appear that we kinda-sorta did that with the Italian ice guy mentioned earlier, but not really. Yes, Italian ice was his main business, but he wasn’t going to sell us anything off-season anyway. We asked him at the end of the season. We didn’t consider asking him in the middle of the summer. As for our friend with the niche food business, we’re not even trying to learn how to do what he does.
- Treat the deal discreetly. The two deals I mentioned above don’t create a problem for the people who gave them to me. The first guy is no longer in business, and I was vague on purpose in talking about what I bought from the second. If you tell people about the deal, your friend will get pinged for the same deal, and then you’ve created a problem for them. (They’ll probably know it was you who blabbed.) They may want to offer the deal to other people, but that should be their business decision, not one that’s foisted upon them.
- Make sure it’s win-win. We got great deals, and we didn’t argue the price down any further. If the deal become too one-sided, the business owner may do it as a favor once because of the friendship, but if it’s inconvenient, or a financial loss, they’re not going to want to do it again. (If my friend did sell his stuff at a loss, I’ll make sure he doesn’t do it again! But I doubt it. )
Have you gotten wholesale prices from your business-owning friends on some of these side deals?
Saving money, and spending less money, are two crucial activities for people looking to take, and maintain, control of their personal finances. And, as with most things, there are classy ways to go about it, and … less classy ways.
On the spectrum of ways to spend less money openly, one can be (in order of decreasing classiness) frugal, cheap, or tacky. Merriam-Webster defines each in context:
- frugal – Characterized by or reflecting economy in the use of resources.
- cheap – Stingy; sparing or scant in using, giving, or spending.
- tacky – Characterized by lack of good breeding.
Frugality is typically a virtue. It’s off the beaten path, and a little unpopular, but still a virtue. Cheapness is Ebenezer Scrooge, or the guy that puts in a quarter when people at the office are collecting for a retirement gift. Tackiness will result in you being asked to leave, and never come back.
“Weird Al” Yankovic parodied Pharrell’s contagiously catchy song “Happy” with an ode to tastelessness, “Tacky.” There are a few money lines peppered in this song. Do they all fall under the description of “tacky?” Let’s see:
- (0:21) “We can go to see a show but I’ll make you pay.” A friend of mine had bought some extra tickets to see Itzhak Perlman, and he reached out to his musician friends for takers. The tickets were $62/pop. (This is Itzhak Perlman, after all!) Initially we refused, because we really couldn’t see spending $124 as a couple to see him. Well, the day before the concert arrived, and he still had no takers for two of the tickets, and offered to give us one. (The other he had given to another friend.) I still ended up paying him for the ticket, because we could afford one. Though I don’t think it would have been tacky to not pay, it certainly would have been cheap.
- (2:08) “Bring along my coupon book whenever I’m on a date.” I don’t see this as being either tacky, or cheap. It’s frugal. Besides, if you’re single, frugal, and are looking for a frugal mate, a good acid test of whether or not they’re like-minded is whether or not they bristle when you pull out the coupon book. If they whip out their own coupon book when you do — well, that’s true love right there!
- (2:21) “Took the whole bowl of restaurant mints. Hey, it said: ‘They’re free.'” Some time ago, I went with someone to pick up pizzas. As we were waiting to get the pizzas, he took a lot of napkins — far more than we actually would have used even with four adults and a bunch of kids — saying, “They’re free.” This is tacky. It’s a fine line between tacky and not tacky, but this person crossed the line. Why? It’s the difference between using supplies at a business (napkins, salt and pepper, toilet paper, or mints) and overusing or stealing them. If everybody took 70 napkins, either prices would go up, or the businessperson would ration the napkins. What might happen too is that the businessperson would call the person out. Or, subsequent orders may be “unintentionally” screwed up. “Sorry about that, sir. You probably want to take your business elsewhere, I suppose …”
Where do you draw the line between frugal, cheap, and just plain tacky?
Personal finance boils down to recognizing, and acting on, good deals in their proper context. What’s a wise finance decision for one person could easily be a foolish decision for another.
In deciding whether something is a good deal, it’s often useful to quantify its cost in terms of something familiar. While raw amounts like “$500″ do indeed quantify the cost, $500 could mean wildly different things to different people:
- $500 to the average laborer in Indonesia is nearly a year’s salary.
- $500 is a bit over two weeks’ pay to someone at the federal poverty level.
- $500 to a middle-class worker is a few days’ pay.
- $500 to a CEO at a mid-sized company is pocket change.
- $500 to someone with Bill Gates’ wealth is hardly worth picking up if he dropped it, as it would cost him more than that in time to pick up!
It’s the analogies that put the amount of money into context, because everyone’s financial situation is different.
Here are a few useful ways to describe the cost of something in terms other than raw dollar amounts:
- Pocket change. This is an amount of money that can be spent without a whole lot of thought. In context, it will hardly be missed. People can budget for this category of spending, and there needn’t be a whole lot of planning as to how it gets spent.
- A pizza. I find myself using this one quite a bit, for some reason. We don’t eat a whole lot of pizza, but if we give up one here or there in exchange for something else, we cook pasta or grilled cheese that evening instead.
- A nice dinner. A slight upgrade from “a pizza.” We do this less often than pizza. Not something that breaks the bank, but also not something we do every night, either.
- A day’s pay. Now the numbers get a bit bigger — perhaps a few hundred dollars. The cost of a purchase begins to hit home when we realize that I’ll work for a full day to pay for this.
- A mortgage payment. This could also be described as “car payment” or “rent check.” A full month’s worth of either transportation (if you owe) or housing. Certainly not something to be taken lightly, and probably something to give a lot of thought to.
- A paycheck. As we were looking for a larger TV last November, I described the cost of some of the newer models as “more than a paycheck.” These are expenses that almost certainly need to be saved for.
- Two months’ salary. This is the self-serving guideline that the diamond industry puts out for guys to shell out for their fiancee’s engagement ring. We didn’t come anywhere close to that amount.
- A car. Five figures. Something you might buy only a few times in a lifetime.
What other money analogies do you use?
I’ll admit it. I’m a card-carrying member of the grammar police, the spelling police, and the style police.
“Weird Al” Yankovic released his newest album Mandatory Fun less than two months ago. He parodied a Robin Thicke’s “Blurred Lines” with “Word Crimes.” If Weird Al’s song speaks to the innermost parts of your being, then you understand.
And, it you’re scratching your head: No worries; we can still be friends!
Below is a list of commonly used, but redundant, money expressions. The phrases either deal with money directly, or deal with issues that can cause people to spend a lot of money.
- PIN number. The acronym PIN stands for personal identification number. Saying “number” again at the end is redundant. The same would be true of the phrase “SSN number.”
- LIBOR rate. LIBOR stands for London Interbank Offered Rate which makes the extra “rate” unnecessary.
- ATM machine. One doesn’t deposit or withdraw from an automated teller machine machine.
- $12 million dollars. Writing this amount either as $12 million or as 12 million dollars gets the point across as to what unit of money we’re talking about.
- Cash money. This phrase is used in sales pitches and street-side negotiations. Nonetheless, cash is money, right?
- Free gift. Whatever is being received isn’t a gift unless it’s free. (Whether the gift should be looked upon with suspicion or not is another matter.)
- Preboard. Some passengers might board an airplane before other passengers, but none of them can get on the plane before they … get on the plane.
- Hot water heater. We’ve had to replace water heaters (at great expense), but never a hot water heater. It’s unclear whether a hot water heater is (a) a water heater that is hot, or (b) a heater that heats water that is already hot. (We might need both a water heater and a hot water heater, then — just so the hot water heater actually has some hot water to heat!)
- UPC code. The bar codes that are scanned at checkout are called universal product codes. “Code” is part of the name.
- Safe haven. These types of investments or accounts are extra-safe, apparently. A haven is already “a place of safety” so a “safe place of safety” really has a lot of safety going on, doesn’t it?
- IRA Account? This one might be redundant, or not. The IRS defines an individual retirement arrangement that gives tax-advantaged status for contributions that are governed by deposit, withdrawal, and reporting restrictions. The same abbreviation also is used to describe a particular account — an individual retirement account – which plays a part in a person’s individual retirement arrangement. If the intent of the phrase “IRA account” is to describe an account that is part of an individual retirement arrangement, then it’s not redundant.
So … beware of people who enter their PIN numbers into the ATM machine to withdraw $300 dollars in cash money from their IRA accounts to buy a new hot water heater.
The post Ten redundant money expressions (and one curveball) appeared first on Mighty Bargain Hunter.
The pillar of responsible personal finance is to spend less than you earn. If you’ve heard that once, you’ve heard it thousands of times.
There are three ways to work towards spending less than you earn:
- Earn more.
- Spend less.
- Both 1. and 2.
One area that discourages people with finding ways to spend less is that “spending less” often translates to “doing it yourself,” and that takes time. Indeed it can.
There are ways to spend less that don’t involve spending a ton of time. I’ll describe five ways that you’ll be able to easily save $5 (or more!) in five minutes (or less!) Five bucks in five minutes is $60/hour. This is mid-level executive wage!
- Check Amazon. If you have an internet connection, it’s quick to look for just about anything you’d care to purchase on Amazon. The technique is called showrooming and it’s here for a long time. Head to your favorite store, find the item you want, and look up the price on Amazon to see if it’s better there.
- Use a rebate site. It’s shopping online but … cheaper. Instead of going directly to, say, bloomingdales.com, you go through a rebate site, click the link there, and you accumulate rebates that you can cash out. There’s really not much more to it than that. Even better: Hit a rebate site comparison engine that racks and stacks the rebates that they offer. Here are the results for the Bloomingdale’s rebate comparison on mine.
- Brew your own coffee. A friend of mine said that coffee always tastes better if someone who likes coffee makes it. If you make it yourself, you’ll do it right, and you’ll easily save a buck per minute of your time.
- Get an Entertainment Book or a local coupon book. For the times you eat out, having this in the car is an easy way to save at least $5. This book pays for itself quickly (even more quickly if you get a rebate!) If it’s not an Entertainment Book per se, then there are local ones (like the Attractions Book in our area) that are often sold by fundraising groups. These sell really well because they pay for themselves so quickly. Normally these books don’t have junk in them.
- Comparison shop in the supermarket. Almost every grocery store worth its existence will have unit prices on the shelf price tags. The tag that has the smaller unit price is (almost always) the better deal. How long does it take (under normal circumstances) to determine that one number is less than another?
What other tricks do you have that are worth $60 in savings per hour of your time?
Rebate sites are a great way to save money easily when shopping online. Just click through these sites instead of going directly to the store, and they’ll keep track of your visit and rebate you a portion of your purchase.
There are quite a few of these sites out there, and they compete against one another. These rebate sites get paid when you shop there, too. That’s how they earn the money that they share with you.
I’ve been working on an improved version of my cash back comparison engine. It now has a browse feature for the stores. You can do a rebate site comparison over a dozen sites in the engine now:
- Coupon Cactus
- Mr. Rebates
- Be Frugal
- Panda Cash Back
- Top Cash Back
- Cash Back Cat
- Active Junky
- Mr. Rebates Canada
- Rewards Runner
- Big Crumbs
- Rebate Blast
Try it out and see which site is giving the biggest rebate for your favorite stores!
I was chatting briefly with a colleague yesterday about married life. (He was going to be best man in a friend’s wedding in a couple of weeks.) In the course of the conversation, I admitted that saving money was a heck of a lot easier before I was married, but that I wouldn’t go back to being single by choice for anything. Everything has pros and cons.
He saw the picture of my daughter that I have in my cube, and pointed to that as one of the pros. I certainly agreed.
Our daughter is our one and only. Being an only child has pros and cons, too, of course. One of the pros is that whatever part of our income that would go to her enrichment is hers alone. No one else is competing for that slice of our income in that way.
Most bigger families have more restrictions on what they can do for their kids
Likewise, being part of a larger family has its pros and cons. The opposite side of the pro above is that larger families are more likely to need to make tough choices about what their kids participate in. If the money needs to enrich the lives of three or four children, the pot of money either needs to be bigger, or the children cannot do as much as would otherwise fit into their schedules.
The restrictions might be matters of practicality, as in running the children to different practices just isn’t possible because of schedule and time. Or, rather than participating in, say, three activities, they may only be able to participate in one or two each — on the reasonable assumption that favoritism is inappropriate, of course.
The sliding fee scale
Activity clubs don’t ignore the fact that participation gets expensive when you have several kids, and many charge a smaller fee for additional children. Large families, in effect, get an activity discount.
Though I could perhaps get bitter about this, and observe that the people in charge of setting the fees stand to be subsidized by smaller families like mine — due to the fact that they themselves have large families — that’s not really a productive way of thinking. It does more harm than good to start judging a large family for being large. (Who’s to say that the large size of a family is due to abundant blessing from God, or due to reproductive irresponsibility? Certainly not I!)
Besides, there’s more to it than that. Economically, it makes sense to encourage families to sign up more, or all, of their kids.
Let’s say that there was no discount, so a family with one child would pay $800/year, and a family of five children would pay $4,000/year.
Is it a fair charge? Yes. It is an onerous charge? Yes, it is. Might the parents stare down the barrel of that $4,000 expense and opt out? Possibly.
Now, let’s say that the club charges $800 for the first child, $700 for the second, $600 for the third, and $500 for the fourth and beyond. This is still expensive for the five-child family — $3,100 — but the family can see the nearly 25% discount they’ve been given, and are more willing to pay it.
The silver lining
Yes, they’re paying $620/child, and we’re paying $800/child. At the same time, though, a larger club activity can take advantage of their scale, and the experience will likely be better with more participants.
Regardless, though, our total payout is $800, while theirs is $3,100. We’ll still pay less, total. That will always be the case. I guess we’ll take that!
I use rebate sites for as many of my online purchases as I can. After getting a free account, it’s only a small amount of extra work to save a few dollars — or even more than a few! — on thousands of online stores.
Mr. Rebates is one of a number of rebate sites available. Using Mr. Rebates is simple:
- Sign up for a Mr. Rebates account, which is completely free.
- Log into Mr. Rebates before you shop online.
- If Mr. Rebates offers cash back on purchases from your favorite stores, go through the links on Mr. Rebates to get to the store instead of typing it into your browser.
It really is just about that easy to start accumulating your rebates!
How it works under the hood
Mr. Rebates has to get their money from somewhere in order to pay you your rebates. They wouldn’t stay in business very long if it came out of the website owner’s pocket, right?
The quick answer is that the store you bought from awards a commission to Mr. Rebates for sending them your business. What Mr. Rebates then does is share part of that commission you. The part they retain is their profit, which keeps the lights on and puts food on the table.
Features of Mr. Rebates
Mr. Rebates has been around for quite a while — since 2002. They hit the market early, but now there are quite a few other competing sites. But, like other sites, Mr. Rebates has unique features that make it different:
- Reasonable minimum payout. The minimum amount required to receive a quarterly payment from Mr. Rebates is $10.00.
- Monthly pay-out with PayPal. My rebate money goes in to my PayPal account as long as I request it before the month changes. It’s very reliable.
- Sign-up Bonus. There’s a $5 bonus that comes with your first purchase. Ka-ching!
- Store of the Week. This Mr. Rebates feature is a store that has higher-than-normal rebates for a full week.
- Weekly Deals. The front page features extra store-specific incentives, like a flat percentage off any order, free shipping, etc.
- Seasonal extra rebates. Depending on the time of year, a group of stores will qualify for extra rebates. So whether it’s back to school, Valentine’s Day, or the holiday season, expect that the places you’ll shop to have extra rebates.
- Favorites List. You can consolidate the stores you shop at most in a list for quick access to the rebate links.
This rebate-site has been around for over a decade You don’t stay in business that by not paying your rebates, so I see Mr. Rebates staying around for some time to come!
A washer and dryer are mainstays in many households. They are in our household, for sure.
We bought a used washer and dryer set four and a half years ago. Over the past couple of weeks, the washer was whining loudly. First we heard it within the drain cycle, then in the spin cycle. When it started squealing during the wash cycle, I sensed that its time was almost over, because that sounded like a transmission problem.
Our family had done some repairs on it already to fix a bent support frame, but a new transmission runs upwards of $100.00. Considering we paid $200 for the whole machine, this expense was questionable.
Time to hit Craigslist for another set, right? I’m of the opinion that older is better when it comes to most large appliances. So, off we went, and started emailing and calling people.
Unfortunately, we aren’t the only frugal people in our area
Looking on Craigslist for a used washer and dryer was a bit of a treasure hunt. The sets that were any good didn’t last long. The Craigslist ads were being removed left and right by the posters as other bargain hunter scooped them up.
One gentleman we called fixed up machines for a living, and he was selling them as fast as he could fix them, basically. He recommended that we drove out to his place early Sunday morning to pick one of the two he had left. This wasn’t feasible because we do the church thing, but it was clear that if we didn’t come out, he would get another buyer quickly.
We visited one woman with a machine. She didn’t know the capacity of the machine. As I told my newsletter subscribers, I would have had to pay to find out the capacity of the machine, but it would have been worth it to do so since it was too small for what we needed.
On the way home from that visit, we stopped in a secondhand store. Several washing machines were out front — sold. One more was in the back — on layaway.
For used washing machines, it’s definitely a seller’s market. There’s a lot of buyers out there.
Getting a used machine can take time — more time than you may have
We ended up getting a Roper machine from Lowe’s. There was a sale going on, so the price was pretty good for a new machine: under $350. It seems to get our clothes clean, but man, it sounds … different. Maybe part of this new sound is driven by the manufacturers doing their best to get clothes clean on a tight, mandated energy budget.
No kidding: the washer sounds like a robotic goose in heat. And from what we can gather, this is normal for the newer machines!
We got this newer machine for a couple of main reasons: (a) the price was decent, and (b) we could get it right then. The second one was the more important consideration, actually. Our dirty clothes were piling up, and our old machine was noisy, which was not normal. Basically, we didn’t want to risk completely breaking our current machine, because that would put us at a big disadvantage.
Were I to do this again, I’d plan a bit further in advance than we did. We had a bit of notice — a few weeks, maybe — and could have looked more than we did. We waited too long to look in earnest. The best time to look for a used washing machine is before you actually need one!
Saving (potentially) $200 or more is a fair trade-off on paying with time vs. paying with money. But that depends on leaving enough time so the search can happen.