Friday, December 5, 2008
I recently came across a site called Swoopo.com. At first glance, this site leads you to believe that items are selling on auction for a small fraction of retail. So what's the catch? Knowing that things that sound to good to be true, usually are, I dug a little deeper.
Here's the scoop. They charge you to bid -- $0.75 per bid. That doesn't sound too bad until you realize that bids are only in increments of $0.15 and done automatically by their system! That means that both the bidders who win the auction and those who do not are paying just for bidding. And before you ask -- no, you don't get your bid money back if you don't win the item!
This model is different, that's for sure. I'm not sure whether to be impressed by their ingenuity or disgusted by the fact that they are obviously getting (i.e. tricking) people to pay mountains of money either for products they "win" -- or even worse -- paying money for the right to bid on products that they don't win. Of course none of this is spelled out clearly. Only after reading through a few pages of the "terms and conditions" would a user be aware of this.
Let's create an example, let's say they put a laptop up for auction that sells for $499 at a normal store. They start the bidding at $.01.
After the first 6 bids, the bid stands at $.91 and the site has collected $4.50 (6x$.75) in bid fees. After 100 bids, the bid stands at $15.01 and the site has collected $75.00 in bid fees.
After 2000 bids, the bid stands at $300 (a seemingly good deal for this laptop), but users have paid the site $1500 for the privilege of bidding on the laptop!
In this case the winning bidder would be in for $300 + all of his bid costs (likely several hundred dollars). The losing bidders would have nothing to show for there efforts except empty pockets.
Are there deals to be found on this site? Maybe, but it is a gamble if there ever was one. In my estimation, you are much more likely to come out ahead in Vegas than on Swoopo.
Monday, September 22, 2008
Coupons are an interesting animal. On one hand, they are a great tool for saving money at the grocery store. But on the other hand, they are tools used my manufacturers to induce you into trying their latest packaged goods. Too often, these packaged goods are highly processed and far from being healthy. In fact, there have been many times my wife and I have decided not to use coupons that would have gotten items like free pizza rolls, just because we didn't want to eat that kind of food.
But thankfully, there are still ways you can save money with your grocery coupons, while managing to eat healthily.
1. Take advantage of sales, even without coupons - While it is true, you rarely see a coupon for fruit, berries, fresh veggies, or meat, deals can still be found plentifully. Remember to put your freezer to use when you spot "Buy One Get One Free" deals on meat, berries, and freezable fruit.
2. Look for coupons and other incentives on frozen veggies - While fresh vegetables may rarely be targeted by coupons, frozen vegetables are featured quite regularly. Just last week, a sale combined with a coupon on frozen Green Giant veggies, got us 20 boxes at only $0.30 per box. Not bad for healthy frozen vegetables.
3. Shop at farmer's markets - This is my favorite way to find fresh, local fruits and vegetables. You can buy just a few, or buy entire cases of vegetables you love and trade with others. (Trading 1/2 and 1/4 cases is a constant practice at my local farmer's market.)
4. Use coupons for household items - Saving money on these items likes cleaners, paper towels, toothpaste and others gives you some flexibility on your other purchases while still coming in under budget. During the last "Triple Coupons" weekend here in Raleigh, I scored 5 different brand name cleaners (Windex, 409, Fantastik, etc) for about $.25 each. All of these were on sale and had $.50 or $.75 coupons which were tripled.
In the end, the key with eating healthy on a budget is the similar to finding deals on many other things. Watch for sales (especially if you can combine with coupons) and make smart purchases. Remember to not buy more than you can eat (or freeze), and save money in other places to allow yourself a little extra money for healthy food. Remember, "You are what you eat!"
Tuesday, August 26, 2008
In my opinion, these sort of stories (and there are plenty of them) completely miss the boat. What these stories glaze over is that it is not the credit cards, but rather the consumer behavior attached to those credit cards that gets people in trouble. I would bet money on the fact that I can save more by using credit cards than by using cash. Here's why:
1. With credit cards, you know where your money goes
It is astounding to me that this doesn't get mentioned more often. With credit cards, you have a monthly statement, and you can even get a yearly statement online. You can import your purchases into programs like Quicken, or add them to a spreadsheet. This allows you to dissect your expenditures, tweak your budget, and be accountable to yourself during and at the end of the month.
2. I can shop for things online and find a bargain without ever leaving my desk. That means I'm not burning gas and wasting time going from store to store, I have full information on product reviews, and can compare apples to apples identical products. By using "user ratings" on sites like Amazon, it is easy to find the truly better products, and not just the prettier boxes.
3. I get cash back on my charges. I know that some of you may roll your eyes, but if you have the right card (such as Pentagon Federal's Visa Platinum) you can earn real cash (not "points") that gets credited to your bill each month. For example, the Pentagon Federal card earns 5% on gas, 3% at the grocery store, and 1.25% on all other purchases. That means if I charge $1500 in a month, I'm getting roughly $20 back -- $240 per year. Not bad for doing nothing.
Of course all of this assumes you have the discipline to pay off your credit cards at the end of the month and not spend more than you have available. If you can't do that, then maybe you are better off with cash or debit.
Friday, June 27, 2008
ABC and a few other news outlets are using the sound bite this morning of "This was the worst June since the Great Depression!" Claiming that the 9% fall this month compares to the fall 78 years ago.
This is utterly ridiculous! While it may be technically correct (there have been no other Junes when the Dow has taken a 9%+ plunge), the spirit of the statement is meant to invoke fear, and fails to consider that for 2008, including June, both the Dow and the S&P are only off by 12%...a mild market correction. Compare that to the near 80% fall between late 1930 and July 1932. To compare these two is blatant fear mongering. (It is also reminiscent of the "creative statistics" recently used by the Clinton campaign when claiming Hillary had the popular vote.)
The few people whom I have personally known who lived through the Great Depression (including my grandfather) told me stories of those days such as only adults having shoes and saving pennies to bake a cake. Compare that to the multi-car families with 3000 sq. ft. houses, $300 footware, and spending billions on entertainment. Even the thought of comparing those two worlds gets me hot under the collar.
Thursday, June 19, 2008
This weekend, my girlfriend and I met up with my parents in Myrtle Beach for a few days of relaxation. Coincidentally, my girlfriend and I had recently been talking about timeshares -- and saying that it might be fun to get some freebies for sitting through a presentation. So when we were approached at a local restaurant to take a timeshare tour for a $100 visa card and two "3 day / 2 night vacations" we decided to sign up. They wanted $20 to hold our spot -- which I was leery of -- but I agree from their perspective seems to make sense so they don't have 50% no-show rate. We did get our $20 back when we checked-in the next morning.
While I have never taken a timeshare tour, I'm very familiar with the concept, the points system, and the retail and resale rates. I suggest if you are going to take one of these tours, you spend an hour reading on different websites before you go on your tour. It will provide you with plenty of ammunition.
How does this tie to building wealth? Simply put, building wealth is as much about avoiding bad financial decisions as it is about making good ones. As a rule of thumb, you should never buy anything (even something inexpensive) under pressure from a salesperson, and definitely do not make a large purchase on the spur of the moment. We live in a time where a world's worth of information is searchable at the touch of a button. There's a reason why a sales person wants you to buy immediately...because if you have a few minutes to go off and think about it and do a little research, they'll never see you again.
If you are considering taking a timeshare tour to get the freebies, here's what you should expect:
We arrived and the first thing that I noticed was that the group of people in the lobby didn't look like they could afford a $35k timeshare. When our salesperson came out, he greeted us and took us into a room with lots of tables, chairs, and balloons. He sat us down and began with the questions about where we were from, how we met, blah, blah, blah. He actually mentioned that he had only been on the job for 3 weeks. My guess is that the average tenure is not much longer than that.
Knowing that the next round of presentations wasn't until 12, my girlfriend and I figured we probably had 2 1/2 hours to sit through and we were right. After the fake chit-chat, we opened the "workbook" where he began to ask us questions about our ideal vacations. Knowing the cons of timeshares, we purposefully stated things that we knew timeshares couldn't fulfil. Such as we enjoy traveling spur of the moment, going to off-the-beaten-path destinations, and the flexibility of choosing from a wide array of accommodations. I got a kick out of the fact that he only wrote down the ones that he wanted and that he had a good comeback for. I actually stopped him and made him go back and write down the others.
When he saw the pros and cons list wasn't really working out, he went on to the next page, which was "rent vs. own." I got a kick out of this as well, because they try their best to equate timeshare ownership to home ownership. Of course the two are completely different, but they play on the fact that "everyone wants to own." We continued to come up with good reasons why "renting" on vacation was optimal, so he brought over his manager for a little chit chat and convincing. We played along.
Next they did a little "cost analysis". He asked us what we spent on vacations, and we stated about $800 a year. So he said over 30 years, we'd be spending $28,000. "Did we really want to waste all that money?" Of course, when I pointed out that the fees on a timeshare (maintenance, points network, etc) are fairly comparable, they tried to glaze over that fact by saying that "as long as you refer 20 people a year, you don't pay maintenance fees!" Wow. They also tried to convince us that the $28,000 would be more like $75,000 because of inflation. It is amusing to me that they don't do the flip side and calculate the $30k sales price, 30 years of maintenance fees and network fees, and the cumulative interest from the sky high interest rate.
Next we got around to the portion where they show us the website. We both laughed when one of the "benefits" was "discounts at restaurants" and the domain in the browser clearly showed entertainment.com. I stated I already bought an entertainment book for $15 from work, so I already had access to those discounts.
Finally, we got to the portion where we took the tour. We got in the salesperson's humongous diesel truck and drove a few miles down the road. The ride was the most interesting part to me, because I got the guy a little off his script. I told him that my side business was a website about saving money (savvydollar.org) and gave him a card. We then drove past the "Bass Pro Shop" where he said that he was approached for a timeshare demo just a month earlier. He then showed us his drivers license picture where he had long hair and a scruffy beard and told us how they told him he needed to shave and come back in a tie. He also told us that things were going well in his first 3 weeks, and that he had even sold 2 timeshares in the same day and had been salesperson of the week for selling the "gold" package to a football player the week before. (This is where I felt a little sorry for this guy. He sounded like an honest Joe...working for a living...trying to move up in the world. I really don't believe he understands what he is selling....or what he bought himself. ) He also had a New Testament bible in the console between the seats. My gf and I wondered later if that was part of the show.
When we arrived at the "resort," my gf and I were really surprised at how dingy it was. Seriously, you'd at least think they would show you the good stuff, but this was seriously in need of a good cleaning. It certainly didn't have the "luxury" feel.
We tried to hold in our chuckles as we looked out over the balcony and the sales person let out a "Ahh..." at the beauty of the beach. We laughed later because it was obviously overcrowded and dirty.
On the drive back, I told him that I might consider timeshare ownership, but only on a resale. I said that I would never buy something full price that I could buy at a 90% discount on craigslist or eBay. (This is where my gf says that she saw the confusion on his face -- that perhaps he was unaware of that and was wondering whether he had made a wise purchase himself.) When we got back, he was ready to get rid of us, but still put on a fake "so are you ready to buy?" He gave us a $25k price tag for a 12,000 point package, and we just smiled and said no. He brought over his closer, who honestly didn't try very hard, but he did give us the "teacher's discount" with some other lines about "we'll pay this and that" the first year. I would love to know what other creative "discounts" they make up on the spot.
We finally got out of there...after 2 1/2 hours...and got our $100 gift card. The "2 night vacations" weren't worth the paper they were printed on (full of "notification in writing" clauses) so we tossed them in the garbage. I called the automated visa number to ensure there was $100 on the card.
In the end, it was sort of fun if you go in knowing enough about timeshares, resale, points systems (RCI), etc. After an hour of reading online, you'll likely know more than your sales person. We figured the return on our time was pretty low ($20/hr each), but it was sort of a fun experience, paid for our gas down to Myrtle Beach, and gave us plenty to laugh about on the 3 hour drive home that evening.
So, what should you do if you fall for their sales pitch? Well, there's still hope. If you signed the contract in the last few days, you may be able to wiggle out of it thanks to your "right of rescission." This means that you typically have 3-7 days (depending on the state you live in) to cancel the contract you signed.
Tuesday, June 3, 2008
Here are some of the advantages of a 529 plan:
1. Anyone can contribute to a fund -- This means that parents, grandparents, friends, and even the child can contribute to the fund.
2. Tax Savings -- The earnings are tax free, and that's a lot of savings when compounded over 18 years.
3. Easily Change Beneficiary - If the original recipient does not attend college, the beneficiary can easily be changed to be another family member.
4. No Harsh Withdrawal Penalty -- If the original designated person receives a scholarship, (or meets a few other conditions such as going to a military academy) the only withdrawal penalty is to pay the tax you would have paid anyway on the earnings. Now that's what I call a no lose proposition. (If you withdraw the money for a non-qualified reason, there is a 10% additional tax on the earnings, but not the principal.)
Now that I have you convinced that a 529 is worth thinking about, you should know that each state offers a different plan, and you are eligible to pick almost any of the state plans you desire (not just the state that you live in). However, if you (or whoever will be making the contributions) are an NC resident, and plan to stay in NC, the North Carolina 529 is an attractive option. If you are not a resident of NC, or plan on moving sometime soon, your best option is the Utah plan. Let's take a quick look at both.
There are three facets that distinguish between plans and that quickly take large groups out of the running. Those three items are total fees, tax benefits, and fund options.
The North Carolina plan offers low administrative fees, the option to invest in diversified Vanguard funds (low fees, stellar reputation), and offers a tax break to residents. (The $2500 allowed deduction for a single person and $5000 per couple results in tax savings of approximately $175 and $350 per year, respectively.) The fees for the NC plan are 0.25% of the average balance throughout the year, and are in addition to the fees (also about 0.25%) charged by Vanguard. While you also have an option for Seligman funds, their fees are significantly higher. You can find out more at the official website at www.cfnc.org/site/nc529/main/overview.jsp.
If you (or the person making the contributions) will not be a NC resident for the long term, Utah offers a very good alternative. You will not get tax credit if you are not a resident of Utah, however, their "maintenance" fee is capped at $20 per year and the funds charge a set 0.25% administrative fee. Utah also offers Vanguard funds, so it is easy to compare apples to apples when comparing with North Carolina's plan. You can find out more at the official website at www.uesp.org.
So as you can see, the only real difference is with fees and tax deductions. As a NC resident, the tax break seals the deal, but you really can't go wrong either way. The only real mistake you can make here is not opening an account.
Dan Griffin holds a Master's Degree in Business from the University of North Carolina, and is founder of SavvyDollar.org.
Thursday, May 8, 2008
Monday, May 5, 2008
We should be thankful that we had a free-ride for such a long time. The price of gas has gone up slowly...too slowly in fact. In 1918, the price of gas was about $.25 per gallon. Inflation adjusted, that brings it to $3.50 in today's dollars. Pretty much where prices stand now. Source
In the last 90 years, supply surged faster than demand and the price decreased (I'm over simplifying a bit here, but for the most part this is correct). Now, with India and China growing at staggering rates, the demand is catching back up with supply. I ran some quick calculations based on the oil consumption data from the CIA factbook.
Oil consumption per day
US: 20.8 million barrels/day
India: 2.438 million barrels/day
China: 6.93 million barrels/day
US: 304 million
India: 1.13 billion
China: 1.32 billion
Oil consumption per person per year:
US: 24.97 barrels per person per year
India: 0.78 barrels per person per year
China: 1.91 barrels per person per year
So as you see in the numbers above, we are consuming roughly 10-20 times the amount of oil per person than our counterparts in India and China. So just imagine what happens when China and India catch up to us! How expensive do you think gasoline will be?
We better start looking for better and more viable fuel sources quick...or $4 gasoline will be just a fond memory we tell our children!
Monday, March 3, 2008
1. Using cash doesn't offer any protection that credit cards provide. If you have a "situation" with a product or a store, your credit card company can be your best advocate.
2. If you carry lots of cash, you can lose lots of cash. If I lose a credit card or it "falls" out of my pocket thanks to the help of a quick-handed thief, it's easy to cancel. Even better, credit card companies limit your liability on fraudulent purchases. Usually with $0 deductible. Try getting back your envelope full of money!
3. The envelope method encourages overspending. I know that sounds counter-intuitive, but if you have $50 in this week's "restaurant" envelope, you are more likely to spend it. Perhaps you decide to order the dessert or a glass of wine that you wouldn't ordinarily have purchased just to use up the money in the envelope.
4. Credit cards allow you to hold onto your money longer. Having one bill at the end of the month allows me to hold onto my money longer, and earn interest longer.
5. Credit cards offer rewards. My current credit card offers 1% cash back on every purchase and 3% on gas. That money is automatically credited to my bill each month. So by paying cash, I'd be paying 1% more for most everything.
6. Paying with cash is a pain in the neck. I can't stand paying for something that costs $13.27 and getting back tons of coins. Or how about going to a sit-down restaurant where your bill including tip is $18.50. What a pain to have to try to make change.
I know it is popular to tout of the evils of credit cards (Dave Ramsey). Just remember, like every other business, credit cards are in business to make money. But you can play on your terms. Treat your spending like real money and pay it off every month. If you do, you'll come out ahead.
Saturday, February 9, 2008
It's good news that the industry is phasing out the standard incandescent lightbulbs....you know, the kind we've used for years. They are replacing them with the Compact Fluorescent bulbs which you've no doubt seen gracing the aisles of your home improvement store, and have even slowly made their way into drug stores and grocery stores.
The good news is that not only are they better for the environment (by using less energy), but they also are a good deal for you....the person paying the energy bill. On average, you will recoup the money you spent on the new bulbs in about 6 months.
If you are replacing a 60 watt bulb with a 13 watt CF bulb, you save 47 watts per hour. Let's say that you burn a bulb on average 4 hours a day. That means you save (47x4) 188 watt hours per day. Multiply that by 365 days = 68,620 watt hours....also known as 68.6 kilowatt hours.
In my home market of Raleigh, NC, 1 kilowatt hour costs $0.095. (To find out how much 1 kilowatt hour costs you, just check your energy bill.)
Therefore assuming 4 hours per day for a year, you'd save (68.6 x .095) $6.51 per year per bulb replaced. Considering the bulbs cost only $2-$3 these days...you get your payback in just a few months.
Here's a quick spreadsheet to help you figure your payback.
Tuesday, February 5, 2008
I read an article this morning on "Avoiding Frugality Burnout." One of the pieces of advice that the author gives is to treat your "couponing" like a game. I couldn't agree more. Treating it like a game makes it much more doable. Have fun with it...laugh at yourself.
Does saving $30 on groceries this week really make that much difference in the grand scheme of things? Not really. But by treating it like a game and enjoying the "thrill of the hunt," the savings begin to add up ...and up....and up.
One of the more enjoyable aspects of couponing is having others to compare to. Even if my girlfriend "wins" this week -- because I save 68%, and she saves 70%....we just had fun and saved tons of money. It beats spending $8.50 per ticket to go to the movies!
So don't fret if you had a bad spending week. Just play the game again this week and vow to win this time. If you had a great week last week, try to beat your best "score." It's a win/win.
Sunday, January 13, 2008
So, as I do with most things, I wanted to put this to the spreadsheet test. My current car is a 2000 BMW 323i, worth about $8k.
I will compare this to the 2008 Nissan Altima Hybrid and the 2008 Honda Civic Hybrid -- two hybrids I have considered. Both which qualify for $2k and $1k, respectively, for federal tax credits.
First, let's calculate what our gas savings would be with two new hybrids vs. my BMW.
Since I only drive about 10,000 miles per year, my savings would only be in the $700/year range (depending on the hybrid car).
Next, we need to figure out several calculations to answer the following questions:
Does the hybrid have a federal tax credit?
What is the expected depreciation?
What is the expected maintenance?
What registration and taxes are involved in buying the new hybrid?
What is the cost of the loan?
Are there any incentives from the hybrid manufacturer?
I have plugged the answers to these questions into the pasted spreadsheet.
As you can see from my calculations, keeping the BMW or going for the hybrid produce roughly the same 3 year projected cost.
So as you can see, based on my calculations and assumptions for unpredictable costs (maintenance, depreciation, etc), the Altima should have roughly the same total 3 year cost of around $10,200-$10,400. The Civic Hybrid however, will have a slightly higher 3-year cost at a little over $11,000. All of these, however, are in the same ballpark and within a margin of error on my estimates.
Conclusion: In my particular situation, both of these Hybrids will have roughly the same cost over the next 3 years as my current car.
The upside would be driving a new car and feeling a little better about my carbon output.
The downside is, with all due respect, that neither a Civic nor an Altima compare to the handling or the fun of a Beemer. So for now, the BMW is staying put.
You can try this spreadsheet for yourself below:
Monday, January 7, 2008
Here are five reasons why I CAN'T STAND them:
1. They have less value than actual money.
I know some will argue that a $20 gift card is worth $20, I say it is worth much less. The reason is because a $20 dollar bill, has no terms and conditions. I can spend it anywhere, anytime. I can save it and use it later. I don't have to spend it all in one place. I can't do any of those things with a gift card.
2. The fees.
Some gift card companies have the audacity to charge fees! Inactivity fees, activation fees, and even a fee for checking the balance! That's outrageous.
3. Balances go unused.
It's pretty common that when I receive a gift card, I have a hard time finding something within that store that I actually want. I don't want to get ripped off, just because it is a gift card, so I'm not just going to waste it on random things. So what happens is that a fraction of the original never goes used. Apparently I'm not the only one.
Freakonomics authors Dubner and Levitt report in the NY Times that 10% of the gift card balances never get used. That's $8 billion dollars that goes unused every year!
4. I may not want something at whatever store it is that you think I should want something.
While I don't want to be unappreciative, it happens quite often that I get a gift card for a store or restaurant that I have no interest in going to. The good news is that ebay and gift card trading sites like CardAvenue have made it easier to get rid of these and trade for something you'd rather have.
5. Giving me a gift card may actually COST me money.
Again, I hate to be unappreciative, but giving me a $20 gift card to a restaurant is basically the same as handing me a bill. There aren't many places where a couple can dine for $20, so unquestionably, I'll have to add to the gift card balance with my own funds.