Credit Cards vs. the "Envelope Method"

While I realize there are quite a few anti-credit card folks out there, I can't help but point out a few downsides of the envelope method and stand-up for credit cards (who always seem to get a bad rap).

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.

Should you switch to Compact Flourescent bulbs?

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.

Avoid Coupon Burnout by "Playing the Game"

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.

Should I buy a Hybrid car?

I've been thinking lately about hybrid cars. There are several of them already on the market, and more and more coming each year. With the price of gas over $3.00 a gallon, the allure is easy to see. However, it is easy to fall into the trap of "I'll save so much money on gas!" without realizing the other costs associated with buying a new car (sales taxes, registration, more loan interest, and higher yearly depreciation).

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:

5 reasons Gift Cards make a lousy gift

Every Christmas, it seems that gift cards become more and more popular. People give them, people receive them, and the stores market them like crazy.

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.

Getting rid of cable/satellite

I admit it....I like TV. I like it a lot. I use it to relax late at night, to start my mornings with a cup of coffee and the news, and to stay current on the latest hit shows like The Office. But it kills me to pay over $50 a month for this privilege.

This week, I've been thinking about how I could reduce my expenditure on TV programming, while still having enough channels to scratch my TV itch. One caveat: I won't even consider a solution that doesn't include a DVR.

Here's what I have now:
Dish Network "America's Top 100" with Locals
HD enabled w/ DVR
Total monthly cost: $55.

After exploring several options, here is what I have decided to go with:

• Samsung SIR-T150 (HD tuner/receiver) - bought for $35 (including shipping) on ebay

• Silver Surfer HD Antenna - Included as part of the ebay deal, but these can be found for about $10 on amazon.

• DVR subscription - $6.95/month. ReplayTV 5040. (The normal monthly rate is $12.95, but I get a discount since I also still have an [inactive] Panasonic showstopper 2020 on my account qualifying me for the multiple unit discount.)

This solution will allow me to receive 6 channels in HD (for watching live) or to record them in Standard Definition (via my DVR).

My Total Savings: $48/month

If you are not a gadget geek like me, and don't have a couple of DVRs sitting in the closet, I saw plenty of Tivo Series 2 machines on Ebay/Craiglist in the $50 range. Those will require a $12.95/month service charge.

Had I started from scratch, it would have been:
$35 ebay for tuner and antenna.
$50 ebay/craigslist for Tivo
$12.95 monthly for Tivo

Curious as to whether you could receive HD channels over the air? Check out your address at antennaweb.org and find out.

Using a credit card for purchases less than $1

It seems that I'm always given weird looks by store clerks and friends when I pay for an inexpensive item (something less than a dollar or so) with a credit card. I understand, of course, that the store owner may have to pay a flat fee + % on the transaction, but I doubt the clerk knows or cares about that.
To me, using a card on these types of small transactions makes perfect sense from the consumers' perspective. Here are some advantages:

1. I don't have to get back a handful of coins.
2. It slightly reduces the purchase price (via cash back bonuses).
3. I don't have to go to the ATM constantly. ($100 in cash can last me months!)
4. Keeping all of my daily purchases on the same card can help answer the question, "Where did all of my money go?"

That being said, this only makes sense if you are paying off your "daily spending" card at the end of every month. If you aren't doing that, you're probably better off paying cash.