Your Debt Makes Decisions For You

Posted on May 16, 2008

The thing about debt is that our financial systems are setup to make it as easy as possible to spend money you don’t have. Your mailbox is littered with credit applications, and if you sign up at a store they give 15% and you are approved in about 3 minutes. At a car dealership all you have to do is sign a few papers. Even a mortgage is easy, although you have to sign a lot more papers. Thousands of dollars can transfer hands in a few minutes, and you are usually left with a depreciating asset and the obligation to pay back the money they gave plus whatever fees and interest they decide to charge you.

The ironic thing is that we often think we are buying stuff that we think will make our lives easier and more free, when in reality we just gave control of a portion of our earnings to someone else.The fact that you gave someone else control of some of your money means that they have a say in what job you work, how much you will save, and how much you will spend.

Now you can’t quit your higher paying dead end job that you hate to take a lower paying job doing exactly what you dreamed about all your life. Can you save $500 a month for some goal that you have always dreamed off? There is a good chance that Wells Fargo, Chase, Amex, or Honda will let you know that there are a lot of things that you can’t do now.

For those that trying to get out of debt or those that think I am overlooking the benefits of debt, do this calculation. Total up your monthly debt payments: mortgage, student loans, car payments, credit cards, everything. Now divide that total by the amount you take home after taxes and you will see what percentage off your own money you aren’t in control of.

Scary, depressing? It was to me. After getting rid of $70,000 of debt, we just have a small mortgage left. It represents about 10% of our take home pay, which means I am in total control of 90% my money. The encouraging part is that you can do something about it! It might take a while, but it is worth it.

» Filed Under Debt Elimination, Psychology of Debt, Spending

What Exactly Is The Stimulus Check? Not A Rebate?

Posted on May 14, 2008

As I discussed whether it’s our patriotic duty to consume our rebate checks, I started thinking that I didn’t fully understand what the ‘rebate’ check is anymore. Everyone calls it a tax rebate check, but it seems to have morphed into a handout or something else along the lines. Originally, it seemed like it would be rebate on our 2008 taxes based on our 2007 returns.

It doesn’t seem to be that clear cut anymore. Even the language of the media and the IRS website don’t seem to mention rebate anymore, just payment. Is it a handout? Is it a rebate? A modified one time tax cut? Let’s dig into a few specifics to try and figure out what it really is.

First it isn’t taxable income or a rebate, since your 2007 and 2008 taxes won’t seem to be effected. A rebate is a refund for money you paid. According to the IRS :

It’s not taxable, and it won’t reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return. (1)

The next thing of note is that some groups of people are eligible who don’t pay taxes.

Families with children under 17 generally will qualify for an additional payment. Some people with no tax liability also will qualify. This includes Social Security and Railroad Retirement beneficiaries, recipients of certain veterans’ payments, low-income workers with earned income and/or benefits of at least $3,000 and individuals who have combined income of at least $3,000 from any combination of these sources. (2)

So there is an element to the stimulus package that includes handouts. Depending on your stance that may be fine, but it wasn’t how the original package was ’sold’.

Finally, the benefit starts to phase out for people “with adjusted gross incomes (AGI) over $75,000 and married couples who file a joint return with AGI over $150,000.(3)” Some people will get no stimulus.

So it what it looks like is a one time tax cut, with a hand out portion, for middle and low income people. No rebate, just government borrowing money to hopefully support our overconsumption in hopes that it will stimulate the economy. Overconsumption could be argued as a big reason why we need economic ’stimulus’ in the first place. And I thought they had a plan to pay the money back with 2008 tax money…silly me. Borrow and spend without a plan, a basic tenant of solid personal finance, right? Either way, I am personally glad to receive a $1,500 check in electronic mail, but I at least want to know what the money is and were it is coming from.

Source :
(1) - IRS Basic Stimulus Information
(2) - IRS Stimulus FAQ
(3) - IRS Stimulus Phase Out

» Filed Under Spending, Taxes

To Stimulate Or Not To Stimulate?

Posted on May 12, 2008

The Happy Rockette mentioned something about our stimulus check that got me thinking. We already have a plan to spend the money on some improvements to the condo. We can enjoy then for the next year our and they will help our house sell when the time comes. I mentioned that the $1500 would look pretty nice in our down payment account, and she hinted that we should use the money for its designed purpose….to stimulate.

She was being somewhat tongue and cheek to counter act my subverting of the plan, but until that moment I hadn’t considered that people might feel obliged to spend money to ‘help’ the economy. In my opinion, the money was ours not the governments and we are free to do whatever we chose with it. This includes paying consumer debt, if we had it, or even throwing it under the mattress. Is it our patriotic duty to spend the money? Will it even make a difference? Thought-provoking questions.

To help answer the question I did a little digging into what kind of effect stimulus payments can have on the economy. Here are a few quotes from the Congressional Budget Office(CBO) on the matter :

“Most studies of purely temporary, one-time changes in taxes have suggested that they have only a moderate effect on household consumption,” the CBO said, noting studies of a rebate issued in 1975 “suggested that only 12% to 24% of the rebate was consumed in the quarter that it was received.”

CBO said though “the experience of the 2001 tax rebate appears to differ from the findings of these earlier studies.” CBO noted the 2001 rebate was part of a broader tax package which lowered tax rates and applied those reductions retroactively. In 2001, most households received rebate checks of either $300 or $600 from late July 2001 to the end of September 2001 during a recession.

“Most analysts agree that the 2001 rebate stimulated the economy,” CBO said, “although there is some debate about the magnitude of the effect.” Households, according to one study, spent between 20% and 40% of their rebate amount in the quarter in which the rebate was received.*

So it looks like there is potential for the stimulus checks to infuse economy with a little money, but there is plenty of debt as to whether our government borrowing money to give to people to spend will do anything to truly stimulate the US economy.

So the question remains stimulate or not to stimulate, what’s your answer?

*Source - The Winners and Losers of the Stimulus Package

What Exactly Is The Stimulus Check? Not A Rebate?

» Filed Under Spending, Taxes

The $400 Phil and Ted’s Stroller - Dissecting The Purchase

Posted on April 28, 2008

Sticker shock. That is probably your first thought, I know it was mine when The Happy Rockette first told me about the stroller. A little more than 3 months later, we own one! See the picture below for a quick look or click here for an in depth look at PhilandTeds.com.

Here are the criteria I used to evaluate the purchase and why I think it was a great purchase:

Pay Cash. The Rockette had been working every other Saturday to help out at her former job and decided she wanted that extra effort to go towards something. We had the money in two weekends or so. That month gave us some time to do some extra research and really get behind the purchase.
Aligned With Our Values. Being in a small condo, going outside is a must. We love going the park and hiking the trails, walking the boardwalk, going to museums, etc. With the addition of Pebble Jr. two strollers just made everything much more of an ordeal. The purchase would help us cope with a small house, provide us with much more convenient time outside, and contribute to the positive welfare of our children.
Get Good Value. Could we have gotten a $200 double stroller? Sure…so that what did we get for the extra $200 dollars.
- When we went to the store to check the stroller out in person, it was quite apparent that this stroller had years of research and design put into it compared to the other double stroller. It folded up smaller then our current one seater. Size is a big deal for double strollers. It provided multiple child configurations that accommodated our baby and a toddler all the way to two toddlers. The current setup has the Pebble Jr. laying down, and the Big Pebble perched on top. There was even enough room to change the Pebble Jr. which has come in quite handy. Handles are adjustable, covers and rain protectors are easy to use and store nicely, it is easy for The Rockette to push, and the list goes on. The value is in the design.
- Pretty much everyone who owns a Phil and Ted stroller raves about it. Not in an I drive a BMW or Mercedes kind of way, but in a “it’s made my life so much easier” way.
- The resale value on used strollers was not much less than brand new, usually $300 or more. This is an indicator of people’s willingness to pay and the quality of the product. It also helps justify the purchase to know that you can unload the stroller and get a decent portion of the purchase price back.
Get A Good Price. We searched for about a month until with found a new one for $399 with free shipping from Pish Posh Baby. I even emailed to see if there were coupons available, but they didn’t respond until they included a coupon code for pishposhbaby.com with my order. You can get 5% with the code Save5 though 5/30/2008.

So far we are very happy with our purcahse, even though I still have a little sticker remorse from time to time when I realize the the stoller is almost worth the same amount as my car. What do you think? Am I crazy and just justifying a silly purchase?

» Filed Under Cash, Children and Money, Spending

Sleep Your Way To Better Finances

Posted on April 25, 2008

With the car breaking down on Sunday and still having a ton of work to do for the 149th Carnival of PF, I ended up only getting 8 hours of sleep on Sunday night. I can survive, and ten years ago I wouldn’t have thought twice about it. The thing I noticed for the next 48-72 hours was how much that lack of sleep effected my whole life. I was much more pessimistic, less energetic, less patient, less productive, and grumpy. Since I have been getting fairly consistent sleep for about two years, I didn’t realize how good I felt. I have even felt more energetic and rested since I went mostly vegetarian and have been eating healthier. When we constantly deprive ourselves of sleep we tend to acclimate to limitations on how we feel, how we act, and how much we can get done. Changes, both positive and negative, take a while to show themselves. During that time we easily forget how we feel until we experience something different sometime down the road. Those differences can have a huge impact on every area of our lives, espcially our finances. Below is a list of ways that our finances can be directly affected by lack of sleep:

Increased food costs. When we are tired we tend to eat out a lot more or by more expensive pre -packaged food.
Increased risk of accidents and sickness. This includes driving and normal around the house type injuries. These types of setbacks can cost money for medical services and oppurtunity cost at work and other endeavors.
Lower self control. The lack of control can lead to increased extraneous spending and debt.
Lack of energy and productivity. This means no energy to sell stuff on eBay or Amazon or to invest in other extra income tasks, perform well at work, or invest in budgeting and financial planning and learning.
Lose of creativity and intellectual prowess. Have you been stuck on how to solve a money problem? Well, research shows you really could find the answer in your sleep.
Grumpiness and impatience with others. This means less communication and teamwork in a marriage or with people who can keep you accountable. It means less satisfying relationship which will directly effect happiness and ultimately your wallet.
Pessimism and depression. In just a few days, I saw how quickly my outlook was effected in negative ways. Getting out of debt and having financial discipline isn’t easy and you need all the help you can muster.

So next time that you want to stay up late to watch some movie you have seen 5 times already, play a Wii game, or spend some not so productive time on the internet, remember what it might cost you. Some of you may be thinking that it doesn’t matter how much sleep you get because you feel about the same no matter what. I will tell you that I used to feel the same way, until with the Rockette’s help, I was able to consistently go to bed and wake up at similar times for an extended period(months). I didn’t realize how good I had been feeling, until I didn’t get enough sleep and felt like my old self again. If you are getting around 8 hours of sleep consistently and you still feel bad, it might be worth having some sleep tests done to make sure there aren’t any apnea or other sleep issues.

There is plenty of research on the benefits of sleep, but I don’t think we even need to go there. In my experience a little experimentation and anecdotal evidence will give us all the ‘research’ we need. Solve your sleep problems and your finances will most likely show a marked improvement.

» Filed Under Careers, Debt Elimination, Happiness, Health, Marriage, Spending

The Best Cash Back Credit Card Analysis For The Happy Rock

Posted on March 31, 2008

About a month ago, I switched my only credit card from my Sunoco Mastercard which I have had since college to the Chase Freedom card. Why? Because I was leaving money on the table since I wasn’t taking advantage of the new breed of cash back cards that have come out in the last few years.

Using my spending history I was able to quickly see how my Sunoco Card matched up to my other options. My Sunoco card offered 4% cash back on all Sunoco purchases and 0.5% up to $7,500 then 1% on everything else. It should be noted that when I called to cancel, they offered me six months of 5% back on gas and groceries. I probably should have taken that deal and waited to switch, but I was to intent on canceling. It is at least good to know that even credit card rewards can be bargained through a simple call and some competition.

The Chase Freedom Card offers 3% back on $600 a month in your three highest spending categories and 1% on everything else. They also allow you to save your cash back until you hit a $200 balance and then they will send you an check for $250, an extra 25% reward. You also gets $50 cash back after your first purchase.

The Amex Blue Cash offers 5% cash back on gas, groceries, and drugstore purchases and 1.5% on everything else after you spend $6,500 for the year. Before that you earn 1% on gas, groceries, and drugstore and 0.5% on everything. This would be the best single card if you could spend $6,500 really early in the year, but for my calculations I assumed distributed spending.

In the final analysis I chose the Chase Freedom card not only because it would earn me the most cash back for my spending habits and a $50 first purchase bonus, but it is also accepted everywhere credit cards are accepted, unlike the Amex Blue Cash. I know that I could do better using the Blue Cash or using both of them, but my general principle is to keep the system simple. I personally don’t want to waste any mental energy on trying to extract an extra few dollars in credit rewards. I would rather focus on things like income generation, family, and giving that all provide much better returns on my energy. I have been happy so far with the new card, and the $50 was quickly applied to my account. The website is solid and the Chase Freedom connects directly with Quicken to save me time. I am quite The Happy Rock with my new card. Plus it is shiny and new!

If you have COMPLETE control of your spending it is probably worth looking in getting a decent cash back credit card. I probably cost myself $2,000 in the last 5 years by not switching sooner.

Just to keep the record straight, despite my affinity for Dave Ramsey’s principals I slightly disagree with his views on credit card for those that have firm control of their spending. For those that are getting out of debt or don’t have control of their spending I would recommend canceling the card until you have complete control over your expenses, spending, and bill paying. For me, I didn’t understand the responsibility of that credit requires early in college, but I learned from my defaulted Sears card experience and have not paid a finance charge or fee in 10 years. That is the kind of spending history that I would recommend attempting to use a credit card to their benefit, otherwise it will probably costs you more than the measly rebates will gain you.

Note : For those that Drive a lot the Citi Driver’s Edge offers 6% on gas, groceries, and drugstores for the first year and 1% on everything else, plus a penny for each mile you driver. With a long commute that could add up to big bucks. The one caveat is that the cash back must be used for a car purchase within 5 years.

» Filed Under Credit Cards, Personal Finance Systems, Spending

How Much House Can You Afford?

Posted on March 30, 2008

Or maybe how large a car payment can I handle?

Every were you turn online calculators and salesman are always telling us the maximum we can spend on any given purchase.

It’s the wrong question!

So you can afford a $200,000 house that has the extra big yard that, but it is 50% of your take home pay. Or maybe you can afford the next size SUV that gets 15 - 18 miles per gallon for a mere $450 a month. What the salesman and free online calculator from a site that is is trying to lend you money forgot to mention is that we are being set up for financial failure. What there aren’t telling us is that the payment is probably more money than we can handle. What they forget to mention is what happens when the dual income family loses one of the incomes or some extra medical bills roll in.

It’s the wrong question, but what are the right questions?

» Filed Under Materialism, Psychology of Spending, Spending

Easter Spending Without A Plan

Posted on March 24, 2008

I have a small confession that I need to make. We spent almost $50 this month on Easter supplies and candy. That was just for our 2 year old, since the 2 month old isn’t old enough to partake. Some of you may laugh, saying “I spent way more”, but to me that is a large sum on items that have almost no lasting purpose.

What happened? Two things, lack of planning and lack of communication. This is the first year that The Rockette and I were forced to mesh our individual preferences into our own special tradition. This normally takes some intentionality or you end up avoided the issue or fighting. We didn’t fight, so we default to each of trying to accomplish our own separate goals. Even more The Happy Pebble was inundated with stuff to the point that I think he only saw a bunch of stuff rather than a few select special items.

If we had talked about Easter spending before hand we would have had a plan for our money. As it is, the spending will come out of the money we have been putting away for adoption lawyer fees. The key here is intentionality. Even though this is a tiny sum of money, if we aren’t being intention about these decision then we set the stage for problems on larger purchases like homes and cars.

So what do we do about it. First, since we can’t return the perishable items we need to let it go. Stewing and/or blaming really won’t help. Second, we will make sure that the we have a spending plan in place before the next Easter comes. With a plan in place, I will be able to avoid the $25 spent in the local Chocolate House and come out with the one Dark Chocolate Coconut Cream Egg with my son’s name on it as I had intended.

The key is to have a plan for your money. This intentionality may look different to each person, but it will really change your finances!

» Filed Under About Me, Planning, Psychology of Spending, Spending

Frugal Tool Chest Tip #1: Get Money Back On Your Purchases With Price Protectr

Posted on March 15, 2008

The Frugal Tool Chest is a recurring series covering practical tips and tools that will arm you to save even more money on your online purchases. I

The first frugal tips involves a website that will notify you when the price drops on any of your recent purchases. How does this help? Well, most stores have a price protection policy that allow you to receive a refund if the price of the item you purchased dropped before X number of days post purchase.

For example Amazon’s policy is currently this :

Post-Order Price Guarantee

Amazon.com’s prices for released items will change from time to time based on a variety of factors. If Amazon.com’s price for an already-released item decreases within 30 days after we ship the item to you, we’ll be glad to refund the difference in price if you contact us. Please click the Customer Service button on the right side of this page, and be sure to have your order number handy so we can assist you.

So how do you protect your purchases. Going back to the item listing for the next 30 days is just not feasible, so you let a site like Price Protectr do it for you. Here is my review…

All you do is supply the link to the item you purchased, verify the when you purchased it, verify the purchase price, supply your email, and click submit. That’s it! Price Protectr will snotify you that the item is being protected and then send another email if the price drops before the price protection policy expires for the site. It really is that easy. The have a large list of sellers that they support, but they don’t support every site.

Since I was reminded of the site a week ago by a co-worker, Ray of Taco Man and Burrito Boy fame, I have saved about$5. One item dropped on Amazon twice for a total of about $4.35.

A sample Price Protectr alert email looks like this :

Price Protectr saw a price drop on the Pinzon 400-Thread-Count 100% Egyptian Cotton Hemstitch Queen Sheet Set, Sand you submitted for price protection at www.priceprotectr.com.

You purchased the item for $42.34 and it’s now $39.99! The item URL is:

Pinzon 400-Thread-Count 100% Egyptian Cotton Hemstitch Queen Sheet Set, Sand

Please verify the item and price, and review the retailer’s price protection policy before requesting a refund.

To claim your refund: Visit their contact page, click the ‘e-mail’ tab, and choose ‘Refund Inquiry’ from the dropdown list. Or contact their customer service department at 1-800-201-7575. Hitting 7 should get you to a customer service rep right away.

If you collect your refund (or try to), don’t forget to log into your My Stuff account and leave a retailer review!

To change your notification settings, go to the account setting of your My Stuff account.

Thanks for using Price Protectr!

Following the instructions in the email, I sent a brief two sentence email to Amazon and had a refund back on my card in about 24-48 hours. The email doesn’t have to be anything special either…here is what I put in the email contact page :

The price of the sheets i recently purchased dropped a $2.35 cents since I bought them, I would like a refund for the difference as the price protection policy states.

Thank you for the great service and products.

Done! It is really quite gratifying to receive a Price Protectr alert! Give a try, you bank account will probably notice.

» Filed Under Frugal Tool Chest, Frugality, Money Savers, Personal Finance Systems, Spending

Save Money By Using The Internet : A Walkthrough

Posted on October 23, 2007

For the frugal person with a little bit a tech savvy, the internet provides amazing access to deals that you would never be able to find otherwise. For learning purposes I wanted to run through the process I used to save 55% on an external hard drive.

After years of procrastination I finally decided that we should be backing up our computer’s hard drive. The amount of pictures and other important data was just too much to bear losing. Unless you have been through a major loss of data, backing up never seems important enough. If you aren’t backing up, please take this as a friendly reminder to start.

I started by searching my usual deal tools to decide what I wanted and how much I wanted to pay. First, I loaded up Amazon to decide which brands of external hard drives would be good enough and their general pricing. Other sites like Epinions and CNet are also very valuable. Western Digital and Seagate seemed to top the list and were around $100 dollars for the most common sizes. Reviews were good enough, and I was ready to find a deal. Click here for some example hard drives here :

To find a deal I started by searching Slick Deals and Fat Wallet. If you haven’t heard of these sites, bookmark them. They are communities of hardcore internet savvy people that are constantly scheming about, posting, and rating the hottest deals on the net. I found some decent deals for larger drives, but I really didn’t want to spend more than a hundred dollars. I was patient and by the weekend I had found a good deal. I saw a few posts that Staples was liquidating some smaller size drives(60gb,80gb,120gb), so I went to my local staples and saw an 80gb WD Passport for $64.50 on clearance.

Not bad, but the story doesn’t end there. A little more searching revealed that it was customer appreciation week, and by printing a PDF coupon I could save another 12%. I also saw mentions of a $30 off a $75 dollar purchase at Staples. I couldn’t find a link to anywhere, so I checked eBay and found the exact coupon with instant email delivery from a reputable seller. The recent feedback said the coupon worked, so I was willing to take a chance. I paid the seller $6 for their time spent finding the coupon and one 15 minute trip later I came home with two packs of nice pens, a 4-pack of tape, and the 80gb drive for $43 dollars. Slick deal!

I use a similar strategy for most of my ‘major’ purchases($50 or more). On smaller purchases, the time investment usually isn’t worth the savings.

» Filed Under Frugality, Money Savers, Spending

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