January 31, 2011

create your own extended warranty

Posted in budget, investing, saving, stuff I think about tagged at 7:32 pm by weiszguy

Extended warranties are almost always a bad idea.  An extended warranty is the protection plan offered to you when you buy some gadget or other.  Relative to the cost of the gadget, the extended warranty is pretty expensive, and you almost never get the opportunity to take advantage of it.

In other words, your gadget almost never breaks in the period of time covered by the extended warranty.  It may break early on, due to a manufacturing defect, in which case the plain vanilla warranty that comes standard will cover the repair.  Or it may break due to old age, which will be after the extended warranty period is expired.  Result?  You gave the company a bunch more of your money and didn’t get anything for it.

The problem is, declining the extended warranty makes you nervous.  What if it does break during the extended period?  Won’t you be upset you didn’t buy the warrant?

Try this.  Next time you are offered an extended warranty, ask what the cost is, but then decline the plan.  When you get home, take that amount of money and set it aside in your own “extended warranty” fund.  Do this every time you are offered a plan.  Eventually that fund will be really big, because you won’t ever need it.  You’ll save yourself the expense, you’ll earn interest, and if you ever do have a covered accident, you’ll have plenty of money to just buy yourself a new one.  Beauty, eh?

September 4, 2008

unemployment

Posted in budget, money tagged at 7:45 pm by weiszguy

If you’re looking for more information about my unemployment, please see the article I wrote for the Greenhorn Valley View.  Also, you can see all my columns and articles here.

September 18, 2007

save money by cutting expenses!

Posted in budget, money, saving, spending at 10:37 am by weiszguy

Ordinarily, I really like the articles that go up on http://www.zenhabits.net. But check out this post from a guest blogger: http://zenhabits.net/2007/09/put-your-spending-into-reverse-gear/

She makes the case that if you can cut back your spending slowly, you won’t even notice any pain. Which is a good point. But the details make the argument, and in this case, I think most of us would have a hard time relating. She talks about how she scaled down to the $100 jeans, and how she saves so much money by getting her morning coffee and muffin at 7-11 instead of Starbucks.

I’m all for a gradual shift into the frugal lifestyle, and I commend the author making the plunge. But having only begun her frugal journey, she doesn’t have much to offer the rest of us. Would you ask a freshman acting student for his thoughts on Richard Burton or Laurence Olivier? He might have an opinion, to be sure, but it wouldn’t be nearly as interesting, or as valuable, as an opinion from Cecil B. DeMille or Robert Altman. This is just an example by analogy, of course. The point is, if someone tells you to cut back your spending, and then offers up a personal example of cutting back to the $100 pair of jeans, how credible are they?

September 12, 2007

buying in bulk

Posted in budget, money, newspaper, opinion column, saving, spending at 9:12 pm by weiszguy

The other day King Soopers was running one of those 10 for $10 specials. They had half-gallons of milk and 200-ct boxes of Kleenex at that price. We needed both those items so I thought I’d grab a few. But when I got there the sign on the Kleenex said if you buy 15 boxes, you get an extra $5 off your total order. So I bought 15 boxes of Kleenex and 6 half-gallons of milk, and the total bill was only $16 plus tax. The Kleenex look beautiful on our closet shelf and I’m happy in the knowledge we can handle all the snot winter can throw at us. The milk is quietly taking up space in the freezer, just waiting to be thawed and poured over oatmeal.

There are two main advantages to buying in bulk. First, you can often get a discount on the purchase price. In this case, the store was using milk and Kleenex just to get me in the door, hoping I’d buy a lot of other things while I was there. Because I didn’t buy a lot of other things, I walked out of the store with some great deals. But even without specials like this, buying in bulk is usually cheaper because of the economies of large lots.

The other advantage of buying in bulk is, obviously, that you end up with a whole bunch of the stuff on your shelf at home. If you plan this carefully, it’s possible to have so many different things stocked up that you’ll only have to run to the store once a month! Imagine being able to skip your weekly shopping trip this week. I bet there are lots of other things you could do with that time. Imagine being snowed in for a week and not having to worry about food.

So save up a little money, wait for the right sale, then go crazy and get all you can (or a least enough to last until the next sale).

This article originally appeared in the September 12, 2007, edition of the Greenhorn Valley View.

September 1, 2007

one-hour projects

Posted in budget, money at 12:23 pm by weiszguy

thesimpledollar is going to post a series of one-hour projects, each of which will directly impact your financial picture.  I’m anxious to read them!

August 31, 2007

financial planning basics

Posted in budget, credit cards, debt, money, newspaper, opinion column, retirement, saving, spending at 9:13 am by weiszguy

There are several principles at the core of any good financial plan. The first and foremost is this: spend less than you earn, and do it for a long time. And while that doesn’t sound like a lot of fun, it is the only way to get ahead. Over time the few extra snowflakes you don’t spend can turn into a giant snowball, growing more massive with each passing day. But if you don’t seed that snowball with those first few flakes, all you’ll get is – flaky.

Once you decide to spend less than you earn, you’ll be faced with a question: what do I do with the extra? There are many options, of course, but an excellent place to start is with your employer’s retirement plan. The match that your employer contributes to your plan is all gravy – it’s instant profit. To top it off, all the money in the retirement plan usually has quite a while to grow, and in the investment world, time is money.

Once your retirement plan is on autopilot, you should tackle any consumer debt you have, including your credit card debt. Paying a little extra each month on a credit card with an interest rate is the same as earning that same rate in an investment. What I mean is this: if your credit card is charging you 12.99% on your unpaid balance and you send in an extra $100 next month, that $100 is actually earning you 12.99%. This is a rate of return that’s tough to beat without taking a fair amount of risk. (By the way, if you don’t pay that extra $100, the credit card company is earning the 12.99%. Now you know why they’re so anxious for you to carry their card.)

If your credit cards are properly whipped into shape, you should think about building an emergency fund. This is money that will be available to you in case of emergency, so you won’t fall back into the credit card trap. Start out by building up one month’s worth of living expenses. Now when you have an emergency (and that killer pair of shoes at the unheard of sale price is NOT an emergency), you’ll have the money to cover it. And when you don’t have an emergency, that money is sitting in an account quietly earning you interest.

It doesn’t matter what stage of life you are in, or how many of the above principles you have already addressed. Start wherever you are and just take the next step. Once you have addressed all these principles you’ll be in a much better place to begin to think about other investments.

This post originally appeared in the August 29, 2007, edition of the Greenhorn Valley View.

August 22, 2007

to give or not to give

Posted in budget, credit cards, debt, giving, money, saving, spending at 7:36 am by weiszguy

Have you started saving for the holidays yet?  Believe it or not, they’re right around the corner.  And with the holidays come the crisis we love to hate – gift giving.  Although we save throughout the year, it seems like we never have enough money to give the gifts we want to give.  So we have some options: we could borrow the money we need to give the kind of gifts we want to give, we could limit our gift-giving to just the amount of money we have on hand, or we could not give anything.  We’ve tried all three options at different times, and all three have their pros and cons.

Borrowing money to give gifts is the easiest way to meet the social expectation of giving.  You’re going to receive a certain amount of gifts and you should give a similar amount.  Borrowing money from your credit cards allows you to meet that obligation without any social pain.  You look like a generous giver, and nobody has to know you’re now in debt.  And that’s the negative side – debt.  Borrowing money requires you to repay, and many people end up repaying well into the summer.

Or you could try limiting your spending on gifts to just the amount of money you currently have available.  The advantage here is you incur no new debt – nothing to repay!  The disadvantage, of course, is that you might not be giving as much as you’d like to give, or as much as you feel like you should give.

One year we didn’t have any money saved up, and we couldn’t borrow any, either.  So we ended up not giving anything to anybody.  Even if you’re at your counter-cultural, rebellious, anti-capitalism, hippie-loving best, I don’t recommend this choice.  We ended up receiving gifts from people we knew weren’t any better off than we were, but we gave nothing in return.  We felt ungrateful, unappreciative, and cheap.

So what should we do?  What do you do?  We have to give something, but don’t have the cash, and don’t have the desire to borrow.  The best solution I can think of is to be more diligent about saving larger amounts throughout the year, but that’s a plan best implemented in January, not August.  Does anybody else experience this dilemma?  How do you work through it?

This article originally appeared in the August 22, 2007 edition of the Greenhorn Valley View.

August 17, 2007

advice from Poor Richard

Posted in budget, debt, money, newspaper, opinion column, saving, spending at 8:40 am by weiszguy

Many estates are spent in the getting,
Since women for tea forsook spinning and knitting,
And men for punch forsook hewing and splitting.

Thus Poor Richard explains in one of his famous almanacs.  Read it again; 300 year old quotes sometimes require a couple readings to soak in.

Many estates are spent in the getting means that many people are spending, or never earning, great amounts of money; money which, if properly sown and cultivated, would provide that person a large living.

There is little question that human passions and desires (desires for things, leisure, and renown, for example) pull at us and cause us to spend excessively.  How many times have you bought this year’s sandals when last year’s are still in perfect shape?  How many times have you neglected work because you had already done enough to get by, even though a little more would provide exponential returns?  Pushing past these desires and looking just a few minutes into the future can be an extremely profitable endeavor.  If you begin to look, you’ll find small amounts of money turning up under all manner of rocks.

Since women for tea forsook spinning and knitting, and men for punch forsook hewing and splitting.  How often have you chosen a social engagement over completing the task at hand?  How often have you chosen to toss back a few at the expense of a profitable enterprise?  If you’re like me, this happens all too frequently.  We can’t forgo all pleasure, of course, and unhappy is the man who makes the attempt.  Nevertheless, we should make every effort to complete our work before engaging in other activities.  Have you performed your job superbly?  Have you hit your quota for the week?  If so, your leisure will be sweet; if not, the most luxurious of locations will not make you feel truly relaxed.

Follow Poor Richard’s advice.  Work diligently until your work is done.  And then sit back and enjoy the fruits of your labor.

This post originally appeared in the August 15, 2007 edition of the Greenhorn Valley View.

August 9, 2007

getting out of debt

Posted in budget, credit cards, debt, money, newspaper, opinion column at 6:06 pm by weiszguy

There’s an old saw that says, “If you find yourself in a hole, stop digging.”  I think most people intuitively understand this to be true.  Still, it can be very difficult to apply this in real life.  Let’s say you’re in debt up to your eyeballs; your credit cards are maxed out, you have two car payments, and you owe a caring relative for the down payment on your home.  Is the solution as simple as “stop digging”?  How do you begin to stop digging?

One very important step, one that people don’t realize exists, but that is of vital importance, is to learn to hate debt.  Debt is your mortal enemy.  Debt will kill you in worse ways than physically.  Debt will gnaw at you, preventing you from being at peace.  Debt must be eliminated at all costs.

One way to begin eliminating debt is to minimize your expenses.  This frees up more money that you can throw at your debt.  There are usually several expenses that can be trimmed.  Have you shopped around for auto insurance lately?  How about homeowners or renters insurance?  Prices for these products are usually all over the board, and spending a few minutes comparing rates might save you a ton.  Other areas where you may be able to save a little are dining out, shopping discount stores, and cutting a car from your household.

Closely related to trimming expenses is increasing income.  Can you get a part time job?  Can you work extra hours at your existing job?  Can you ask for a raise or promotion?  Obviously, earning more money will help your bottom line.  Just be sure the extra income isn’t being wasted.

Another step many people don’t realize exists is to look for sources of encouragement, not discouragement.  The most expensive friends you can have are the ones who spend for fun.  Look for people who enjoy hanging out; having a friend over for dinner satisfies more than your wallet.  Read about simple living.  Rent movies instead of going to the theater.  Grow a garden.  Make a game of saving, and enjoy the hunt.  And remember to keep your chin up.

This article originally appeared in the August 8, 2007 edition of the Greenhorn Valley View.

July 18, 2007

bankruptcy

Posted in budget, credit cards, debt, money, newspaper, opinion column, spending at 1:01 pm by weiszguy

This is my column from the July 18, 2007 edition of the Greenhorn Valley View (registration required):

To be bankrupt means to not have the ability to repay what is owed. You can work yourself into this condition slowly, or it can be thrust upon you quickly.
Business debts and medical debts can rack up quickly and leave your head spinning, without the faintest idea of a clue about how to repay. In these situations, it might be best to forget the whole thing ever happened, and seek legal discharge from your debts.

Or you could simply be living outside your means, spending slightly more each month than you bring in. Over time, this little bit of extra spending can result in maxed out credit cards, massive home equity debt, and payday loans, among other things. Obviously, you are more at fault in this case than with the business or medical case. But even then, legal discharge may be the way to go.

But how do you know if bankruptcy is the right course of action? On one hand, you made a promise to your creditors that you would repay them. This is money you have a moral, ethical, and legal obligation to repay. Imagine how your wallet would feel if you loaned someone some money and they ran off without repaying.

On the other hand, the hole you find yourself in may be too big to climb out of. Short of a rich uncle kicking the bucket in Nantucket, there may not be a way out. The debtor’s prisons of yesteryear were filled with people who were effectively serving life sentences – people without any hope of ever being able to repay.

Bankruptcy is the chance to start over again. Erase all your debts (and assets) and start fresh at ground zero. Like anything else, however, there is a cost. Bankruptcy will show up on your credit report for ten years, which means no one will want to lend you money. And if they do, you’ll pay sky high interest rates.

And if you do consider bankruptcy, don’t forget to consider what got you into that mess in the first place. Are there any bad habits you need to consider? Are you going to repeat the behavior that caused the problems, or have you changed something so that this won’t happen again? The worst thing that could happen is to get a fresh start, only start digging yourself a new hole.

In general, I don’t encourage people to consider bankruptcy. But I don’t automatically rule it out, either. By all means, repay every penny that you owe. But if you don’t have any pennies, it might be beneficial to chew the matter over with someone you trust.

June 5, 2007

Jonses

Posted in budget, money, newspaper, opinion column, saving, spending at 11:22 pm by weiszguy

My column from the Greenhorn Valley View, on June 6, 2007: 

My family and I are half way through our little experiment.  We’re not spending any money for a whole month.  In spite of a couple interesting insights and anecdotes, I can’t wait for this to be over!  Forcing myself not to buy something I want, even when I have the money, takes a high degree of discipline that I would rather not exert.  Friends and family aren’t too keen on our experiment either.  More than once we’ve had to decline an activity with friends because we couldn’t spend money.

Things have gotten interesting around on the home front, too.  My daughter (9) questions every purchase we make, asking if it is a “necessary expense,” even making the little quote marks with her fingers.  When did she become the voice of my conscience?  My son (10) was walking through Walmart with us when something caught his eye.  “Man,” he said, “not being able to buy things makes me want to buy even more.”

I think he’s on to something.  I think discontentment might be the root cause of most of our society’s overspending.  For a variety of reasons, we’re not happy with what we have.  We secretly hope spending will make us happy, maybe fill some void that needs filling.  The little thrill of the new purchase makes us temporarily forget something we’d rather not face.

Then, of course, there is the desire to keep up with the Joneses.  Naturally, since we derive our view of ourselves by comparing ourselves to the people around us, we will always want to be a half a notch better than the Joneses.  Is it possible to forget about the Joneses?

Or maybe forgetting about the Joneses isn’t even desirable.  Capitalism is an economic system built on man’s inherent greed.  Yes, greed is bad, but since it is impossible to eradicate, capitalism seeks to turn an inevitable evil into an economic good.  Because people are hungry for more, inventions are invented, jobs are created, diseases are cured, and our environment is overall improved.

So this is where we are.  We’re combating our desire for more by curtailing spending.  And while we expect that our family’s finances will improve, we’re confused about the overall role spending plays in our lives and in our culture.  Talk back in the comments section below.

May 30, 2007

the b word; in which I never actually use the b word

Posted in budget, money, newspaper, opinion column at 7:49 am by weiszguy

My column for the May 30, 2007 edition of the Greenhorn Valley View:

Do you have too much month left at the end of your money? Do you never have enough money to do the things you want? Do financial emergencies leave your head spinning?

What if there was a way to make sure you have enough money for all your real needs, AND make sure you have enough money for the things you want to do? What if there was a tool that made all this simple and fun?

There is such a tool, and it can accomplish all these things.

A spending plan is a description of how much money you’re going to spend each month. You can spend money in any of several different categories: rent, food, clothing, and gasoline, for example. You determine what your categories are, and how much you want to spend in each one.

Make up an “account sheet” for each of your categories. An account sheet looks just like your checkbook register, but you just draw the columns on a piece of lined notebook paper. (Click here for an example of an account sheet.) Now every time you get paid, add your predetermined amounts to each category’s account sheet. As you spend money, subtract the amount you spent from the appropriate account sheet. The total of all the account sheets should be the same as the total in your checkbook.

A quick look at any category’s account sheet tells you how much money is available to spend in that category. If the amount in a category is getting low, you can’t spend much until you get paid again. If the amount in a category is pretty high, you may need to lower the amount you put in that category, and increase the amount going to another category.

This same system can be used for saving and emergency spending, as well. Just create a category for “Saving,” or “Emergency Auto Repair,” for example, and put a little money in those categories at every payday, just like you do with the other categories. But this time, you’re not going to take money out very often; only for emergencies or to put your saved money in a better investment.

This method is simple, can be done without a computer, and will ensure you always have at least a little bit of money for those fun activities and for emergencies.