Real Savings

This morning, I was reading this article titled “What are your REAL savings?” and it reminded me a lot of my weekend.
On Saturday, I spent most of the morning, into the afternoon looking for a bike. In the morning, I went up to the swap meet. They had some decent bikes there, but nothing I was quite in love with (except for maybe the one that guy had already bought). Next, I went over to City Bikes, where I really loved the Specialized Tricross Comp, at the bargain basement price of $2000. Sweet ride though, fast, and I couldn’t feel any of the gravel under the tires at all like I could with some of the other bikes. I also stopped by Big Wheel Bikes to test ride some others. In the end, I was really no closer to making a decision than I had before, so I kind of felt like I wasted a few gallons of gas and 4+ hours of my time looking for a bike.
On Sunday, we went out hunting for new Crocs for Ellie. She wore the treads off her old ones, and she wanted the Mary Jane style, in pink, size 10/11. A couple of places had the Skechers version of Crocs, which were not quite right. Other places had plenty of Crocs, but either not the right size or not the right style. We looked for probably a good hour and a half in the mall trying to figure out which store might have them until we stumbled across the fact that Hallmark carried every style, size and color you could ever want. As a bonus, they also had every Disney Princess Jibbit that Ellie wanted too. So we did finally get what we needed, but I couldn’t help feeling like it would have been easier and less hassle to just order them over the Internet and have them delivered.
Were those trips worth the time and effort? Judging from Ellie’s giddiness at her new Crocs, that may have been worth it, but it also would have been just as gratifying if we had never taken the trip and ordered them. Test riding the bikes did give me a little more insight as to where I am willing to make compromises when it comes to speed and comfort of a bike, but didn’t get me much closer to a decision. Before I go out on any more test rides, I really need to decide where my priorities lie (and what my budget is!) so that I can be better prepared in the store. At any rate, I’m certainly going to think more about what it’s costing me to make these trips in the future and whether they are truly worth it.

The Dumbing of America

Yesterday’s Washington Post had a slew of great articles that I wanted to bring to your attention.
First, two related opinion pieces on American literacy. The first by Susan Jacoby nearly brought me to tears.

In 1982, 82 percent of college graduates read novels or poems for pleasure; two decades later, only 67 percent did. And more than 40 percent of Americans under 44 did not read a single book — fiction or nonfiction — over the course of a year.

That leads us to the third and final factor behind the new American dumbness: not lack of knowledge per se but arrogance about that lack of knowledge. The problem is not just the things we do not know (consider the one in five American adults who, according to the National Science Foundation, thinks the sun revolves around the Earth); it’s the alarming number of Americans who have smugly concluded that they do not need to know such things in the first place.

The next by Howard Gardner is slightly more optimistic: “[W]hatever our digital future brings, we need to overcome the perils of dualistic thinking, the notion that what lies ahead is either a utopia or a dystopia.”
The final article on literacy by Randy Sulzman talks about the lengths to which people in oppressed countries like Iran go to read, which should inspire you to read as well.
Then there is this series on helping military families get out of debt. Of course, the stories are predictable, as they are not unique to military families. The Bathiches make $65k/year and have $27600 in credit card debt. But the military pays for their housing, and gives them a food allowance as well. Yet they somehow rack up the debt, despite the two biggest spending categories being essentially taken care of for them. Worse, they borrowed money from the man’s father to pay off credit cards, only to get right back to the same amount of credit card debt a short time later.
The Colons make $191k/year. The article doesn’t say whether they have their housing and food paid for by the military, but it does say they have three houses. They also have three very expensive cars. His BMW Z3 costs $700/month, and he foolishly traded in a Ford Mustang (on which he still owed $10k) for a Ford Explorer, making his new loan balance on that one almost $50k, making payments of $853/month! Yes folks, over $1500/month on two cars. No wonder they’re in trouble. Then tack on an expensive wedding, and it’s a recipe for disaster.
Finally, the Holmeses make $135k/year. They have two houses themselves, one of which they are renting out for $1000/month LESS than the mortgage costs. They put a lot of money into their Thrift Savings Plan (government equivalent of a 401(k)), but they also took $20k in loans on the retirement account. Ugh. So many mistakes, so little time.
At least these people recognize that they have made mistakes and they are willing to put a giant spotlight on their problems to try to dig their way out. Americans across the country make similar mistakes every day, getting in trouble with credit card debt, fancy cars, and things they can’t afford. I just wish it was so easy to predict their stories before even reading them. The solutions for most of them are simple: cut down on unnecessary spending, cut up your credit cards, sell the fancy things you bought that you can’t afford (those cars!), and stop trying to live beyond your means.

Financial Goals for 2008

Yesterday, my wife asked me what my financial goals were for the year. It was spurred a bit by doing our taxes, plus the recent rate drops which momentarily had me considering another refinance (they’ve since jumped back up to the point that a refi doesn’t make sense). I had a bunch of them, so I’m going to put them out there so that I am reminded of them later in the year.
1) Do a budget which anticipates known, but inconsistent (not monthly) expenses like curling, baseball, etc. It’s not like it’s a surprise that we need to pay for them, but somehow we always seem to have to scramble for the money when it comes due.
2) Adjust my paycheck withholding again so that we don’t get a giant refund next year. I adjusted a small amount last March, and we are still getting a large refund. I want to stop giving the government my money during the year, only to get it back with no interest in February.
3) Increase my 401(k) contributions. I bumped up by 1% last year, I think I can do another 1-2% again this year. We are also going to look a bit closer at Lisa’s side of the retirement picture, which has been largely neglected since she stopped working. Part of this may involve going to a fee-only financial planner who can help us organize our various accounts.
4) Get adequate life insurance. We finally put together our will last year, and now it’s time to make sure the family is taken care of if something tragic happens. This was brought to bear recently when my co-worker’s brother died unexpectedly. He was 38 and had a wife and 2 kids.
5) Start a 529 plan for Evan. Ellie is enrolled in a prepaid tuition program right now, but Evan’s got nothing.
6) Get rid of debt. We don’t have much, some holiday credit card bills, the minivan payment, mortgage, but I want to aggressively pay off the credit card and minivan.

Update: 7) Thanks for Shane’s reminder: I need to contribute my $50 so he can buy a heifer. This should be part of a larger plan to donate more to charity this year.

Ways I Made Extra Money This Year

As a year-end wrapup, I present to you the many ways I made extra money for myself this year.
We filed our taxes early, as usual, this year and got a nice refund. Instead of blowing it on something silly, we plunked $2500 into starting our emergency fund.
I realized that I had not updated my IRS withholdings lately to reflect our latest family situation, so I sent that in to my company. I was still conservative in the changes I made, and it got us and extra $140/month, which is better than giving it to the IRS for 12 months.
We started regularly feeding our emergency savings account, which is an HSBC Direct Online Savings account. This earned 5.05% for most of the year, which is way better than our regular credit union’s rate of 1.something%. We earned more in interest in the first month than we had all last year. Later on in the year, when the Fed cut rates, we were able to lock some money in a 3 year CD at 6% from Pentagon Federal Credit Union.
I got a surprise bonus in May, which also got put right into the savings account.
We refinanced our house in June. This allowed us to skip our July mortgage payment of $1800. We also reduced our payments to about $1500/month by taking our property taxes into our own hands instead of doing the mortgage company’s escrow. They always seemed to underestimate us and we ended up paying extra every month to make up for it. Obviously the difference went into our savings and will be used for the taxes.
We cashed out a good chunk of change on our refinancing, which we planned to use for getting new windows and redoing our bathroom. While we waited, the money earned some extra interest for us until we needed it. Getting our windows done this year will also allow us to take advantage of the last year of tax credits for energy efficient upgrades, about $200.
Started bringing my morning and afternoon coffee. Even at $8-10 for a bag of the good coffee, that covers a week’s worth of afternoon coffees made by someone else. I also drank water instead of soda with lunch.
Switched to Sunrocket VOIP. We paid $199 for 15 5 months of service from Sunrocket. I also got $80 back from The combined savings was $17/month before long distance charges. We did spend part of that savings by switching to FIOS for a faster and more stable Internet connection though. We eventually had to switch to Verizon’s VOIP, VoiceWing, in July, which runs $19.99 plus taxes for 500 minutes, more than enough for us.
I had my vasectomy in June, just before our new health plan kicked in. You’re probably wondering how this saved me money. We had already used up our deductible for the year after Evan was born, so I was fully covered and paid a small amount rather than pushing it into July and having to start our deductible all over again. As a result, I paid $76 for the procedure instead of nearly $800.
I opened a Citibank “Ultimate Savings Account” with a $5 deposit and got $100 bonus, no strings attached. The rate is actually decent, 4.6% or so, and they have ATMs in every 7-11, so I may actually keep it around for travel cash purposes.
We rearranged our checking accounts so that we have a bill paying (and interest earning) account, and a regular grocery, gas, etc account. We didn’t earn a lot of interest, but anything is more than $0, and it’s also helped us keep track of our spending better.
I finally got a “rewards” credit card. It only gives me 1% of each transaction, but it’s better than nothing. The rate is also better than my old non-reward credit card. Plus, since the card is issued by the same credit union at which we have our checking account, we can use the card all the time for points, then just immediately transfer money from our checking account to “pay” for what we just bought.
We got rid of a bunch of stuff on Craigslist in a cleaning binge, which also allowed us to declutter a bit while making some cash as well.
Here’s to making the most of 2008!

Amazon 30 Day Price Guarantee

I just saved an extra $6 on my holiday shopping! How? By using’s 30 day price protection guarantee. I filled out a form, and literally 10 minutes later, I got an email informing me that I was getting a refund.
If you want to get a price drop refund, just follow these simple steps (blatantly stolen from FiveCentNickel):
(1) Visit “Your Account” and look at all invoices from the past thirty days.
(2) Click on the item names to pull up the current item description/price and compare to the price that you paid.
(3) If you paid more than the current price, copy down the order number and go to:
» Returns and Refunds Contact Form
(4) Check of the item(s) in question and then click the e-mail button. Select “Refund Inquiry” as your subject.
(5) In the body of the message, tell them that the price dropped and that you want to be credited for the difference. It might help to mention the item name as well as old and new price, but I’m not sure that’s entirely is necessary.
That’s it. And keep in mind that this even works if you used a coupon and/or “Buy Both & Save” deal and the regular price later drops, even if the new ‘regular’ price is higher than what you paid after the coupon/discount.
Here’s a tool to help you keep track of your purchases and any price drops: PriceProtectr (with the obligatory vowel dropped). You enter the URL of your item, and optionally when you bought it and what you paid for it (the tool will automatically fetch the current price for you), enter your email address, and they’ll monitor the price for 30 days and let you know if it drops.

Car Buying Tips

Since we just finished the process of buying a new car (and I still haven’t had the chance to take any pictures), I thought I would share some tips about how I went about trying to get the best deal.
First, I had some things set up in advance of making any contact. I have a GrandCentral phone number which makes it very easy to avoid phone calls until you are ready to talk to them. When someone calls that number, I can set it to ring my phone at work, home, or cell, or none of them (straight to voicemail). Even once I pick up the phone, I can choose to listen in as they leave a message instead of talking to them, and if I want, I can even connect to them while they are leaving the message. This was a definite sanity saver.
I’d also recommend either setting up a special Gmail address to control the flow of emails, or to be very diligent about monitoring your inbox. The emails came in fast and furious, but I set up a good labeling system and used the Folders4Gmail Greasemonkey script to keep everything well organized into subfolders. Creating filters to label messages as they come in is also recommended, but you’ll probably need to get few emails first in order to set them up properly.
Now, on to the process. I should also mention that we did a little bit of used minivan window shopping at CarMax and and found that the prices on used Odysseys (without negotiation) were really not that much lower than new ones. So, we knew we wanted a Honda Odyssey EX-L. Luckily, Honda doesn’t really have the multitude of options packages that other makers do, so it was easy to inform everyone of exactly what we wanted. I went to the Honda website, and put my zip code into the dealer locator. I got back a list of fifteen dealers in the DC area and went about contacting each through their website (pretty much all of them put you through a website form, as they didn’t list email addresses on the site). For those that had a comment field, I used FiveCentNickel’s form letter and told them exactly what was going on. For those that didn’t have comments, I quickly followed up after they sent me an email with the same form letter.
After gathering all the initial quotes, I was able to weed out some of the higher offers, as I knew they were probably not going to be able to compete. I selected a few of the mid-range offers, and emailed them back with the lowest price quote. This is where things got a bit difficult. As you’ll see below, some dealers dropped out, which scared me into wondering if I wasn’t near the bottom of the market already. Others simply wrote back and said they would match, or beat it by $100. Not exactly what I was looking for, but it got me started in the right direction.
After haggling a bit with them, I went to my next tier of quotes, which were slightly above the lowest, to see if they would go below my new low quote. At this point, I was $200 below my initial low offer. Then suddenly, one of these dealers came back and said that Honda had raised the dealer incentive by $500, and my new low quote was $400 under the first round. At this point, I wasn’t too worried about hitting the bottom of the market, and just wanted to either get someone close to me to get a reasonable low bid, or get down to the very bottom with one of the further dealers. I used a variety of email strategies at this point, griping about the distance I’d have to travel, or the colors remaining, anything to try to spur activity. I knew I was close to the end when one dealer not only dropped out of the bidding but actually said, “I can’t do that price, and I don’t think that other dealer can either.” I did a little more research and found this FatWallet thread about negotiating with dealers. My target price ended up being $26389, and since my low offer was $26400, I knew I was close. I finally emailed the two dealers I had been saving for last. One was a nice guy, but far away, and the other was my nice local guy. The distant guy reluctantly came down to $26200, but said, of course, that he’d be losing money if he made the deal. I went home early on Friday and gave my local guy a call and asked if he could do $26200, and he quickly checked and said yes, with no guilt trip about losing money. We packed our stuff in the car and headed over to pick up our new minivan.
A couple of things I would do differently. First, I would wait until 2-3 days before we were ready to buy, and I wouldn’t have started on a Friday like I did. Dealers work on weekends, and I wasn’t ready to do anything that first weekend. Your best leverage is when you can say, “Get me this price, and I will be in today.” I had to keep delaying the decision, which frustrated me and the people with whom I was trying to negotiate. Second, I wouldn’t bother with any of the “buying services.” The only thing that got me was an extra quote that was right around the starting point for negotiations, and way higher than where I ended up. Maybe different situations would work differently, so don’t let me scare you off. Just know that if you put in a little effort, you can probably get a better deal than their “convenient” service. I also might have tried to buy a little bit earlier in the year. I know a couple of dealers were completely out of 2007s by the time I got to them, and one or two more were down to their last 2 or 3 and weren’t as willing to deal (I know, seems paradoxical). So for us, late November was a bit late for buying an Odyssey. Other models may differ (I know they had a LOT of Accords left), so if you’re looking at using the changeover from one model year to the next to your advantage, start checking dealer stock in September so that you can be prepared to start looking early if they are running low.
I hope that this walkthrough helped you in some way. If nothing else, I hoped I proved that you don’t need to be scared of the car buying process

Freebie Update

I mentioned a while back that I caught the freebie bug again, but that this time, it wouldn’t involve selling out my family. Not too long afterward, I tried out a couple of the offers: a $500 Best Buy gift card for 3 offers, and a $500 Visa card for 3. The cat got out of the bag last week, literally, when the kitty litter trial I signed up for showed up at our door. Did I mention we don’t have cats? Needless to say, Lisa was a bit confused. At any rate, it’s going really well so far. All my offers have been credited, and I sent in my confirmation forms. Now I just have to wait, and also make sure that I cancel the trials before they charge me again. So far, even that has gone well. The kitty litter people canceled my trial when I really only asked them how long the stuff was going to take to get to my house. I was also able to cancel the “Grant Consultant” trial over email, and the “Rising Star” deal was easily canceled over the phone with no hassle (I just need to return their CDs now). I also received $20 in gas cards from signing up for “Great Fun.” So far, I’ve spent $16.93 on one gift card, and $10.74 on the other, and gotten that $20 in gas back, so net, I’m out $7.67 at this point, and while I still have to spend a small amount shipping CDs back, I’ll be just over $10 to potentially get $1000 in gift cards. Not bad for a couple of hours of my time. Now the most frustrating part, the waiting, begins.
I know it’s going to take a while to get the gift cards, butt I do really wish I had the Best Buy one right now, because they have a nice deal on this 26″ LCD HDTV that I might have been using the card on. Oh well, I knew I was going to have to be patient, so hopefully I’ll get something in time for maybe the Super Bowl, otherwise, I’ll settle for my birthday (yes, 5 months from now).

Aw (“Free”) Crap!

Beware, I have been bit by the bug again. It was just about 3 years ago that I sold out my friends and family to get myself a free iPod. And thanks to an innocuous post on Consumerist that linked to Josh Clark’s website, I’m being tempted to get back in the game. On the plus side, this time should not require any referrals from other people. Most of the places that he links to simply require you yourself to sign up for enough trial offers to earn your free crap.  Although, the Macbook Pro offer that got me started on this does require one referral, so let me know if you want to get in on that!  While you should take this all with a very large grain of salt, you can’t argue with his results:

Item What I Paid Retail Value Site/Company Used
MacBook Pro $98.69 $2,000 NuiTech
Xbox 360 $35.82 $400 Netblue
iPod Nano $11.95 $200 Shop FreePay
iPod Shuffle $2 $79 Shop FreePay
Apple AirPort Express $5.87 $129 Shop FreePay
A book $1.87 $10 Shop FreePay
Parallels software package $0 $80 Shop FreePay
$50 Visa card $1.95 $50 Netblue
Xbox 360 games & accessories $21.80 $195 Trainn
$580 check for Apple iPhone $5.45 $580 Trainn
$250 check $2.50 $250 Trainn
$500 (two $250 sites) $13.95 $500 Trainn
*Nintendo Wii $18.98 $250 Netblue
$55.80 check $0 $55.80 FusionCash
42″ Plasma HDTV $53.63 $1,499 I-Deal Direct
†$100 in gift cards $0 $100
Total:  $274.46 $6,377.80

* Items that are in process, but have not yet arrived
Received for signing up for certain offers

I think I’m getting back in the game.

Stackbacks System

This year has been one of many financial goals. The ultimate goal is to get everything to the point where I don’t have to think about where the money is going, or whether we’ll have enough at the end of the month. We’ve made a lot of progress toward that goal throughout the year: refinancing our mortgage, tracking finances with Yodlee, and automating and maximizing our savings.
Recently, we took our organization a step further, and implemented a sort of Stackbacks budget system. As the creator says “This budget system is based on a simple idea… You shouldn’t have to think about your budget. Figure your budget out once, not constantly. I want to pay my bills on time, reach my financial goals, and have money I can spend without worrying about it.” Ding! Sounds good to me, how do I do it?
For us, it took a while, but we are doing it and liking it.
Back in March, we opened a high-yield savings account with HSBC Direct. We started feeding an emergency fund with a bit of each paycheck, having it direct deposited, so we never saw it even pass through our main checking account, and thus were not tempted to spend it, or use it to cover an overdraft. Then, in June, HSBC introduced their online payment account. It was easily linked to the savings account, and didn’t cost anything, and pays 2.5% interest, so I went ahead and opened it, while somewhere in the back of my mind, I thought it would come in handy sometime in the future. My wife was still wary though, since the account didn’t come with paper checks, and had no branch access to speak of. So I didn’t really do anything with the account for a while.
Then I discovered Stackbacks and the 4 week challenge to mastering your budget. I was intrigued and read the steps:
Step 1: Open a new checking account. Did that with the HSBC payment account.
Step 2: Identify your planned expenses. I put together a spreadsheet that listed out all of our big expenses and their due dates. Yodlee helped greatly here, as did signing up for our utilities’ budget payment plans.
Step 3: Control your cash flow. As the creator of the system mentions, this is the most crucial part, and the hardest for us to get through. What I did was to set up my direct deposit to have enough money deposited into the HSBC payment account to cover all of the expenses I listed in step 2. Then I set up online bill paying from that account, and scheduled the transactions to get entered into Quicken, and automated their payment. I moved the emergency fund to Presidential Bank’s savings, so that we wouldn’t be tempted to dip into it. And the rest of the money would go to our regular checking account, which would be used for things like gas, groceries, etc.
Step 4: Manage your budget. It would be easy to think that your job is done, but this is the part we are working on now. The easy part is paying and reconciling bills. That is mostly automated now. But we do still need to check up on ourselves and make sure we are not blowing a lot of money on things we don’t need. If we start doing things well, we should find ourselves with some extra money at the end of each month that we can start using for things like vacation funds, and college savings. The key thing we have left to do is to give ourselves an “allowance,” rather than just dumping everything that is not a bill or emergency fund into this account. Doing that will just perpetuate the cycle of living paycheck to paycheck, you’ll just be better organized when doing it. So we’ll keep an eye on how much we’re spending on living expenses, with the goal of increasing the amount we’re saving each month. So far, we’re not doing great on this front, because I stupidly forgot that my curling membership was coming due (almost $500 unplanned expense there), and we had a couple of other unplanned things pop up. But we’re working on it, and hope to get things smoothed out in time for the big expenses of the holiday season.
It took some effort, but we are pretty happy with the way things have turned out. We’re no longer spending money on stamps, or forgetting to put bills in the mail. We still have our local credit union account, so we can still write paper checks if needed, and get free ATM withdrawals for spending money. Best of all, we don’t have to spend nearly as much time fussing over the budget.