Financial author Matt Bell tackles a problem we haven't written on lately: the rising proportion of couples who are keeping separate finances.
He cites a recent Money Magazine survey in which:
71 percent of married Americans acknowledged keeping secrets about their spending from their spouses
44 percent said keeping secrets about money is acceptable under certain circumstances
40 percent admitted that they tell their spouse they spent less on purchases than they actually did (women lied mostly about clothing, shoes, and things for kids; men lied mostly about things for the car, entertainment, and sports tickets)
Matt's perspective is in line with what we've written on the subject in SMI:
I don’t care how many people have gotten on the separate accounts bus. I’m clinging to my quaint, clearly out-of-fashion point of view that the ideal way for man and woman to get along financially is to practice full financial disclosure before marriage and complete financial transparency after marriage.
Full financial disclosure means talking about money before marriage. A lot. It means detailing how much debt you have, how you got it, and what you’re doing about it. It means revealing how much you have in savings and investments and how much you earn.
It isn’t about interrogating each other; it’s about talking with each other about something that’ll impact countless aspects of your relationship.
And here’s where I’ve really gone off the deep end. I have this odd point of view that if one person had a lot of debt before getting married, after the wedding, both spouses have a lot of debt. If one was rich before the wedding day, the minute the vows have been said, both spouses are rich.
This isn't a very popular opinion these days. And it's understandable why the numbers have shifted this direction over the years as divorce has become so much more common (if eventually separating seems like an eventual probability, it can feel like preparing for it financially is a smart, even necessary, move).
I found this comment to Matt's post particularly telling. (I've added the emphasis below.)
As a marriage counselor I concur with your statements about the need for joint financing. I cannot count the number of couples who come to see me with problems that seem to be unrelated to money yet when we look at the whole issue – separate money is at the root. I tell all couples, in new marriages and old that separate money is asking for trouble. When I counsel engaged couples I am particularly strong with them because I don’t want them coming back in 5 years!
If you're married and keeping separate money, I encourage you to prayerfully consider whether this is the right course of action. It might be worth picking up a copy of Matt's book (mentioned in the post; note that I haven't read it).
As always, I'm interested in your (non-judgmental) thoughts on this sensitive matter. You might have an insight that could really help someone else reading this (as iron sharpens iron...).
I have a love-hate relationship with IKEA. I'm grateful that they offer a clean, modern design aesthetic at unbelievably low prices. However, you have to be careful what you buy at IKEA. As much as it pains me to write this, it seems that more often than not, you can buy some poorly-constructed products.
The first time I went to IKEA was October 2003 (there are no IKEAs in Louisville, but we were in Chicago on a getaway). Being a big fan of modern furnishings, but having little money at the time, it was like going to Disneyland for my wife and I.
Two years later we went back and bought two nightstands, a wide 3-drawer dresser, a tall 5-drawer dresser, and a wardrobe for $350. What a deal, right? But when you start assembling the furniture with that little hex wrench they give you, you quickly realize that these are not heirlooms we will be passing off to our children. Particle board chips. Veneers peel. Cams get stripped.
Now in all fairness, these particular pieces have at least a few years left. No peeling to speak of and the drawers all open and shut fine. The doors are impossible to align though, and the wardrobe is buckling a bit from the clothes on the rod. But other pieces we've bought haven't fared nearly as well, like the end tables, the can opener, a few of the picture frames, and so on.
What's my point? That if you can afford it, buying quality, I believe, could save you money. For instance, we would have saved $4 on the can opener had we just bought a good one to begin with (like the one we bought to replace the IKEA one). Our end tables, while they weren't expensive, have some veneer peeling and bubble spots and they just need to be thrown away quite frankly.
Now I'm not saying you can't get good stuff there. In fact, we still really like going. We bought a huge mirror for $100 that would have cost $600+ in a similar style somewhere else. We like the lamps we've purchased, as well as some kid's furniture/decor items that seem to be holding up quite well. You just have to be careful.
But there's another way you can get in trouble: most everything is such a good deal that it's easy to buy more than you need. Because of the price, I find it tempting to buy things that I only kinda like, rather than holding out for something I love. In fact, I have the same issue with Old Navy that I do with IKEA. Clothes are insanely cheap, and usually, cheaply made. Rarely do I see something there that I just love, but often times I see stuff I like (actually, I more or less swore off Old Navy for this very reason... last week was the first time I'd been in an Old Navy in over a year). The clothes can be great for kids, it's just that often times they don't last.
So I've decided that I'd rather have one really nice shirt from J. Crew than 4-5 shirts that I only sort of like from Old Navy. It's likely to last me longer and I'll get more enjoyment out if it when I wear it. And the same goes for IKEA. I'd rather have one really nice living room coffee table from Room and Board, than a whole living room collection that I just sort of like from IKEA.
This commitment to quality over quantity got me to thinking, "I wonder what our Facebook Fans" think of this tactic. So, I decided to ask. Here's how a few of them responded:
Fred from Louisville wrote:Quality weathers the bounce of the market. Quantity doesn't matter if you are loosing money.
Martha from Richmond wrote: It is far better to buy quality than to have to turn around and replace something that doesn't last. Quality shows.
Jason from Orlando wrote:Total cost of ownership (TCO) this is often forgotten about in the equation. Also there is the intangibles, the way I feel (and perhaps perform better/produce more) with quality in my hand versus something cheaper. Likewise, is it provable (objective) quality or is it inferred (subjective via suggestive adverts)?
And our friend and frugal guru Mary Hunt from Debt-Proof Living wrote:Match quality to need. If you'll use it very little (Halloween costume), get the cheapest one you can find. If you'll use it every day for as many years as you can possibly get out of it (car), buy the most quality you can afford.
So what do you think about what I've said. Do you agree or disagree? When is it best to buy quantity vs. buying quality?
I recently blogged on the best spending decision we ever made. One of the key principles, if not THE key principle, is to spend with your goals in mind. The post explains why this principle is important. In fact, it's so important that I'm going to stop right now to give you a chance to read it. Go ahead, I'll wait right here...
... Back? See my point about being intentional with your spending? In the same way that you should invest with inside-out thinking, you should spend with inside-out thinking. Well, a recent spending opportunity came my way. Let me paint the picture for you:
It was a lovely Saturday afternoon and I'm at Costco with my 6-year-old doing some grocery shopping. Walk in, turn the corner past the TVs and there sits a nice, brown sectional. It's big. Seven different configurations. Child friendly micro-suede fabric. And only $999.
Now it's our ideal family couch for the basement. In fact, we had talked about this very thing... a big, brown, sectional, perfect for a family night watching some Netflix with the kids. But, what we really need first is a couch for the living room. We still have a futon as the primary seating in the living room (also purchased from Costco) and it really needs the new furniture before any other area of the house. And while we could use this sectional in the living room, it's a little big for the space and not conducive for the arrangement we had in mind.
By now you've figured that we did indeed buy the couch. And it currently occupies the living room and doesn't look completely terrible. The futon has been moved to the basement, which provides some much needed seating downstairs. But did we spend with our goals in mind?
Functional: Yes
Aesthetics: Yes
Value: Emphatic YES
Comfort: Maybe (my wife isn't blown away by the coziness of this couch, which is ironic given our Costco futons aren't the most comfortable either... but I'm thinking with some time it will break in... at least I'm hoping).
Timing: NO
So how intentional were we with our spending? Did we order the lobster?
On one hand, I'd say no. Getting a couch like this was a part of our plan, it just wasn't top priority furniture-wise. It was an unbeatable value. We had the money for it.
On the other hand, I'd say we botched it. The timing wasn't great. While it would have cost more to get a more comfortable one, we shouldn't let value trump comfort. And if the right living room couch does come our way, we may not yet have the funds to buy it because we sunk them on this couch.
So I guess the question becomes, does a good spending decision have to meet ALL your goals. I'd say no, a good one does not. But good is the enemy of best and for that reason, I'd say it wasn't the best decision we could have made.
But maybe you see it differently? What would you have done?
In April 2010, we gave up TV when we bought a new house. Our thinking was, "New house, new beginnings, let's try life without cable." This past Spring, I wrote an update for a post on how we cut the costs of digital services. Here's part of what I wrote regarding giving up TV:
So how's the past year been with no signal? Mostly good, I'm glad to report. Now to be fair, we do have Netflix which can stream to our TV, so when we need a video-entertainment fix we can get one. But dropping cable has drastically reduced our watching. Our girls didn't watch that much before anyway, but even less now...
And it's the last sentence that I want to pay particular attention to: Our girls didn't watch that much before anyway, but even less now. And because what they do watch is on Netflix, there are no commercials. Now let me stop and say that we do not profess to be perfect parents, nor do we have perfect kids. But one area where our girls do not struggle with is materialism. Sure they like to look at toys (if we let them) but they don't "have to have" the next big thing. Why? Because they don't even know what the next big thing is. Why? Mostly because they don't see commercials. What things they do know about, it's because they've seen them at their friends' houses.
And materialism isn't a struggle confined to adults or teens or even tweens. Don't think a 3-year-old and a 6-year-old can't struggle with it too. Marketers are very strategic in going after our children. And they're only growing more and more savvy as they reach mediums outside the television. And while you don't have to cut cable to raise non-materialistic children, it certainly doesn't hurt.
Now I'm not saying that my kids never ask for anything, but it's rare (because when they do ask, they know we'll likely say "no" and that they'll have to use their own money). And having children content with what they have produces another unintended consequence: it frees us up to really take pleasure in the joy of giving. I've never been a fan of lists for birthdays or Christmas. Do you know how fun it is to search out that perfect gift that they didn't even know existed? It's a blast. And if it's an item that they happened to know about, they're delighted anyway because they were trying to save up for it (saving money mostly pertains to my 6-year-old as the 3-year-old is still learning the concept of money).
Talk about fun, one time I took them to Toys "R" Us to let them each pick out a small present. Why? Just because I love them and thought it would be fun for them. They were in awe, especially the younger one as she didn't even know such a place existed... a place with ONLY toys? Well, we looked up and down each aisle for quite some time because they had no idea what was even out there. After ruling out toys I thought would get limited use, conveyed the wrong image, or were too expensive, we settled on presents for each. And get this, the younger one picked books... BOOKS!
You see, the major purpose for a commercial is to create discontent. Remove commercials and there's one less device out there to compete with when trying to rear children to love the Lord first. So it's easy to see that of all the digital services we scaled back on, cutting out cable TV was the most profound, both in saving money and otherwise.
If asked for ways to save money on purchases, several ideas would come to mind: clip coupons, buy on sale, use promotional codes, etc... you know, the usual stuff. Nothing glamorous, but they work.
However, if I were asked for the absolute best, the number one approach to saving money when buying stuff, I would say: planning/timing. And before you quit reading because you're disappointed it's not some magical, secret silver bullet, let me explain.
If you're not in a hurry for something, you can wait till it goes on sale, correct? If there's no rush, than waiting to use a coupon makes sense, right? The problem is, often times we don't plan this out. We buy when we "need" something and so we're forced to pay full-price because we have an impending "deadline." We've all been there. Poor planning leads us to wait till the last minute, and the last minute rarely leads to savings. (Plus, at the last minute, there is often a poor selection). Here's a personal example.
My wife and I recently did a surprise room makeover for our two girls who will be sharing a bedroom to free up a room for our baby due in August. We'd been stockpiling decor options for several weeks, but with the makeover just a week away, we were without good curtain options.
The only thing we could find were curtains from Pottery Barn Kids (which don't come cheap I might add). Because of the time it takes to ship them (another added cost), we didn't have time to try to find a means of discount (promotional codes, gift cards, coupons, wait for a sale, etc).
Had we done a better job of planning out this makeover, we could have found some cheaper ones we like from somewhere else, or perhaps tracked down some kind of discount. But because of the timing, we paid full price + shipping. (That was painful to type.)
Timing is one of the primary principles behind extreme couponers. Yes, they add coupons on top of sales, but they don't wait until the need an item to buy it — they buy it when it's the most beneficial financially and then they stockpile the items for when they need them.
Think about it. Plane tickets usually get more expensive when you wait until you need them. The same with hotels (sure, there are last-minute deals, but the selection and quality may not be up to your standards). If you're buying a car because yours is on the brink of death and you need something stat, you won't have the time to research for the best car for your situation.
And when is it most expensive to buy clothes? When they're in season. You could have saved a bundle on a winter jacket in February if you were planning for next winter, but those savings are likely gone now.
This is why timing is everything. It affords you the opportunity to make a purchase without deadline pressures, gives you more selection to choose from, allows you to research discounted options, and — let's face it — makes the process more enjoyable overall. (And, chances are, if you're doing a good job of timing your purchases correctly, you're probably also doing a good job budgeting for said purchase because you're a good planner.)
Take my word for it: you never want to pay full price for curtains from Pottery Barn Kids. Plan better and carefully consider the timing of your purchases. I bet you'll save money almost every time.
Do you have a "generosity line item" in your budget? Personal finance blogger Jason Topp does, and he thinks it's an idea others should consider.
Jason writes about a "generous budget" in the July issue of the Sound Mind Investing newsletter:
Imagine you are out to eat with your family and you strike up a conversation with the server. You learn she is a single mom with three kids and works two jobs to make ends meet. After her children go to bed, she spends several hours taking online classes in hopes of getting a college degree and moving forward in life.
Your heart goes out to her.... You can only imagine how difficult it must be to juggle the demands of employers, children, and professors.
You would love to help in some way, but you feel like you can't afford to.... You imagine how exciting it would be if you had an extra $25, $50, or even $100 a month set aside specifically for times like this. You picture yourself plopping down an extra large tip with a note that says, "We're praying for you!"
But how can you increase your ability to give without hurting your own financial situation?
We try to limit out eating out as a family to once a week. This keeps costs down and helps us really enjoy it. Saturday evening rolled around and we decided on a place (I wanted Mexican, but got outvoted).
The night started out fine. We had a big table with a view of the kitchen (which the girls liked). The kids also got crayons and paper (which they also liked). We had a game plan for who was getting what. Everyone was happy (although I still wanted Mexican).
Our happiness peaked in the first five minutes because the rest of the meal was peppered with server mistake after server mistake. We were constantly waiting on refills, the server brought the wrong meal for the girls (and then she tried to fix it by disregarding what I had originally ordered and bringing us something else), items were missing, we had to repeatedly ask for certain condiments and sauces — it was just an unpleasant experience from the service end.
The food itself was good and the girls weren't really aware of all the mistakes, but my wife and I certainly were. And I noticed that the people at the table next to us were having problems with the same server (I overheard them discussing the final bill — the server eventually recognized her error).
When it was finally time to pay our bill, the server took my debit card, and returned with the bill for me to sign. She failed to come back with my card — par for the course.
Now it's tip time.
Let's pause for a minute so I can give some personal background. I've done more than my fair share of food-industry work — six restaurants, a country club, a grocery store, and a camp kitchen. I know what it's like to work for tips. I know what it's like to give good service (and occasionally bad).
I know what a good dining experience should be and how hard restaurant work can be. I also know how lucrative such work can be, considering the rather easy requirements for becoming a server. In fact, I think everyone should work in a restaurant so that they can have a better appreciation for servers.
Image by avlxyz via Flickr
And it's with this background that I nearly always tip at least 15%. But that night, I didn't. I couldn't. It was just so bad. And you know what? It felt good!
Why? Because I hate rewarding bad behavior with good things. Why should I reward that waitress's terrible service with a good tip? Wouldn't I just be reinforcing bad service? When my kids act up, they don't get good things — they get consequences. In school and in jobs, poor performance generally yields bad results. Just because I'm a Christian, should I feel obligated to tip higher because it might help my witness?
Now it's true (at least in the restaurants I've worked at) that servers don't like the Sunday lunch crowd — aka, the church crowd. Supposedly, tips are worse and guests aren't as nice as you'd think they'd be. It's possible this is the case, though I also think the quick influx of guests and increased number of kids makes it a more stressful shift. I'd be curious to see the actual breakdown of tip percentages as compared to other lunch shifts.
But back to our recent dining experience, my question is: Was I wrong? As a Christian, should I tip well regardless of how poor the service is? Perhaps the server saw us pray before we ate — so was not giving her at least 15% a bad witness? Or perhaps I should have said something or written a note explaining why I just couldn't give her a nice tip?
I know some people not like it that my family eats out weekly, but that's not what this post is about. I'm specifically interested in your thoughts on what you think our responsibility is, as Christians, on tipping. Is there any scripture to back up your viewpoint? As always, keep it civil! Thanks!
About a year ago, I did a post regarding my family's progress in cutting the costs of digital services. Now, 12 months later, I thought I'd let you know how things have gone.
Text messages: First up was texting. I was looking into an app called textPlus that we could use instead of paying for a texting package via my cell provider. The way it works is that those you text have to be using textPlus as well.
Since I couldn't guarantee that those I text could/would also use textPlus (other than my accommodating wife), I decided not to pursue this app any further. So, no money saved.
Cable: I also mentioned that I had a billing error from the cable company and that it was finally resolved. So that saved a little bit of money. But I also decided that we could do MUCH better — i.e. pay nothing at all — by canceling cable altogether (again, with the support of my accommodating wife). Do What? That's right: go TV-less — no cable, no satellite, no digital antenna, no nothin.' (Remember how home-schooling used to sound weird, now people are doing it everywhere? That's what is happening with the growing ranks of those cutting the cable — who knows, someday, the weird ones could be those who have cable/satellite).
So how's the past year been with no signal? Mostly good, I'm glad to report. Now to be fair, we do have Netflix which can stream to our TV, so when we need a video-entertainment fix we can get one. But dropping cable has drastically reduced our watching. Our girls didn't watch that much before anyway, but even less now (though that may be partially due to the only TV being in the basement of our new house).
But dropping cable hasn't been without its downside — namely, the lack of live sports! We're big college basketball/football fans and we were able to watch only a handful of games on the computer. So the lack of access has generally meant missing games or going to a friends' house to watch (mostly the latter).
Fortunately, for March Madness, there was an iPhone/iPad app that played every game. But for much of the year, not having cable or satellite was a definite inconvenience on the sports front. (This also harmed the hospitality angle, since we couldn't invite friends over to our house to "watch the game." This was certainly an unintended consequence.)
Given the good (less time watching TV, spending less money), the bad (limited sports), and the ugly (departing from my wife and family for a couple hours to go watch games elsewhere), will we re-subscribe to cable? Not sure.
Probably the best thing would be to get a digital antenna and be able to catch most of the games via broadcast signals. This would be the most cost-efficient, and because there'd be so few channels available, it wouldn't dramatically increase the temptation to start watching a bunch of TV again — at least I don't think so. (You may have to wait a year for another Updated Update to find out what we decide.)
Phone: Now for the home phone. As you may recall we started using Ooma last spring (with the support of my accommodating wife, of course). For the uninitiated, Ooma is a device that connects to your high-speed Internet and your home phone and allows you to make calls with no monthly charges, although there is a ~$11 yearly FCC "pass-through" charge.
So how's it been? Pretty good.
At first, we had some stability issues. After talking with customer service a number of times, they overnighted us a new unit. The new unit hasn't had any stability issues — but that's not to say it's perfect. Depending on your data upload speeds from your ISP, you could experience a delay when talking on the phone.
For instance, our Ooma is connected to a router and when you combine the router with a meager 1.5mps upload speed, there's a delay in the time the person you're talking to hears what you've said. So this can be a little bit of an annoyance, but not to the point that it would make us want to go back to a full-fledged land line. Plus I have the ability to check messages at home from any computer with an Internet connection, as well as see call logs and a few other nifty features. And with both spouses having cellphones as backups, we see no reason to go back.
(Not unlike cable, someday people may think it's weird that people ever had landlines. We're just ahead of the weird curve — or behind it, not sure which).
One other thing, we haven't yet paired my wife's cellphone with Google Voice because we have plenty'o cellphone minutes and we can't get a smaller minute package. However, if the minutes start running low, we may pair her phone with the Ooma using Google Voice.
All in all, I'd say it's been a successful venture. How successful?
1) We've saved close to $1,000
2) We've spent far less time watching TV
3) Perhaps most importantly, it's helped me realize what an accommodating wife I have!
What about you? Saved any money over the past year on digital services? If so, how? If not, why not?
In my last post, Buying a car — new: Part 1, I confessed to doing something back in 2008 that I never expected to do: I bought a new (rather than used) car.
Nearly all the financial "experts" frown on such purchases because of the ridiculous amount of depreciation that occurs the second you drive it off the lot. That kind of financial logic is difficult to argue with. After all, I'm a "best-deals" kind of guy and rarely are new cars the best deals.
But, as I said in the post, "Our game plan was to have a bigger car by June [2009], to boost our level of retirement savings, to increase our giving in 2009, and to make my wife happy."
Still, some blog readers, uh, "took exception" to my decision. Here's what a few commenters had to say:
"Thank you Matthew, for taking the depreciation of a new vehicle for me. Let me know when you are ready to sell it in 3-4 years so I can pay next to nothing for it in cash. I know you said you'd 'likely' own it for 8 years, but your post lets me know that you are excellent at justifying. Let us know how the warranty works. Usually covers everything except for what needs fixing. I will refrain from name calling, but your purchase surely does go against the SMI principles I've been reading for many years."
"I don't think it is wrong that you bought a new car. The problem is the principles you broke. No they are not laws, but breaking Biblical principles has a way of not working out. First you took on debt in order to buy the new car. I know you are thinking your can earn more than 1.9%, but that probably did not work out last year if you were in stocks. And we all know that we can not reliably forecast what will happen this year. Secondly you are investing in your 401(k) without being out of debt. You are breaking the order of the 4 steps that SMI outlines."
"I'm sorry, but I feel you were a bad example for going into debt for a depreciating item. It goes against all the principles taught in your own newsletter and by Crown Financial Ministries. And it was not even for absolute necessity, as for some very poor people who buy something cheap just to get to work. The price of used cars also went way down."
Yeeeouch! Maybe "took exception" is understating it a bit. They filleted me. But that's okay. We invite healthy (even if heated) discussions on financial matters at SMI: "As iron sharpens iron, so one man sharpens another."
♦ ♦ ♦
As I mentioned, that original post went up in 2009. So let's fast-forward a couple years: how'd it all work out? How did we do with our game plan?
Boost to retirement savings – check. We were able to fully fund our Roth 401(k) here at work. And because we were investing during the bounce-back from a severe downturn, we did quite well. Upgrading was up 33.6% in 2009.
Increased giving in 2009 – check. Years ago, my wife and I put into place a system to help us increase our giving each year. While tithing 10% is a good place to start, it is important to us for it not to be the final destination. While it's not always easy to increase our giving, we trust God to work things together for the good.
Wife happy with new van – check. And if asked, I like it too. In fact, we like it 42,257 miles worth so far. This thing is a tool-box on wheels, making it much easier to do road trips with our three kids (fourth coming in August!), car-pooling to school, trips to the grocery and even occasional outings to Lowe's where I can take the seats out and hold quite a bit of lumber. Could we have done all this with a used car? Yes. But the peace of mind from the warranty does have its value (we haven't needed it yet by the way).
And so the million-dollar question: would we do it again?
Probably not — but not for the reasons you're thinking. It has nothing to do with the monthly payment (which we no longer have — we paid the car off in January 2011). It doesn't have to do with the lost depreciation, either. True to our plan, we intend to keep this car for quite some time. Nor does it have to do with newer models coming out making me wish we had waited.
What then? It's the dings. The scratches. The dents. I didn't realize how badly they'd hurt emotionally.
Our nice new van now has been through a couple of fender benders, car toppers falling on the side panel (that one was all me), scratches from purses and grocery carts, crayons ingrained into the floor, etc. And every time there's a new one, it still hurts.
When you buy a car used, it's already a little imperfect, so the new imperfections aren't as painful. But with this car, each one reminds me of what use to be our perfect, shiny, immaculate minivan. I have to say, I didn't see this coming.
♦ ♦ ♦
So there you have it. And while we probably won't buy new again, I don't have regrets over buying this one new. It fit our game plan, lined up with our risk temperament, filled a need, and pleased my wife.
What about you? Ever bought new and then regretted it? Or maybe the opposite held true: you bought used and wish you bought new?
What will you do differently next time? Tell your tale.
In this two-part piece, I'm going to first look back at a post I did in February 2009 regarding purchasing a new(!) car. In part 2, we'll fast-forward to where I am now in my thinking on buying cars new, rather than used. So let's rewind a couple years, shall we?
Confessions of a liar?
Okay, I did it. I admit it. I did something I publicly announced I wouldn't do, stopping just short of telling you to read my lips. I bought a car — new. Gasp! You did WHAT?
Let me clarify a few things. To be exact, I had earlier said, "I'm not likely to buy a car new" — "likely" being the operative word. And in the post in which I made that statement, I was talking about buying a car for me. But the new car is for my wife.
But I'm sure a few of you are griping about these technicalities. So what, pray tell, brought me to this seemingly un-SMI-like decision?
Background: Last March [i.e., March 2008], we added Gigi to our fold. That meant it was difficult for the five of us to go anywhere — two car seats, a teenager, and a 2004 Pathfinder do not mix. In fact, when we went on our annual family vacation, Jordan had to ride in a separate vehicle. My wife was not happy, therefore I was not to be happy.
Being a loving husband who valued his vacation time, I quickly promised a bigger vehicle by next vacation. And after some soul searching, my wife Kim relented to the idea of a minivan (she had been plagued by the anti-minivan virus, which apparently is a very real phenomenon that mom's deal with, battling what seems to them as a loss of soul and self).
Fast forward seven months and we had the perfect storm for car shoppers: a collapsing economy and year-end inventory. Dealers needed to deal.
But you're saying to yourself, "Just go find a 2-3 year old Honda Odyssey." That proved to be difficult — unless we were willing to sacrifice our whole wish list of options, color, and so forth.
I was able to further rationalize the decision with the 1.9% financing. While I had hoped to pay cash for the vehicle, I was stymied — mostly by my decision to contribute aggressively to a newly created 401(k) plan here at SMI. Furthermore, Honda was offering to extend the bumper-to-bumper warranty an extra five years for about $300/year, and if we never used the extra warranty, they promised to refund that money. We figured that we'd be "likely" to have the car for eight years, so that was a no-brainer for us.
Why spill the beans about my new car purchase when I know I'll likely disappoint a few of you? Admittedly, it's a little cathartic. And we try to be pretty forthright around here (I've had several people inquire).
But most importantly, SMI is always talking about having a game plan and sticking to it. Our game plan was to have a bigger car by June, to boost our level of retirement savings, to increase our giving in 2009, and to make my wife happy.
That was my thinking a little more than two years ago. Would I buy new if I had it to do again? I'll have the answer in Part 2.
First, a little background on Craig. Having worked in both youth ministry and pulpit preaching ministry, Craig is currently a missionary in Papua New Guinea with his wife and three children. He has attended Rochester College, York College, Abilene Christian College, and Harding University Graduate School of Religion, and he holds an AA, BA, and a Masters of Divinity degree, all in the field of Biblical Studies.
Oh, and he's debt free (mortgage excluded).
What I first noticed about his e-book was how professionally it was done. From the table of contents to the use of images, formatting, grammar, it all has a top-notch feel. This isn't always the case with self-published e-books.
After the introduction, Craig details what he calls "The Menu for Financial Health." This is his creative way to approach a financial plan. On his menu, he has listed (among other things):
Beverage — Give Generously
Soup — Pay off all debt with an interest rate above 6%
Salad — Save 3-6 months worth of living expenses
Dessert — Save for major future purchases
I found this to be a great outlook on finances and should appeal to many who haven't been persuaded by other financial plans.
After this, Craig talks briefly about "Financial Focus Points — The FFP is where you send all the dollars your budget helps you create. For example, if you are trying to get out of debt, that is your FFP."
From here, we move into the nuts and bolts of the e-book, and that's defining a budget, working with a budget, creating a budget, budgeting methods, budgeting tips, and budgeting questions.
One of the things I appreciate about his writing is that while he does it with honesty, he does it without beating you up over things. For instance, he writes:
The question we must each ask ourselves is — when budgeting gets hard, will I quit?
If you respond to the difficulty of trying to get control of your finances by avoiding any period of discomfort, then this budgeting system won't work for you. My best advice would be to email mhforc@gmail.com and ask for a refund. However, if you are willing to endure a season of discomfort, adjustment, and transition, then you'll really enjoy the rewards.
I love that kind of gentle candor.
Another thing I appreciate is the lack of rigidity. Craig doesn't claim to have all the answers, nor does he say there is only one right way and it never changes. In fact, he says quite the opposite when he mentions, "Budgeting is a process, not an event... There is no such thing as a perfect budget." I believe this kind of perspective makes the book more accessible and easier to digest.
Craig has also sprinkled in personal stories, Bible illustrations, analogies, and tips throughout the book. One of my favorites is on page 42 when talking about how to decide what to cut from the budget, he says:
When we buy things, we don't just spend money. We spend our time. When deciding what stays and what goes, you should ask: do I want "x" number of hours of my life to be used on buying this item?
But my favorite aspect of the book is that when reading it, you can really hear his heart — that as Christians, God is an essential reference point in how we spend our money. This is evident in how he suggests giving back to the Lord (generously, extravagantly, from the firstfruits and the leftover), as well as in his closing prayer:
I pray that you might commit everything you do to God in prayer. Ultimately, budgeting is not about you. It's not about putting another dollar into a bank. It's not about saving every penny you have. It's about doing what God would want you to do with your money.
In closing, I found The Secret to a Successful Budget a pleasure to read. Craig has a thorough, well-written resource to offer Christians struggling in mastering their budget. So if yours is non-existent or in need of some direction, I think Craig could provide you both the encouragement and motivation you've been needing.
Wow! Another Christmas is just around the corner. How have you done thus far on your spending plan for 2010? If not great, don't lose heart, today's a new day. And for those who've done wonderfully, there's always room for improvement... especially around the holidays.
And with one of the busiest shopping days of the year upon us, I wanted to remind you of a series of posts we did last year entitled, The Ghost of Christmas Budgets Past, Present and Future.
In The Ghost of Christmas Budgets Past, I encouraged you to embrace your families' creative giving traditions while keeping the cost of past homemade gifts in mind: "So in your efforts to keep spending down this year, embrace the ghosts of Christmas budgets past. Listen to them and learn what you're getting yourself into."
One thing we did years ago was to decide that we should put more emphasis on individual birthdays than Christmas. That cut down the amount we budgeted for just one event. I think it made the individual attention that each of our 4 children got on their birthday more meaningful.
The second decision we made was that whatever we budgeted to spend on ourselves, we would budget the same amount to give to other ministries. Human nature being what it is, this went a long way toward keeping our splurges to a minimum. — Bob
We've always created a budget for Christmas, right down to the annual Christmas DVD we add to our collection each year, or postage for Christmas cards. We also budget an extra margin of around 10% — which comes in handy when the gift my mother-in-law would really love is $5 to $10 more than I budgeted and I can't find it on sale...
I want to recommend a site that's helped me keep Christmas organized and sane for several years now. It's called www.organizedChristmas.com. I made a binder with master copies of forms I use every year, such as master gift list, family wardrobe check, menu planner, etc. There's a master calendar with "countdown" weeks, so you can be totally done early in December and just enjoy the season. Checklists, too! Everything is free for the printing, and the website owner (now retired) is Christian, so many of the articles speak right to the heart of Christmas and are great for re-reading year after year. — Cate
As for me, next year I'll do a better job of looking at sites like dealnews.com (slogan: "Where every day is Black Friday") before I go out shopping. But I have to say, using these online saving tips paid off...
I'll also continue to use cell phone apps like have ShopSavvy which kept me from overpaying on more than one occasion. With ShopSavvy, you simply take a picture of a product bar code with your phone's camera, and within a few seconds you're shown a list of the best local and internet prices for that item.
And perhaps next year, I'll focus our September-November shopping on the non-toy presents. According to Dan de Grandpre, founder and chief executive of dealnews, the best time to buy toys is at least two weeks after Black Friday (or about two weeks before Christmas) when retailers, such as Toys 'R' Us, Wal-Mart and Amazon.com, slash prices to clear out unsold inventory.
So there you have it, some friendly reminders on how to stay in the black on Black Friday.
We're going to do something a little different, something I can't recall ever doing before, something most blog publishers dare not do — we're going to let our readers write an upcoming post...sort of.
We are going to put forth a topic and then take your feedback and make a post out of it. Sounds fun, right? So in the spirit of last week's election, let your voice be heard... POWER TO THE PEOPLE!
Our inaugural post topic: Christmas gifts!
How do you approach giving Christmas presents to your children?
Do you set a limit on the number of presents, the cost, or both?
Do the kids know about these limits?
Maybe you draw names?
Do you make an effort to tie in gift-giving to the message of Christ's birth?
Do you even give presents?
What kind of traditions do you have that you feel really have a positive impact?
What have you done in the past that you've discontinued because you found it unhelpful?
What kind of things did your parents do that you really appreciated?
Pick out a few of the questions above and give us your answers on our Facebook's Note Page.
Consider your input to be the first gift you've given this Christmas. We'll receive it with joy — and put it to use!
Once a month, we invite a guest blogger to write our Personal Financial Friday post. Today we're pleased to introduce you to Craig Ford, founder of MoneyHelpForChristians.com, a site that promotes "a frugal, simple, debt-free, and generous lifestyle so Christians can faithfully maximize their resources by putting them at the disposal of God’s Kingdom."
Craig is also the author of the e-book, The Secret to a Successful Budget (more about that below).
One thing of particular interest about Craig is that he is a missionary, currently living in Papua New Guinea. So, we take you now to the Southwest Pacific and Craig Ford!
♦ ♦ ♦
If you're a regular Sound Mind Investing reader, you probably are already aware of the four financial "levels":
Level 1 – Get Debt-Free
Level 2 – Save for Future Needs
Level 3 – Invest Your Surplus
Level 4 – Diversify for Safety
In some ways, each new level requires a new body of knowledge and set of skills. What you need to know to get out of debt is different than what you need to know to wisely invest your surplus.
But no matter where you are in your financial journey, there's one tool that can help you keep financially healthy. It's the best financial tool of them all.
Are you ready for this? I call it — a budget. Yep, some folks try to be more subtle and give it a different name, but I’m gonna call it like I see it: it's a budget.
But a budgetdoesn't have to be the same for everyone. Too often, books on budgeting focus on numbers, techniques, and math. But what's essential is finding something that works for you, whether it aligns with anyone else's budget technique or not.
It really doesn't matter whether your system is low-tech or high-tech. All that really matters is that you come up with a system that:
helps you intentionally spend your hard-earned income;
helps you make informed spending decisions;
provides accountability for spending;
serves as a concrete reflection of your true priorities; and
helps you achieve your financial goals.
The goal of the budget is to help you spend less than you earn. If you have a money management system that accomplishes that, then it is an effective budget.
Because each person is different, I wrote a book on on budgeting (details below) that doesn't try to force everyone into a budgeting mold. Instead, I offer various ideas for systems that fit different personality types.
Whatever system you develop, here are three things to keep in mind as you get started on a budget:
Budgeting is a process, not an event. You won't wake up tomorrow with a highly effective budget. It takes time to get better.
There is no such thing as a failed budget. There are simply ample opportunities to improve! When you make a budgeting mistake, just make the necessary adjustments and keep on budgeting.
There is no such thing as a perfect budget. Make it your goal to have an effective budget, not a perfect budget.
So stop thinking about budgeting as drudgery and get out of your mind that it has to look a certain way. Instead, focus on the positives of having a workable plan.
I believe personal finance is really about managing life, not money, so on the cover of my book, I put a picture of my daughter and me on a beach at the Gold Coast of Australia (that's southeast of where we live in Papua New Guinea). This picture reminds me why I budget. It reminds me that budgeting is not about saying "No." It's about choosing when to say "Yes."
Budgeting isn't an end in itself. It is simply an effective tool to help you use money wisely and make the most of what has God entrusted to you — all along life's financial journey.
♦ ♦ ♦
If you're interested in learning more about Craig's book, click here. Craig's offering a 30% discount (good through Nov. 12) for SMI readers. Just enter the coupon code “SMIblog” at checkout.
It's SMI's Personal Finance Friday, and today I'm bringing you a smorgasbord of articles to get your financial juices flowing.
Fitness Deals to Beat the New Year Rush: "It's true that you won't see splashy promotions right now, because most gyms wait to publicize big promotions until the New Year's resolution rush. But if you walk in and ask, you'll find they're very willing to give a discount to get you in the door..."
"'Dad, I need $40 for my new cross-country jersey and stuff,' he said. I fished out a fifty to pass over to him. He could give me the $10 change later.
"Whoa, just a second, I thought. 'Whatever happened to the change for the 30 bucks I gave you back in August?' I demanded.
"'What $30?' he responded..."
The Mall Goes High-Tech: "Back in August, the big retailer Gap decided to go where few large retailers have gone before — using a popular discount Web site to hold a nationwide sale. Shoppers had 24 hours to go online at Groupon.com and buy half-price shopping vouchers good for everything from jeans to trendy messenger bags.... [B]y day's end, almost 450,000 potential customers had bought into the deal.
"It's the new paradox for the American shopper: Just when buying online has become second nature for most consumers, retailers are shaking up the way they sell, now increasingly using the Internet to lure them back to Main Street or the mall."
Goodbye to All That Penny-Pinching: "The challenge for us lies not in knowing what to do, but in doing it. Despite our current economic travails, we live in a society of great wealth. Every time we drive past a shopping center or flip on the television, we are confronted with all the great products we don't own but could.
"Even for those inclined to be cheap, it's not so simple.... So, rather than providing helpful tips in my previous columns, I've used the space often to examine those two great forces that make us spend more than we should: seduction and compromise."
Future-Proof Your Phone's Data Plan: "Following AT&T's lead, both Verizon Wireless and T-Mobile are expected to unveil new cell phone data plans this week, offering lower prices for customers willing to give up their unlimited data plans. But the $15 savings might not be worth it — and if you switch, there could be no going back."
The newest question is whether or not to get a "home buyer resale warranty" (not to be confused with a home warranty offered by a builder). If you're unfamiliar with these, they're more or less a service contract on various components of your house, such as appliances, HVAC, and water heaters. They are usually considered at the onset of a relocation, but many can be purchased at any time.
The one we're being offered is by American Home Shield. It costs $356/year for the basic plan ($512/year for the "Enhanced Plan") and works like this: when a covered item breaks down, you can contact them by phone or online and request a service call. After the request is processed, one of their "approved and insured contractors" will come out to diagnose and fix the problem. The cost for this "Trade Service Call" is $60.
Sounds reasonable, but let's look at some of the fine print:
"This Trade Service Call Fee applies to the initial visit by a contract for each covered trade. This initial fee covers any additional contractor visits required for the same breakdown within 30 days of the original service date. Additional charges may apply for some repairs and replacements."
"... Warranty covers the repair or replacement of many system and appliance breakdowns, but not necessarily the entire system or appliance."
"... may provide cash back in lieu of repair or replacement in the amount of AHS's actual cost to repair or replace such item, which in most cases may be less than actual retail pricing."
"... [items needing to be replaced] will be replaced with units having comparable features, not necessarily the same dimension, color, and/or brand."
Hmmmm... you thinking what I'm thinking? That's a lot of fine print. Let me see if I've got this right:
My two-year-old $1,100 Kenmore stainless steel 3 x 3 x 6-foot side-by-side fridge is acting wonky. So I call, a technician comes out to "fix" the problem and I shell out 60 bucks. 31 days later, it's acting up again so I reluctantly make another call. After parting with another $60, tech tells me it's unfixable.
I call AHS and they give me two options: I can either have the $600 it would cost them to replace it with a "comparable" fridge, or they'll deliver me a brand new 2.5 x 3.5 x 6.2-foot Hotpoint bottom-freezer... in bisque.
This is a real possibility.
So let's do the math: $512 for the Enhanced Plan (basic plan doesn't cover refrigerators) + $60 + $60 = $632. So in essence I've either payed $632 in order to get $600 (which isn't usually a good deal) — OR — I paid $632 for a fridge that doesn't match ...have the same features... or fit (which is arguably an EVEN worse deal).
Of course, while this is a possibility, it isn't a certainty. Instead, he could have fixed it the first time he came out and I could have no more problems the rest of the year.
Then I'm only out $572 ($512 + $60) for a repair that, according to AHS's literature, averages $157. In that case it would have been worth it because I... wait a minute... no... no, it still wouldn't have been worth it. I just flushed $415 down the toilet!
And speaking of toilets, the average cost to repair one is $70 and the average cost to replace one is $285. So if my toilet broke instead of the fridge, I just paid $572 to have an old one fixed when I could have spent the same amount and bought TWO brand new ones!
So you can see, the fewer things that break, the more "expensive" this coverage is. If you really want to get your money's worth, you need a lot of things to break. I don't know about you, but I'm not big on rooting for my house to fall apart so that I can get my money's worth out of a warranty. Come to think of it, kinda sounds like insurance... EUREKA! Call it a warranty, call it a service contract, call it whatever you want, but we've discovered the truth: it's just another form of insurance.
Nothing wrong with insurance as long as you know that's what you're getting. So back to my original question, are these warranties a good idea? If the seller pays for it, then sure, why not. But if it's coming out of your pocket then consider the age of the home, its various components, and what exactly is covered in order to make an informed decision. Again, pay attention to the fine print.
In our first home we chose to get one because we were first-time home buyers and it gave us a little peace of mind (which is, perhaps, the biggest selling point). But when we had a plumbing issue within that first year, since it had to do with pipes outside the footprint of the walls, it wasn't covered (said it right there in the fine print and a customer service rep confirmed it for me, unfortunately).
So will we get a "home buyer resale warranty"? Doesn't look like it. The home is only four years old and we have adequate savings to cover any breakages that would have been covered by the warranty. What we could do each year is put the contract fee (or premium, pending how you look at it) in a separate savings account just for home repairs (not unlike what I suggested for pet insurance). That way if we need it, we'll have it. And if we don't need it, at least we didn't wash it down a drain that never needed fixing.
It's too bad really, I was a big fan of Bing Cashback. I first started using Bing Cashback late last year, when, in an effort to diversify the free internet services I frequent (i.e. I don't like relying too much on any one provider, be it Yahoo, Google, or Microsoft), I switched to Bing Search. Since that time, I've saved nearly $250.
We are writing to notify you that the Bing cashback program will be discontinued, and the last day to earn cash back on your Bing Shopping purchases will be July 30, 2010.
So why did it close down? Usually, these things just boil down to profitability. But here's NPR's take:
Note that Microsoft themselves said, "We did not see the broad adoption we had hoped for." That could mean not enough users of the program or not enough increased search engine market share or... But who knows?
So what if you're a Bing Cashback user and you have rebate money you haven't redeemed? No worries, you have until July 30, 2011.
But what if you're such a Bing devotee that you aren't interested in other rebate programs? There may be hope for you after all. Did you notice that at the end of their announcement, they say, "...and we are currently working on an exciting new program which you will hear more about from us later this summer."
Hmmmm... I'm intrigued.
Update:Rumors are flying around that Bing Cashback might team up with Amazon. Whether or not that is true is anyone's guess. Until we know for sure, you can use this handy list of other rebate sites from Comparerewards.com for your online shopping.
I'm torn. I can't decide if my love for our dog outweighs my distaste for feeling duped into buying yet another kind of insurance: pet insurance. Yes, it's real with actual revenue numbers to back it up. Opinions vary regarding its merits: this piece acknowledges the value, while this piece does not. Then there's this information about calculating the worth of your pet.
If you ask me, it's impossible to put a price on a face like Gertie's. But I think I'm in the "factor it into your budget" camp. In other words, instead of paying premiums to a pet insurance company, open a pet savings account and "pay yourself" instead. If we put money aside now, not only will it be there if we need it but we'll get the benefit of compounding interest.
But that's only half the story, the money-saving, budget-conscience half.
Isn't there a stewardship issue here? Don't think so? Maybe this piece will change your mind. It willl certainly incense the hard core pets-aren't-people-they're-possessions crowd. Even a big-time pet lover like myself was taken back. Listen to this:
APPMA reports that 42% of dogs now sleep in the same bed as their owners.I'm not judging anyone... yet.
Half of all dog owners say they consider their pet's comfort when buying a car. I barely consider my kids' comfort.
With annual growth nearing 50%, the pooper scooper industry is now experiencing a lot of consolidation...There's a "pooper scooper industry"?
I'm not going to say that some of these crazy things people do for their pets are morally or even financially wrong because I don't know their heart or their giving. But it's hard not to have questions when you learn that Fido could be put on a cocktail of Slentrol and Reconcile; one for the unwanted pounds he put on while being depressed and the other for the depression from all the canine separation anxiety. My question in particular: Why medicate when he could just have liposuction and go everywhere with you in your canine-cozy Caddy? ;-)
Is it just me or is there a financial stewardship issue banging around in here somewhere? I think so, or at least there certainly can be without proper balance. You see, I want my giving to reflect how much I love the God and love other people. So it's more about my love for Him and less about my lack of love for Gertie.
Besides, when pet cloning comes down in price, Gertie will know how much we love her for the rest of her lives.
(This piece originally appeared in a July 2007 blog post (membership required) of The Sound Mind Investing Weblog.)
Last summer, we wrote about Swaptree, a website that allows you to list and trade books, music, DVDs, and video games for free (and soon you'll able to trade Blu-ray discs and audio books). Since then, I've had a chance to use it in real life.
Here's how it works in general. Lots of individuals create lists of items they want, as well as items they have to trade. For the most part, you're saying that you're willing to trade any item on your "have" list for any item on your "want" list. (You always have the opportunity to reject a trade, but if you do this too often, Swaptree will evidently get cranky.) This is important, because in most cases Swaptree arranges deals among three parties, rather than two. In other words, you're sending an item to person A while getting an item from person B.
Here's the detailed version of how this works:
After you sign up for a free account, you are prompted to list items you have to trade and those you'd like to have. Listing items you have is quite easy. You either search for it or, better yet, simply enter in the UPC or ISBN in the "Have" list box and click "Add". From there, you select the item's condition and give a description if you'd like, then submit. Very quick and easy.
To add items to your Want List, type in the name of the item in the search box, then click the "Want It" link when it pops up. It's really that easy.
Next, you can view potential trades by clicking on your "Want List" and then sort the selections by "View Only Get Now Items." If there are any trades available to you, they will show up here. Next you can initiate a trade, assuming you are okay with the exchange. But not all items are equal. You may not want to trade a popular movie for an old paperback. But if you are good with the terms, you can initiate the trade and wait for the other party to accept (they are given roughly 2 days). If it's accepted, you'll get an email (or you can check back on the status by clicking the "My Trades").
Assuming it's accepted, you have a couple days to mail the item. Swaptree will give you the person's mailing address. You can either have Swaptree calculate and print the postage/mailing label for you right then (you'll need a credit card to pay for the postage if you select this option and they charge a small fee for this service - but it's extremely convenient and the prices are quite reasonable), or you can calculate your own postage.
After you mail it, you can "Contact the user" to notify them of your ship date and/or ask them questions/make comments. Once you've received your item, you can come back to "Rate the User". This rating might make a difference with whom you trade in the future. Since other users also likely take notice, it's advisable to solicit positive feedback if they haven't already rated you.
And that's Swaptree in a nutshell. We recently moved and came across some old movies and video games that I had intended to sell on eBay. But since I didn't want to hassle with auctions, and there were some DVDs we wanted, I thought I'd give Swaptree a try. And it works as advertised. I'm notified when someone initiates a trade and I check back once a week to see if there any available trades I may have missed or if I want to add some items to our Want List. So far, I've made 4 trades (traded movies for movies and traded video games for movies) and haven't had any issues. The only fees I've paid were the shipping costs. Again, Swaptree makes a small profit when you buy and print postage but you don't have to use their postage generator.
If there's a downside to Swaptree, it's that pending the size of your Want and Have Lists, a trade could take a while. So if you're in a rush, this probably isn't your best option. But it will likely be on my pre-eBay checklist if there's an book, movie, CD, or video game I'm interested in getting. And it sure beats paying retail because as is often the case, patience pays dividends for the frugal.
UPDATE: Swaptree has acquired Swap.com. Besides an eventual name change and a bigger user base, the changes brought about by this acquisition will take some time to manifest. In the meantime, it's free trading as usual.
You may have heard us mention Mint.com a time or two around here. For the uninitiated, Mint is a free, web-based money management tool. Founder Aaron Patzer launched Mint in 2007. It quickly rose to the top of web-based financial tools and two years later, he sold it to Intuit (maker of Quicken/Quickbooks) for $170 million.
While most of the beefs I had in the SMI review I wrote in 2008 (subscribers' link) have been addressed, I wanted to ask about a couple that hadn't:
An envelope budgeting option, and
The possibility of a comprehensive part standalone product, part web-based product, and part mobile product all rolled into one.
I was able to ask Aaron Patzer (who still heads Mint, though now as part of Quicken) about these two features during a live webcast he did yesterday. If you're interested in how he answered, fast forward to the 13:16 and 28:00 marks, respectively.
As we become a more and more data-centric society, all that information consumption not only eats up our time but also our money. And if you're anything like me (and for your sake I hope you're not), it's easy to fool yourself into categorizing a "want" as a "need."
Take, for instance the cell phone. Until January 2009, I was an anti-cellphone-ite, a breed on the doom of extinction. My wife, my son, my nephews — even my mom — had a cell phone. I didn't want the extra expense, the extra interruptions, and the extra cargo to lug around (I had trouble enough not forgetting my wallet and keys).
But I eventually caved, in part because my wife wanted me to have a cell phone, and in part because of the convenience factor. And if I was going to schlep one of these around everywhere, I wanted a good one... so I got an iPhone.
With all the things it can do, it's closer to 1-part convenience, 3-parts entertainment. There's nothing wrong with that, as long as I'm honest about it when factoring it into our budget: this is 75% an entertainment-budget item.
This leads me to a New York Times' piece on the cost of home entertainment. There are some interesting figures to consider:
It used to be that a basic $25-a-month phone bill was your main telecommunications expense. But by 2004, the average American spent $770.95 annually on services like cable television, Internet connectivity and video games, according to data from the Census Bureau.
By 2008, that number rose to $903, outstripping inflation. By the end of this year, it is expected to have grown to $997.07. Add another $1,000 or more for cellphone service and the average family is spending as much on entertainment over devices as they are on dining out or buying gasoline.
And those government figures do not take into account movies, music and television shows bought through iTunes, or the data plans that are increasingly mandatory for more sophisticated smartphones.
Incredible really. All this got me wondering 1) how bad the damage was at the Pryor household and 2) where could we cut costs on digital services yet still keep most of the functionality?
I started with our cell-phone plan. I went to the website, downloaded our usage, and checked our monthly average of minutes and text messages used. We use about 450 minutes a month, but had a 750-minute plan. Unfortunately, that's the lowest family plan listed on the site. But I called anyway hoping there were other unlisted options. Sure enough, there's a 550-minute plan that's $10 less. Then I asked about texting (which I use way more than I talk). Unfortunately, there's only one family plan and the individual plans wouldn't cover our average monthly texting. However, I'm experimenting with apps like textPlus which allows free texting to other textPlus users. This could reduce our phone bill by $20/month if we're diligent about using it.
My next call was to our cable company, which provides our home phone, internet, and TV. I started off by kindly letting them know I wasn't happy with my 15% bill increase over the past year and wondered what they could do to help me. In seconds, the rep offered to knock off $13 from the internet portion of my bill, but said that was all he could do. I took him up on his offer, thanked him, and hung up.
I then immediately called back to talk to someone about the TV packages we have. Turns out, we were paying for a package that has only two channels that we ever watch (and not with much frequency). Dumping that tier of service shaved off $10/month. Secondly, there was a package I NEVER signed up for (and never use) but was being charged $8/month for. I promptly canceled that one too and asked for a refund.
The rep was friendly but said she couldn't do that. Now in their defense, I understand: any yahoo could call up months after the fact and say they didn't ask for it and demand a refund. And had I diligently been studying my cable bill every month and comparing it to the ever changing TV package line-up options, I suppose I could have caught the error. But on principle, I couldn't let it go. I had been overcharged. And had they not made the error to begin with, I wouldn't be in this mess. So I called back the next day, spoke with a rep, and then that rep's supervisor. I'm still waiting for a call from the supervisor's supervisor.
Let's re-cap: to that point, I'd knocked off $10 + $13 + $10 + $8 = $41/month (not to mention all those convoluted taxes and fees). And this doesn't include a potential $20/month if textPlus meets our needs. But I wasn't done yet.
With our home phone getting used less and less, I've been wanting to get rid of it (and its $26/month fee) for quite a while. I nagged my wife to death and she finally relented. So I ordered an Ooma. In a nutshell, Ooma is a device that connects to your high-speed Internet and your home phone and allows you to make calls at no charge. It does other things as well, but we're getting it primarily so we can cut the $26/month phone bill. It will take about 10 months to pay for itself, but should be worth it (I'll do an article or post once we've been using it for a while).
So put all these things together and by the end of the year, I will have shaved $67-87/month off our monthly expenses, while not sacrificing a great deal in these luxury/entertainment categories. Notice I said "shaved" and not "saved" because as our good friend Mary Hunt says, "You don't save money buying things on sale unless you stop at the bank to deposit the money you saved."
Bottom line: Be honest about your budget categories and your "needs" vs. your "wants." Technology is nice, but all those 0's and 1's really add up.
By now you've worn it, played with it, smelled it, ate it, listened to it, watched it, cut with it, mixed in it, served on it (or in my case, because I didn't really know what to ask for, broke something on purpose and then Mighty Puttied it), or some combination of the above. Some of you have already returned it for whatever it was you really wanted.
But my question is this, "How'd your budget do? Does it need a little Mighty Putty of its own, or did it hold up pretty well?" Or perhaps a better question is, "What, if anything, will you do differently next year?"
As for me, next year I'll do a better job of looking at sites like dealnews.com (slogan: "Where every day is Black Friday") before I go out shopping. But I have to say, using these online saving tips paid off, especially Bing Cashback (UPDATE: Bing Cashback has made some changes and not for the better.).
I'll also continue to use cell phone apps like have ShopSavvy which kept me from overpaying on more than one occasion. With ShopSavvy, you simply take a picture of a product bar code with your phone's camera, and within a few seconds you're shown a list of the best local and internet prices for that item.
And perhaps next year, I'll focus our September-November shopping on the non-toy presents. According to Dan de Grandpre, founder and chief executive of dealnews, the best time to buy toys is at least two weeks after Black Friday (or about two weeks before Christmas) when retailers, such as Toys 'R' Us, Wal-Mart and Amazon.com, slash prices to clear out unsold inventory.
I'm also going to push for drawing names on my wife's side of the family. It's so much more enjoyable (and quite a bit less expensive) to worry about buying gifts only for one or two people. Plus, they get better presents 'cause we can afford a little bit more.
The downside is if you draw you-know-who's name (a.k.a. MrOrMrsImpossibleToBuyFor - because they either don't like anything or they're just going to take it back, or they're taking it back because they don't like anything), you're up a creek for a bigger present.
But all and all, if we keep to the same intentional and pro-active strategy next year, will we let our budget scare us? Not a ghost of a chance.
Blog
My wife and I recently did a surprise room makeover for our two girls who will be sharing a bedroom to free up a room for our baby due in August. We'd been stockpiling decor options for several weeks, but with the makeover just a week away, we were without good curtain options.
Jason 
Phone: Now for the home phone. As you may recall we started using 
What then? It's the dings. The scratches. The dents. I didn't realize how badly they'd hurt emotionally.
But I eventually caved, in part because my wife wanted me to have a cell phone, and in part because of the convenience factor. And if I was going to schlep one of these around everywhere, I wanted a good one... so I got an iPhone.