Monday, November 09, 2009

Liz Jones Loves Spending Money



I understand that we are all products of our environments to some extent. That works until you are about thirteen years old; then you should be able to look around and figure some things out for yourself. When you are thirty-five years old and still blaming your parents, you need a reality check. Grow the hell up.


Liz Jones.

Yeah.

I don't know who she is, either. Apparently, she's a social critic and columnist. Lives "across the pond," as they say.

But she sure appears to be a GDP-growth-worshipping economist's wet dream:

Dailymail: I'm £150,000 in Debt...

I'd say that it takes big courage for someone like her to come out and announce her debt situation. But really, the true courage comes when she proves that she's willing to actually work and pay it off ... rather than "Woe is me!" her way to more recognition and preferential treatment.

That is the thing with being bad with money. It always ends up costing you much more: in late fees, interest rates.

The poorer you are, the more life costs. Like lots of other optimistic, hardworking members of the middle classes, I always thought I'd be OK - not with pools and private jets, but at least with organic food on the table and a nice house.

Yet I am terribly, shockingly in debt.

...I am in a terrible financial black hole right now.


Ummm ... yeah. You, Liz, have racehorses, a farm with a "bat sanctuary," and you "holiday in Tuscany." You wear clothes made by designers whose names have far too many consonants. You spend all this money in some dear hope that others will either be jealous of you, or will see you for something you're not.

I'll give you this: You made me, a social peon (though a solvent one), laugh at you. You sure did that.

I have, probably still smarting from the humiliation of not owning the right jodhpurs as a child, started to rescue race horses, which are proving ruinously expensive. Even my rescued battery hens have two vets: a normal vet and a homeopathic vet.


Nice. And there's more, of course — much more — in the article.

But don't hate her because she's so pathetic.

Hate her because she's still (I'm pretty sure) blaming her poor parents.

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— Posted by Michael @ 8:17 AM



Thursday, September 24, 2009

Paycheck to Paycheck



You might not be living paycheck to paycheck, but 61 of your 100 closest friends are.

Those are the figures reported by a new survey from Careerbuilder.com, in which Harris Interactive surveyed 4,478 workers about their current financial standing. Sixty-one percent reported that they're living at or near a "paycheck to paycheck" basis. Further:

Surprisingly, people earning average salaries aren’t the only ones feeling the need to pinch pennies: 30 percent of workers with salaries of $100,000 or more report that they too live paycheck to paycheck, up from 21 percent in 2008.


Admittedly, earning $100k in NYC isn't the same as earning $100k in Memphis, so the tangible value of the "$100k" aspect has to be moderated somewhat.

How has the recent economic tumult affected the paycheck-to-paycheck figures? Well, here's a visual:

Paycheck to Paycheck Graph


And here's a nasty (though not unexpected) tidbit that does NOT bode well for the future:

Some workers are making ends meet by dipping into their long-term savings. More than one-in-five (21 percent) workers say they have reduced their 401(k) contributions or personal savings in the last six months to get by. Looking at workers earning six figures or more, a nearly equal number (23 percent) report that they have also reduced their 401(k) or savings.


Some other factoids from the survey:


  • 36% of workers report no participation in 401k, IRA, etc.

  • 33% say they are not able to save ANY money each month

  • 30% say they are able to save $100 or less each month

  • 16% say they are able to save $50 or less each month



Oy. Not a pretty picture, no matter how you look at it!

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— Posted by Michael @ 8:07 AM



Monday, August 10, 2009

Pay Cash, Spend Less (Month 2)



Well, July 2009 is gone. Which means another "cash only" month is in the books for the IYM household.

For those readers who might be new to this blog miniseries, my household has moved to (largely) cash-only spending for the three-month period of June, July, and August 2009. Previous to this little experiment, we paid for most everything with no-fee, cash-back credit cards. (As per my "How We Manage Our Money" post, we don't carry balances ... EVER.)

The idea here? I want to see how much less we spend when we spend only cash. Actually, in the two months we've been on this cash-only kick, we've actually used debit cards a handful of times as well. But greenbacks have been the payment mode of preference, since I want to make the spending feel as "immediate" as possible.

For simplicity's sake, I've picked seven every-month spending categories to watch closely during this experiment.

Why Not Total Spending?


I don't pay much attention to our overall total monthly spending when looking for cash-only results. The reason? The "grand total spent" doesn't tell the true story of cash-only versus plastic, because any one month can have irregular but necessary expenses — like backyard fence replacements — which have nothing to do with whether we spend cash or not.

Results: Cash-Only in July


So here's how our spending in July (cash only) compared to the average monthly spending in March, April, and May (when we paid with plastic):



Results: Two Months of Cash-Only (June & July Averaged)



And here's one that's even more interesting to me. In this chart, I've averaged our cash-only spending months (June/July) and compared it to March/April/May:



Wowsers. More than a twenty-two percent decrease in spending across these common categories.

The old maxim, "When you spend cash, you spend less!" sure appears to be holding up. One month to go!

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— Posted by Michael @ 8:10 AM



Monday, August 03, 2009

Dipping Into Savings



Boy. You'd think that I'd be over this by now.

Regret, I mean. The kind you feel (or I do, at least) when we complete a month in which we had to dip into savings. The kind you feel when you see your monthly cash flow finish in the red.

That was July for us. Thanks to an $1,850 backyard fence replacement, our liquid-savings funds took a thousand-dollar dump.

At the end of June, our savings progress looked like so:



Then, at the end of July:



Bleh. I'm a guy who likes to "always move forward." When I finish a month in the red ... well, unless you're the government, that ain't "forward." To me, it feels like wholesale failure. This, even though such things are the reason we build up savings!

I'm not sure why, but this $1k drop in savings sure seems to feel worse than the $6k expense when we paid cash to replace our central A/C system.

I'll say this, though: Not having to look into my neighbor's forest backyard while I'm grilling ... or mowing ... or just sitting on the patio ... is awfully nice!

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— Posted by Michael @ 8:04 AM



Monday, July 27, 2009

Monday Morning Trivia



A wee bit o' financial trivia for the gallery this morning:

What do the years 1998, 1999, 2000, and 2001 all have in common?



Those would be the only four years since 1970 that the U.S. government has run an annual budget surplus.

Now go out there, get to work, and pay some taxes!

Source: CBO Historical Budget Data, data spreadsheet, Table F-1

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— Posted by Michael @ 8:14 AM



Monday, July 06, 2009

Pay Cash, Spend Less (Month 1)



As I noted at the start of last month, our household went to cash- or debit-card-only spending for the month of June, 2009.

Until June, our household's spending was done almost entirely by cash-back credit cards; auto-debited utilities and such notwithstanding. (Check my "How We Manage Our Money" post for a few more details.)

Why use plastic? (All balances paid in full, of course!) Well, it's insanely convenient. It makes for one simple monthly payment. It allows easy record-keeping. There's no need to tote around cash or change. Plus that one- or three-percent cash-back adds up pretty quickly.

But then, of course, there are the negatives. Here's one everybody's heard:

A study by Dunn and Bradstreet showed that the credit-card user spends 12 to 18 percent more when using credit instead of cash. It hurts when you spend cash, and therefore, you spend less.
— Dave Ramsey, Total Money Makeover


And if you prefer, a more scientific slant on that:

In the case of credit cards, there are two additional reasons that the pain of paying is dulled. First, the payment is temporally separated from the consumption. Second, credit cards allow mixing of purchases where several purchases are combined into one payment such that a single payment is not attributable to a specific consumption. In sum, the extent to which people match more transparent payment forms to necessities or utilitarian consumption and less transparent payment forms to frivolous luxuries, using cash discourages spending and using a credit card or a gift card encourages spending.
— Priya Raghubir & Joydeep Srivastava, "Monopoly Money"


So Let's Look at June


So how'd it go in June? Well, here are seven expense categories in which I would've expected to see "cash only" effect some changes:



My Quicken reports have lots more spending categories than that, of course. But as I scanned through most of the others (utilities, insurance, and so on), I was able to discount many of them: We didn't go cash-only with utilities, for example. And even if we had, it wouldn't change what we spent.



But Was It Really Because of Cash?



As we can see, in the spending categories listed above, we spend just a nudge under 19 percent less in June than we did in the previous three months (averaged across March, April, and May). That, in my mind, is significant.

It's possible, of course, that we spent less in June on things like groceries and household items simply because we had "stocked up" on these items in May. If this was the case, it was unintentional.

Also: There's this thing with "special occasions" and increased spending. For instance, my wife mentions that May included some wedding-related clothing spending that otherwise wouldn't be there.

My response to this? Well, what she says is true. But every month has that sort of spending somewhere. There are no "perfect" months.

This is why I'm using a three-month spending average for comparison — it helps smooth things out just a little.

So Let's Try This Again!


As I see it, the best way to prove/disprove the impact of cash-only spending at MY household's level would be to keep doing it over several months. By doing this, I could compare a cash-only monthly average from June/July/August to our "use cash-back credit cards at every opportunity" normal spending average from March/April/May.

To be honest, I was really surprised to see "cash vs. credit" the spending difference be as high as it was for June. I was expecting to see perhaps an eight or ten percent decrease. But not much more than that.

Obviously, I was wrong.

Which is why we plan to do more cash-only in July! Let's see what happens...

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— Posted by Michael @ 9:46 AM



Monday, June 29, 2009

Fireworks: Most You've Spent?



Question for the readership:

What's the most you've spent on fireworks for one Fourth of July?

With a little under a week to go, my household has spent just a smidge over a hundred bucks on multicolored pyrotechnics and assorted versions of Dismemberment in a Tube.

And of that hundred bucks, a hefty chunk was for a 24-piece set of Excalibur shells. I can admit it: My inner Beavis always wanted to do some of these...



Anyway, this is the most I can remember spending in quite a while ... probably back to my high-school days. Which is ironic, because I feel about as unpatriotic and generally politically discouraged these days as I ever have.

Given the state of things economically, I'm also curious: Wonder how the fireworks stands will be making out this year...

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— Posted by Michael @ 8:31 AM



Monday, June 01, 2009

Paying With Cash



As I mentioned in May, for the month of June our household will be doing its spending on (mostly) a cash-only basis.

There are a couple of reasons for this. Firstly, I want to see if our spending on variable expenses (groceries, dining, household items, etc.) really does decrease. And if this spending does decrease — I can't imagine that it won't, by the way — then I want to see how much of a difference it makes.

Here's a sampling of the items I'll be comparing against. The following are monthly averages from the latest three-month period (March, April, and May 2009):

Some items I'll be watching...


Second, with the upcoming "Credit Card Bill of Rights" changes being made in the financial industry, it will not surprise me to see Citibank, Chase, et. al. initiate a raft of annual and miscellaneous fees on those of us who use our cards for convenience and cash rewards only, and who never carry a revolving balance.

If these fees do appear, then Lisa and I will give serious thought to living on a cash and/or debit-card basis. I figure June will be a nice "practice run" for this scenario.

Cash Spending: The Exceptions

After some consideration, I've determined that there will be a few exceptions to our cash-only rule:

Online Shopping
No, I'm not going to send paper checks to Amazon for my book purchases. I tend to buy a book or three each month. In June, any book purchases will be made with either debit or credit card. (I really hate the idea of using debit cards online, but I'll make an exception for Amazon.)

Gas
Though gas-station owners might be ecstatic to see us paying with cash (or so I've heard), they'll not be the beneficiaries of our cash-centric spending in June. It'll be debit/credit cards here as well. Why? Because whether we spend cash or credit for gas, the amount spent will not change: We always pay at the pump; we always fill up; we never make convenience purchases at the counter.

Thus "cash vs. plastic" makes no real difference to us.

Auto-Billed Items
We have several monthly items which are auto-billed to one or more of our credit cards. Six-month auto-insurance premiums (happen to be due in June) are one; online-game and learning programs for our daughter are another. I'm not changing the payment plans for these services.

Business Expenses
Still using credit cards here. (Pretty much because these are all auto-billed expenses — hosting, domains, and such.)

One Reason to Hate Cash

I've already rediscovered one reason I'd much rather use cards than cash:

Loose freakin' change.

I hate it. I mean, I'd forgotten how much I dislike walking around with change in my pockets. Don't ask me why this is; it's just something that (1) as a kid, I was cool with, but (2) an adult, bugs the crap out of me. (And you know those dimes and quarters are gonna end up clanging around in the washer and dryer, right?)

In any case, here goes "cash only" at the IYM homestead!

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— Posted by Michael @ 8:14 AM



Tuesday, May 26, 2009

Credit-Card Predators Unite



It's amazing how those of us who try to handle our money intelligently — try to do things the right way — end up getting tsk-tsked for the plight of those who are now squarely behind the eight-ball of life (financially-speaking).

WaPo: Revealing the Hidden Cost of Credit Cards

If you, like me, are one of the privileged few who somehow manage to pay zero interest on your credit-card spending each month, you need to know that you are a cold, heartless bastard who is enjoying those zero-interest, 30-day loans on the bruised backs of the poor and downtrodden.

Here's how Michelle Singletary, in the above article, lays it out:

You probably never considered that the credit pushers made your access to "free" money possible by gouging the less fortunate with hideous penalty fees and wicked double-digit interest rates. Effectively, the most financially vulnerable consumers have subsidized the low interest rates and rewards programs that the more financially secure enjoy.


Well, Michelle, I actually have considered that. Several times, in fact. And you know what?

I never really cared.

You see, I carried credit-card balances for quite a long time, too. For ten years I paid my share of interest on said balances. Then I did something crazy: I got smart. I took responsibility for our future. I worked harder, learned more, and finally paid the cards off in December, 2004. (Whilst dropping from a dual-income household to a "single-income household w/kid," I might add.)

Hideous penalty fees?

Wicked double-digit interest rates?

Yes, both are integral parts of the card companies' playbooks.

However, if you're paying them — or if you're continually faced with those blasted bank overdraft charges — well, Life is trying send you a message. And that message is:

You're doing it wrong.

As Larry Winget notes in You're Broke Because You Want to Be, where you are in your life right now is the sum total of the choices you've made up to this point.

"Your life is a reflection of the choices you have made," he writes. "If you want a better life, then make better choices. When you do, you'll find that taking credit for your successes feels a lot better than blaming others for your failures."

We Own U
Make good choices; get good results.

Make poor choices; get poor results.

"I didn't have the money to pay my car insurance bill," the common tale goes, "and when the bill went late my card company saw it and jacked my interest rate up to 45 percent! What was I supposed to do?"

Uhh ... work more? (I did, and still do.)

Sell stuff. (Done a little of this, too.)

And move forward with the understanding that if you won't do these things, the world won't be forgiving. Reality will be only too happy to wail on you again.

Because that is how it works.

As Phil McGraw wrote in Life Strategies (see my related "Life Laws" page), "Many people fail to grasp that, when you choose the behavior, you choose the consequences."

I Know: Let's Change Some Laws!

Note that I'm not at all against the changes which are about to smack the credit-card industry. On the contrary: They're long overdue.

For instance: Throwing credit lines at college kids who don't have jobs is something that should've been snuffed out a long time ago.

And requiring cards to give 45 days' notice before raising a customer's rate? Seems reasonable to me.

But over the years, I've also developed quite a respect for the ability of banks to create their own reality via rules changes. They're masters at finding profits over here to make up for the profits they gave up over there. (Darned if the Federal Reserve doesn't help 'em do it, too. What — you think dropping rates to the floor was done with the public service in mind?)

Will these new laws cut into banks' bottom lines? Yup, I betcha they will.

Will the banks then dig and scrounge and find profits somewhere else? Also yup.

After giving it fair consideration, I'm now assigning better than 50/50 odds that the cash-back rewards and 30-days-no-interest credit which my wife and I enjoy as "convenience users" of Visa and Mastercard will be in serious jeopardy in the coming months. Ms. Singletary is probably correct when she writes:

Now that Congress has sent Obama a bill intended to rein in unfair credit card practices, it won't be long before the industry responds with new or old ways to make up for lost revenue.


At the very least, I'm expecting to see annual fees be initiated on the cards we carry now.

And them giving the proverbial boot to cash-back programs wouldn't surprise me, either.

Now, depending on how much those annual fees (or other newly-created arbitrary charges) are, we may or may not continue using plastic as our primary means of payment.

Note to Chase and Citibank:
We CAN Do Cash

For the month of June, Lisa and I will be shelving the credit cards and going back to the way our grandparents did it: Cash and checks. (I suspect the cashiers at Sam's Club and Target will think we've gone batty.)

I like to think of this as something of a practice run for what may be coming down the pike. Also, it'll be interesting to me to see if our grocery and household-item spending declines at all simply by virtue of us using cash at the checkout desk.

But I would like to address this to Ms. Singletary: I'm not going to apologize for being a "convenience user" of credit cards. Nor will I apologize for taking advantage of balance-transfer arbitrage to make myself a few bucks over the years.

I understand that nothing in life is free. Whatever you've been given, someone, somewhere is paying for it. That goes for lunches, t-shirts, magazine subscriptions.

And credit.

This doesn't mean the system is evil. It doesn't mean the world is evil.

The world is just the world.

Learn the rules. Play the game. Minimize losses. Don't be a victim.

And most of all, reap rewards where you can.

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— Posted by Michael @ 8:25 AM



Monday, May 11, 2009

New Values? I Doubt It



Smack in the middle of the May 2009 issue of Money magazine is an article entitled "How the Crisis Is Changing You." It's authored by Dan Kadlee. The gist, as you could likely guess, is that this recession will have a lasting (beneficial!) impact on the U.S. consumer.

Some argue that when the economy recovers, our new embrace of thrift, nesting, and altruism will end along with our fears of Armageddon. Certainly, Americans will borrow and spend again. But it won't be the same as in the pre-crisis era.


And similar thoughts are offered in a recent New York Times article:

NY Times: Shift from Spending to Saving...

From that article:

Fearful of job losses and anxious over housing and stock declines, Americans are squirreling away more of their paychecks than they were before the recession. In the last year, the savings rate — the percentage of after-tax income that people do not spend — has risen to above 4 percent, from virtually zero.

This happens in nearly every recession, and the effect is usually fleeting. Once the economy recovers, Americans revert to more spending and less saving. Over the last 30 years, the savings rate has fluctuated from over 14 percent in the 1970s to negative 2.7 percent in 2005, meaning Americans were spending more than they made.

This time is expected to be different, because the forces that enabled and even egged on consumers to save less and spend more — easy credit and skyrocketing asset values — could be permanently altered by the financial crisis that spun the economy into recession.


As the kids would say: Orly?

I say: Just give it time, boys. Over the last thirty years or so, the American consumer has repeatedly shown himself to be, on the whole, a mindless spending machine who pays little regard to the usual "What if?" situations in life.

So long as the "bad incidents" like this recession and that of 2000-2001 (neither of which have been all that "bad" by historical standards) roll along only once in a while, then Silly Spending Steve is all good.

In an exclusive nationwide survey conducted for this magazine earlier this year by Marketing & Research Resources, nine of 10 respondents said they have changed the way they manage their money as a result of the economic crisis; seven of 10 said their priorities are shifting as well; and a whopping 94% said the recession will have a lasting impact on the way they handle their finances.


Sorry, but I don't buy it. It's gonna take something way bigger than what we've seen so far to bring about a truly "lasting" impact. By "lasting," I mean longer than a few years.

I seem to recall hearing all this same "But we've changed!" schlock right after September 11, 2001, too. And look how long that lasted. A handful of years, tops.

Remember? Within four or five years a large segment of us were right back at it, buying McMansions with upper-six-digit price tags and parlaying the newfound "instant equity" into HELOCs (Hi, Corazzis!) and plasma TVs and weekend RVs and Caribbean vacations.

Thanks to an extravaganza of gubmint stimulus and debt-market manipulations, I have little doubt that we'll be back in our customary role as cheap-debt junkies soon enough. The only thing that'll change my view is that if the economic situation worsens from here — as in, the bottom falls out at some point.

We know that the Great Depression changed people FOR LIFE.

Nothing I've seen in the last year or so would lead me to believe that we've achieved such an outcome this time.

But Just Maybe...

Could a larger meltdown occur going forward? Sure. I wouldn't rule anything out. Actually, the fact that so many people (like Dave Ramsey) insist that another Great-Depression-like event "can't happen" because of all the economic "safety valves" we've put in place ... well, that sort of talk circulated about the "unsinkable" Titanic, too.

Too bad nobody told the iceberg.

History does have a way of crushing hubris under its boot.

Whether the uber-consumer mentality will be a victim of this recession remains to be seen. As of today, if this is all the pain we get, I really doubt it.

Thirty years of "Debt is your friend!" spending won't go away so easy.

We haven't seen "bad enough" yet.

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— Posted by Michael @ 8:50 AM



Thursday, March 26, 2009

Shaquille Spends How Much?



Pretty readable article for those of you who enjoy reading about how pro athletes (like lottery winners) can flush money faster than anyone:

Sports Illustrated: Why Athletes Go Broke

A tidbit that made my wife and I do a double-take:

Perhaps the upper limit on spending was set by the famously profligate Shaquille O'Neal, who — according to a document obtained by the Palm Beach Post during O'Neal's canceled divorce filing in January 2008 — spends a total of $875,015 each month, including $26,500 for child care, $24,300 for gas and $17,220 for clothing. But O'Neal, who also has been known to fund charities anonymously and cover medical bills for complete strangers, has the wherewithal to remain solvent.


That is just sick. Really. The guy spends more on gas in a month than we paid for our 2006 Accord back in late 2005.

I'm sorry, but that's just hard for me to wrap my wee middle-class brain around.

I also discussed the topic of financially-distressed athletes in July, 2008 in "When BK's a Layup Away."

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— Posted by Michael @ 8:45 AM



Monday, February 09, 2009

One Week's Food Menu



Since I'm a certified Control Freak, one idea which has always appealed to me — and which we've never tried — is the idea of planning a week's meals in advance.

(By "planning" I mean "writing it down." And then shopping based on that.)

Having a week's menu set in advance is something I've heard of other bloggers' families doing. Usually they do this because it's a good way to establish some amount of control on one's grocery and food spending.

Always eating "at a moment's notice" tends to be expensive: Not knowing what you want until you want it — and then buying based on that whim — often means special trips to the store (where you'll inevitably buy extra goodies) or, even worse, the restaurant. Both places are only too happy to pilfer those "extra" impulsive dollars from your tingly little fingers.

So one way to overcome this is to plan some number of days' eating beforehand, and then to shop based on that plan. Let's face it: Grocery spending ain't getting any cheaper. Nor is dining out.

(It's not like the Dollar Menu stuff is healthy for you, either.)

Money Freaks, Take Notice

Another neat side-benefit of working from a weekly food menu is that the Curious Money Guy in me can place a tangible dollar figure at the end of the following question:

What might it cost a three-person household (like ours) to buy a week's worth of food if they started with empty cupboards?

I'm talking "middle of the road" meals here — not ribeye steaks and California wine three nights a week.

Anyhow, for curious souls, here's the menu we devised for last week:

IYM: Menu for a Week! (PDF)

Assuming zero foodstuffs in the pantry (save some common spices, seasonings, and condiments), the cost for ingredients for this week's meals would be roughly $142 (before sales tax). Add six bucks for the kid's lunches at school, and you'd be in the ballpark.

How do I know this? Because, of course, I have a spreadsheet of prices. And also because I was willing to write those prices down as I ambled down the aisles of Wal-Mart.

Obviously, that $142 would buy more than one week's worth of food: You'd not be using ALL those foodstuffs on that one week's meals. (If your kid can put away a box of Cocoa Pebbles in a week, well, you have my sympathies.)

BONUS: For those of you willing to read this far, and who are now wondering what the point of this little exercise really was (mostly to give me something to blog about) ... well, you get a recipe!

IYM: Lisa's Better Taco Bake (PDF)

We love this "improved" taco bake! It's extremely easy, and mucho tasty with a cloud of light sour cream on the top!

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— Posted by Michael @ 9:07 AM



Monday, February 02, 2009

Wow: Keurig Coffee Maker



It's pretty rare that I talk about specific products on Money Musings. In fact, I can't see where I've ever done it. But I'm going to do it now, simply because I purchased something I swore I never would, and I've loved it to death so far.

In fact, this product will apparently turn out to be one of those expensive purchases that were truly worth it.

(Actually, it was a Christmas gift from my wife, but since our household doesn't yet have the ability to print money, it was, effectively, purchased by me.)

Single-Cup Coffee Makers? Pricey!

Single-cup coffee makers have become popular recently. Being something of a coffee junkie, I've definitely noticed. And up until this past Christmas, I'd always glanced at those $100+ price tags and cringed. I swore I'd never fork over that kind of cash for a coffee maker. Our 12-cup drip coffee maker made pretty good coffee already, thank you very much. And it didn't cost a hundred bucks.

However, in the weeks before Christmas 2008, as Lisa and I were wandering through our local Sam's Club, I happened to step over for a free sample cup of coffee. The Sam's employee was using a Keurig single-cup maker to brew the stuff. I was, admittedly, curious.

The flavor I tried? Newman's Own Extra Bold Special Blend.

It was really fast.

Really hot.

And most importantly, really yummy.

This cup of coffee had taken less than a minute to brew, and it came out steaming hot, as opposed to the only-mildly-warm stuff that our drip maker typically produced. I had just one question for the Sam's employee: Would I be able to use my own beans in the Keurig? I didn't want to be limited to some company's pricey single-cup pods for my daily java fix.

"Yes! You'll just need to buy the special filter accessory," she told me. "We don't have any, but someone said Bed Bath and Beyond usually keeps them in stock."

As it turns out, according to what I've seen, Keurig's coffee maker is the only single-cup setup which offers this feature.

As you might guess, I was sold.

Single-Cup Prices: Ouch

We paid a nudge under $130 for the Keurig coffee maker (Model: Ultimate - B66) bundle. The coffee maker itself was grouped with a special charcoal water-filter attachment (normally $20-$25) and an assortment of 72 K-Cups (value of maybe $36 or so). Our model B66 isn't on Keurig's website, but it's pretty similar to the B60.

Since I wanted to be able to use my own coffee beans as well as the prepackaged K-Cups, we also purchased the "My K-Cup" reusable filter (roughly $15) from a local retailer.

In our area, prepackaged K-Cup coffees are available at places like Target and Bed Bath & Beyond. However, buying them online from places like Amazon, as well as directly from the coffee roasters themselves (Green Mountain, Timothy's, and so on) seems to be more cost-effective. (If, that is, paying anywhere from $.40 to $.60 per K-Cup cup of coffee can ever be considered "cost-effective.")

(NOTE: Amazon carries the Keurig accessories, too, but they seem to be wildly overpriced. Amazon's prices on boxes of K-Cup coffees, though, are the lowest I've yet seen, especially if you're an Amazon Prime member and get "free" 2-day shipping as we do.)

Why Pay That Much for a Coffee Maker?

Yeah, see, I swore I'd never pay a hundred bucks for a coffee maker. But that first cup was so tasty and so fast, and so perfectly hot, that I had to rethink my stance. And with the added accessories included in the Sam's Club bundle, I felt somewhat better about the expense.

Look: My wife rarely drinks coffee. And I typically don't drink more than a cup at a time. So fixing a six-cup pot of coffee each morning isn't exactly efficient. And whenever I found myself yearning for nice yummy flavored decaf after dinner, I'd almost always talk myself out of it: Who'd drink the other five cups?

Nobody. That's who.

So no evening coffee for me.

Bummer.

And have I mentioned how much I want my coffee to be hot? Sure, when your drip maker throws you a lukewarm cup, you could just nuke it in the microwave. But I'm lazy when it comes to coffee. I want it hot and I want it quickly. And, obviously, I want a good coffee flavor. No mess would be nice, too.

The Keurig gives me all these things. If you're using the K-Cups, cleanup is stupid-easy: You toss the used K-Cup in the trash. (The environmental impact is less than optimal, however.)

If you're using the "My K-Cup" filter — it's just a very small metal-mesh oval filter — then cleanup is a little more involved. But no environmental snags here.

Personally, I'm rapidly getting hooked on the K-Cups. There are TONS of brands and flavors available. And you simply cannot beat the ease of use.

Flavors, Flavors Everywhere

Thus far, I've been most impressed with the coffees from Green Mountain and Timothy's. Green Mountain's "Nantucket Blend" was an early winner with me, and I've liked their other blends so much that I ordered a handful of K-Cup boxes and enrolled myself in their Cafe Express recurring-buyer club.

In my area, Bed Bath & Beyond carries a nice selection of K-Cups. We routinely receive 20%-off coupons from Bed Bath & Beyond, so their higher-than-online prices become more agreeable with coupons in hand.

Again: The selection of coffees available in K-Cup form is immense. If this is as big a deal to you as it is to me, then the Keurig brewer will be your friend.

Summary: Keurig Wins

I've always enjoyed my morning coffee. But now I'm actually looking forward to my Keurig brews as soon as I get out of bed. Coming from a guy who hates early mornings as much as I do ... well, that's saying something.

And being able to have a hot cup o' "coffee snob" java anytime? A cup that's ready in less than a minute?

In my opinion, that's heaven.

A hundred bucks worth of heaven.

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— Posted by Michael @ 8:55 AM



Thursday, January 29, 2009

How Much Grocery Spending, Part 3



It's not the most common Google search that lands visitors at IYM, but it's close:

How much do families spend on groceries?

Well, I can only speak for one family, and that's mine. We're two adults and one 6-year-old daughter. Over the last three months of 2008, we spent an average of $451 per month on groceries. Here that info, plus a little more, in a more-spiffy package:

Our Average Spending / 4th Qtr 2008


Curious souls might be interested in a few definitions here:

Food - Groceries: Pretty straightforward. This is how I categorize all unprepared food purchased from outlets such as Wal-Mart, Target, Sam's, our corner store, and so on.

Food - Dining: Restaurant and prepared meals, including workday lunches.

Household: Most household consumables, really. For us, this contains things like cosmetics, hygiene products, paper towels, cleaning supplies, and so on.

Utilities: All monthly utility items, including water/trash, electric, natural gas, cell phone, telephone, basic cable and internet, and such.

(My previous posts on this topic can be found here and here. Interesting that as my income has increased substantially over the last several years, so has our food spending.)

Luscious Consumer Data

According to the 2007 Consumer Expenditure Survey (PDF), American households matching our characteristics (2 adults; 1 child between 6 and 17) spent an average of $336 per month on "Food away from home." They spent roughly $426/month on "Food at home."

Just some more stats to chew on, Google Searchers!

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— Posted by Michael @ 8:47 AM



Tuesday, January 27, 2009

How We Manage Our Money



It's been a while since I discussed how my household manages its money; the last time was in October of 2006. Some things have changed since then, and since readers continue to ask my opinion on ways to keep funds running smoothly at the ol' homestead, I'd like to cover the topic again.

Receipts, Receipts, Everywhere

This, inevitably, is Issue Numero Uno for many readers: How can I keep track of my spending as well as my spouse's? It's impossible to know where the money's going!

Actually, it isn't. Or, perhaps more correctly, it hasn't been for us. Oh sure — it was a challenge for a while. Back when we were paying bills from our checking accounts (more on that later), we ran into a few obstacles. But once we became debt-free and were able pay our card balances in full each month, things got easier.

Cash Flow in a Box

So how to handle all those receipts? Well, we do it with a box.

This invention, I call our Cash Flow Box. Whenever either of us spends money, we tuck the receipts into our wallets RIGHT THEN. Later, once we get home, we toss the receipts in our Cash Flow box. Mail and bills go here, too.

Since I'm the guy who handles bill-paying and money-tracking for our household (gee, can't imagine why), I sit down every couple of days and enter the receipts into Quicken. (You can tell I'm a sicko, because I actually enjoy this part. Then again, I've found that being in control of your money tends to have just this sort of odd, Twilight Zone effect on people.)

If any receipts need to be kept for tax purposes (or some other reason), I have a set of manilla folders right next to the box for just this purpose. Think flexible-spending account receipts, small-business expenses, and large-item purchases (where warranty might be an issue) here.

The rest of the receipts get File Thirteen'd as soon as I enter them in Quicken.

Easy peasy.

Joint Checking ... Times Four

For starters, our household has multiple joint checking accounts — four of them, in fact. And a host of savings accounts (online variety, mostly) on top of that.


Click here to start saving with ING DIRECT!
I primarily use our ING Direct Electric Orange checking, while Lisa uses a local credit-union checking account. Due to its extreme ease of use, ING Direct also holds most of our savings at present.

Since ING Direct isn't exactly a "local" banking entity for us — if you need to see someone face-to-face, whatcha gonna do? — we also have two joint, no-fee checking and savings combos at local institutions. We generally keep only a few hundred dollars in these "just in case" accounts.

Pay It All By Plastic

Here's the caveat to all these checking accounts: We rarely pay for anything by check. Every expense than can go on plastic OR can be paid electronically will be handled that way. We use two cash-back, no-fee cards for this. We pay these cards in full every month.

Because of this, we typically write no more than one or two paper checks per month.

Spending and Account Balances


I am a Quicken devotee. It is my Ultimate Money Security Blanket, and I'm not ashamed to admit that. I depend on Quicken like snow depends on cold.

Right now, my laptop runs Quicken 2008 Deluxe, which I believe is the best Quicken version yet.

Quicken tracks our spending, our account balances, our net worth, our bills and recurring payments, and about a thousand other things that are only important once or twice per year. (Use taxes would be one!)

And oh yeah — I now use Quicken for our...

Budgeting!

Honestly, we don't need much of a budget these days. With no debt (other than our mortgage) and a definite aversion to long-term financial commitments, we just don't have that many bills coming through the door. Savings-building is our goal now, and I can accomplish it just fine, thank you, with Quicken's recently-added Cash Flow Tab.

Cash Flow - Click to Enlarge


What's coming in? What's going out? The Cash Flow Tab tells me what I need to know. Once I got our recurring bills and deposits set up, and designated the correct "spending" accounts for Quicken to monitor, I no longer had any need for my Spending Plan spreadsheet at all.

I love my Spending Plan spreadsheet. But having my budgeting tool contained within Quicken makes things oh so simple.

And simple is good.

Download Transactions? Nope!

I have never once used Quicken's ability to download transactions from banks and other financial institutions. As noted elsewhere, I enter all Quicken transactions by hand.

Keeps me "closer" to our spending, ya know? (Plus I've heard too many horror stories about transaction downloads going horribly wrong!)

The All-Important Freedom Account

I believe that the discipline to save up for future expenses — rather than relying on the kind-heartedness of Visa and Mastercard — is a hallmark of successful personal finance. Heck, it may be THE hallmark.

In any event, we do such saving in our Freedom Account, which resides with the rest of our savings at ING Direct. Why?

Because it's darn easy (and immediate) to transfer funds to our Electric Orange checking, where the vast majority of our transactions land at some point. (We pay our credit cards electronically via Electric Orange.)

This is one area where Quicken falls short. Since it doesn't allow for subaccounts, I track our FA subaccount balances with ExcelGeek's Freedom Account spreadsheet.

Emergency Fund

I don't have a specific spreadsheet that I use to track my Emergency Fund. We're currently keeping most of our E-fund (say, 90% of it) at ING Direct. Any transactions which affect our Emergency Fund get logged/tracked in Quicken, as noted above, and I can always see our E-fund's balance right there in my Quicken toolbar.

Small-Business Stuff

Lisa and I both have our own small-business ventures. I utilize QuickBooks 2009 Pro to manage these tasks.

Credit Monitoring & ID Safety

I monitor our credit reports and scores monthly. I do this with TrueCredit 3-Bureau Credit Monitoring . (Here's my TrueCredit review, if you're interested.)

Whew ... that should pretty much cover it!

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— Posted by Michael @ 9:04 AM



Monday, January 19, 2009

The Angst of Affluence



Ready for your weekly jaw-dropping bout of "I'm glad that's someone else's family!" reporting? Well, here 'tis:

New York Times: As Economy Shifts, So Do Family Roles

It's mostly a write-up of the Berry family of Darien, Connecticut, and the skirmishes caused by Mom's unwavering consumerism in the face of Dad's job loss. I went looking for a paragraph or two that'd sum up the whole mess. I believe I'd have to go with this bit:

How to spend is a continuing negotiation — one that sometimes devolves into heated discussions, outright arguments and bouts of sulking. Tracey is trying, often unsuccessfully, to spend less on clothing for herself and the children. “Don’t make me look like a jerk,” she told a reporter, “but I cannot bring myself to buy my children’s clothes at Wal-Mart.”

“But do you have to buy them at Ralph Lauren?” Scott shot back.


Ah, yes. The angst of affluence rears its ugly head at the corner of Unemployed Avenue and Entitlement Way. Bedtime conversations are a blast at the Berry homestead. You get favorites like this:

The Berrys have been at this long enough to make light of the well-worn nature of their disagreement. “It goes like this,” Scott said. “ ‘How can you complain about me not earning an adequate income, when you can’t control your spending?’ ”

On cue, Tracey chimed in. “And I say, ‘How can you complain about my spending when you don’t have an adequate income?’ ”


Wowsers. I've never watched a single episode of Desperate Housewives,, but I always imagined the scripts would contain snippets like that. At least on TV I'd eventually get to see Teri Hatcher and/or Eva Longoria Parker in lingerie. That's worth something.

But with this Berry story we merely get an introduction to ... clickers.

Amy Reiss, a divorce lawyer in Manhattan, said that she had seen a spate of women seeking to end their marriages after they re-entered the work force or expanded their careers to replace their husbands’ income. The wives don’t resent working, she said. In fact, they’re pleased to contribute.

But “the husbands become what I call ‘clickers,’ ” Ms. Reiss said. “These are unemployed men who sit on the couch all day, holding the remote and watching TV, unable to step up and take over some of the household tasks and chores associated with raising the kids.”


I'll say this: Lisa and I feel tremendously fortunate to be able for her to be a SAHM. My income is well above the median for our area — but if that were to change, I'd like to think we could pare down from our current, pretty-modest spending levels. No kid clothes from Ralph Lauren in our house; no Beemer in the driveway. Our house isn't paid-for yet, but it's not the seven-figure variety, either.

I've always believed it's the long-term spending commitments we make that are the most deadly — the "stretch to get it" mortgage, the "I deserve it" SUV payment, the "how'd it get his large" balances on high-rate plastic. Those recurring, high-payment expenses you can't easily back out of are the ones that crush you when job loss or other financial instabilities hit.

Throw a sense of outright entitlement on top of that, and you have the makings of a full-on disaster.

One mother in TriBeCa, who is married, at least for now, to a Wall Street executive, put it rather bluntly: “My job was to run the household and the children’s lives,” she said. “His job is to provide us with a nice lifestyle.” But his bonus has disappeared, and his annual pay has dropped to $150,000 from $800,000 a year. “Let me just say this,” she said, “I’m still doing my job.”


One has to wonder: Will rising divorces, and the fees derived therefrom, count as economic stimulus in the coming months?

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— Posted by Michael @ 9:07 AM



Monday, January 12, 2009

War on Savers



That's pretty much what the following article by Anatole Kaletsky advocates:

Times Online: Punish Savers and Make Them Spend Money

Wow. I don't know where to start. Let's go with this:

I believe, in line with the vast majority of non-socialist economists, that Mr Cameron's campaign for savings is completely wrong; that “borrowing our way out of debt,” paradoxical as it sounds, is exactly the right prescription for our present problems.


Did you know that if you're saving money, you're a socialist? And that borrowing 'til the banks say "no mas" is the path to freedom? Yeah. It was news to me, too.

This paradox is easily explained: if governments or wealthy individuals increase their borrowings they replace weak debtors - bankrupt hedge funds, struggling businesses or repossessed homeowners - with strong ones and this helps to stabilise the financial system and sustain economic activity and employment. The country can borrow its way out of debt.


I understand the "replace weak debtors" theory, but it's crap. You're asking savers (which does not describe the U.S. government at all, by the way) to step up and borrow. Profits from this "stronger" borrowing then eventually "pay" the bills of the weak debtors — they "take the losses" that the banks cannot, as it were.

If that's what it takes to stabilize the financial system, you can count me out. It's time for a full-on reset.

...the US and British governments, despite their reputations for reckless borrowing and fiscal imprudence, have managed their finances better than most other countries and entered this crisis with substantially lower public debt levels than Germany, France, Italy or Japan.


Right. Which is why U.S. public debt tallied over $530k per household.

In 2007.

Sounds like someone has confused "well-managed" with "well-expanded." Here's one difference: Well-managed debt won't bring about insolvency if (when!) interest rates rise. Well-expanded debt, on the other hand...

What then is the outlook for economic policies in the US and Britain? And how will consumers, businesses and voters react? The second question is imponderable - and may depend on whether Mr Obama and Keynes look more credible to voters than Mr Cameron and Marx - but the answer to the first is quite clear. Governments and central banks on both sides of the Atlantic will do whatever they can to increase spending and borrowing.


More reinforcement of the idea that saving is a Marxist thing to do.

Meanwhile, the central banks in both countries are trying as hard as they can to make people save less. In the US, interest rates on bank deposits have been cut to zero and the Fed has just announced that it may buy long-term government bonds to squeeze five-year and ten-year rates as close as possible to zero.


Well, he's right on this part. It is indeed a race to the interest-rate bottom. Good thing there are never any unintended consequences for this sort of policy.

Assuming interest rates are reduced to about 1 per cent today [in the U.K.], it will make little difference to savers if they fall all the way to zero. To all intents and purposes, income from bank accounts will be reduced to nil.


Well, the interest rate on my ING Direct Electric Orange checking is now .5 percent. So yeah, that might as well be zero.

But with my savings collecting 2.5 percent, I'm at least content. Those savings aren't about "income," and never will be. They're about being prepared. They're about stability. Things which the bailout-begging debt-bingers Mr. Kaletsky seems so enamored with will never understand.

The next logical step, although it may be politically controversial, would be to ... tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.


That's a tremendous idea. Do it, and I guarantee you every penny I have in any bank comes out and goes in the mattress. You want bank runs? Guess what — you got 'em.

In the absence of a savings tax - and even Mr Obama would probably balk at anything so controversial - there are plenty of other measures to boost consumption and investment. Most obvious are direct government spending on infrastructure; public guarantees and subsidies for business loans or home mortgages; or tax cuts and handouts, especially for those on low incomes who tend to spend all their money. The beauty of such policies in a world of zero or near-zero interest rates is that they are effectively cost free.


Cost free? I've got news for you, pal: There are always costs. They just may not be of the interest-bearing sort.

At some point, the more a debtor — whether it's your next-door neighbor or that profligate entity in D.C. — needs low-interest financing, the less it will be available. Risk will surface somewhere, and lenders will require that they be compensated for it.

As I write this, 10-year U.S. treasuries offer a yield of 2.41 percent. The 13-week t-bill yields .07 percent. In historical terms, these figures are "on the floor."

Low yields like these mean the prices of those bonds have headed for orbit; i.e., folks are willing to pay up in order to have the AAA-rated safety offered by the U.S. Treasury and its current and future taxing authority. (They're front-running the Fed, too, who as mentioned above have said they'll be buying long-dated bonds in order to further depress rates. Can't allow credit rates to be priced correctly for any increased risk, can we?)

One might argue (with validity, IMO) that this country, after so many years of living beyond its means, is at an important juncture: We can no longer function without (1) dirt-cheap credit, and (2) a bubble existing somewhere.

That current bubble, some maintain, is in government debt (t-bill yields low = prices high).

When this bubble pops, interest rates and debt-carrying costs will rise substantially. Perhaps very quickly. Even the most heretofore highly-rated debtor countries will have big, big problems on their hands.

Their lenders will, too, though. It's mostly a matter of who flinches first.

"If you owe the bank a hundred bucks," the old axiom goes, "and you can't pay, you have a problem. If you owe the bank a hundred million bucks and you can't pay, the bank has a problem."

If you're a saver and owe nobody, you're mostly out of that loop. You have no problem. Except, of course, for the fact that your socialist savings habits will have to be taxed into extinction by entities who never met a spending project they didn't like.

I only thought Fred Thompson, in his "We can't afford to save" video, was being facetious. Turns out I had it all wrong.

No, the guy was prescient.

Mr. Kaletsky, obviously, would attest to that.

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— Posted by Michael @ 8:35 AM



Thursday, December 11, 2008

We Can't Afford to Save Right Now



As a rule, I distrust all politicians. Even the one in this YouTube video.

But I sure do agree with what Fred's saying (8 minutes):



Well, I dunno about the "liberal economists" thing, but most of the rest of it is spot-on. Particularly:

"We can't afford to save right now. We can only afford to spend."

Oh, how I do loves me some sarcasm.

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— Posted by Michael @ 9:44 AM



Tuesday, October 14, 2008

Incredible Shrinking Coupons



Maybe it's a seasonal thing — I dunno.

My wife, Lisa, does a fair amount of couponing. Lately she's noticed that many coupons are dropping in value. For instance:

Coupon Shrinkage


And then there's sugar:

More Coupon Shrinkage


And the prime component of my favorite sandwich, the BLT:

Triple Coupon Shrinkage


Could this be because we're heading into the fall holiday season, where consumers are less likely to price-compare on foodstuffs and just purchase whatever's within easy reach?

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— Posted by Michael @ 9:28 AM



Thursday, October 09, 2008

What Matters, Exactly?



Is it just me, or does this Chase commercial make all you responsible-with-money types want to hurl a blender at your TV?



"Text Chase for your credit-card balance," the narrator instructs us, "and decide what to spend in seconds."

Yeah.

Sounds like a great plan — if you want to practice HUGE FAIL. Like this guy:

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— Posted by Michael @ 8:44 AM



Wednesday, September 03, 2008

One Calamity Away



If you can do so, set aside about 18 minutes to watch the August 22 segment of PBS' Bill Moyers' Journal:

PBS / Bill Moyers' Journal: "One Calamity Away"

"So America's middle class, our 'fearful families' as some people call them, is taking it on the chin," Moyers tells viewers in his monologue. "The history-making nominations aside, all the rhetoric from all the speakers at next week's Democratic Convention will be so much hot air above the Rockies unless the party comes to grip with how people are living and hurting today."

Worth a looksie.

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— Posted by Michael @ 9:07 AM



Tuesday, September 02, 2008

Gone in Sixty Minutes: $100



When I was a kid, a hundred dollars was a whole lot of money. Heck — my very first paycheck was only sixty-something bucks. I remember going out to the garage to show it to my dad, and telling him how surprised I was for the paycheck to be THAT MUCH.

My, how times keep changing. This, the tab from our last Sunday afternoon of August, 2008:

It goes quick, huh?


A hundred bucks — gone in sixty minutes.

Good thing inflation is only five percent or so, while the most popular online savings account pays a mere three percent.

That, kids, is what's called a losing battle.

But you still gotta fight it.

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— Posted by Michael @ 9:16 AM



Monday, August 25, 2008

Necessities That Aren't



Sure, the article was published back in June, but I just now found it. And it piqued my interest:

Bankrate: 12 New Necessities That Drain Your Cash

Author Jay MacDonald gives us a list of twelve items which, he says, current American society deems "necessities." As he writes:

However, modern life has created a host of "new necessities" that many people swear they cannot live without -- a daily latte, premium cable, a weekly manicure, a new leased automobile and cell phones for the family.

In reality, there's a more accurate word for those pricey add-ons: entitlements.


Just for kicks 'n' giggles, I wanted to take a look at Jay's twelve "necessities that aren't" and see where I stand on each one. So here goes.

Daily Latte
My wife and I love good coffee just as much as the next couple, but you'll see us standing in line at Starbucks maybe once per month. I do occasionally order coffee beans over the 'net, and I most certainly do brew my java at home (as in, every morning). But you'd never find me spending $4 or $5 per day on coffee. Not a chance.

Cable TV
Guilty as charged. We do have cable TV, complete with a host of premium channels (HBO, Showtime, etc.) and HD programming. If times became tough, I could easily give up the premium channels. The rest of it? Tougher. But it could be done.

Manicure/Pedicure
Uhhh ... whatever. Not an issue for my wife or myself.

Botox
Seriously? This is a necessity for WHO outside Hollywood?

Bottled Water
I drink my share of this stuff. But the article seems to imply that folks invest in home-delivery services for water, and I'm not in that league by any stretch. A big ol' tray of Aquafina bottled water costs me less than $4 at Sam's Club. And even then, we reuse the bottles with water from our Brita filter pitcher (and at my work, the Ozarka service).

Second Car
Sort of depends on the household, doesn't it? Ours is certainly a two-car family (well, three cars, if you count the rarely-driven '67 Mustang in our garage). My '95 Nissan truck's long since paid for, and our '06 Accord will be likewise in a few months. If dire financial times came along, could we become a one-vehicle family? Could carpooling become a household task?

Some consideration of the idea suggests that my work schedule, and our kid's school schedule, would make this somewhat challenging. But since Lisa (my wife) is a SAHM, it could be done.

How much money might be saved this way? For us, with both vehicles paid for, the financial benefits are negligible at best.

Cell Phone
I have one (partially paid by my employer), and Lisa has one. In a pinch, I'd sooner give up our home phone service.

Lawn Service
Guilty as charged (again). Lawn service (the weed n' feed kind) cost us $205 this year for the annual plan; that's about $17 per month. I'd give it up in a heartbeat if conditions warranted.

I do mow and edge my own lawn, thank you very much, which is the sort of "lawn service" that the article was actually discussing:

The average cost for weekly mowing, hedge trimming and leaf blowing is $65 to $90. It's hardly a savings to shell out $260 to $360 a month, is it? Mow your own and save the dough.


Clothes
Everybody needs 'em. And if you have growing-up kids, you need 'em constantly. Sure feels like it, anyway. So far this year, our three-person household has spent just a shade under $1,200 on clothing. So yeah, this is an appreciable expense, and one we could slice considerably. But I wonder about this comment from the article:

"I think most Americans could easily go for one year without buying any new clothes," Yeager says.


No new socks? No new undies? Surely he jests.

Private School
As concerned parents who are getting our first glimpse of the public-school system in about twenty years, Lisa and I have considered this. The monthly private-school dues are stout, indeed, and the recommended school in our area is WAY across town. Yecch.

I can't say whether private school is in our daughter's future or not, but I can say this: It is not a necessity in any circumstance I can envision.

Childhood Parties
No extravagance on our part here — not yet, anyway. Birthdays at home or at McDonald's have been just fine to this point.

I can't see how anyone not about to end up on Oprah or Dr. Phil could possibly consider this to be a necessity.

Pet Grooming/Walking
We have two cats, for cryin' out loud. As pets go, we might as well have named them "Low" and "Maintenance."

Stuff I'd Add to the List

I'm good with most all of the expenses on MacDonald's list. But what about:

Eating Out
Especially at lunchtime and during working hours. Most of the people I know couldn't imagine bringing their own lunches each day. Sacrilege!

Broadband Internet
I'd sooner give up cable TV than my cable internet. A LOT sooner.

What else am I missing? What sort of stuff is out there now that folks consider to be "necessities," but in reality are just "niceties?"

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— Posted by Michael @ 8:52 AM



Friday, August 01, 2008

Household Expenses 1st Half 2008



It's been a while since I created a post which reviewed my household's monthly expenses in any sort of detail. So let's get this out of the way, but pronto:

Some Expenses for Feb-July 2008


Those aren't all our expenses — not even close. The house payment's not in there, nor is the soon-to-be-gone car payment. But the chart does at least show some of the larger and more common household expenses, I think.

Keep in mind that our family consists of two adults, one five-year-old daughter, and two uber-lazy cats.

And there, friends, is your glimpse inside our spending for the period of February through July of 2008.

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— Posted by Michael @ 9:06 AM



Tuesday, July 15, 2008

Two-Day Getaway Redux



It was just about a year ago that I wrote about our two-day vacation trip and the lodging expenses incurred therein. Since the Wife, daughter, and I just returned from this summer's Two-Day Getaway, I figure it's worth sitting down to see how the money flows came out this year.

Quicken and Excel tell the story like so:

Expenses for Two-Day Getaway


This Summer 2008 trip took us from our home base in Norman, Oklahoma, up northeast to Tulsa via I-44. We left Saturday (noonish), and returned Monday at around 5pm. Lodging consisted of two nights in a Holiday Inn Express. Activities included visiting the Philbrook Museum of Art, the Oklahoma Aquarium, a bit of geocaching ... all topped off by a somewhat scenic return via Route 66 and a hunger-busting visit to Pops Gas & Grille.

Yup, vacationing away from home is still pricey — though it's not the gas that drained our wallets. Short of camping outdoors or sleeping in your car — neither of which appeal to me all that much — I'm not sure how much one can really slice the lodging expenses. Priceline discounts tend to average $8 to $15 per night, which ain't bad ... but it's not bargain-basement, either. (Much like last year, we booked straight through Holiday Inn.)

On the other hand, food and dining expenses can be mitigated. Take-along lunches and sandwich picnics could've zapped a decent chunk of the $159 we spent over Saturday/Sunday/Monday. We elected not to do this, however, as our household budget has been (thankfully) flexible lately. And since I take sandwich lunches to work two or three days per week ... well, practicing the same discipline during a mini-vacation isn't a task I relish.

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— Posted by Michael @ 9:07 AM



Thursday, July 03, 2008

When BK's a Layup Away



As is dictated by widely-held Man Laws, I enjoy sports. But usually I don't find much at ESPN.com that stokes my financial interest. This column by Rick Reilly, though, is fun:

ESPN.com: How to Be a Broke NBA Player

Well, as "fun" as financial meltdown can be, I guess. As Reilly tells us:

Filing for bankruptcy is a long-standing tradition for NBA players, 60% of whom, according to the Toronto Star, are broke five years after they retire.


I did a minimum of research and discovered that what makes this "60% go broke" stat so particularly nifty is that, according to InsideHoops, the NBA's minimum salary for the 2008-09 season will be roughly $442k. Not exactly bread-n-water money.

But let's be truthful here: How many guys who make the leap into the NBA (or the NFL, or MLBA, or whatever) were good with money before they got there? Instinct tells me very few. If you've sucked with money all your young life, and then come into a lot of it ... well, not much changes. You just have more money to suck with.

Once these pro athletes step up to the financial 3-point line, there's an entire world of agents, marketers, and family members just waiting to drain every dime from the athlete's (admittedly sizeable) pockets.

Not exactly a system which guarantees success, is it?

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— Posted by Michael @ 10:02 AM



Monday, June 30, 2008

How Long to Fill Up Your Tank?



No, I don't mean "How long does it take for you to fill your car's tank?"

I mean, "How many hours do you have to work to fill your car's tank?"

There's a calculator at CNN/Money that's supposed to answer this question. But it seems a bit too optimistic — it doesn't appear to factor for taxes, for one thing. Or any other paycheck deductions. Those are pretty serious items to leave out, methinks.

(Heck, it told me I only had to work 1.3 hours to fill up our Accord's tank. No way can that be correct.)

So I built my own Excel spreadsheet to (hopefully) answer the question more realistically:

Hours worked to fill up your tank.


There. I'm much more confident of that figure. In our case, at least 2.69 hours of work would be required to top off the Accord. And with my Nissan truck, which has a slightly smaller capacity, it'd take a bit over 2.3 hours of work.

Pricing by "Hours Worked"

Figuring out any item's price in terms of "hours worked to purchase it" is a pretty good metric. (Joe Dominguez' tremendous book Your Money or Your Life (review) was the first to introduce me to this idea.) In the case of fuel prices, it's a good "hardship metric." Gas priced at $4 per gallon would generally be much more of a hardship for someone earning $10 per hour than it would for someone whose time is valued at $25 per hour. Of course, if that $10/hour person is debt-free, but the $25/hour person is leveraged to the gills ... well, that can change things a wee bit, can't it?

And yes, take-home pay matters much more than does gross income, which is what the CNN/Money calculator appears to use. I don't know about you, but I talk to very few souls who get to use their gross income to pay at the pump.

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— Posted by Michael @ 9:25 AM



Tuesday, June 17, 2008

Auto Body Damage: Fix It or Nix It?



Here's a question for the readers:

You're at fault in a small fender-bender in your family's sedan. The damage to your car, though, is purely cosmetic. Say, a moderately mushed left front fender. Quality repairs will cost between $600 and $800.

Do you spend the money to fix your car? At what level of savings, if any, does full repair become a viable option?

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— Posted by Michael @ 9:10 AM



Tuesday, June 10, 2008

Another Fuel-Cost Spreadsheet



Because I'm a complete spreadsheet dork:

Pain at the Pump


Excel Spreadsheet: Pain at the Pump

This one allows for a little more detail than my previous version.

Have fun watching the numbers change.

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— Posted by Michael @ 9:46 AM



Monday, June 09, 2008

Gas Price Stress Redux



Not too long ago I posted about gas price stress. Even if your TV viewing is as sporadic as mine, fuel prices are still a topic that no doubt grace your local evening news EVERY SINGLE STINKIN' NIGHT.

For my part, I touched on some of the expected home- and workplace effects of $3-per-gallon gas, and calculated that gas at around $3.50 per gallon might cost an average family about $125 more per month than would $2-per-gallon fuel.

Well, now that our national average cost-per-gallon of fuel has reached four bucks, I wanted to revisit the topic just a bit. And also point you kids toward this nifty CBS news snippet:

CBS News: Oil Prices Expected to Rise

The clip's only a little over two minutes long; the fairly interesting part hits at about the 1:49 mark. It's there that the reporter graces us with this:

And if you think what you pay at the pump is pricey now, just wait: This gasoline [$4/gallon] comes from oil when it was ninety bucks a barrel. Now that oil is almost one hundred forty dollars a barrel, economists say you can expect to see gas top six dollars a gallon. And that's in the next few months.


Now, I will profess that I have no idea how much truth is in that little statement. Drawing a straight-line trip from $140 oil to $6 gas seems a bit tenuous to me, but I suppose it could happen.

In any case, it gives me a fantastic chance to update my Excel-powered "Gas Price Stress" scenario. Let's add the $5 and $6 price levels and see what happens to gas prices for my completely-fictional Average Working Family:

Click to Enlarge


And my hopefully-reasonable assumptions:

Spreadsheet Assumptions


That's an Ouchie

So if gas hits $5/gallon, our fictional family better be ready: Their fuel expenses will almost tag the $418/month mark. And at $6/gallon, they're spending $501 per month.

These numbers look pretty yucky, really, when you see that they were spending just $167 per month back when gas was two bucks per gallon. (Ah, sweet memories.)

The above numbers assume, of course, that our family's driving patterns and habits don't change as fuel prices rise. Something tells me that's not likely.

For me, the striking thing about all this is that I know too many households who won't be able to absorb, say, the $250/month expense increase which $5 gas would bestow. And that doesn't even factor for the price increases in food and other downstream inflations.

For a great many Americans, the picture being drawn here isn't terribly pleasant.

NOTE: You can download my spreadsheet here. Feel free to play with it to your heart's content.

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— Posted by Michael @ 9:20 AM



Tuesday, May 20, 2008

Here's to You, Mr. Boat-Repo Man



Excellently readable (and dare I say entertaining) article from the New York Times:

NY Times: "Times Are Tough, Except in the Repo Biz"

Just between you and I, you know, being a Repo Man is not something I'd want to do. Whilst there'd definitely be something soul-satisfying about repossessing a yacht named "Bally Hoo," the threat of violence and/or gunfire from Downtrodden Dave and Misunderstood Mary as I absconded with their stuff — the bank's collateral — well, it just doesn't suit my personality.

The guys who do this gig — and I've run into a few of 'em over the years — are a different breed. They tend to be burly, determined, and gruff. And they wear ill-fitting Grateful Dead t-shirts.

Here's a clip from the article. Truly, I dig this. We hear about this uber-consumer, a guy by the name of Robert Dahmen, whose silly spending contributed mightily to the Bush Economy. "He is one of the millions of reasons the consumer-powered American economy did so well for most of this decade," we're told, "and one of the reasons its prospects look so bleak now."

And this, which boxes it all up so nicely:

The merriment came at a price, though. Toy Box [Mr. Dahmen's boat] cost $175,000. With the trade-in and a down payment, Mr. Dahmen ended up with a $125,000 loan. “You pay the interest up front,” he observed, “and the principal never goes down.” After seven years he still owed $111,000, about twice what the boat is worth. Meanwhile, he lost his condominium when his mortgage readjusted and those payments went up. His 401(k) is down to $9,000.

“I oversaturated myself with long-term debt,” he said. “It was a risk, a calculated risk. I obviously lost.” He is declaring bankruptcy.


Yeah. Yeah.

Anyone wanna bet that Dahmen's boat salesman called that boat "investment" no less than five times during the sales deal?

What a world.

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— Posted by Michael @ 8:23 AM



Wednesday, May 07, 2008

Gas Price Stress



I haven't spent much time talking about gas prices on this blog, mostly because I'm fairly tired of hearing about them 24/7. But Tuesday I came across an article on which I'd like to comment:

UPI: "Gas price stress lowers work productivity"

Some quick points:

Wayne Hochwarter of the Florida State University's College of Business surveyed more than 800 full-time employees this spring when gas prices hovered at about $3.50 per gallon and found employees are simply unable to detach themselves from the stress caused by escalating gas prices.

The people surveyed work in a wide range of occupations, primarily in the southeastern United States, and drive personal vehicles to work with an average commute of 15 miles each way.

"People concerned with the effects of gas prices were significantly less attentive on the job, less excited about going to work, less passionate and conscientious and more tense," Hochwarter says in a statement. "These people also reported more 'blues' on the job."


A few more stats from the article:

[Due to rising fuel costs] 52 percent [of respondents] have reconsidered taking vacations.

— 45 percent have had to cut back on debt-reduction payments, such as credit card payments.

— Nearly 30 percent considered the consequences of going without basics, including food, clothing and medicine.

— 45 percent report the escalating gas prices have "caused them to fall behind financially."


What this article seems to tell us — aside from the fact that this country has too many researchers — is that lots of households apparently have a tough time coping when any one expense increases $125 per month. Not a surprise, of course, but a telling point nonetheless. The paycheck-to-paycheck crowd is alive and well. Or alive and suffering, as the case may be.

Where'd I get that $125 number?


Easy. I was just playin' with Excel:

Cooking with gas prices


Using the survey's 30-mile-per-commute-per-day average, and factoring for some other assumptions (2 drivers per household; 17mpg average from vehicles; and so on) I estimated that having gas prices at $3.50 per gallon (where they are in my town) costs our Average Survey Family roughly $125 per month more than does $2 per gallon gas.

If you'd like to see the (very basic) spreadsheet I used, and perhaps play with the numbers a bit, you can get it here:

Spreadsheet: Cooking with Gas Prices

I enjoyed changing the variables (like commute distance and mpg) and watching the effect these changes had on monthly fuel costs. Makes me glad my household owns two four-cylinder, decent-mileage vehicles (Nissan truck and Honda Accord). However, it also makes me wish I had my '95 Accord back. That little scooter had a five-speed standard transmission, and got FANTASTIC mileage (upper 20s to lower 30s mpg) all around.

Bothered By Higher Fuel Prices?

Am I bothered by higher fuel prices? At this point, not so much. Certainly it doesn't interfere with my workday — except for that part about having to listen to coworkers b*#&h and moan about $80/tank fill-ups.

Now, I don't like spending $40 or $45 to fill up our tanks, but the increased fuel cost hasn't destroyed my budget. In fact, at the end of the month, I don't notice it too much at all. My commute is less than 20 miles per day, and my wife's (stay-at-home mom) driving is largely "to-school-and-back" or "to-store-and-back." We're terribly lucky in this regard.

If you're a paycheck-to-paycheck family, however, whose monthly cash flow is already redlining, then current fuel prices could be a zinger. Throw higher food costs on top of that, and yes, you're talking significant stress.

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— Posted by Michael @ 8:38 AM



Thursday, April 17, 2008

Perhaps a Bundle of Money Would Be More Appropriate



Apparently ABC's World News Tonight is undertaking a series called "America's Kitchen Table" or some such thing. As best I can tell, the idea (can you guess it?) is to show us how Actual Real Americans (read: financial skills = questionable) are making it from day to day.

A recent episode cast ABC's spotlight on the Cramers, of Palmyra, PA.

"If Lisa Cramer had her choice, she would be a full-time stay-at-home mom to daughters Kate and Lindsey," ABC tells us. "Her husband Michael, a manager at an auto glass store, would be the breadwinner. But for now, the only way this Palmyra, Pa., family can make ends meet is for Lisa to work three part-time jobs."

ABC News Video: The Cramer's Kitchen Table

For once I'm going to withhold much commentary on the Cramers' situation, and just let the video speak for itself.

One thing we know: The Cramers don't do the Baby Steps.

You'll want to check out the comments, too. As I write this, apparently Ms. Cramer has responded (04-16-08 @ 8:22am) to all those folks posting "negative feed back" and such. (I've saved her purported comment here, in case it gets yanked; more on this below.)

I find it interesting that yesterday morning, when my wife and I first saw this video, there was a comment posted by someone who seemed to indicate that he/she knew the Cramers, and that ABC had conveniently left out a lot of details regarding the story — details that were fairly unflattering to both ABC and the Cramers. That comment, however, was greatly edited sometime during the day, removing the vast bulk of the derogatory info. Then, last night, it was eliminated entirely.

Oh, how I wish I'd have screenshotted it.

Who "edited for content" that comment? The original poster? ABC editors? I dunno. Was it even true? Don't know about that, either. I just find it very, very interesting that a comment like that — specific, detailed, and unflattering as it was — somehow disappeared.

Curiouser and curiouser...

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— Posted by Michael @ 10:24 AM



Wednesday, April 09, 2008

Say Hello to the Middle-Class Collapse



No, really. It's coming.

Elizabeth Warren says so.



Hyperlink to the video:

YouTube: Elizabeth Warren Video

Set aside some time for this video lecture; it's almost an hour long.

FWIW, I haven't yet had time to watch much of the video, so I can't offer an opinion on it. Just figured I'd post it for those of you who are, like me, sick enough to be interested in such things.

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— Posted by Michael @ 10:40 AM



Monday, April 07, 2008

Liquidity Constrained? Take a Vacation!



Now that we American consumers are all frothy and anxious to get our hands on this summer's Special Tax Unwinding and Preplanned Income reDistribution (STUPID) tax rebates, it's time for every business niche under the sun to urge us to SPEND OUR NEWFOUND CASH WITH THEM.

For example, here's an AP story:

AP: "Tax Rebates Could Be Ticket to Vacation"

Ah yes ... vacations. Exactly what we liquidity-challenged (read: debt-burdened) folks need to get ourselves back on track. It's not what Suze Orman suggested, of course. But what does she know, anyway?

Not nearly as much as the tourism folks, apparently.

"But we have seen some behavior that even when they are pinched, vacations are a right of life," [economist and director of the Tourism Institute at the University of Tennessee] Morse said. "People will borrow money to take a vacation; it is that important to them."


But what about polls suggesting that folks will put their chunks of STUPID money toward debt and savings?

The research suggests that consumers will say "one thing before they get the money in their hand but after they get it, they actually spend more than they got in the rebate," he [Morse] said.

Morse cites a November study by three economists from the Federal Reserve Bank, the University of Nevada-Reno and the University of Pennsylvania's Wharton School examining consumer habits from a similar though smaller rebate in 2001. The researchers tracked activity of 75,000 credit card accounts.

The study found that many consumers used the rebates to pay down credit card debt, just as pre-rebate surveys suggested they would do. But three to nine months later, they used their newly freed-up credit to buy even more. On average, they spent 40 percent more than the original amount of their rebate.

"If consumers use the 2008 tax rebate in a similar fashion as the 2001 rebate study suggests, consumers will spend more of the (2008) rebate than originally planned, generating opportunities for boosting 2008 travel demand," Morse's report says.

"We are sure hoping that he is right," said Leon Downey, chairman of the Southeast Tourism Society and executive director of tourism in the Smokies tourism community of Pigeon Forge.

Morse's report created a buzz last week at a Southeast Tourism Society meeting in Asheville, N.C. Hotel and travel destination professionals from 12 states — from Little Rock, Ark., to St. Augustine, Fla. — left with plans to order up ad campaigns and design getaway packages aimed at the rebate audience.


Here's that Fed study, for those of you who are sick enough (as I am) to actually be interested in this stuff:

Federal Reserve: Let's Save $10 ... Then Go Spend $14

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— Posted by Michael @ 10:46 AM



Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


100%

Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]

100%

Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]