Why Financing Your Computer is a Terrible Idea

In general, I don't advocate buying things that you don't have the money for, whether it's an expensive item like a car or an inexpensive item like a pair of shoes. In the case of computers, however, those offers to get a new laptop from Apple or Dell for "as low as $26.00 a month" always look so enticing, so I decided to see what they're about.

Apple's offer is just flat-out false advertising, if you ask me. With each computer on their website they show you the real price and then the financed price. A basic MacBook laptop that costs $1099 can be had for $26.00 a month, they claim. But the real offer here is for a credit card, and a rather poor one, at that. The card allows you to pay no interest for 90 days on purchases over $999 (though right now they have a promotion allowing you to go 180 days without paying), meaning that if you made payments of $26 a month on the aforementioned computer, after 90 days you would still owe $1021, which you would then have to start paying interest on at a rate of 13.74% or more (based on your credit history) per year. Even if you weren't saddled with all this interest, to pay for a $1099 product at only $26 a month means that you would be taking three and a half years to pay for the product, which is longer than a lot of people use their computers for. Since it's a laptop, it has a higher risk of needing repairs, which are likely to run you $200-300 per repair. Put those on the credit card, too, and a single purchase can really get you into trouble. The only reward this card offers is a $25 iTunes card after $2500 in purchases -- a mere 1% cash back.

Dell also offers a financing option. For their least expensive notebook, which costs $549 last time I checked, the monthly cost is listed as $17 a month. This program is called the Dell Preferred Account, but the only reason they prefer you is because you're going to be paying them whopping amounts of interest. Furthermore, the account isn't really through Dell, it's through CIT bank. In other words, it's a credit card. This program is even worse than the credit card Apple wants to hook you up with. After three months of no interest, at which point you'd still owe $498 if you were paying the $17 a month, the APR starts at 17.24% and goes all the way up to an obscene 29.99%.

Presumably, the $26 or $17 a month advertised is the minimum monthly payment you would owe if you put the computer purchase (and nothing else) on your new credit card. Paying the minimum monthly payment on your credit card is one of the easiest and fastest ways, aside from going to Vegas, to get suckered out of a ton of money. So when you're shopping for a new computer, just ignore the monthly payment option. The best way to making purchasing a new computer affordable is to shop for deals online and purchase from a retailer who offers free shipping and won't charge you sales tax.

Photo by erikf

12 Tips for Getting the Best Buy at Best Buy

A good friend of mine who is an avid DVD collector and very regular customer of Best Buy shared these tips for making sure you get the best deal on all of your Best Buy purchases. Even if you aren't a Best Buy customer, these tips will give you some ideas for how to get the best possible deals at any of your favorite stores.

1. Watch the register ring up your sale items to be sure that they ring up at the sale price, because they often don't. If you're not paying attention, you might end up overpaying.

2. Sign up for RewardZone and use the card not just for your purchases, but for the purchases of anyone else who is with you as well (who doesn't have their own RewardZone card, of course). RewardZone is Best Buy's customer loyalty program which tracks the amount of money you've spent at their store. Each time you reach $250 in purchases, you get a gift certificate for $5. That's only 2% back, but I'm a firm believer that every little bit counts, and this is easy free money, so you might as well take it. RewardZone is particularly useful if you buy often or buy expensive items. If you don't shop at Best Buy very frequently, it's unlikely to do you any good. You can get even more cash back by signing up for a RewardZone credit card, which is not a bad card. It gives you 4% back on Best Buy purchases and 1% back on everything else. If you spend enough money at Best Buy and always pay your credit card balances off in full each month, this card might be worth having.

3. Get even more cash back on your purchases by using Ebates to purchase your items through BestBuy.com. Even if you want to purchase your items in the store, just choose Best Buy's store pickup option. This way, you'll get another 1% cash back on your purchases.

4. Another good use of the store pickup option to hold low priced items for you so they don’t sell out before you make it to the store.

5. Take the current week's Circuit City advertisement to Best Buy with you to get price match discounts. You don’t NEED the paper to get the price match—they’ll actually call the store for you and confirm the lower advertised sale price. Obviously, this takes a LOT longer, though. Bring the ad if you can, but if you forget it, remember that you can still get the lower price.

6. I often find that the non-new sale items listed in Circuit City's weekly ad will be hard-to-find at Best Buy, as if they pull them from the shelves intentionally when Circuit City’s paper comes out to avoid having to price match. My ideas to combat this: if you can anticipate what items will be on sale (sometimes you can, by watching what goes on sale at Amazon), you can hide items in the store and go back for them when they're on sale; if you can’t anticipate, then you can buy via the Best Buy website using the store pickup option, and pick up your item on Sunday (the day the paper comes out). Then when you pick up your item, get them to price match.

7. When a new release movie has a really large inventory, it might be better to wait a few weeks to buy it—often it will wind up being a part of a 2-for-$20 sale or other deal later on, which will save you a few bucks. It takes some practice to figure out which movies will do this, though, and you won't always be right.

8. Check Amazon, DeepDiscountDVD, Circuit City, Target, and any other retailer that you like before buying at Best Buy. Despite their name, they don't always offer the best deals.

9. If the prices at Amazon and Best Buy are the same, buy from Amazon (as long as you get free shipping) because they won’t charge you sales tax. Of course, you'll have to wait a while to receive your order. Best Buy usually has a better price than Amazon the first week an item is released (during the sale), but after that the price will often be the same at the two stores.

10. Don’t try to run the scam of buying something cheaper someplace else and then exchanging it at Best Buy for a higher amount of store credit/exchange value. They won’t take the item if you can’t prove it was bought at their store. Save your receipts!

11. Another reason to hold on to all your receipts for a while is that Best Buy will retroactively price match for a couple of weeks if the price goes down at Best Buy (or other places that advertise it) on something you bought. Also, sometimes DVD companies will offer a deal where if you buy multiple discs, you get a special rebate or free DVD—and you need the receipts for that.

12. If you can’t find that sale item you were hoping to get at Best Buy, ask an employee to see what nearest store does have it in stock. You can also do this on your own using Best Buy's website. Simply act like you’re buying something with the store pickup option, and you'll be able to see what stores have it in stock.

Store loyalty cards, store credit cards, price matching, and shopping through Ebates or Fatwallet will help you save money at many stores. What additional tricks do you use to save money on your retail purchases?

Photo by pmilg

Target Update

Well, I just couldn't stand that I had left part of my purchase at Target, so I went back to the same location, explained what had happened, and they let me get some replacement cups for free! Now I feel better, even though I wasn't able to find the exact same items anymore--they were already sold out. At least I still have the beginnings of next year's gift collection and I didn't waste any money. I also appreciated their gesture of goodwill. I guess you have to figure that most people wouldn't make up a story like that just to save $4.

The main reason I'm telling you this is because it's an example of my just ask philosophy. If you're not already in the habit of speaking up for yourself, you should start--you'll be pleasantly surprised at how often you can get what you want. I've had late fees dropped, defective products replaced, you name it. Most of the time, companies seem to want to keep their customers happy.

Post-Holiday Shopping

I thought you might like to know that I actually practice what I preach. Here's what I scored at Target's post-holiday 50% off sale yesterday:

8 sheets of red, green, pink, and white striped tissue paper - $0.50
25 sheets of white tissue paper - $0.50
60 sheets of holiday colored tissue paper in non-Christmas colors, suitable for birthdays and whatnot - $2.50
2 spools of shimmery blue curling ribbon - $1
6 spools of nice holiday fabric ribbon in year-round colors - $7.50
4 sturdy plastic holiday cups to use as gifts next year - $4
2 Christmas gift bags - $3
3 non-Christmas gift bags - $2.50
1 package Christmas gift tags - $1.50
1 holiday sponge - $0.50

Total with tax: $25

The bad news is that part of my purchase didn't make it into my bag and I didn't realize it until much later, so I'm out $4. Argh! That's pretty frustrating, and kind of puts a damper on the whole money-saving thing, especially because it was the gift items that got left out. I could call them, but it's really not worth a special trip to the store to pick them (one hour round trip). I'd be better off just re-buying the same cups another time when I'm out, if they still have some left. Besides, it's Target, so I doubt they'd even know what I was talking about.

Also, even though I got great deals on everything, I still found myself wondering if I spent too much, particularly on ribbon. However, I take pride in my present-wrapping skills, and if that costs me an extra $10 a year in ribbon, so be it.

Never Pay Retail: Ten Things You Should Never Buy at Regular Price

"Never pay retail" is a common mantra amongst frugal shoppers. While I think most of us don't want to inconvenience ourselves so much as to never pay full retail prices for items, there are some items that are so easy to get at a steep discount that no one should pay full price for them. With all the bargains available right now, the post-holiday shopping season is a particularly good time to put this mantra into practice.

1. Holiday decorations and cards - There's no reason to buy these items on December 1st each year for full price when you can buy them on December 26th for half the price. True, the selection will be smaller, you'll have to store your purchases all year (and remember where you store them), and you may have to dig through some disorganized piles to find what you're looking for, but these minor inconveniences are a small price to pay to save a significant amount of money.

2. Wrapping paper - Immediately after Christmas is the best time to buy not just your holiday paper for the following year, but all of your wrapping paper for the following year. Mixed in with the snowmen and Christmas trees, you'll find more generic looking paper, ribbon, and gift bags that can be used for birthdays, graduation, and any other occasion. Even festive colors like red, green, and blue can be made to look unseasonal with the right ribbon--red paper is just as good for Valentine's day as it is for Christmas, and green paper with yellow ribbon is just right for a spring birthday.
3. Cardboard boxes and other packing and shipping supplies - Whenever you buy something online, you get a free box with your purchase. Don't toss the boxes, bubble wrap, or any other materials you receive, and you'll always have shipping supplies on hand when you need them. If you need larger boxes, you can pick used ones up for free at retail stores, which always have more empty boxes than they can use due to all the merchandise they receive (you may have to visit several stores or make special arrangements to make this work, so don't wait until the last minute). Finally, don't forget about the free priority mail boxes available at the post office.

4. Clothing (shop on weekends at department stores, end of season sales, thrift stores, always cheap stores, stores with very frequent sales)

5. Cars - The biggest decrease in a car's value occurs the moment you buy it and drive it off the lot. Buying a car that's even a year or two old from someone else will save you thousands of dollars. Read more about saving money on your next car purchase here.

6. Cell phones - It's so easy to get a cell phone for $20 or less by renewing your contract or shopping on eBay. Just don't get caught up in the bidding frenzy and pay more than the phone is worth--with cell phones, there's always another phone auction right around the corner. With some patience, you will be able to get a good deal, even on a newer model. If you're willing to settle for a used older model or no-frills model, you can pay as little as $10, including shipping.

7. Portable storage media - Blank DVDs, blank CDs, and flash drives are almost always significantly on sale or free with purchase somewhere. Websites like Dealcatcher will help you spot these deals. You can also look for the freebies yourself in the weekly ads for office supply and electronics stores.
8. Books and Textbooks - The most expensive way to get a book, especially a textbook, is at a brick and mortar bookstore. In my experience, the cheapest way to get a book, especially a textbook, is to buy it used through Amazon or Half.com. Sometimes you can even get new, unread books at a discount through these sites by purchasing from third-party vendors.

If you're not content to check only two sources, use a book comparison shopping tool like AddAll. If you have books of your own that you don't want anymore, you can even get free books through Paperbackswap.com. I also recommend seeing if your local library has a book you're interested in before you decide to purchase it. With library catalogs being available online these days, you can look for a book in just a few seconds without even leaving home.

9. Magazines - The simplest way to avoid paying retail for a magazine is, of course, to subscribe. A magazine subscription costs around $1 - $2 an issue, while the cover price is generally $3 and up. If you just need some easy reading material for a plane, why not sign up for free trials of a couple magazines that interest you instead of forking over $4 or more for a newsstand copy at the airport? If it's a full year's subscription you're after, you can probably find a deal online if you keep your eyes peeled or do a Google search. Sometimes after making an online purchase, you'll get a popup offering you up to three free magazine subscriptions. The catch is that the company offering this deal wants your credit card number and the subscriptions will automatically renew in a year, so if you think you'll want to cancel and you know you won't remember, skip deals like this.

10. Frozen food - because it's non-perishable, you can easily stock up on frozen food when it's on sale and use it as needed. I've noticed that the sale prices on frozen food in particular will save you quite a bit over the regular price--so much so that I can't bring myself to pay the $7 regular price for a frozen pizza anymore, knowing that it will only cost me $2.50 if I can wait a week or two.

Photo by Paul Keleher




Why I Decided Not to Buy . . . At Least For Now

Since I live in an expensive part of the country, I never gave thought to buying a home. Everyone I know, even successful people in their mid-thirties, rents. Then I started reading personal finance books, all of which said that I needed to quit renting yesterday. At first I just dismissed this advice because there was simply no way I could afford either the down payment or the monthly mortgage payments. Then, slowly, I started making a little more money, my household gained a second income, and I began looking at properties in a less glamorous part of town that I previously wouldn't have considered. Suddenly, owning a home seemed like not just a possibility, but a near-future possibility.

I started going to open houses and found that almost all of the properties I looked at, regardless of how expensive they were, just weren't the kind of home I envisioned having for the amount of money and effort that would be required to own them. I figured I would just keep looking and eventually I would find something, but then I lost my interest in looking. Here's why.

Though thousands of people from all walks of life buy homes every year and aren't necessarily well-educated about the process, for me, buying a home without knowing the ins and outs of every line on every piece of paper I'd have to sign wouldn't be an option. So the first major piece of work in buying a home would be to research every aspect of it by reading lots of books full of information I had zero prior knowledge of. Then there would be the hassles of finding a tolerable and trustworthy real estate agent and mortgage lender, actually finding properties I both liked and could afford, making offers (and dealing with the heartbreak of losing out on great places to other buyers), and the major stress and chaos of actually closing the deal and moving. And that would only be the beginning--after that, there would be ongoing monthly homeowner's association fees (I was looking at condos), potential extra homeowner's fees in times when major repairs were needed, private mortgage insurance (since I would have a down payment below 20%), property taxes, and home maintenance and improvement expenses (which can come in the form of an untimely $2000 bill for a new air conditioner in August).

It's true that by not buying, I'll be missing out on benefits like pride of ownership and being able to modify my living space however I please, along with the stability of not having anyone raise my rent drastically or turn my apartment building into condos. I might also miss out on making a massive amount of money if my neighborhood keeps gentrifying the way it has been. On the other hand, I also might miss out on losing a ton of money by buying at the peak of a market that so many people think is in the process of crashing, or at least leveling out (I've been watching the listings, and prices haven't actually gone down much at the low end of the market--the only different is that there are more properties available at the same lowest price).

Most personal finance books will tell you to buy a home because it will make you more comfortable financially in the long run. They say that the only reason you should rent is if you're planning to move in the near future (since this might force you to sell at a loss and because of the high costs of buying and selling a home). People also like to mention that you can deduct your mortgage interest, but this really isn't the fantastic deal it's made out to be unless you're already itemizing (if you have high ongoing medical expenses, for example).

Since I can't predict the market, I have decided to base my home ownership decision on the things I actually have some degree of control over. I want to keep my options open. I want to have the ability to explore paths like starting my own business, working part-time, working in a low-paying field doing something I'm passionate about, taking a couple of months off from working to travel, or picking up and moving to another city. If I were locked into the high expenses of home ownership, I would give up all of these possibilities (or make them much more difficult), and for me that just isn't worth it. The supposed "freedom" of home ownership really isn't a reality for me at this point in my life.

For me, the main purpose of having money is to have options, and to lock myself into a rather expensive thirty year mortgage plus expenses would take away a lot of that freedom. It would require me to maintain a full-time, well-paying job for the next 23-30 years (which is fine for many people, but not for someone with as many divergent interests as I have). Even though I calculated that buying a home might save me $200,000 over 30 years with modest increases in home values and rental rates (which, of course, I can't really predict, and may well be overestimating), if I continue my current savings habits (very likely because I'm a saver by nature) I will probably be comfortable enough in 30 years anyway that the extra potential $200,000 will not have a major impact on my lifestyle or my freedom.

Whether it's deciding whether to rent or own or making any other financial decision in your life, don't just assume that because a personal finance book tells you something is the best choice that it's the right choice for your situation. Think about your own values and goals in life, and structure your finances in a way that will allow you to live by those values and achieve those goals as painlessly as possible.




Understanding Disability Income Insurance

We all hear a lot about protecting our financial futures by staying out of debt, having an emergency fund, and saving for retirement. Disability income insurance, or DII for short, is another important form of protection that many people don't have and haven't even heard of. The purpose of this kind of insurance is to provide a safety net if you develop a long-term disability that prevents you from working. DII will pay you 60% to 80% of your salary until age 65 if you are unable to work.

How do you know if you need disability insurance? If you aren't rich, your significant other isn't rich, and your parents aren't rich, purchasing this insurance is a good idea. If you don't have one of these safety nets, then your ability to work is your greatest financial asset and should be protected accordingly. Otherwise, becoming disabled could ruin you financially and add a great deal of stress to an already terrible situation.

What should you expect when you apply for DII? First of all, unlike car insurance, you can't simply purchase it online and be done with it. You'll have to work with an agent. Acquiring an agent is easy -- just fill out a contact form on any DII website and an agent will contact you. You might want to talk to several agents until you find one you feel comfortable with -- you're going to be making a major purchase, after all, so you want to work with someone honest and well-informed. The agent may also try to sell you other products like life insurance, but I would recommend focusing on these two products separately as each requires a good deal of thought and the company with the best DII policy will not necessarily be the company with the best life insurance policy. Some agents work for a particular company, and some can sell you any company's policy.

Once you've found an agent, the actual application process is less simple. First, you'll talk to the agent by email or phone, discuss your needs, and get an initial quote. Then the agent will want to meet with you in person to discuss everything. You'll ask lots of questions during and after the meeting until you understand the details of the plan you're applying for. Then you'll fill out some forms with your basic information and document your income by submitting recent pay stubs and a couple years' worth of income tax returns. You'll also have to take a medical exam and fill out an extensive and thorough medical history form, which may be done by a medic of the insurance company's choosing. If all of this seems like overkill, keep in mind that the company might end up paying you a fortune over the years if you get hurt, so to protect their interests, a thorough application process is necessary. Insurance companies like applicants to have a three year employment history and an easily documentable, regular income, but even if this doesn't describe you, the right agent may be able to find a policy that fits your situation.

If you work for a company that gives you DII, you've got it easy. You don't have to find a company, choose an agent, fill out any paperwork or take any medical exams. However, you may want to examine your company-sponsored policy to see if it gives you as much coverage as you'll need. Company policies may only replace 60% of your income and, what's more, if you need to use the policy, the income you receive will be taxable (whereas a policy that you purchase yourself will provide tax-free benefits). For this reason, many people choose to purchase additional insurance on their own.

A good DII policy has several important components. It should be guaranteed renewable and non-cancelable until age 65. This means that even if your health degrades, you'll still be insured as long as you keep paying your premiums. You won't have to ever take another exam again unless you want to reapply for a new policy (if your income increases dramatically, for example, or you want to switch companies), and your premium rates will be locked in at the time of purchase. You'll want to make sure you're getting own occupation (that is, the line of work in which you're presently employed) insurance to the extent that you can, which will depend on your profession. If you have a typical office job, the policy may offer you own occupation coverage for five years and then after that expect you to get whatever gainful employment you can. However, if your new gainful employment only pays you $7 an hour and your old job paid $25 an hour, your policy will still make up the difference so that you're bringing home the same amount of money you were during the first five years of your disability (which will be somewhere from 60% to 80% of that $25 an hour).

Disability income insurance is expensive (1% to 4% of your annual pretax salary). If you can't afford much, get a cheap policy with a good company -- it's better than nothing, and you can always reapply for a better policy later. If you can afford more, make sure you don't spend more than you really need to. It's easy to let fear make decisions for you when dealing with a product like this -- bouncing the details of the plan you're thinking about purchasing off of a couple of other people can help you get a sense of whether you're making the most rational decision.

One way to decrease your premiums is to increase the waiting period before you start receiving benefits. Your agent will probably try to sell you a policy that kicks in on the 91st day after you become disabled. If you don't have much in the way of savings, don't have anyone who can help you in a financial emergency, and have a hard time accumulating an emergency fund, this policy is probably a good idea for you. However, you'll pay an extra couple hundred dollars a year for this benefit. If you have somewhat of a safety net in the way of a well-padded emergency fund, an income-earning spouse or significant other who can support you financially if needed, or family who are willing to help you out in a pinch, you should consider a policy that doesn't kick in until the 181st day (6 months) or longer. The maximum waiting period offered by most DII companies is two years.

As with all insurance, you'll have several different payment schedule options. If you pay an entire year's premium at once, you'll save a few bucks, and if you pay smaller amounts on a shorter schedule, you'll pay a bit more. If the fee for breaking up your payments makes a difference between you being able to comfortably pay for the policy and forgoing it altogether, don't let the additional charge trouble you -- it could be as little as $20 extra for the whole year, which is worth it for the peace of mind of not having to fork over $1000 or more all at once. In addition to the payment schedule, some companies (Northwestern Mutual is one) will offer you a choice between a level payment plan (where you pay the same premium every year) and a plan that starts out cheap and increases over time. The idea behind the latter plan is that your income will theoretically increase over time, so you'll always be spending about the same percentage of your income on disability insurance. The drawback is that over time, this type of plan is much more expensive (like $25,o00 more expensive). Once you choose one option or the other, you can't switch. You can, however, reapply for insurance later if you're still healthy and change to the plan that is a better value in the long run.

Here's a list of well-known companies that offer disability income insurance:
Northwestern Mutual
Guardian
MassMutual
MetLife
Unum Provident
When purchasing a product like this, it's smart to pick a large, established company that will still be in existence and financially solvent when you need to make a claim. You can always check an insurance company's ratings through A.M. Best.

Why do you need DII if Social Security provides disability benefits? Social Security really only covers absolute worst-case scenarios. If you can do any job at all, they will expect you to work. Also, Social Security's benefits, while a nice thing to have, probably won't be enough for you to live on, especially if you live in an expensive part of the country -- Social Security doesn't take into account the cost of living in your geographic location. Below, I've summarized the most important points of the SSA's program and provided links to their webpages so you can read the information firsthand or get more details if you're interested.

How the SSA defines disability: "We consider you disabled under Social Security rules if you cannot do work that you did before and we decide that you cannot adjust to other work because of your medical condition(s). Your disability must also last or be expected to last for at least one year or to result in death." Depending on the coverage you are eligible for, you will either start receiving disability insurance payments in month two or month six of your disability, so even in a worst-case scenario, you'll have to support yourself for a while before you get any help from social security. Even if you have private disability insurance, you likely will have purchased a policy that kicks in after, say, six months in order to reduce your premiums. Your emergency fund will support you in the meantime.

How the SSA decides if you are disabled: In 2007, if you make over $900 a month, you won't qualify for disability benefits. Your condition also must be severe enough to "interfere with basic work-related activities."

List of Impairments: If you have any of these conditions, you are automatically eligible. If you have a condition not listed, the evidence must show that the impairment has lasted or is expected to last for a continuous period of at least 12 months." Children can be considered disabled, too.

How to prove to the SSA that you are disabled: In a nutshell, you need medical proof, such as reports from doctors who have treated or evaluated you.

You also have to pay into the program (via your social security taxes) for a certain number of years before you qualify.

Your state may also provide disability benefits, but these will only cover you in the short-term, and again, the payments won't be very high. Also, whenever you're dealing with a government agency, things tend to be time consuming and complicated, and your claim may not be approved.

Applying for disability insurance can be a bit time consuming and complicated, but if you ever get so sick or so seriously injured that you are unable to work for several months or longer, you'll be extremely glad that you took the time to protect yourself in this way.

If you have disability insurance, what company do you use and what do you think of them?

Photo by hfabulous

Best Reads of the Week

Here are some of the most interesting or amusing articles I read this week.

Hell on Wheels - Seth Stevenson's NY Times op-ed explains why you don't need a rolling suitcase. Here's a man after my own heart!

Over at PF Advice, Jennifer Derrick points out that luck has nothing to do with staying out of credit card debt or having a comfortable balance in your bank account. Shannon Christman provides some excellent tips for post-Christmas shopping. If I can drag myself to the mall (not my favorite place), I am indeed going to start shopping for 2008 on December 26.

Investopedia Followup: More Ways to Save on Holiday Spending

Investopedia is running a special budgeting feature this month, and I'm today's featured article! Check out my tips to Avoid Overspending This Holiday Season over at Investopedia, and read my additional tips below.

Decorating

It's easy to add festive accents to your interior without going overboard: a couple of seasonal throw pillows and a blanket can give your living room some holiday flair for under $50 while also keeping you warm and cozy.

Meals

If you still want to create a full-fledged meal yourself, you can ease the burden by spreading the cost out over a few weeks. Instead of making a couple of giant shopping trips to buy everything you need all at once, gradually stock up. Start purchasing non-perishable items first and buy the fresh ingredients last. Also, plan for your meal to have leftovers so that your the expense and effort of preparing all that food will last you more than one meal. Freeze things and reheat them in a few weeks when you aren't sick of sweet potato casserole anymore.

Gifts

Consider homemade gifts. Baking cookies or making candy can be a great money saver if you take advantage of economies of scale and make multiple gifts from one set of ingredients. While the preparation of this gift will take you a few hours, so would shopping for a conventional gift. This way, you get to stay home instead of wandering through a chaotic mall. You won't even have to make a special visit to the store: just pick up the ingredients on your next grocery trip. You may be thinking that most people already have more holiday treats than they can handle, but if you make something different than what they are already likely to have, they probably won't care. Think beyond brownies, chocolate chip cookies, and sugar cookies. You could also give something that they can eat later, like a homemade cookie mix with a recipe card attached. When your gift recipient runs out of holiday goodies, all they'll need are some eggs, butter, and vanilla to enjoy your gift. They'll even be able to re-create it later using your recipe. Look for a large jar to put the ingredients in at a craft store or a garage sale.

If baking isn't your thing, maybe you're crafty: how about putting together a photo album with photos of you and the recipient that you've collected over the years?

Another option is to buy gourmet or semi-gourmet items from the grocery store and repackage them with a clear cellophane bag and some ribbon. Most people won't figure out where you got them from, and even if they do, they probably won't care.

Coupons for services can also be a great deal for both you and the recipient. The gift of time can be the most valuable gift of all, whether it's quality time like going out for a cup of coffee or relief from housework.

Remember, your pets have no idea it's a holiday. They don't need gifts. If you just don't feel the celebration is complete without doing something special for your pets, give them their favorite treat, spend some extra time with them, and they'll be happy. If Fido really needs a new bed, give it to him in March when money's not as tight as it is at Christmastime. Besides, what looks old and grubby to you may look like home sweet home to him!


Photo by Chris_J

(This guy really has a lot of great shots. Check them out!)

Things I Didn't Waste Money On This Year

Since I wrote about the things I wish I hadn't purchased last year, I also thought I'd explore the things I'm most glad I spent my money on this year (aside from the obvious things, like food and shelter).

Photography: I bought a new camera with a much-needed wide angle lens and spent a lot of money on printing my photos, including lots of 8x10's for my portfolio. Though I don't make any money from my hobby (yet), I really enjoy it and the sense of pride I get from sharing my best work with others. I did all of this as cheaply as possible, but it still cost me about $600.

Travel: I spent more money on travel this year than I ever have before (which contributed to the high photography costs), but I don't care. Getting away from my regular surroundings every once in a while helps me clear my head and focus on the things that are most important to me in life (and that includes seeing the world). Frankly, I don't want to tell you how much I spent here! Let's just say that even budget travel adds up.

New jeans: I wear my jeans until they are literally falling apart. It was really time for a new pair (or three).

Shure E2C Noise-Reducing Headphones: These only cost me $40 through an Amazon Goldbox Deal of the Day and were a godsend during my long flights. I can't believe how well they work considering how small and inexpensive they are.

iTurbo - this nifty gadget cost $20 on eBay and allows you to charge your iPod using a AA battery. I think I would have gone batty on my overseas flights if I hadn't been able to make the time fly by with episodes of 24.

Desk chair: I found a much-needed, comfortable desk chair at a garage sale for only $3.00. So what if one of the armrests falls off occasionally? I saved $97!

Donations: I found a couple of causes this year that I really care about, and I'm glad I sent them some money. If anything, I wish I had sent more.

Disability Insurance: Okay, I'm not glad I had to spend all the money this cost (and will continue to cost) or go through the major hassle of obtaining it, but I'm glad to have one of the cornerstones of my long-term financial stability in place.

New Computer: My Apple laptop was so unreliable. It's by far the worst piece of electronic equipment I've ever owned. Since I'm surgically attached to my computer, it probably provides me the most enjoyment per dollar spent of any item I own. I got a pretty good deal on a near top-of-the-line new laptop for $800.

Kitchen gadgets: I used my microplane, garlic press, and citrus press all the time. I love these things. Together, they cost around $40.

German classes: I love foreign languages, but I haven't spent nearly as much time learning them as I would have liked. I'm glad I took the time and money necessary to do something that, for me, is part of creating a fulfilling life. I had to spend a little more to attend a private language school since there is no community college in my area that offers German.

As you can see, there are more things that I'm happy to have spent my money on this year than things I feel I wasted my money on (more than I can list here without boring you, really). I'm glad that all those hours of work have allowed me to purchase some things that have added to my enjoyment of life. Otherwise, what's the point?

Things I Wasted Money On This Year

A recent post by David at My Two Dollars inspired me to review my own budgeting records from 2007 and think about whether I'd made good use of all the money I'd spent. Here are some things I wish I hadn't purchased and why.

An expensive sushi dinner at a mediocre sushi restaurant - $40. I've decided that when I'm craving sushi, nothing but the best will do. I will not waste $40 on sub-par sushi anymore. (Admittedly, a $40 sushi dinner is actually showing some restraint on my part--I adore the stuff.)

Expensive haircuts - $206: The last expensive haircut I had didn't look any better than if I'd gone to a low-priced chain. So maybe I will, next time, or maybe I'll just wear my hair up so no one can tell how long it's been since my last trim.

Melatonin $13: I bought a bottle of melatonin pills from a health food store to help me overcome jetlag on an overseas trip. They don't do a thing for me. I wish I had spent the money on Nyquil instead.

Car rental I didn't need, $79: When visiting some friends out of town, I rented a car. I probably should have just let them drive me around instead, because the only thing I used the car for was to spend more money taking myself to the mall and out to eat!

Getting my check engine light checked at an overpriced mechanic because I was impatient, $89: I should have just gotten a ride to work or taken the bus instead of insisting on driving my own car to the mechanic as soon as the check engine light went on. Now, I have an OBD-II reader so I can conveniently and inexpensively check the engine light myself.

Thanksgiving plane ticket, $322: It's not a bad price for a holiday plane ticket, but if I had made up my mind about where I wanted to go earlier, I could have flown for free with my frequent flyer miles. The particularly annoying thing about this plane ticket was that I purchased it through Cheap Tickets, who didn't manage to put my plane seat requests through to the airline. This got me stuck in the last row both to and from my destination and nearly got me bumped off my flight on the way back. I'll never purchase through them again!

Pants and purses from Goodwill to re-sell on eBay, $21: This seemed like a great idea, but I wasn't able to sell any of them, which ended up being a frustrating waste of time and money, particularly since I hate the funky smell and disorganization of thrift stores.

Gardening supplies, $80: My garden didn't produce a thing this year. Add this $80 to the $200 or so I spent last year and you've got the most expensive twenty-five sugar snap peas and seven cherry tomatoes I've ever eaten.

eBay shipping, $30: I perpetually underestimate the cost of shipping my old stuff that I sell on eBay, and then I lose money. I don't want to depress myself by actually adding up these numbers, so we'll just call it $30. Since then, I've bought a shipping scale that weighs items up to fifty pounds--I figure it will pay for itself pretty quickly.

Overall, I'm happy to say that I feel most of my purchases this year were money well-spent. Of course, I certainly wish I hadn't needed to spend $2000 on dental work and other such unanticipated required expenses, but that's life. Overall, I wasted close to $900 on the items described here (which was even more in pre-tax income), and while I'm not beating myself up over it, I'll certainly strive to waste less money next year.

Photo by B Tal

Will Virgin America Revitalize Airline Customer Service?

On August 8, 2007, during the peak of this summer's travel nightmares, Virgin America arrived on the scene with a promise to bring quality customer service and enjoyability back to flying.

While they have some interesting-sounding perks like self-serve minibars and wider seats (19.7” in coach, as opposed to 17.2" on most American flights), it's questionable whether gimmicks like mood lighting that changes with atmospheric conditions and planes with monikers like Air Colbert and Jefferson Airplane can really make a flight more pleasant when you're sitting near rambunctious children or someone who doesn't wear deodorant. Also, they've managed to introduce another inconvenience to flying in that you must have a credit card to pay for any of your in-flight entertainment or food. A better idea would have been to actually equip staff with change for customers' cash purchases, which is apparently too difficult a task for other airlines to handle.

Many of Virgin's promises for revolutionizing airline customer service are already offered by all other airlines, like the ability to check your flight status online or by phone. Other pledges are really just basic courtesies that should be extended to anyone forking over $300+ for a service, like attempting to notify you of a flight delay or cancellation and delivering your baggage to your destination on-time (how hard is it, really, when that baggage is on the same flight you are?).

Virgin America also doesn't promise that you won't be bumped (though they do say that those passengers to be involuntarily bumped will be the people who checked in last, which is better than the seemingly arbitrary criteria used by other airlines). Being able to order food from your seat at any time instead of waiting an hour for the cart to roll by, choose from 25 pay-per-view movies and 3000 MP3s, and plug in your laptop at your seat are probably the biggest perks this airline offers right now, in addition to their rather low airfares. They also base your frequent flyer rewards on the dollars you spend instead of the miles you fly.

However, their routes are very limited at the moment: they only fly to San Francisco, Los Angeles(LAX), Las Vegas, New York (JFK) and DC (IAD). Right now, not all of these cities are connected to each other. Flights to Seattle and San Diego are on the way in early 2008, and the airline hopes to have expanded their routes to thirty cities over the next five years (assuming they last that long).

Their fleet currently consists of only fourteen planes, with eight first-class seats per flight. The major perks for first class flyers are massaging chairs, free movies, and free meals. I wonder how annoying those massage chair rumblings are for your rowmate, though?

Though I'm very curious as to whether Virgin really has managed to create a more enjoyable flight experience, I doubt I will be flying them anytime soon as I plan to fly with nothing but frequent flyer miles this year. Because some of Virgin's selling points are so basic, the cynic in me wonders if they are really interested in providing a better flying experience or just want to provide lip service to the concept in the hopes of winning over disgruntled customers from other airlines. I suspect that more changes than the ones Virgin has implemented are needed to truly make flying tolerable, let alone enjoyable.

Have you flown Virgin America? If so, what did you think? I'm terribly curious.

Photo by Johnny Vulkan

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How to Prepare for a Fire

Many of us feel like there's little point in preparing for a disaster because we never know when something might happen and it's impossible to be perfectly prepared. If you back up your computer every Friday and it gets stolen on a Thursday, you've lost an entire week's worth of work. Or maybe you keep emergency food in your car in case of a natural disaster, but your car is in the shop when that disaster hits. Even though there's a chance that your efforts won't pay off, some preparation will always be better than nothing. The following tips won't take much time or effort to implement, but they will make a big difference should your home ever suffer a fire.

Check your smoke alarms. Start by taking the most obvious but often overlooked step of making sure you have smoke alarms and making sure they work. Most alarms have a light that stays solid or blinks to let you know it's working, but it's still a good idea to test them every three months using the alarm's test button just to be sure. Some folks say you should have smoke alarms in every room, but if you can't manage that you should at least put them near the kitchen and in your bedroom or the hallway near your bedroom.

Have fire extinguishers. You should have at least one home fire extinguisher. You'll want to keep one in an easily accessible spot in the kitchen for sure, and make sure you have the right type of extinguisher for the type of fire that's most likely to occur in that location.

Run emergency exit drills. Most of us have never practiced how we would exit our homes in an emergency. If you have children or pets, this is an especially important step to take. Do your kids know what to do when the smoke alarm goes off or they smell smoke, especially in the middle of the night? How will you coax your cat out from under the bed in an emergency?

Always know where your purse/wallet and keys are. It's a good idea to develop a habit of keeping these items in the same place at home so that you can find them in the event of an emergency, fire or otherwise. That being said, if a fire has engulfed the part of your home that contains these items, don't try to get to them--the most important thing to rescue in a fire is always yourself.

Have emergency money. Store some cash, checks, and an extra credit card in a secure location outside of your house (and not in your car, which could be lost in a fire as well). A safe deposit box at the bank is a good option, as is storing these items with a very trustworthy friend or relative who lives in your city. A fire-rated safe that you keep at home is another (just don't expect it to deter burglars), though if your home is structurally unsound after the fire, you'll have faster access to these items if they're off site.

Take inventory of your home's contents. This will help you to file a claim with your homeowner's or renter's insurance company and get money to replace everything you've lost. Make sure to update your inventory after making a major purchase or once a year. Keep copies of your inventory in a secure form of online storage and in your safe deposit box. For more details, check out Jeffrey's article on creating a digital inventory of your possessions.


Make sure your homeowner's or renter's insurance policy provide replacement cost coverage. This increased level of protection will barely make a dent in your premium, but it will make a huge difference if you ever need to file a claim. The alternative is actual cash value insurance, which will only give you cash for the value of your possessions at the time of the loss (i.e. you won't be getting much for your 1970's couch).

Keep your computer backed up regularly and keep the backups outside your home (that bank safe deposit box will come in handy again here). You can easily back up important files by emailing them to yourself and/or storing them on a flash drive that you keep in a separate location. It's also a good idea to scan important documents like tax returns and other important forms related to your finances and your health so that you'll have electronic backups if you need them. A great way to back up your photos is to upload them to an online photo storage and printing company like Kodak Gallery or Winkflash. Just make sure to follow any requirements for keeping your account active so you don't lose your pictures.


Dealing with a major loss like a fire is always distressing, but with a little preparation you'll be better equipped to handle things. For more information on what you can to do prepare for a worst-case scenario, check out Jeffrey's article on preparing a financial emergency kit, which will also help you prepare for major disasters like hurricanes or earthquakes.

Photo by danny.hammontree

Investopedia Followup: Why Dental Insurance Is Often a Waste of Money

On a recent dentist visit, I learned that I needed to have $1600 worth of work done on my mouth, none of which could be put off for more than a month or two. I normally don't have expenses that high, so I was pretty upset about my situation for several days and spent some time trying to figure out how I could reduce my bill. I learned that I was indeed stuck with the full bill, but that my intentional decision to not purchase dental insurance had paid off.

In my Investopedia article, Should You Bite On Dental Insurance?, I explain how dental insurance works. Below, I've elaborated on that explanation, including some numbers that help illustrate my point.

Let's say you have amazing teeth. You could go for five years without a cleaning and you still wouldn't have a single cavity. But, because you don't want to take any chances with the only set of teeth you have and your employer doesn't offer dental benefits, you decided to buy your own dental insurance. You get your teeth cleaned and examined the recommended two times per year, and you also get your recommended bitewing x-rays once a year (as opposed to a full set, which you need once every five years). Your total dental expenses per year would be $600 for insurance premiums, $0 for cleanings and exams, and $0 for bitewing x-rays. These services are generally considered "preventive" and are therefore free if you're insured. Congratulations, you've only spent $600 on dental work for the whole year! However, without insurance, you would have only spent about $350 total for the two cleanings and exams and $50 for the bitewing x-rays, a savings of $200. (Dental costs seem to vary regionally and sometimes with how long you've been a patient of the same dentist, so take these numbers with a grain of salt.) Here's a chart to illustrate the cost of being insured versus not being insured in a good year.











Good Year With Insurance Good Year Without InsuranceSavings by Having Insurance
$600
$400-$200

Here's a loose approximation of what you'll spend for common dental work with insurance/without insurance:

Cleanings and exams: $0/$175 (for one cleaning+exam) (covered 100%)
X-rays, full set: $0/$150 (covered 100% every five years)
X-rays, bitewing: $0/100 (covered 100%)
Fillings, amalgam (silver): $26/$130 (covered 80%)
Fillings, composite (tooth-colored): $30/$150 (covered 80%)

Here's what you'd spend for big ticket dental work with insurance/without insurance:
Root canal: $400 / $800 (covered 50%)
Crown: $450 / $900 (covered 50%)

Now we can calculate your potential savings in a somewhat bad, but not really atypical year. You still need the exams, x-rays, and cleanings no matter what kind of year you're having, so with insurance you're starting at $600. Let's say you need three fillings and that you, like most people, prefer the more attractive, more expensive tooth-colored fillings. (It's important to note here that the cost of a filling can vary by over $100 per filling depending on the tooth being filled, the number of surfaces that have to be drilled, and the type of material being used to fill the tooth.) Let's say that you have two small, one-surface fillings on two of your front teeth and one larger, two surface filling on one of your molars. The regular price of these fillings is $120 each for the small ones and $180 for the large one, making the insured price for these fillings is $30 each for the small ones and $40 for the large one. Now you've spent a total of $700 ($600 in insurance premiums plus $100 for filling copayments). If you didn't have insurance, you would have spent $450 on the cleanings, exams, and x-rays, plus $120 each for the small fillings ($240) and $180 for the large filling. That's a total of $870. Now you've come out ahead for the year by $170 thanks to your insurance.











Average Year With Insurance Average Year Without InsuranceSavings by Having Insurance
$700
$870
$170
At this point, you've had one good year and one okay year, and you've about broken even (you're behind by $30). You've also used up $770 of your $1,000 annual maximum, because the insurance company paid for $770 of your total bill and you paid the other $100.

Now let's dig into a really bad year. On top of the work described in the previous section, you also need a root canal and a crown. Ouch!

Now, not only are the root canal and crown incredibly expensive, but you only have $130 left in that annual maximum. That means that you don't get the full 50% copayment for these services, but rather, only $130 of the $1700 bill will be covered. You're not saving as much as you thought you were going to when you signed up for that insurance plan. Double ouch.











Bad Year With Insurance Bad Year Without InsuranceSavings by Having Insurance
$2270
$2570$300

Over a five year period, a typical patient might have three good years, one average year, and one bad year.











Five Years With Insurance Five Years Without InsuranceSavings by Having Insurance
$4770
$4640-$130
How disappointing! You've actually lost money by being insured. Of course, the numbers can vary a lot depending on your situation. You may need more or less dental work done or you may have a $2,000 annual maximum. Your monthly premiums may be higher or lower. While it is beyond the scope of this article to calculate multiple scenarios, I've tried to illustrate a scenario that I believe will be common for a large number of people, as well as show you how I got my numbers so that you can run the numbers for your own situation.

Also, there is one way you might be able to get a good deal on dental insurance if it isn't offered through your employer and you aren't married. If you have a significant other that you live with but you aren't married (legally or otherwise), in some states and with some plans, you can qualify as a domestic partner regardless of whether you are a same sex couple. You may have to live together for a certain period of time, like six months, before you officially qualify. On the other hand, some insurance companies will make you jump through serious hoops to get your totally legit same-sex domestic partner on your insurance plan. It sounds terribly unfair, but I imagine the rules are in place to prevent people from claiming their roommates as domestic partners or something. (How this is good for the insurance company's bottom line is beyond me -- for many people, their only options are cheap insurance or no insurance. In most cases, I imagine that insurance companies are only losing money by preventing potential customers from getting insurance, regardless of whether they're in a relationship or the nature of that relationship. How does being in a heterosexual relationship make one a better insurance risk?)

To sum up, the lesson here is that you probably shouldn't buy dental insurance unless you can get it cheaply as part of a group plan that will get you significant discounts on both the premiums and the dental work itself. While the monthly dental insurance premiums don't cost much more than a basic cell phone plan, those payments really add up. Add to that a low annual maximum, and you're unlikely to win the dental insurance game, even if your teeth have frequent problems.

One final note: don't go into or add to your credit card to pay your dental bills -- most dentists will work out a payment plan with you if you don't have the savings or the cash flow to pay your bill all at once. Following your dentist’s recommendations for at-home oral care and not neglecting your regular cleanings every six months are the best way for most people to save on dental care.

Photo by greefus groinks