Posts filed under 'Money'
I had an interesting thing happen today, someone used the contact form on this web site and asked me if I would be interested in selling a blog posting and/or a text link.
I’ve written in the past about building passive income streams, so I was interested to learn if the products or services this person wanted to promote would align with my own values for this site. I replied back and asked what they were selling.
The reply that came back was…payday loans.
They even prefaced their reply with, “I appreciate that your stance on our industry may be negative, but assure you that we are not out to editorialize or sway you in any way.”
Fair enough, we can agree to disagree on the “benefits” of payday loans, but what really made me stop and consider the state of paid-for-post blogging was this next sentence:
“To be frank, even a post about reasons to avoid payday loans would probably prove beneficial, while of course not vilifying our company in any way.”
Wow. They were offering me the perfect out, I could write a don’t-use-payday-loans post and still get paid - how could I say no?
Payday loans are a blight on the communities they’re in, and the fact they’re not illegal puzzles me (I know why, they spend a lot of cash lobbying for exclusions from usury laws). They put the people they purport to help into a cycle of near eternal-debt and the rates they charge are more than usurious. I don’t think it’s possible to over-vilify these companies!
I’m not naming companies or providing links, but their web site lists the APR on the loans at between 507% and 1304%. And that’s if you pay the loan in full when it’s due! If a “borrower” doesn’t pay the loan in full and makes minimum payments, the effective APR is even higher!
I certainly want to monetize my site and produce supplemental income, but I won’t do it at the expense of my beliefs and principals. What’s scary is that they would have been fine with a “negative” post, and I could have written this post and gotten paid for it. That seems to me a bit dishonest on everyone’s part; mine, the “advertiser’s”, and yours.
How about you? Is your conscience worth a little cash; even if you could “get away” with it?
January 28th, 2008
The word “only” has been a good friend of mine. I’ve used it to justify a lot of dumb expenses in my life. I say things like, “Hey, adding HBO and Showtime to our satellite package is only $22 a month.” And I don’t think about how that’s really $264 a year (plus tax)!
It’s so easy to see that easy, low monthly payment and “only” yourself. And when you have a lot of “only” payments, pretty soon you’re looking at your bank account and wondering where all your money went.
I did a quick inventory of my current “only-ies” and calculated I’m spending $316 a month! That’s $3,792 a year that’s going out the door…a few bucks at a time. Yikes! Where’s that money going and how can I get it under control?
To clarify what an “only” is; it’s a payment for something that’s really nice to have, but is ultimately non-essential at the end of the day. We gotta’ pay our electric bill. The satellite TV bill isn’t necessary to living, it’s just nice. It’s an “only” expense (ditto for items on store-credit, or credit cards. I’m looking at you new room-full-of-furniture!).
Here are some of my “only-ies”:
Cell phone bill? Yep, going to keep it. True, I could live a completely fulfilling life without a cell phone, but it’s just so darn convenient (We have decided to look into pay-as-you-go options when our contract is up because frankly the wife and I just don’t need thousands-of-minutes a month).
Virtual fax line? Yep, I’m keeping that too. I don’t get personal faxes every day, but when I do it’s a pain to coordinate getting them at work or hooking up a fax machine at home for a few hours to receive one. Plus it’s less per month than a separate phone line at home for a dedicated fax machine.
HBO & Showtime premium channels? Nope! There are a few shows on HBO that my wife and I watch, and they’re all off until next season so….canceled! (We’ll decide if we’re going to resubscribe when our shows come back)
Super-duper-all-the-channels package on satellite? Nope! We sat down and scrolled through the channel guide and found out that we regularly watch ten channels; our 4 major locals plus TLC, Discovery, Food Network, Comedy Central, HGN, and A&E. To our pleasant surprise all of those channels are in the very lowest-level package our provider offers. Move over $90-a-month TV, here comes $40-a-month TV! Sure, we could probably cut paid TV out entirely, but we both like it so it stays - for now - at a much lower monthly cost (plus there is never anything good on these days anyway!).
Netflix subscription? Tough call - I’ll need to do some number crunching on this. When I first subscribed, I was a movie-watching-fool. I would get a movie on Monday, watch it, mail it back Tuesday, get a new move on Thursday and do it all over again. I calculated my first month I paid about $0.80 per movie. However as I moved through my list of to-watch flicks, I’ve slowed down a lot in my movie watching habits. For the last two months it’s cost me $6 per movie to be a subscriber! Sorry Netflix - I love you - but you’ve got to go.
Some quick Excel work tells me that by cutting out and cutting back we dropped our “only-ies” from $316 per month to $191 per month (and a lot of that is cell phone). That’s a 39% monthly savings or $1,500 a year back in our pocket.
We’re fortunate that we’ve kept a lot of our “only-ies” under control, but I know a lot of people who use credit, same-as-cash deals, and store financing to get new appliances, electronics, furniture, and more - all for “only” a few bucks a month - and it’s killing them!
I encourage you to sit down and take a long hard look at your “only-ies”. You might be surprised at how much your “little monthly obligations” really cut into your bottom line when you add them all up!
January 24th, 2008
I’m “stuff” person…always have been. It’s not that I want to acquire stuff for the purpose of just acquiring it; I’m the kind of person who gets exciting by something, and then has to have all the requisite items and accessories to support whatever phase I’m going through.
For example, I got the wild urge to learn how to make a really good cup of coffee. I start researching everything that’s been say on the subject, and decided I needed to buy a bean roaster, a super-duper 18-bar coffee maker, and a special grinder for the fresh coffee beans I would have to purchase online. Cha-ching! Making a cuppa-joe just got expensive.
And not to long ago I would have had all that stuff in my shopping cart at Amazon or some other e-tailer and have been well on my way to checking out before I even paused to think about the money I was spending.
And because of that, I have spent a lot of money on a lot of dumb stuff. I had to come up with a way to temper temptation and stop spending money on things I didn’t really need.
So what works?
I’ve found that - for me - the single best thing that keeps me from making as many “not-thought-out” purchases is reviewing how I’m spending my money. And that means keeping track of every single penny I spend.
I’ve tried both at various times throughout my life, and taken individually they don’t work.
When I tracked my spending to the penny, but didn’t review where the money was going I still overspent on temptation items. When I keep reports, but didn’t track my spending to the penny I would eventually get behind updating my records and overspend. I needed both.
I know other people use different tactics like writing down the item that’s holding their infatuation and then reviewing it a week or a month longer and only buying if the temptation is still there. That doesn’t work for me. I would write down what it was I wanted, and I would wait a few days, and invariably I would end up somewhere - item and credit card in hand - breaking my vow to wait for the purchase. The thrill of giving in to temptation would overwhelm me and lead to yet another dumb and unnecessary purchase.
For me accurate records AND regular review are necessary to avoid temptation, financially speaking.
I use Quicken for both the record keeping and the reporting, but the software alone won’t be your salvation. You have to work the system and make it a habit, that’s hard. There’s no easy way to do this other than doing it. I was lucky enough that my bank worked out-of-the-box and was able to get started by loading some data.
Trick 1:
To keep on top of it I make sure to put all my receipts in my wallet and key them into the software each and every day. That’s important because you can make a lot of dumb mistakes in a week’s time. If you’re entering and reviewing your spending once a week you’re probably not doing it often enough.
I know what you’re thinking; that you don’t have time to enter your receipts daily; just trust me and do it. It won’t take nearly as long as you think. I found I was spending literally three minutes a day entering my receipts.
Trick 2:
Run reports every day when you first start to get a really good idea where your money is going. It’s really nice if your bank lets you download the last few month’s transactions; you’ll be way ahead of the curve. Having a few months of transactions lets you immediately get an idea of how and where you’re spending your money.
But even if you have to start by entering the receipts you have, run spending reports every day. I like the fact that Quicken shows me a pie-chart of my spending and I can drill into the details. Regardless of what software you use, watch your spending daily!
When you start to see your “hobbies & leisure” spending heading toward the stratosphere, and you’re looking at it each and every day, it makes it a lot harder to rationalize spending you’d rather avoid.
Trick 3:
Be brutally honest with yourself. You’re not keeping all this detail and reviewing it daily for anyone else’s benefit. If you make a stupid purchase make a note of it. Put it in the memo field, make it a category, whatever it takes. Quicken lets you create category tags which are separate from spending categories. If I buy a video game, I can categorize it “hobbies & leisure” but I can tag it as “stupid”.
The category tags I use are: Essential, Non-essential, Unnecessary, and Stupid.
Paying my mortgage is essential, dining out is non-essential, buying a used video game is unnecessary, and buying a coffee bean roaster is stupid!
You’re only fooling (and hurting) yourself if you’re not honest in how you tag and categorize your expenses, so tell the truth!
So, does it work?
For me the answer is, yes, this works. I’ve been tracking and reporting my spending (every penny) for seven months now and - while my wife might disagree - my “foolish” spending is down a lot.
Sure, I still review my reports and have moments where I wonder what the heck I was thinking, but those moments are much fewer and farther apart these days.
To share an example, I’ve become hooked on Guitar Hero III and want to get the other Guitar Hero games. Since we’re just now out of the holidays, and our non-essential spending was already higher than normal, I’ve been able to keep myself from running out and buying the games. The old me would have looked at his checking account, seen plenty of “extra” money, and run off to the store without a second thought.
I still want the games, and I’ll buy them once my budget has room for it. For once I’m controlling my money rather than the other way around.
Getting started:
If you’re not using some kind of personal financial management software today, it’s time to start! There are so many choices available there’s no excuse to not be using something.
You can use Wesabe, Mint, Microsoft Money, Yodlee, or Quicken to name a few.
I’m partial to Quicken because it runs locally on my computer and I like the bill-pay features.
With the specials on tax software this time of year you can usually get Quicken or MS Money free. Since it’s likely you have to file taxes anyway, it’s a great way to get started using personal finance software if you’re not currently.
The most important thing is to just get started. Keep at it and you’ll find it easier and easier to put off those spending temptations. Your bank account will thank you!
January 17th, 2008
This is a unique article - a bit rant and a bit non-productivity - but I’ll try to bring it around to the purpose and mission of this site, but forgive me if it misses the mark.
Over the last few months I’ve been working hard to improve my frugality. I’ve never before been described as frugal or any other word approaching frugality. But back in the fall I just decided that too much of my money was going out the door on dumb things, and that I worked too hard to be stupid with my money.
So I’ve been evaluating how and where I spend money, and one of the things I decided to do was scale back the programming package I have with Dish Networks. With the writers on strike (and the sad state of TV in general) my wife and I haven’t been watching nearly as much TV, but we’ve been paying through the nose to have it!
So I logged on to my Dish Network account online to downgrade my programming. Simple.
At least I thought it would be simple until I couldn’t find a way to actually downgrade my programming, only ways to upgrade my programming (and spend more money)!
I called Dish Network’s customer service number and navigated through their automated system. I punched in #2 to “change my programming” and listened as it asked me to dial various numbers to upgrade to “Americas’ everything-pack” or “Dish Latino”. Upgrade, upgrade, upgrade - not an option anywhere to downgrade. I was aggravated. So I dialed zero to see if it would connect me to an operator, but it told me it wasn’t a valid option!
Not only could I not downgrade my package, I couldn’t even get to an operator for help! I hung up and called back (and was again greeted and told I was “one of Dish Network’s most valuable customers“) and started hammering the zero key; eventually I was connected to a service rep.
She was in an Indian call center (or a call center that only employed Indians) and told me her name was “Sally”, and asked how she could assist me. I told her I was trying to downgrade my service to save a little money each month, and I couldn’t figure out how to do it either online or on their automated call center. She told me it was only possible to downgrade service with a live customer service agent, so I asked her to please downgrade my package.
She said she was happy to help, and notified me there would be a $5 fee to downgrade my service!
I asked her if there was a $5 fee to UPGRADE my service and she assured me there wasn’t. So I said, “I don’t want to pay the $5 fee to downgrade, I’m trying to save so money each month, but I want to keep some of my satellite services.”
She then told me that there was no exception to the $5 fee on downgrading services.
So I asked to “please” speak to a manager or supervisor. She re-iterated the $5 fee was non-negotiable.
I demanded to speak to a supervisor and she folded and told me she would make a one-time-only-never-ask-again exception and waive the $5 fee.
So at the end of it all I accomplished what I set out to accomplish, but Dish Network why are you making it so difficult for customers really manage their account? See - the thing is I really like the service I get and I recommend Dish Network to a lot of my colleagues, co-workers, and friends. But when trying to do something simple like downgrading my service - and it being such a pain in the heiny - I really question if I should even keep the service at all!
Shame on you Dish for not really taking care of your customers. You were inches away from losing a customer entirely. And the next time I have to argue with a CSR to make a change to my account you probably will lose a customer.
Corporate America - why are you letting customer service just go down the toilet? Sure - there are a lot of sub-par companies out there who don’t care about service, but why are even the “good ones” starting to suck now? Please re-evaluate your policies and views and attitudes towards customers and customer service because if you don’t, one of these days (and I believe it’s coming sooner rather than later) you’ll see a major backlash by your customers.
January 11th, 2008
What do you do that earns you money? If you’re a salesperson, the answer is probably pretty easy to come up with. But what if you’re not part of the revenue-chain in your position; how do you earn your keep?
Top performing salespeople are mindful of their pay-time and their no-pay-time and they work to keep the balance heavily in favor of pay-time. At my company, our top performing sales people don’t enter their own orders into our ordering system, they don’t send faxes with quotes for prospects, they don’t sit and polish their staplers…they get appointments and they get in front of prospects and customers.
That’s their pay-time. If they’re not booking an appointment or spending time in front of a prospect, they’re not actually providing value to the company.
But what if the value you provide isn’t so clearly defined? How do you know if you’re working in pay-time-mode or no-pay-time-mode, and how can you switch gears and spend more time in pay-time?
When I get to work, the first thing I do is check my email messages. I usually justify this to myself by noting that it’s possible someone will have contacted me with a major problem that needs resolving. In reality if any problem that major came up while I was out of the office my cell phone would be lit up like a Christmas tree.
For me, 90% of the time I spend dealing with my email is no-pay-time. Any sufficiently critical problem that arises that would put me into pay-time (i.e. earning my keep through crisis mitigation) will result in my phone ringing or someone appearing at my office door.
So I try to be mindful of this and limit the time I really spend in email. Sure, I still check it first thing in the morning, right after lunch and then in mid-afternoon (and there are some days with a few more checks thrown in) but I’m aware that the time I spend with my nose in Outlook is most definitely no-pay-time for me!
That’s the first trick; Be mindful of the tasks you’re working on.
When you’re mindful of what you’re working on, you can ask questions like, “Is this the best use of my time right now?” If the answer is “no” then it’s time to work on something else.
In my position - technology director - I don’t contribute directly to the bottom line. Usually information technology budgets are seen only as cost centers in companies; a necessary evil to business in the 21st century. Where my key contributions fall is keeping critical systems on-line and functioning smoothly and actively researching new ways to use technology to improve processes.
When our systems are running smoothly, our sales assistants can more easily enter the orders our sales people are generating, our receivables people can get customer statements easily printed, our accounts payable people can get our vendors and suppliers paid. In general, smooth running technology systems enable everyone else to do their job which does contribute to the bottom line.
Likewise, when I am working on improving business processes (with or without technology) those improvements are to enhance the business and save it money or allow people to get more done in less time. Business process enhancement does - for me - directly contribute to the bottom line.
This is the second trick; Know how you contribute to the bottom line.
When you know how you directly contribute to the bottom line, you’ll know what it is that you do that keeps you employed and brings the value of your paycheck to your company.
Being the technology director of a company means I’m flooded with requests as wide and varied as, “We need a proposal for a wireless warehouse implementation.” to “The printer is jammed and I don’t know how to fix it.” I am fortunate to have a great staff that can deflect a lot of the smaller issues so I can work on proposals for wireless warehouse implementations.
I’ve always been a “if-you-want-it-done-right-do-it-yourself” kind of guy. In this position I quickly found myself buried under a to-do list a mile long. Sure, I might know I’ll do it right, but if I never have time to get it done that’s usually worse! So I lean on my staff…a lot.
All of the small issues that I know are not what I do to bring value to the bottom line I try to delegate down to free me up to work on the projects that keep me in my pay-time.
This is the third trick; Delegate as many no-pay-time tasks as possible.
When you get unnecessary and low-value tasks off your to-do list you’ll feel much better because you won’t be worried about dropping a ball you have in the air by taking on too many tasks yourself.
Since I do have so many people come to me on a daily basis with requests for help, or requests for time on their pet project - whatever it may be - I have to pick and choose what I actually have the time to accomplish and what my staff has the time and resources to accomplish.
This means that some people have to hear the dreaded, “no.”
And this is tough for me - I’m not good at telling people no. It’s one area that I have to constantly remind myself I need to work and improve. I just don’t like to turn people down - maybe it’s a bit of my own “head trash” and inner fear of rejection. Whatever the case, something I have to constantly remind myself is, “It’s okay to say no!”
This is the fourth trick; When asked to take on more tasks that are no-pay-time tasks, just say “no.”
When I keep all four tricks in mind, I find that I spend consistently and considerably more of my time in the pay-time category; and this should be the goal of every high-achieving, goal-setting, self-improving person out there…I mean you!
Plus you can make a competition with yourself by charting your pay-time versus no-pay-time on a day-by-day basis. Your goal should be to improve the ratio a little every day.
In summary, keep these four tricks in mind to improve your pay-time vs. no-pay-time ratio:
1) Be mindful of the tasks you’re working on.
You can’t manage what you don’t measure; so start measuring!
2) Know how you contribute to the bottom line.
Be crystal clear on how your unique talent bring value to the bottom line. Know this whether you are on front-line sales or back-office support.
3) Delegate as many no-pay-time tasks as possible.
Your no-pay-time tasks are very likely someone else’s pay-time tasks.
4) When asked to take on more tasks that are no-pay-time tasks, just say “no.”
No one likes to hear “no”, but taking on too many tasks and getting nothing done is even worse! Plus many of these tasks are no-pay-time tasks.
Finally, keep in mind that if you start to weed out the no-pay-time tasks you’re regularly working on you may feel like you’re weeding out important tasks. Not every no-pay-time task is unimportant and not every pay-time task is important. The trick is knowing which are which, and minimizing your no-pay-time to (ideally) dealing only with the important no-pay-time tasks.
You’ll never get to the point where you spend 100% of your time in pay-time, but the closer you get the more productive and valuable you’ll be!
February 6th, 2006
Okay admit it - statistically speaking - you have credit card debt.
The average American household carries $8562 in credit card debt! A lot of people who carry credit card debt are also only making the minimum payment towards their balance. If you carry the statistical average balance, and make the average minimum payment, and never charge another dime; it would take you almost four and a half years to pay off your balance.
I’m no different; I have credit card debt that I’m carrying too. Thankfully, I’m not carrying the average $8562 in debt, but I’m carrying more than zero which means I’m not being financially efficient.
All along I’ve given myself credit for paying over my minimum balance and making some progress towards paying off my debt. I took the approach of spreading my payments around and covering each card with about an equal payment each month. But I will still unhappy with how long I had projected it would take me to pay off the last of my balances. I wanted to find a better way to handle getting rid of my credit card debt.
I found an interesting method in David Bach’s book The Automatic Millionaire. He calls it the “DOLP” or Dead On Last Payment plan; it’s very simple to put into place.
1) First, you create a “DOLP” number for each of the credit cards on which you are carrying a balance. To figure out that card’s DOLP number divide the balance by the monthly minimum payment. If you have a Visa card with a balance of $2300 and a minimum payment of $50, its DOLP number would be 2300 / 50 = 46.
Get DOLP numbers for all the cards with a balance. You can use Excel to make a nice and neat list, plus Excel can handle all of your calculations for you.
2) Once you have all of your DOLP numbers, rank and list them from lowest to highest. Enter this information into Excel or write it on a piece of paper. For example:
3) Next pay the card with the lowest DOLP number first, while making minimum payments on your other cards. If you normally spend $250 per month on credit card payments, in the example above you would pay the minimum monthly payments to Capital One, Discover, and Earl’s Bank - $95 in total - and you would apply the balance of your $250 towards your card with the lowest DOLP number (in this case $155 per month to Citi).
4) When the last payment has been made to a card you cancel it. If you feel like you just can’t cancel the card, freeze it into a block of ice and make it almost impossible to get to it.
Now drop down to your card with the next lowest DOLP number and apply the balance to that card. In the example above you would now be paying $170 each month to Capital One while paying the minimum monthly payment to Discover and Earl’s Bank.
5) As you pay off your balances, you drop all of the money (less the minimum payments) you spend each month to settle your debt down to the next card. You’ll be paying them off faster.
When I first read this I thought it was an interesting idea, but I didn’t know if it was a better way to manage my money than my way - spreading my money all around. So I turned back to Excel to crunch some numbers.
I calculated that if I follow the DOLP plan, I can accelerate paying off my credit cards by more than six months. This is because some of my lower balance cards with a lower DOLP number have higher interest rates. So I’ll be paying those off faster and paying less money overall in interest charges.
If you do use Excel to calculate all of these numbers; here is a handy formula to know. It will calculate for you the number of payments you have left for a given balance, interest rate and monthly payment.
The formula is: =NPER(A/12, B, -C)
For each of the values, A, B and C:
A = Annual Interest rate (APR). The formula divides this number by 12 to get your monthly rate.
B = The amount of your monthly payment.
C = The principal balance. We make this number negative so we will end up with a positive number as the result.
Once you have an Excel spreadsheet setup with this formula you can use it for “what if” scenarios. You can adjust your payment and see how it affects the time required to repay your account. You can adjust your interest rate to see how it will affect the time required to repay your account (call your credit card and ask if they will lower your interest rate, many will just with a phone call).
You can also use it for goal setting. You can set a goal to have an account paid of in a certain number of months and using this Excel spreadsheet you can adjust your monthly payment until you achieve a number that will let you reach you goal.
In the example above, if my goal were - in six months - to pay off a balance of $3822 at 14.99% annual interest, I would need to make a monthly payment of $665.
If you’re carrying credit card debt it’s time to “DOLP” it out of existence! It’s easy to calculate your debt’s DOLP number and put together a plan to knock it out.
Remember, a little “DOLP” will do ya!
January 31st, 2006
