Festival of Frugality: 88th Edition

Posted on August 21, 2007

The Happy Rock is hosting the 88th Festival of Frugality - About Me Edition.  There are some great posts submitted this time and some of the highlights I found were:

  • 12 Things I Will Never Spend A Dime On.  Interesting list and I definitely agree with the majority of them.  Although I use an electric toothbrush and have found it makes my mouth “feel” much cleaner, not sure if it is actually better though.  Neon lights under the car is a no-brainer.  I previously purchased a color ink jet printer and never will again.  I am all laser now and its so much more efficient.
  • Free tool for your blog: The Frugal Search Engine.  This is a clever idea that allows you to search frugal and personal finance blogs.  I tried it and it returned very relevant results from all the best personal finance blogs that I actually read. 
  • My Sitemeter and pMetrics Addiction And Other Things We Do Too Much.  I am definitely a stats abuser as well.  Need to cut down on this, but now that I just saw how much pMetrics does, it will be kind of tough.
  • 12 Ways to Save on Cooling Costs.  Solid tips for creating energy efficiency.  Living in an older home I am always trying to upgrade to the most efficient products over time.

» Filed Under Festival of Frugality | 2 Comments

HOWTO: Flexible Spending Accounts (FSA) Deconstructed

Posted on August 20, 2007

Flexible Spending Accounts (FSA) have been something I never fully understood.  They seemed complex, cumbersome, and although a good idea, were executed poorly.  Over the years FSAs have become simpler and more convenient, allowing the user to have real savings without all the hassle.  There are two types of FSAs:  health care and dependent care.  Health care FSAs are for medical related expenses and dependent care FSAs are for child care and elder care expenses.

What is an FSA?  FSAs allow an employee to set aside a portion of their earnings to pay for qualified expenses as established in the employer’s plan, but most commonly used for medical expenses as well as for dependent care or other expenses.  Money is withdrawn from each paycheck prior to payroll tax, resulting in a substantial savings by using pre-tax money to pay for qualified expenses.

What are FSA qualified expenses? 
Health care FSA expenses:

  1. Medical, dental, and vision deductibles.
  2. Co-payments (amount not paid by your health insurance)
  3. Amounts paid over health insurance limits
  4. Expenses not covered by insurance including over the counter drugs
  5. Vision care (glasses, contacts, solution, exams, etc)
  6. Dental care (cleanings, orthodontics, crowns, etc)
  7. Treatment/therapies
  8. Medical equipment

Dependent care FSA expenses:

  1. Child day care
  2. Child in-home
  3. Nursery and pre-school
  4. After-school care
  5. Summer day camp
  6. Elder care center
  7. Elder in-home care

How do I participate in FSAs?  First, take a look at your previous spending on health care to get a historical average of what you spend on medical and dependent care last year as well as what you plan to spend the next year.  Then decide on a yearly amount you plan to contribute to the FSA.  Your employer will then deduct a prorated amount before taxes from paychecks throughout the year.  Whenever you spend on qualified expenses you pull from the savings account using an FSA Debit Card or saving receipts and getting reimbursed.

What is the catch?  There are a couple of major things to understand before jumping into an FSA.  First, the money that is not used will be lost, so there is a “use it, or lose it” policy.  Second, you will need to re-enroll each year.  Be sure prior to each yearly enrollment you assess how much you will need to fund the FSA account.

Check out what other bloggers are saying about FSAs:

» Filed Under Insurance, Unexpected Expenses, Saving, Spending | 7 Comments

The Golden Rule of Personal Finance

Posted on August 18, 2007

Personal finance can be overwhelming and confusing.  With all the pitfalls and intricacies along the way it takes time, experience, and education to understand it all.  But to simplify the point of everything this personal finance blog has written and condense it into one sentence it would be as follows:  The simplest way to live comfortably and remain debt free is to spend less than you earn.  Notice I did not say it was the easiest.  It takes discipline.  However, without understanding this basic principle, debt will always have a constant role. 

I know there have been times in my life when I felt like I had more income than I actually did.  In the late 90s with the stock market rising to all time highs and sustaining double digit gains, on paper it appeared like I had amassed a comfortable amount of money for a 20 year old.  Cashing out only a portion of that money it was obvious later on when the market tanked that I did not have as much as I had thought.  And like many others it was much easier to spend when I came home at night and saw my stocks had another record day and my investment account was increasing daily.  Again in 2003-2004 when the housing market was going through the roof, I still had not fully understood the concept.  Buying in a desirable market at that time everyone made some money.  It was impossible not to.  However, again the housing returns where temporary and not sustainable, and only on paper.  But coming home at night and reading how much I had gained in my house gave me a false sense of how much money I really had. 

With those lessons learned I think I finally understand that unless the money is in the bank, it’s not mine.  With that said monitoring my monthly spending makes it much easier to understand where I stand and how much I really have, both on paper and in the bank.

» Filed Under Debt, Financial Planning, Saving, Spending | Leave a Comment

Book Review: Affluenza - The All-Consuming Epidemic

Posted on August 14, 2007

Affluenza: The All Consuming Epidemic

After seeing some other personal finance bloggers churn out book reviews like machines, I figured it was my turn to give a critique of a few of books.  I will be posting more book reviews in the future, but today I just got finished with Affluenza: The All-Consuming Epidemic. 

Affluenza is defined as “a painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste resulting from the dogged pursuit of more.” Affluenza explores Americans relationship with money, credit, and the acquisition of more stuff.  In the context and terms of a medical report, the book details symptoms of the disease in detail and then offers relevant suggestions for treatment.   The book is divided up into three high level sections including Symptoms, Causes, and Treatment.

Symptoms.  The book begins by detailing symptoms of Affluenza and how we have gotten to this point.  Symptoms include historical and cultural perspectives detailing where we have come from and where we are at this point in terms of our relationship with materialism.  Examples of symptoms presented include shopping as recreation (retail therapy), expanding homes (McMansions), massive, inefficient automobiles (Ford Excursion), and electronic addictions (the latest iPod/iPhone/etc).  “Possession overload” is described as everything you have actually owning you instead of vice versa.  The point is made some are taking care of their “stuff” more than the people in their life.  Retail therapy is examined and the analogy of a short term is high is used.  Buying “stuff” temporarily making you happy, but in the long run eroding at your financial security causing even more problems.

Causes.  The industrial revolution brought along material conveniences with the capacity to be produced in a fraction of the time.  The book stresses the fact that at this point in time the choice was there: Do we work more and thus produce more, or work less producing the same amount previously produced without the technology?  With the introduction of steam power and assembly line techniques, a three or four hour work day could produce the same amount of textile or other goods as was previous produced by hand.  Production obvioulsy began to substantially rise at this point, dramatically increasing labor hours and profits.   

Another root cause of affluenza documented is TV presenting an inflated and unrealistic standard of living and pushing that as the norm.  The fictional “keeping up with the Jones” has turned to keeping up with the wealthy.  The wealthy are the new person next door as we continue to emulate the images we see on TV.

Treatment.  Voluntary simplicity is the overall theme of the treatment plan for the individual.  Voluntary simplicity is a lifestyle in which individuals consciously choose to minimize the pursuit of wealth and material acquisition.  Instead, wealth is measured by the amount of time you have as opposed to the amount of stuff you have. 

The book also documents numerous federal and local government treatment options, some far fetched and others rooted with realistic potential including “reducing working hours (1500 hours per year max), restructuring the tax and earnings systems, corporate reform for product cycle responsibility, more sustainable infrastructure, and campaign finance reform.”

Statistics to note the authors present:

  • Americans each spend more than $21,000 per year on consumer goods.
  • Our average rate of saving has fallen from about 10 percent of our income in 1980 to zero in 2000.
  • Our credit card indebtedness tripled in the 1990s.
  • More people are filing for bankruptcy each year than graduate from college.
  • We spend more for trash bags than 90 of the world’s 210 countries spend for everything.

» Filed Under Book Review, Net Worth, Relationships and Money, Saving, Spending | Leave a Comment

Carnival of Personal Finance: 113th Edition

Posted on August 13, 2007

My Open Wallet is hosting the 113th edition of the Carnival of Personal Finance.  I just got done going through the entries this week and here are some of the entries that caught my attention:

» Filed Under Carnival of Personal Finance | 1 Comment

Car Dealer’s Worst Nightmare: Cash or Pre-arranged Loans

Posted on August 9, 2007

Car dealers can make up to 75% of their showroom profits on extras including arranging auto loans and leases, extended warranties, anti-rust coatings, tire and oil change plans according to a recent NY Times article.  When borrowing through the dealership it is much easier for the dealer to persuade the buyer to roll up many of the extras into one loan package negotiated by “the monthly payment.”  The dealers often discourage the use of a pre-arranged loan through a local credit union as well as paying with cash because the customer is looking at the bottom line number when negotiating and not the often misleading monthly payment.  That makes it much more difficult for the dealer and less tempting to the customer to add “extras.”  When shopping for your next car or truck be sure to understand these are the four main ways a dealer makes money from a new car purchase:

  1. New Car Price.  The price of the new car above invoice is the dealer’s profit, including any manufacturer’s rebates or dealer incentives that do not get passed on to the customer.
  2. Trade in.  Paying the customer less than the trade in is worth.
  3. Financing.  Proceed with caution when using dealer financing.  If the bank approves the dealership to finance you for 4.9% and the dealership gives you a rate of 8.9%, the 4% difference is all dealer profit.
  4. Accessories.  Paint Sealant, fabric protection, and anti-rust coating as well as extended warranties are included in this category.  Ensure you are getting the best deal for the warranty and accessories by shopping around and knowing the market prices of each.

» Filed Under Loans, Debt, Credit Report, Saving | 5 Comments

6 Things To Know About Your Homeowner’s Insurance Prior To A Disaster

Posted on August 7, 2007

Anyone living in the coastal Southeastern United States knows the importance of understanding your homeowner’s insurance prior to hurricane season (June through November).  I can remember when the first hurricane of the 2004 season was approaching Central Florida, Hurricane Charley, calling my insurance company to fully understand the details of my coverage.  That was a lesson for me as well as many others to have a better understanding of the intricacies of homeowner’s insurance.  Here are six things to understand about your insurance:

  1. What is covered.  Knowing what is covered and just as importantly, what is not covered will ensure you are purchasing the right type of coverage.  Find out if your policy covers additional living expenses like hotel bills and restaurant meals.
  2. Deductibles.  This caught many people off guard during the 2004 hurricane season when millions of claims were filed.  Years early in the aftermath of Hurricane Andrew, deductibles were raised from the standard $500, $1000, $2000 to 2% to 5% of home value.  That made deductibles tens of thousands of dollars for many people.  Knowing what you will have to pay out of pocket will ensure there are no surprises when you call to report a claim to the insurance company.
  3. Replacement cost of home’s contents.  This is the part where you are suppose to take pictures, video, and have an inventory with receipts of all your home’s contents.  Many people fall short of all of that, but just striving to take some quick pictures will help.
  4. Replacement cost to rebuild home.  This is what your insurance is actually covering.  You will want to know a solid figure of what it would cost to rebuild your home, which is not the same thing as the resale value of the home which includes the land.  You do not want to over insure this portion because you could face higher deductible and out of pocket expenses if this is an inflated figure.
  5. Location of paper copy of policy.  It is a good idea to keep a paper copy of your homeowner’s insurance policy in a waterproof safe to ensure you have the policy number and details readily available.
  6. Insurance company contact information.  Keeping your agent and company’s name will ensure you can quickly and efficiently call after the disaster to report any claims.

If you are thinking of debt consolidation, make sure you do not get stuck in cash advance loans and prefer not to declare yourself bankrupt. This is important because your bankruptcy records may affect any insurance you have as well as your consideration for capital one card. Even your health insurance would not be covered that easily.
Other informative homeowner’s insurance blog posts:

» Filed Under Insurance | 2 Comments

How Much Is Enough In Silicon Valley?

Posted on August 6, 2007

For many Silicon Valley millionaires the sky is the limit.  Their neighbors drive six figure cars and live in seven figure houses.  Keeping up with the Jones’ in Silicon Valley has become out of control.  In this weekend’s NY Times article entitled “In Silicon Valley, Millionaires Who Don’t Feel Rich”, the working class of the small microcosm that is Silicon Valley are examined to fully understand why a $10 million net worth is just not enough.

In most parts of the country five to ten million is enough to live comfortably, possibly retire early, and pursue your own endeavors.  However, with the average cost of a single family home in this Northern California area costing $788,000 the inflated sense of monetary reality begins to come into focus.  In towns like Palo Alto, Menlo Park, and Atherton the cost of living has soared, but so has the net worth of many of your neighbors.  Most people cannot help but slightly, subconsciously compare themselves to others that may have a little more than them.  In Silicon Valley, the comparisons are often targeted at pioneers of industry that have made hundreds of millions or even a billion dollars.  Those types of comparisons are leaving many in Silicon Valley thinking their seven figure net worth is just not enough.  It is the ultimate case of comparing yourself with the Jones’. 

The classic rebuttal to all this is to simply move to a cheaper area and downsize your lifestyle.  However, the feeling many get with that type of mentatility is a feeling of defeat having to leave the area.  For most the competitive drive that has got them to where they are keeps them going even further, pursuing an even higher level of status and security. 

To conclude, at some point it has to be enough to the point you can cut back the 70 hour work weeks, three week business trips, and work weekends to spend more time with your family or friends.  Everything is a trade off, and having an extra million compared with seeing your family more than ten minutes a day is a decision only you can make.

» Filed Under Relationships and Money, Net Worth, Financial Planning, Saving, Income, Spending | Leave a Comment

Top 5 Online Banks

Posted on August 5, 2007

Waiting in line at a drive up teller at a local bank is something I will never do again.  Rushing to the local branch of your bank trying to get there before it closes should be a thing of the past for many.  Banks have committed to bringing all the features of the local branch bank online including depositing checks, viewing account summaries, and making bill payments.   Aside from ensuring the bank you choose has all the right features online, you will want to ensure the customer service is satisfactory in the occasional event you need to speak to a live person to straighten a unique situation out.  Here are five options that will allow you to go completely online without ever visiting a bank branch again:

  • USAA.  Features include $15 a month ATM reimbursement, free checking writing, check scanning at home, and no minimum fees.  Interest rates for savings is up to 4.26% (on a $25,000 balance) and checking is only 0.10%.  Hidden fees:  None, but must meet eligibility requirements.
  • EverBank.com.  Features include $6 a month ATM reimbursement, free check writing, and solid interest rates on checking (3.41%) and savings (5.01%).  Hidden fees:  $1500 minimum balance on savings and $800 minimum balance on checking, plus you have to mail in your ATM receipts for reimbursement.
  • HSBC Direct.    Most innovative and unique of the group, they provide online bill payment instead of a traditional checking account.  This is an account that earns good interest rates (2.5% with no minimum) and allows the user to pay bills online but does not offer traditional paper checking writing.  Other features include up to three free reimbursed ATM withdrawals per month, and a great savings interest rate (5.05%). 
  • E-Trade Banking.  Best known as a low cost brokerage house, but also providing feature rich banking services.  Features include unlimited ATM reimbursement, check writing and respectable interest rates on checking (3.25% on $5,000 balances) and savings (5.05%).  Hidden fees:  Must maintain $5,000 in the checking account or have direct deposit to avoid a $15 monthly fee.
  • ING Direct.  Another internet based option that is going paperless.  The electronic, paperless checking account features interest rates starting at 3.93%, free ATM access but not reimbursed for other banks fees, and free overdraft protection.

There are numerous options if you are ready to go paperless and be done with the traditional brick and mortar banking hassles.  Standing in line, rushing before closing time, and excessive fees are a thing of the past considering the reliable, high quality banking options available online.

» Filed Under Banking | Leave a Comment

Welcome To The New Site

Posted on August 4, 2007

As I stated I have recently sold the domain name that was previously associated with this blog, plus6.com.  Apparently there is some link to plus6 in aviation and a buyer felt it was a great fit for his concept.  Anyhow, the Saving With Me title is more appropriate to my needs.  Please add the new RSS feed into your readers!

» Filed Under Extra | Leave a Comment

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