Category — Finance Hacks

A pack a day smoker spends $1825 annually on cigarettes (according to this calculator @ $5 per pack). I’ve got plenty of friends who like to make fun of smokers for wasting their money on cigarettes yet they’re putting nothing away for their retirement. Clearly the smoker has made a choice to waste their money on cigarettes, but my non-smoking friends are simply making less obvious decisions to spend their money in other ways instead of putting the money into savings.

Whether it’s the Marlboro factor or the latte factor (or heaven forbid, both) it’s easy to fall into bad financial habits which do nothing to advance our long term goals. And it’s not enough to just break those habits (as hard as it might be)  you have to start a new habit of actually saving and investing the savings.

Creating a new habit is hard, but you can help yourself by setting up an automatic transfer to savings. If you were to transfer $150 per month to savings each month you remove the money you would have spent on <insert vice here> from your available pool.

Here’s a great way to piss your kid off!

Step 1. Offer to hold onto their money for them.

Step 2. Write down exactly how much they’ve given you to hold for them.

Step 3. Every time they ask for some of their money, charge them $1.50 for the convenience of having a portable bank.

Fun right? I mean how dare they get upset because you are charging them $1.50 for the convenience of having a portable bank. I mean you have to update their balance every time they make a withdrawal; don’t you deserve to be compensated for all of your hard work? How can they be so ungrateful?

Oh wait… most banks charge the same thing to their customers and they make billions doing it. So clearly the average American is just fine with these fees in the name of convenience. But what happens when banks start jacking up those fees? Will customers just sit idly by and take it? The sad thing is most of them probably will. I’m leaving my banks because of “stupid” fees and poor returns.

Step 4. Stop torturing your kid, waive the fees.

Step 5. Stop torturing yourself, do the same.

4 years ago I needed a new pair of glasses. I was pretty close to broke and looking for the best deal possible. I went to a couple of optical shops close to my work and nearly choked at the prices. Frames alone were $200+ for every pair that I liked. My prescription isn’t cheap either, so I was anticipating another $200 or so for the lenses. $400 or more for glasses was going to have me eating ramen for a month.

So I decided to see what I could find on the internet. And what I found was Optical4Less.  At the time, I could only find 2 reviews* of this company (admittedly both were positive) and the company was based on Hong Kong.  Normally,  I probably wouldn’t have taken a chance. But their  price for a pair of glasses was $29 (+$10) shipping. $39 vs. $400 was a huge delta and so I decided to take a chance.

3 weeks after I ordered, a brightly colored package arrived at my doorstep. Upon opening the package and inspecting my glasses I couldn’t have been more pleased. I got more compliments from people on that pair of glasses than on any pair I had owned previously. I told all of my glasses wearing friends about Optical4Less and  several of them ordered from them as well. All of them have been pleased with their purchase.

2 years ago I went hog wild and ordered 3 pairs of glasses. One pair of rimless glasses, one pair similar to the pair I had ordered previously and a pair of semi-rimless tinted pair for sunglasses. Total cost: $96. If I had purchased the same glasses from a local shop my total cost would have been in excess of $1500.  And all 3 pairs again exceeded my expectations.

Optical4Less has an affiliate program… but I won’t sign up for it. I’m such an evangelist for this company that I don’t want to cloud my enthusiasm with the perception I am somehow being compensated for my endorsement.

If you wear glasses I encourage you to check them out. The biggest objection I’ve heard from people about ordering glasses online is that they aren’t sure how they will look. I recommend finding a pair of glasses you like on the website and then visiting your local optical store to try on similar pairs. While you’re there, compare the price and I think you’ll find that the risk is minimal if you find a style that you like.

The added bonus to purchasing from Opical4Less is the look of amazement on the faces of your friends when they find out how much they cost. Or, if you’re like my Seattle friend the inner chuckle when you keep that little tidbit to yourself.

* These days you’ll find a lot more reviews for this company. I encourage you to check them out.

There are many countries where negotiating the price of something, anything is the normal course of affairs. Buying a bag of rice, a t-shirt or a CD is an elaborate dance between the seller and the purchaser.

Typically in the United States we consider the price to be the price unless we’re dealing with big ticket items like a car or a house. The reality is that many things are negotiable.

Clearly we understand this as it relates to the internet. If I see something online I’m interested in purchasing I’ll do a quick search to see if I can find it somewhere else cheaper, or with free shipping or free pickup. But when it comes to shopping in a store most people assume that the price of an item is the only price the seller is willing to accept. And while that may be true at some retailers, it isn’t a universal truth.

Think only mom and pop stores will negotiate on price? I’ve found many national retailers are willing to negotiate as well.
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I have a confession to make about the biggest leak in my financial boat. I eat out entirely too often. To help combat that I am implementing the Double Thermos Savings Plan. The plan is simple; every day I will take two thermoses to work. The first, a Nissan Thermos FBB1000 34-Ounce Stainless Steel Vacuum Insulated Briefcase Bottle. The second, a Zojirushi Mr. Bento Stainless-Steel Lined Lunch Jar. The first will be filled with tasty Ruta Maya coffee brewed at home. The second will contain my lunch.

I’m not really trying to combat the literal latte factor here, the coffee is mostly because what I brew at home tastes significantly better than what we have in the office. But taking my lunch at least 4 days a week is a primary requirement to meet my savings goals for 2008. I’m hoping that this system along with more frequent reviews of my actual spending in various categories vs. my budget for those same categories will help me keep on track.

Whenever I have a a refund coming from the IRS there’s always an internal struggle against what I know I ought to do (save it) and what the evil voices in my head tell me to do (spend it). Here’s a relatively simple hack to help fight the evil voices: Have your refund sent directly to savings. With Form 8888, Direct Deposit of Refund to More Than One Account you can specify up to 3 different accounts to have portions of your tax refund deposited into. So you can automatically have some of your refund directed into your Roth-IRA or other savings/brokerage accounts. You’ll want to check with the financial institutions in question to make sure there aren’t any fees associated with an electronic deposit.

One word of warning when using this form or the standard account direct deposit option on your tax forms: Make sure you enter the correct account information. If the refund is somehow deposited into an incorrect account, you are very likely out of luck. Banks are generally prohibited from disclosing account holder information and the IRS can’t disclose details about individual taxpayers.

This is a great way to get a jump on your investment goals for 2008 though if you are due a refund this year.

Thanks to SH for the pointer… Starbucks is currently piloting $1 coffee with free refills at some Seattle locations in the face of growing competition from rivals such as (gasp!) McDonalds. That’s about 50% less per cup of small coffee than their regular price. So at the moment if you want to take advantage of the price cut you either need to live in Seattle or be ready to move!

I admit to enjoying an occasional Starbucks latte (grande, no-fat, vanilla please) but it’s not a daily vice. But where the ‘latte factor’ really kills me is that since Starbucks charges $4 for a cup of coffee restaurants feel they can charge $2 and get away with it.  If I’m really in the mood for a cup I will suck it up and pay the $2, but when the coffee winds up tasting like pond water strained through an old boot, I send it back and ask for it to be taken off my bill. If you’re going ot charge $2 for a cup of coffee it better be a decent cup. Most days I’ll just brew a cup at home instead. Not only cheaper, but it tastes better too.

My friend Texy and I were chatting via IM about my Help I’ve Fallen In Debt And I Can’t Get Up! post and she had some great comments and pointed out some places I was not as clear as I could have been. Her points were important ones so I wanted to get them up for folks to consider.

Step 1. Set up all bills you can for electronic payment (and make payment automatic).
It’s significantly faster and easier to pay bills online. And if you can make the payment automatic, perhaps simply paying the minimum amount due. This will help you to avoid late fees which , I’m sure you are already aware, are incredibly painful. This first step can help you from falling deeper into a financial hole through late fees.

I should have been more clear about what type of automatic payment I was talking about. I meant that if your bank supports electronic bill pay you should configure your payments within your online bank account settings to automatically pay the minimum amount on the due date. With my bank, I am alerted when the bill comes in, I quickly review the total and if it is in line with previous months I do nothing else. If it were way out of line, I would review the bill to make sure there was nothing else added to it. Ideally you would review all of your bills to make sure there were no erroneous charges on it. But when you’re drowning in debt you take baby steps.

Setting up automatic payment where your payees automatically withdraw money can lead to trouble. If they bill you incorrectly or continue to bill you after you’ve canceled an account, getting things  straightened out can be a nightmare. Texy made this point loud and clear to me.

She also pointed out that you should check to make sure your bank doesn’t charge a fee for setting up electronic payment or receiving ebills. My bank doesn’t, so the thought hadn’t crossed my mind.

Side note: One of the great things about having started 60 Second Finance is I’m now talking more than ever about financial topics with my friends and family. And it’s discussions like this one that help me to improve my own thinking about money matters.

When my son came to live with me, I decided that I wasn’t going to be an ATM for him. Instead I wanted to provide him with an allowance, that if he managed it properly would allow him to purchase things he wanted. I also needed some help around the house. I love my son, but a neat freak he isn’t. So I needed him to pick up after himself and pitch in with some chores. We also didn’t have the best relationship at the time.

I spent a lot of time trying to decide how best to set the parameters of our new financial relationship with my son. And so far it’s been working fairly well. I’ve told a few friends of mine about the arrangement we worked out and the reactions have ranged from impressed to mildly amused. I thought I’d share our system here.

One of the primary things I wanted my son to know is that I trust him. So I pay him his allowance in advance each week. I make it perfectly clear that that the reason I’m paying him his money before he’s done a lick of work is that I know he’ll hold up his end of the bargain and that if he doesn’t then the allowance stops until he regains that trust. The primary advantage to this system is that if he slacks off, I call him on it and if it continues I stop paying him until he’s put together several weeks of consistent effort. Like most people my son doesn’t like working for free, so it only took 1 or 2 instances where the allowance train got cut off for him to decide that it was easier to help consistently.

This also lets him know he’s already been paid for the work he’s about to do. When he lived with my ex he also got an allowance, but he didn’t always get paid. With this system he never has to keep track of how much he’s owed and there’s never any disagreement on the total. Since he’s paid up, there’s no chance for resentment over being asked to contribute when I’m not holding up my end of the bargain.

And finally, the amount of allowance was non-negotiable. If he wants more money the boy needs to get a J O B.

Family can be a great source of wisdom when it comes to financial matters. I’ve been very fortunate that my family (for the most part) has provided me with excellent advice and models of behavior when it comes to money. Not all families are perfect; I have a friend whose family provides some great models of what not to do. Even there, being mindful of the implications of those choices helps us to shape our own financial choices and future.

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