Things I’m Too Frugal For

There are just some things in life that I’m not meant to buy. I’ve slowly come to this conclusion over the years as I’ve watched people buy things I’m not at all jealous of. It’s not because I can’t afford them or that I don’t have room for them at home. It’s simply because I’m too frugal.

So I’ve come up with a list of some things I’m too frugal for. This list isn’t exhaustive; rather, it’s just a few common things people buy that I avoid.

Electric toothbrush

My wife mentioned a few months ago that she’d like to have an electric toothbrush. The ones we’re currently using are from the dollar store – 2 for $1. So I’ve been monitoring deal websites for any mention of these and I even checked to see if Costco had any last week. They had a 2-pack for $80, which I guess is a pretty good price for these things.

Then I started thinking. I’ve gotten along just fine and cavity-free to this point using 50 cent toothbrushes, so why would I pay $40 for a toothbrush? Not to mention the replacement heads you’d have to buy. I’ll probably end up getting my wife one. As for me, I’ll stick with my cheapo toothbrush.

Going to the movies

At $10 a pop, these outings aren’t cheap. When I was a kid I remember tickets cost about $4. I guess you could make the argument that you’re paying for the experience of the big screen and surround sound, but you also have to deal with people messing with their phones and grossly inflated concession prices.

The only time I go to the movies is when a family member or close friend wants to go. Even then I’ll suggest alternatives, but sometimes there’s no way to get out of it.

Dry cleaning

What a waste of money. The only reason to dry clean a piece of clothing is if the tag specifically says to. If not, throw it in the wash with everything else and iron it on the other side.

I try not to buy anything that needs to be dry cleaned. That helps me avoid shelling out $4 to clean a pair of pants.

Newspaper subscription

I really enjoy reading the newspaper everyday. I mean, really enjoy it. I love knowing what’s going on in my area and the world. I love reading about business and sports. I even like the smell of the pages.

But when it comes to actually subscribing to the paper, my wallet doesn’t leave my pocket. My employer gets the paper delivered each day and I’ll often read that during my lunch break. I’ll also read at the library on one of my frequent visits.

Besides, there are so many websites that offer breaking news and more in-depth articles for free. Why should I pay for something I can essentially get for free?

Anything at McDonald’s that’s not on the dollar menu

This might be the ultimate example of my frugality. When I go to McDonald’s, I only order items from the dollar menu. I’ve found that it’s generally a better value than what you get from the regular menu (i.e. you get more food for the money.) A filling meal under $5 is right up my alley.

Financial advisers

I debated putting this one on here, but I think it should be mentioned. From the reading I’ve done, most financial advisers look our for their own best interest first. Many earn a commission on the products they sell you, so it’s easy to see why they may recommend a product that makes no sense for your situation if it earns them a nice bonus.

If you’re looking for advice about where and how to invest your money, sit down with a fee-only financial planner. These advisers only collect an upfront fee for their advice, so there’s no conflict of interest. Visit napfa.org to find a fee-only planner near you.

What are some things you’re too frugal for?

Paying Off Credit Card Debt Using Winter Weather Analogies

For those struggling with credit card debt, coming up with a repayment plan can be a challenge. Should you focus on the highest-interest card or the one with the lowest balance? What if you have student loans or car loans mixed in? Dealing with so many different monthly payments at once can be overwhelming.

The Motivational Perspective

Which credit card you deal with first depends on two factors. First, there’s the psychological aspect. Many people tend to pay off the lowest-balance card first because of something known as “debt account aversion.” That is, we aim to limit the number of open accounts we have.

Paying off the smallest card first means one less account we have to deal with. Getting rid of one balance is a small victory, which gives us motivation to move forward with our plan. Experts have come up with a cute name for this strategy: Debt snowballing. The idea is that you build momentum by paying off smaller accounts first, then putting those payments towards larger accounts.

This path certainly makes sense from a motivational standpoint, but is it best for you wallet? You also have to consider the financial aspect of debt repayment.

The Financial Perspective

From a purely financial perspective, paying off the highest-interest card first makes the most sense. Using this method you’ll pay less in total interest to the credit card company and reduce the time it takes to repay the debt.

Let’s say you have two credit cards. One card has a balance of $8,000 at 19% and the other is $5,000 at 15%. Both have minimum payments of $40. Psychologically, you’d be tempted to pay off the $5,000 balance first to eliminate one of the accounts. But I’ll show you why this is bad for your wallet.

Making the minimum payment, it will take you over 10 years to pay off both balances. But since you’re on top of things, you have an extra $300 to put towards the cards each month beyond the minimum. Where should you put this extra money?

By paying $340 to the $5,000 card and the minimum to the $8,000 card it would take you 49 months and cost $5,575 in total interest.

On the other hand, by paying off the larger card first it’ll take you 47 months and cost $4,754 in interest. Focusing on the higher interest rate first saves you $821 and will take you 2 months less to pay off both balances.

You’re probably thinking that $821 is a lot of money, and you’d be right. But let’s say you cut back on eating out, giving you an extra $100 a month to put towards the cards. It will now only take you 35 months to pay off both balances, a full year less. Not only that, it will save you another $1,343!

Applying every bit of extra money you have each month to debt repayment is known as “snowflaking.” Snowflakes can come from anywhere – income from a side job or savings from decreased expenses.

Which Strategy is Right for You?

Your repayment plan should depend on your personality. If you’re very disciplined with money, focusing on the highest-interest card first is probably your best strategy. On the other hand, if you think you’ll need small victories as motivation to stay in the game, paying off low balances first (the snowball method) might be your best bet.

No matter which strategy you choose, your goal is the same: to pay off the debt. Having the numbers in front of you will only increase your focus. Use a debt repayment calculator like this one to help you build and track your strategy.

Which repayment strategy makes the most sense to you?

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Never Pay Full Price for These Things

Faced with decreased earnings as a result of the recession, consumers are putting their frugal mindsets to greater use. We’re increasingly demanding discounts and coupons on more categories in an effort to cut back our spending.

Let’s use dining out as an example. As a child growing up in the 90’s, I don’t ever remember my parents clipping restaurant coupons. Maybe it was because we lived in a small town with only a few restaurants to choose from. Today, I couldn’t imagine not looking online for a coupon before going out to eat. I don’t find one every time, but when I do the average savings is about 20%.

WiseBread has a list of 25 things to never pay full price for. I want to focus on a few and share some strategies that have worked for me.

1. Magazines

If you’re looking for a good variety of current, free magazines, look no further than your local library. Most libraries offer dozens of the most popular titles. If the library isn’t your thing, check out DiscountMags.com. They offer yearly subscriptions of rotating titles as low as $4, but you have to search for a coupon code to get that price. Amazon also has a good selection at decent prices.

Each time a renewal notice comes for one of your subscriptions, it’s a good idea to think about whether you actually read the magazine anymore. Do they sit in a pile on the coffee table collecting dust? If so, it’s time to cancel your subscription.

9. Gift Cards

Unless you are getting cash back or rewards points on your credit card, you should never pay full price for a gift card. Think about it. You’re taking actual, real cash and turning it into credit that you can only use at one store. For that inconvenience, you should get a discount of at least a few percent. Buying gift cards at a discount is a great way to save money before you even walk into the store.

GiftCardGranny.com is the best site I’ve seen for buying gift cards. It compiles gift cards from many different sources, so you don’t have to visit several sites to find the best deal. They give you a list of available cards from each store and provide info including the discount you get, shipping cost (if any) and who the seller is. I recently saw a JC Penney card valued at $130 on sale for $107 with free shipping — a discount of 18%!

13. Car Rentals

A quick trip over to Expedia to search for rental cars tells us that an economy car can cost as much as $50 a day, with the lowest price at $30. That’s expensive. So how do you find the best deal on a rental? There are two things you can do.

The first is to use Priceline. Using blind booking, you must agree to book a non-refundable rental for a set date. If you know your trip will definitely happen and you don’t care which company you rent from, this is the best way to go. You can save up to 40% using this method.

The second is to book at the cheapest published rate you can find online. Because car rentals are fully refundable pretty much up until the day of your trip, you can re-book at any time if a lower rate comes along. But who wants to constantly monitor for better rates? A new site called AutoSlash has developed a solution. You can either search for rentals on their site or enter a rental you’ve already booked. Then, they continually monitor for coupon codes or lower rates that pop up and automatically re-book you at the lower rate. It doesn’t get much easier than that!

Conclusion

Nobody should pay full price for everything they buy anymore. New websites become available every day to help us get a better deal on the things we buy. Use these resources and your own creativity to come up with ways to save on just about anything.

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Showrooming: The Battle Between Retailers and Your Wallet

I think most of us agree that smartphones improve our lives in many ways. They accommodate our busy schedules and enable us to do things on the go that wouldn’t have been possible a decade ago. But for retailers, these devices haven’t exactly been a boon.

Online shopping accounts for 8% of total retail spending, up from 2% just 12 years ago. Even though the majority of spending is still done at physical stores, retailers can’t just sit back and enjoy their success. Instead, they’re forced to develop creative ways to compete against booming online competition, which can offer better prices because of lower costs.

What is showrooming?

Retailers in all industries are facing a new challenge known as showrooming. This is when a customer walks into the store to look at an item, check the price and perhaps test it out, only to ultimately buy it elsewhere. Customers often use a price comparison app on their smartphones to help with the process (my favorite is ShopSavvy.) After scanning the bar code, you’re able to see who else is offering the product and what their price is. Often you can even order the product through the app, right there on your phone.

As you can imagine, this isn’t sitting well with retailers. Before smartphones, consumers had to rely on research they had done prior to entering the store. If they hadn’t done any research they were forced to rely on information provided by the retailer.

Retailers wake up

Smartphones have driven a transformation in the way consumers buy products. They allow us to comparison shop on the spot, giving us valuable information when and where we need it. Using a smartphone, we’re able to look up product reviews and ratings, right there in the aisle.

All of this information makes retailers nervous. They’re starting to realize that we’re becoming more savvy and they’re responding in one of two ways. Some, like Target, are asking manufacturers to come up with unique product numbers for their items so that when a customer scans the bar code it won’t come up anywhere else. They might also change the name of the product.

Other retailers, like Best Buy, claim to offer superior customer service and employee knowledge to differentiate themselves. Whichever strategy retailers use, their goal is the same: to limit comparison shopping. So how can you as the consumer fight back?

Your sword and shield

First, understand which features you need in a product. If you’re buying a window air conditioner, how many BTUs do you need? Do you want an automatic timer or a remote control? Knowing what you’re looking for allows you to look past cutesy product names and focus on the benefits of the products you are comparing.

Next, do some research ahead of time. Are there retailers that might offer a similar product, or the same product by a different name? How do online prices compare to store prices? Having a general idea of price range and availability will benefit you once you’re in the store.

Finally, if you’re not getting any results after scanning the product’s bar code, try a Google search. For example, if you’re at Finish Line looking at running shoes, type in “Finish Line” and the description of the shoe. You might find the same product listed under a different name at other retailers or online.

Conclusion

Using a price comparison app is one of the best ways to get a great deal. Now that retailers are at battle with us to limit our ability to comparison shop, we can’t rely on these apps alone. Add the strategies mentioned above to your arsenal as you’re searching for the best price.

Have you successfully used a smartphone app to find a better price?

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How to Save on Car Repairs

I think it’s safe to say that most of us dread going to the mechanic. In fact, many would probably rather go to the dentist than navigate through the maze of car repair shops. Not only is it possible to find an honest repair shop, doing so will give you peace of mind and save you big bucks on car repairs.

The best thing you can do is to find a good repair shop before you experience a problem. I realize that in some cases this may be too late — when you’re stuck on the side of the road with smoke coming from the engine, for example. But hopefully you have at least a little time before trouble strikes.

To find a good mechanic, start by asking those around you where they take their cars. Find out where your coworkers, friends, neighbors, and even those in your social network go for maintenance and repairs. Another tactic I use is searching for internet reviews. I’ll look up repair shops on a search engine and see what others have to say. If a shop has multiple positive reviews, you’re probably on the right track. Finding an honest, reliable repair shop in advance will give you peace of mind when you do have to take your car in for repairs.

Use RepairPal to get a repair estimate. This tool will give you a total estimate for almost any job, breaking it down into labor and parts based on your zip code. Knowing the repair cost before you even take the car in helps you avoid getting ripped off.

For more expensive repairs, always get a second opinion. A few years ago my car needed new front shocks. The first shop I took it to quoted me $700. I called another shop and they estimated it would cost $500. I then looked around online and found a coupon for 10% off, so it ended up being only $450. Just a few minutes of work saved me $250.

Skip unnecessary maintenance. You could be changing your car’s oil or other fluids too often. Many people go by the old rule that says you should change the oil every 3,000 miles. But many cars built today are made to go 5,000 or even 7,500 miles between oil changes. Check your owner’s manual for the recommended interval.

Find parts yourself. Say you need a new headlight assembly. First, try calling your local salvage yard to see if they have any in good condition that would fit your car. If that doesn’t work, check auto part stores in your area to see if they have it in stock. One other place I have used in the past is the Parts and Accessories section of eBay Motors. This is especially helpful for hard-to-find parts for older or discontinued models. Mechanics charge more for parts than what you’d pay by finding the part yourself.

If you’re the adventurous type, do simple maintenance and repairs yourself. Replacing tail lights, checking fluids and installing new windshield wipers are simple tasks that can be done in your driveway. To start, look on YouTube for videos that walk you through the process for your particular car. I’ve replaced spark plugs and changed the oil and filter using guidance I found on the internet. More complicated repairs, such as brake work or replacing belts, should probably be done by a mechanic to minimize problems down the road.

Finally, consider a diagnostic tool that tells you what’s ailing your vehicle. This one from CarMD is considered one of the best out there. Plug it into your vehicle’s connector and it will tell you why your check engine light is on. Then, using your computer, you can find out more details including the estimated cost of repair. As an alternative, some auto parts stores will do this for free using their scanner. Some of these tools can be used to turn off your check engine light if the issue is a loose gas cap — a common trigger of check engine lights.

Car repairs can be expensive, but using these tips will keep the cost low and help you avoid getting ripped off.

Photo by bestsandiegoautomechanic.com

The Best Way to Save for Your Child’s College Education

College costs have increased faster than the rate of inflation over the past several years. The higher costs are most often being met with more student loans. If you’re in a position to help your child pay for some of his or her college education, a 529 plan is the best way to do so.

I should mention that before you consider saving any money towards your kid’s college, you should be saving every penny you can for your own retirement. You don’t want to have to depend on your kids financially during retirement. In addition, there are loans, scholarships and grants for college expenses. There are no such benefits for retirement.

So what is a 529 plan? Basically, it’s a state-sponsored college savings account. Created by Congress in 1996, these accounts give families an efficient way to set aside money for college expenses. The idea is to set up the account in your name and contribute what you can each month to the plan’s investment options. The simplest option is the age-based fund, which is heavily invested in stocks when your child is very young and turns more conservative each year as the child approaches college.

It goes from being an investment account in the early years to basically a savings account when your child reaches the last years of high school. Other than putting money in each month, it requires very little effort on your part.

The primary benefit of 529 plans is that all earnings on the money you put in the plan are spent tax-free if used for eligible college expenses. These could include tuition, fees, books, supplies and equipment. In addition, some states offer a tax break on money you put into the plan.

A common misconception is that you must use your own state’s 529 plan if you want to save for college. In fact, you can use any plan in the country. Every state has at least one 529 plan, but some have several. If your state offers a tax break and the total account fees are low (generally below 0.5% annually), put the money in your own state’s plan. If not, many experts agree that Utah’s plan is the best in the country because of its low costs and investment options.

One thing you never, ever want to do is pay a commission on college savings. You want every dollar to go towards paying for your kid’s college and not lining the pocket of some stockbroker. To minimize costs, set up the plan yourself rather than going through a financial adviser. This is another reason Utah’s plan stands out. Every state except Utah has an option to go with a full-commission adviser who charges fees as high as 2.6%. If a state is willing to charge that much, can they really be trusted with your hard-earned money?

Parents, aunts, uncles, grandparents or others can open 529 accounts for a child. If the child chooses not to attend college, the owner of the account can simply change the beneficiary of the account to another child with no consequences. You can even use the money for yourself if you plan to attend college or graduate school.

Because the account is in your name, you have flexibility and control over how it is spent. In other words, your niece, nephew, or grandchild won’t be able to blow the money on a shiny new sports car! If they want it, they have to use it for their education. The money won’t hurt the child when it comes time to determine how much financial aid they qualify for since it’s not in the child’s name.

The cost of going to college will continue to increase each year for the foreseeable future. Choosing an age-based fund within a low-cost 529 plan is the best way to save for your kid’s college expenses. Just remember to max out your own retirement savings first.

To learn more about 529 plans, a great place to start is SavingForCollege.com.

Photo by personalfinanceanalyst.com

Buy Current Technology, Not State of the Art

Companies in the tech industry love to tout their latest and greatest must-have gadgets. Cell phone providers are a great example. We’re constantly bombarded with ads for the newest smartphones, which cost only $200 with a 2 year contract! What they don’t tell you is that today’s new device is tomorrow’s outdated technology.

This is an idea I first became aware of from Clark Howard, a consumer expert and radio show host.

The problem with always buying the latest technology is that devices are nearly obsolete as soon as the box is opened. By that point, companies have already moved on to promoting the next greatest thing.

My wife and I have been overtaken by tablet envy. We had been in the market for our first tablet for several months, waiting for the right deal to come along. This week that deal came and we decided on an iPad 2. You might be thinking that we’re a little behind the times since it’s 2012 and the iPad 3 (“new iPad”) just came out. But the $500 price tag of a new iPad was out of reach for us. After visiting Apple’s website we found that we could get a refurbished iPad 2 for $350, which is very reasonable for a device that just a year ago many experts were calling the greatest tablet ever.

Apple includes the same warranty with refurbished devices as with new ones, which shows you they really believe in their products. They even replace the battery and outer shell, which are the two parts that take the most wear.

That the iPad 3 came out recently doesn’t change the fact that the iPad 2 is a wonderful product. I’ve seen reports that the new retina display is causing all sorts of issues — overheating and long charge times — in addition to reports that wi-fi reception isn’t as good with the iPad 3. The absence of these issues, combined with a much lower price tag, means that the iPad 2 is still a viable product and a true bargain.

This trend can be applied to many other categories of devices such as HDTVs, digital cameras, GPS units and laptops. Early adopters pay steep prices for the privilege of being among the first to get their hands on new technology.

For the frugal among us though, buying current technology that meets our needs doesn’t have to break the bank. Waiting a year or even a few months can mean big savings, or in some cases more features for the same price. Take HDTVs for example. In 2008 the average 32-inch LCD TV cost over $850. Today you can get one for as low as $199, and it’s likely to have more features than the original models.

Spending more money to get the best possible product is a losing proposition. New products will come out every day, making your device obsolete faster than you might imagine. Avoid state of the art technology and your wallet will thank you.

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