Looking for some deals this Christmas? Understanding the strategy behind retailer’s sales can help you save twice as much!
The reason retailers have sales is to convince us to buy from them. The promotions they run have two main goals:
1) Get us into the store
2) Convince us to spend the most money once we’re there
The first goal is more difficult to accomplish than the second. Once we’re in the store, it is easier to sell to us. This means that the promotions they offer to get us into the store must be more enticing than the in-store sales.
Choosing the Right Offer
If we can take advantage of the more lucrative offers, then we can save more money. A common way retailers try and get us into the store is by sending us coupons by mail or email. These coupons frequently offer better savings than the sales you find in the store.
I Doubled My Savings
We got a coupon in the mail for a buy one get one free deal. I stopped into the store today to do some Christmas shopping and left with the best deal.
The items I wanted to buy were $9.50 each. They had an in-store offer, buy 3 get 1 free. Instead I used two of my buy one, get one free coupons that I had brought along.
I left the store with 4 items, having paid $19. Had I used the in-store offer I would have gotten 4 items for $28.50.
Full price would have been $38. By using the coupons I was mailed I saved 50%, if I would have gone with the in-store sale I would have only saved 25%. I doubled my savings! Not only that, I saved a little more by paying sales tax on a smaller purchase price.
Shop Smart this Christmas
Of course my example was only one purchase. But these savings can add up with all the gifts we buy at Christmas time. The key here, as it is with most personal finance success, is doing your research and planning ahead.
If you can’t score a great coupon the best place I’ve found for getting Christmas deals is eBay. Happy Shopping!
Do you have trouble reducing your debt because you love to shop? If so, this article may be for you!
We all love a little friendly competition. Below are the rules for a shopping game that will help you spend less money as you shop and give you more money to pay off debt!
Find a friend that is also on a mission to cut their spending. It often works best when it’s someone you live with such as a spouse, significant other, or roommate.
1) Each player picks one item that they REALLY want to buy.
2) Each player makes a list of all the things they spent money on in the last month and how much each item cost.
3) For the next month, each player has to find ways to buy the items in their list for a lower price.
At the end of the month, the total money saved by each player is totaled up. Whichever player saved the most money wins the prize! The prize is the one item that the player listed in the beginning that they REALLY wanted to buy. The losing player has to pay a certain percentage of the cost of the prize; the percentage is to be agreed on by both players before the game begins.
The title of this article is “Shopping Your Way Out of Debt”. We’ve talked about the shopping part, where is the debt part? Well all the money that you save, minus the cost of the prize, goes towards reducing your debt. Obviously, the cost of the prize should be proportionate to the amount you save or you won’t save any money and won’t be reducing your debt.
Things to Consider
This game works best when played for multiple months in a row. This gives each player a chance to win, helps build the habit of frugal shopping, and of course, helps save more money. It is also recommended that the players choose a 3rd party to moderate any disputes.
Why It Works
Motivation through Competition. Sometimes it’s hard to motivate yourself. Nothing gets us going like a little friendly competition. Who wants to spend part of the money they saved on someone else’s wish list? Not me! So save away to come out on top.
Frugality Habits. While you might not normally try and get the best deal on everything you buy, this game will create a spending reflex. In the drive to win, you’ll create a habit of frugality.
What are you waiting for? Game On!
When everyone else is nervous, are you?
Although we pride ourselves on being individuals and unique thinkers, when trouble looms, the herd mentality often kicks in. This can cause us to do crazy things, especially with our money.
Storm on the Horizon?
Everyone at work was on edge yesterday as the first winter storm moved into our city. You could feel the tension and stress as people checked out weather.com and worried about the drive home.
Just like the economy, we can’t predict the weather. The weather forecasters are just as bad as Jim Cramer, getting us all hot and bothered about the next big thing or the coming storm.
Spooked by the Herd
We don’t know if the storm will bury us with snow and ice or skirt around the city, leaving the roads clear and dry. Although we don’t know, we worry all day. We can’t get anything done. Every new weather report sends a stir around the cubes. Imagining ice covered roads and long lines of traffic we panic, “I’m leaving early!”.
Sound familiar? Does it sound like investors act when the market forecasters are speculating gloom and doom?
Following the Herd
The herd files out as early as they can. A few lone workers remain in their cubes. Some of them were able to block out the nervous noise and focus on their work, knowing that the forecasts of the next “huge snowstorm” sweeping in often turn out to be just hype. But still they wonder, “Should they have left? Was it foolish to remain?”
This happens all too often with financial decisions in our lives. We’re spooked by the media, by the buzz of the crowd. We can’t focus on our strategy, we cut and run. Instead of holding on for long term returns we sell to cut our losses. Or maybe everyone is jumping on the bandwagon. We don’t want to miss out. The window of opportunity is closing and we’ve got to get in!
To Follow or Not to Follow
The great thing about having a financial plan is that you know where you’re headed. If you’re always changing course to follow the herd it will take you much longer to get there. Of course, staying in tune with your environment is key so check out the reasons behind the herds’ panic. If they make sense, block out the hype or fright and update your plan on your terms. Remember, when you follow the herd, you are always behind.
How much time and money did you lose last year because of a winter bug?
Unfortunately, it’s that time of the year again; use these four simple suggestions to keep your body healthy and your wallet fat.
1) Get Your Flu Shot
A recent Challenger, Gray & Christmas Inc survey estimates that 15 million to 60 million Americans get the flu each year, costing companies nearly $10 billion in paid sick leave. Many employers are taking note of this and offering free flu shots to their employees.
If you can’t get a free shot, pay for one yourself. A 2002 study by the Stanford School of Medicine concluded that the benefits of getting a flu shot outweigh the cost.
2) Keep Your Hands Clean
One thing we look for in personal finance is a way to leverage a great return out of only a small investment. Well, investing a small amount of time washing your hands can pay off big time keeping you healthy according to this article by the Mayo Clinic.
Whether you use soap & water or hand sanitizer, keeping your hands free of germs can help not only you but everyone around you. This article claims that “even such threats as bird flu would spread significantly more slowly if we just washed our hands regularly”.
How can the employees for the companies you invest in be productive and grow at least 10% a year if they’re all laid up with the flu? If everyone washed their hands maybe our stocks would perform better! This CBS News article reports that 2/3 of Americans admit they might not always wash their hands properly. Are you the one dragging down the national GDP by not washing your hands!
3) Buy the Store Brand OTC Medicine
Many of the name brand over the counter remedies have a store brand equivalent. Instead of Sudafed, buy Wal-Phed at Walgreens. Instead of Robitussin buy Tussin at CVS. While the name brand medicines can cost 2-3 times more, the generics contain the same active ingredients and are just as effective. If you have a cold that sticks around for a few weeks, the savings can really add up.
4) Use Your Flexible Spending Account
If you participate in your employer’s flexible spending account or cafeteria plan, sign up for a flexible spending debit card through the plan provider. One example is the FlexDirect card from ADP. Instead of paying cash and applying for reimbursement purchases made with the card draw directly from your flexible spending account.
One thing I’m guilty of is losing a receipt or forgetting to file for reimbursement for a $4 over the counter medicine. These little costs can add up if you’re frequently sick during the year. If you use the debit card the money is taken right out of your flexible spending account.
If your flexible spending plan doesn’t offer a debit card, watch your receipt. Stores such as Walgreens are now labeling purchases on your bill that qualify for flexible spending account reimbursement. Make sure you don’t miss these items.
Prevention is the Best Cure
How long does it take to get an annual flu shot? How much extra time would you spend every day just washing your hands? A little bit of time invested can save you big bucks this cold season.
If some of the germs slip by, you can buy store brand medicine and take advantage of your flexible spending account to reduce your health care costs.
Wishing You a Healthy & Wealthy Winter!
What Thanksgiving traditions does your family have? One of our favorites is bringing home and trimming the Christmas tree Friday after turkey day. Although we have always used a live tree, I couldn’t help listing the ways we could save money having an artificial one instead:
1) Save gas money
I’m no Clark Griswold; we don’t pick up a tree from the middle of a forest every year. If you pick it out at a local Home Depot the gas bill isn’t too high but making the round trip to a Christmas tree farm outside town can put a dent in the gas tank and your wallet. Making the trip down to the basement or out to the garage for the artificial tree can save you some money.
2) Save time
The few days after Thanksgiving can offer many good deals to the savvy shopper. Instead of spending an afternoon on finding and bringing home the Christmas tree you could always hit the deals and save some money on Christmas presents.
3) Save on the purchase price
According to a 2005 survey by the National Christmas Tree Organization, the mean cost of a real Christmas tree was $41.90 while an artificial one cost $72.20. Over 5 years this adds up to a sizeable chunk, $137.30. If your artificial tree can last 10 years that’s $274.60 you could save by buying artificial.
Tradition over Money
The numbers point to buying artificial but the tradition and the family time of picking out and bringing home a live tree win out for me. I think part of having a money smart life is being able to balance the urge to save and the need to live. Plus, I don’t think there’s any way I could talk my wife into buying an artificial Christmas tree 🙂
Which Will You Choose?
For more information on choosing between real and artificial trees and what to look for when buying either check out this article
I agree with a recent Blunt Money post, arguing that although many of us tend to see spending and saving money as mutually exclusive, they are not.
Live for Today, Spend for Tomorrow
I like to live by the rule, “Live for today, spend for tomorrow”. Enjoy the here and now but when you’re spending, keep the future in mind. Most of us have limited funds over a two week or one month period of time. If we live within our means, what we spend today will limit what we can do tomorrow.
A Simple Ratio
One way to balance out spending and saving is to come up with a simple save / spend ratio. For example, decide that for every 1 dollar we save, we’ll spend 5. In this case the save to spend ratio would be 20%. Obviously, the higher the ratio the better.
I think this ratio puts our spending in perspective. If we have a ratio of 2%, that means we’re spending $50 dollars for every $1 we save. Do you think looking at it in these terms will change the way you approach spending?
The ratio can also encourage us if we don’t have a lot of money to work with in the first place. If at the end of the year we’re disappointed by the total amount we saved we can check out our save / spend ratio. If we are meeting or exceeding our target ratio then we know we’re making progress. If we want faster progress we can increase our target ratio.
Choosing Your Ratio
Picking an appropriate ratio is important. Just like a diet, the more unrealistic it is the less likely we are to stick with it. On the other hand, the less aggressive it is, the longer it will take to reach our goals. The key is to find the ratio that fits your current situation.
There is no magic number. Rather than arbitrarily choosing one, figure out your current save / spend ratio. Take all the money you saved and invested last month and divide it by the amount you spent. Now that you know where you are, pick a higher save / spend ratio as your goal, one that you can realistically reach within the next 2-3 months.
A commonly used example of a way to reduce spending is cutting out our daily vice, whether it is a latte, pack of cigarettes, or eating out for lunch. There is another daily expense that we don’t often consider that costs us more than these typical items.
The income, sales, FICA, and other taxes we pay are a daily expense. Don’t forget to figure this “hidden spending” into the amount of money spent. True it is not optional spending but it is money we spend daily and omitting it in your calculations can greatly skew your ratio.
Unfortunately, we can’t eliminate this expense but we can reduce it with smart tax planning. One simple way to reduce the amount of tax we pay is to spend less money. The less you buy, or the cheaper you buy it for, the less sales tax you pay.
Making it Work
Now that you’ve determined your save / spend ratio, go out and get on with your life. Pick a timeframe to check in on your ratio, maybe every few weeks or every month. See how close you are to your target and make adjustments accordingly. Remember, “live for today, spend for tomorrow”.
What would happen to your portfolio if your star player was injured?
For some teams the loss of a super star may mean the end of winning season. Just think about how you feel when your team’s all star player doesn’t get up after a nasty collision. You and the rest of the fans hold their breath, knowing the future of the season lies teetering in the balance.
Coaching Your Investment Team
There is not much you can do about the fate of your favorite team and players but luckily you are the coach of your own investment team, your investment portfolio.
Too often our portfolio is built around a few holdings that are outperforming everything else. We know we should diversify but how can you bench international stocks when they’re delivering insane returns?
Depth on the Bench
In the long run a diversified portfolio will win out. We know the tide will turn. Every player will get injured or have an off tournament sooner or later. Every investment will take a turn for the worst at some point.
When your top performer can’t do anything right, what do you want the rest of your team to look like? Do you want 75% of your portfolio sunk into an investment that is consistently throwing up air balls or interceptions? If your financial future is dependent on your investment team winning the national title wouldn’t you rather have the talent spread around than concentrated on one investment?
Conference Champs or National Title?
Obviously, as the coach, it’s your call to make. In the game of risk/reward balance the superstar approach might offer more reward if they’re on fire. But the risk is higher as well. If that player goes down, the fans may turn on you and it can get ugly fast. Some teams have done it with a superstar but statistically you’re much better off choosing a diversified portfolio.
Here’s a question to consider. Which would you rather have your portfolio do, win the national championship once in 35 years or consistently make it to the NCAA tournament every other year?
I know, the temptation to swing for the fences is enormous. But remember, in sports results are measured a season at a time. With investing, results should be measured over the long term. Unlike sports, your investment’s performance carry over from year to year.
So let me ask you, what looks better on the trophy wall of investing, a national title from 30 years ago or conference champs 6 out of the last 10 years?
Since Thanksgiving is a time to reflect on our blessings in life, I came up with a list of my money blessings. In no particular order, these are items that have contributed to my progress in having a money smart life:
1) Money Mentors
Thanks to my parents and grandparents who taught me the value of a dollar, how to accumulate dollars, and the importance of using these dollars responsibly to improve my life and the lives of those around me.
2) Money Community
Thanks to the pioneers of personal finance blogging over at the Money Blog Network for inspiring us and the community of other personal finance bloggers offering advice and support to anyone smart enough to listen.
3) Financial Planning
Those that fail to plan, should plan on failing. I’m grateful to my wife for taking the time to plan our financial goals together, grateful for my luck that we started planning and executing early in life, and grateful to our financial planner for helping us turn our plan into action!
4) Healthy Living
Life can be miserable without a healthy body. I’ve been blessed with good health so far and have done what I can to follow healthy habits. Hopefully my efforts will keep me out of the doctor’s office and my healthcare costs low to a minimum far into the future.
5) Yearning for Learning
I’m thankful for my desire to continually learn new things. There is always something new to learn about money and the best way to use it to live my life.
What money blessings are you thankful for? Happy Thanksgiving!
How can we most effectively use our time to maximize our income?
Time Is Money
When you’re at work, every minute that goes by is costing your employer money. In return, they expect productivity; they expect you to generate value for them. If you work for yourself, you want every minute you spend to be generating some type of income.
Gimme Your Money
So, when you’re working, time is money. When someone asks, “Can I have a few minutes of your time?”, what they’re really asking is “Can I have some of your money?”
Next time someone interrupts for a “quick question”, think carefully of what your time is worth before responding. My weakness is that I like to help other people out and have a tendency to say, “Sure, what do you need”. Of course working an 18 hour day yesterday helped put things into perspective and was the inspiration behind this post.
Turning Time into Money
So, how can we do a better job of not giving away our time and instead turning it into money?
The first step is determining what activities generate the most income for you. As an employee, what projects or accomplishments will you be evaluated on next performance review? If you’re self employed, what products or services bring in the most money? Which clients generate the most revenue or have the most potential? If you don’t know these metrics, figure them out quickly!
Once you know where your effort is most effective then you can turn to prioritizing your time. A great resource for this is Stephen Covey’s book, 7 Habits of Highly Effective People, which describes habits we can form to be more effective in our efforts. The third habit he talks about is called “Put First Things First”. He uses the following quadrant:
to help us plan how we spend our time based on how urgent and importance a task is. In our case, the importance would relate to the amount of money it generates. The urgency would correspond to the priority we set for a task.
Junk Mail Theory
How do we know which quadrant it belongs in for sure? Sometimes I worry I’ll stick a task in quadrant II or III that potentially should be in quadrant I.
The way I get over this concern is by thinking of it like throwing away what looks to be junk mail. If it’s really important, you will get another follow up letter. The same with tasks, if I misclassify it, sooner or later it will pop back up into quadrant I.
So basically, when something comes up at work, if it’s not in Quadrant I, don’t do it! Give this approach a shot and you’ll find yourself making more money and giving less of it away!
Outside of Work
For discussion on what your time is worth outside of work, check out these articles at Mighty Bargain Hunter, Free Money Finance, Blueprint for Financial Prosperity and Make Love Not Debt.
What will be the most useful tool on Wesabe? I predict it will be context sensitive financial tips.
A person could spend 24 hours a day reading financial advice on the Internet and never get through it all. What we need to make our financial decisions more quickly and effectively is information targeted to our life situation.
Google came up with its Adsense / Adwords tandem to deliver targeted advertising to users. In the same way, Wesabe is using contextual advice to deliver money saving tips to its users based on their spending habits and their financial goals.
Advisor vs. Accountant
One of the items listed on the Wesabe FAQ page is “What makes your product unique?”. The part of the answer that sticks out is “we show you ways to start saving money based on your actual spending.”
So instead of a ledger system like Microsoft Money or Intuit’s Quicken that helps you “figure out where your money went”, Wesabe is somewhat like a spending advisor that can “help you figure out how to get more from your money” and tie your spending habits to your goals.
The value of Wesabe’s contextual financial tips is based on the size and contributions of its user base. Just as the success of Adwords and Adsense depended on the popularity and usage of Google’s search engine; the success of Wesabe’s contextual tips will be dependent on how well this web based tool manages the details of entering and managing personal finance information.
Find Out For Yourself
In order to build their base Wesabe is offering free membership at its Pro level for all of 2007 if you sign up and create an account in 2006. I signed up for one today and am eager to check out what Wesabe has to offer. For more information on things such as setting up an account, offering tips, tagging transactions, and privacy read a review over at Get Rich Slowly.