Plain Old Common Cents

Photo by smlp.co.uk

Saying “no.”

It’s so difficult. Telling yourself “no” when there is something that you really want can seem impossible at times. It’s something that I struggle with especially, but I have been getting better. The one thing that has helped more than anything else has been having an accountability partner in my wife. I know that if I go out there and buy the thing I want, I will have to answer to her and it helps me make the right decision. I think it is important for everyone to find an accountability partner to help them stay on budget. Accountability partners are a successful technique used by weight loss professionals to help an individual stay on their diet and weight loss program, and it can benefit you in other areas of your life too.

Photo by pagedooley

What are you doing this Christmas season? Shopping til you drop? Probably not, considering the current economic crisis. Or maybe you are, because despite everything else you don’t want to make sacrifices during this time of the year. I have two pieces of advice for getting through this holiday season:

1. Set realistic expectations for your gift giving and gift budgeting - and stick to them!
2. Start early with your planning and wait for the best deals (at least for next year).

Lets take a look at budgeting and expectation setting first. Last year my wife and I went nuts at Christmas and we spent way more money than we had originally planned. This year we scaled back our expectations. We agreed that many of the people we bought expensive gifts for last year, would receive something homemade and a Christmas card.   Some of our family members decided, without input from us, that adults shouldn’t exchange gifts this year. While I disagree with this, and I think that anyone that wants to give a gift should be able to do it without causing problems, other families could use this as a way to save money this year. The last recommendation I have is to simply reduce the dollar amount you spend on people. My Mother, who loves to spend way too much on her children and grandkids, is having to deal with lowering her spending this year now that my Father has retired. She doesn’t like it, but it is necessary for them to remain within their budget.

If you don’t want to reduce the quality of your gift giving, or if  you simply want to get the most bang for your buck, the very best thing you can do is start early. The earlier the better. If you can start shopping for the next Christmas on December 26th, you will be better off. By watching sites like FatWallet or PriceGrabber or simply checking in on Amazon.com every once in a while you can find ridiculous deals on popular Christmas items. Make a list of potential gifts for all the people on your list and keep checking prices, and eventually you will see something on the list go on sale.

photo by axelsrose

Lunch doesn’t seem like something that would make or break your budget. After all, lunch isn’t as big as replacing the transmission in your car, fixing a leak in the roof, or any other temporary “emergency,” is it?

In my limited experience in the workplace, I have seen many different eating habits from my coworkers, but by far the most common habit is to eat out every day, or nearly every day. If we assume that this is the norm, then we should see how much money we can save each year by deviating from the norm.

Lets assume that your average lunch is a $5.99 sandwich, with a $0.75 bag of chips, and a $1.50 drink. With tax, that comes out to $8.82. You might not spend that much every day, but some days you might spend much more. You probably work somewhere around 240 days per year, not including holidays, weekends, or vacation days. We will exclude those days for the sake of this exercise, but lets be realistic - you will eat out on those days too.

• 240 days x $8.82 = $2,116.80

If your spouse works, multiply that by 2 to $4,233.60. You should tailor this to fit your situation. If on average you spend 20 percent more than $8.82, multiply the total by 1.2; and likewise, if you spend less then adjust down from there. Lets not forget that you are probably addicted to caffeine, and if you have a Starbucks coffee each day along with a muffin or bagel, lets add that in too, just for kicks.

• 1 Starbucks Coffee - $2 or $4 if you get a latte.
• 1 Muffin or Bagel w/ cream cheese - $1.75

When you add your breakfast habit to your already expensive lunch habit, you’re looking at $3,256.80 per person. $6,513.60 for both you and your spouse.

What if I told you that you could eat a healthy and enjoyable lunch for much less than $1,000 per year per person. If you give up Starbucks for home and office brewed coffee and Starbucks muffins for store bought muffins you could have breakfast and lunch for less than $1,000 per year.

On average, my wife and I spend between $1.50 and $3.00 for our packed lunches. We cook almost every night and use the leftovers as our lunch, or we make a sandwich or other simple and inexpensive meal to take with us into the office. Instead of purchasing a soda at a vending machine for $1.50, I bring a can of Arizona Green Tea with me that costs about $0.25. My wife only drinks tea or water. Instead of buying an individual bag of chips, I bring a piece of fruit or on occasion I might buy a big bag of chips and use it to fill up sandwich bags at home. By choosing much cheaper alternatives, we do not sacrifice quality or quantity in our lunches but we save literally thousands of dollars a year.
With that money invested long term in the stock market, we are talking about saving hundreds of thousands if not millions of dollars over our career by simply choosing to bring a lunch instead of eating out. Are you willing to throw away that much money, just so you can eat out at lunch every day?

Consumer Reports Article Comparing Leasing To Financing A Car:
The Money Lab determined that buying a car—in this case, the best-selling 2008 Honda Accord EX, at $24,495—would cost $4,597 less over five years than closed-end leasing for exactly the same model.

Consumer Reports calculated that it would cost the average consumer nearly $4,597 more to lease a Honda Accord than to finance the same car over a 5 year period. Assuming that you get an average loan rate of 7%, the final cost of the Honda Accord is $29,100. That is $4,500 more than buying the vehicle outright. What about buying a used car instead of a new one. Can you guess how much you would save by buying a 3 year old Honda Accord with cash, instead of financing a new one? According to Kelly Blue Book, a 2005 Honda Accord EX in excellent condition with 45,000 miles should retail for $18,095. It would cost $15,890 if you bought it from an individual.

Lets recap, shall we:

• Brand new Accord: $24,495
• Brand new Accord with loan: $29,100
• Brand new Accord with lease: $33,697
• Used Accord with 45,000 miles: $18,095

By choosing to buy a used model with cash, instead of leasing a new model, you can save $15,600. You could buy a second car with that.

photo by flickr user mjmyap

Here are a couple of blog posts that I have especially liked, courtesy of The Simple Dollar and I Will Teach You To Be Rich.

• If You Ask “What’s the Monthly Payment?” You’re Asking the Wrong Question - Trent at The Simple Dollar points out that people who only care about the monthly payment do not understand the actual cost. He also points out that paying with cash is by far the cheapest and therefore the best method for buying a car.

• 10 Links To Walk You Through Today’s Financial Crisis - Ramit at I Will Teach You To Be Rich has a fantastic group of links to get you through your day. I enjoyed this post very much, but was upset to see one of the links where Ramit tried to justify his purchase of a brand new car as being the best financial decision, and then he advocated that people take out loans to purchase their cars. He is not teaching anyone to be rich with that example.
• Getting Things Done by David Allen - I’m about half way done with this popular book that spurred the GTD lifestyle that is apparent all over the internet. It’s got a lot of good ideas in it, and I will probably discuss it further when I finish.