Freezing in NH

Interesting post here: How’s This for a Savings Account? $8000 Cash in a Shoebox

I have to admit, I have the same irrational fear of debit cards.  But I don’t take out cash every other day, or keep it in a shoebox.  At many places, like the grocery store, you can use your non-debit ATM card with PIN to make purchases.  Works just like a debit card but requires a PIN, so it makes me feel a bit better about using it.  I also use a rewards card (paid in full each month) for most of the purchases that I would otherwise use a debit card for.

There are differing opinions of using a credit card, but I pay it in full every month and enjoy the rewards, so it works for me.  I do end up taking cash out a couple times a month, but I know where the free ATMs are and don’t pay all that much in fees.  I’m sure if I made more small purchases I’d need to use cash more often, but I don’t eat lunch out much, and try to group my grocery purchases into one trip a week, so it’s a large enough purchase that I use my credit card.  Cash is mostly used on trips, either for small impulse purchases or when splitting a check.

Some tips on how to make habits and keep track of all the little steps:

How to use a checklist to focus your entrepreneurial efforts

Checklists for a Successful Life

24 Daily Habits

There’s an interesting article in the NYTimes today about FSBO (for sale by owner) vs agent real estate transactions.  The results (using data from 98 to 2004) are that in Madison, Wisconson it makes financial sense to do it FSBO. Prices are similar (though FSBO are on the market a little longer) and that 6% commission eats into your profit if you’re getting the same price.

Caveats include the longer time on market as well as the fact that Madison has a very popular FSBO site, which helps drive potential buyers. Though I think that today (vs 1998) people are more willing to look at things like Craigs List when looking for a home. So that’s a point for FSBO. And many places have a service for about $400 or so that lets you put your personal home on the MLS, which is one of the big advantages of going with an agent.

The potential downside is that you might have a buyer’s agent backlash (even if you’re willing to pay them their half of the 6%) where they want to stand together as realtors and not show your house. But if you’ve got the time and energy, it’s worth a try.

Penelope Trunk (author of the Brazen Careerist column and book) has some interesting advice.  I’ve been reading through some of the older columns recently and found some gems.  Even if you don’t agree with everything she says, it certainly gives you some food for thought.

Letter to New Graduates

How much money do you need to be happy? (Hint: Your sex life matters more)

Here’s an interesting post on Cutting Costs for Dummies.

My company recently did something similar.  They have a program for reimbursing tuition.  It’s a great benefit and from my perspective even if the class has nothing to do with the employee’s job, it still works out great for the company.  One class is not going to make the employee leave and to take enough classes to get, say, a master’s degree takes forever at one class per semester.  You’ve locked the employee in to staying at your company for however many years the degree takes.  And they require reimbursement for any courses taken in the 12 months before you quit.  So the degree plus another year. 

I have a friend who is doing this.  She’s in a certificate program, but even then it takes five years (at one course per semester) to get the certificate.  She’s in a job that doesn’t pay as well as it could, but doing the work of someone at least one level up.  If she wasn’t taking the classes paid for by her employer she’d be long gone and they’d have to spend money to replace her plus getting an additional person one level up to cover the work she’d been doing.  So for her company it’s a lot cheaper to send her to class than it is to promote her and pay her what she deserves.  They’ve got her locked in for five years (probably four more than she’d have done otherwise), and considering how much time it takes to train a new person, it’s worth it.

So my company has just changed the rules to require that the courses be not just business related, but specifically apply only to the job the employee CURRENTLY has.  So someone wanting to take a course that would help them get to the next level in their job is now out of luck.  I’m curious how much these courses were really costing the company.  One course has to be less expensive than training a new hire plus paying them while they’re useless.  Heck, we paid someone in our department to be useless for a year (with no training or mentoring) before firing them.  They could have sent her to a couple of courses and made her useful, or fired her in the first month when they discovered how useless she was.  Oh well.

Pricing - Can You Charge More for Your Services? Summary:  Yes!

It’s Not Just Honey.  A discussion of Burt’s Bees, which started out as a small business and is now quite a bit more!

Money Smart Life talks about the business he’d start with a 50K windfall.  I think it’s an interesting idea, and maybe could be done for a lot less than that price.  You’d need some initial advertising, but some could be word of mouth and flyers.  You’d need a truck or two, but could probably get away with a used pickup and trailer.   Rent a smaller place with room for expansion.  I think he could start with 20k or less, and that kind of money (assuming the “begging and borrowing” method of financing rather than the windfall) would allow him more flexibility than being crushed under the payments on a larger debt.

The Simple Dollar answers the question Does Ultra-Frugality Mean That You Don’t Need A 401(k) Or A Roth IRA? for a couple that lives on half their income and saves the rest.

I think there are a couple of points to think about: 

Do you get a company match in the 401k:  if so, fund enough to get the match.
Retirement income level vs current income level: the 401k shelters income, but you pay taxes on it at the income rate, not the (cheaper) long term capital gains rate.  If your income in retirement is similar or higher than now, a Roth or other post-tax savings are better options.  If your retirement income is lower than now (and it probably will be if you’re managing to save half now) a 401k can shift those taxes to your lower-earning years.

The 401k can be a great savings idea for people who aren’t good at saving.  For your average person, the money coming out of their paycheck before they see it really can help them save.  For someone disciplined enough to save half their income, that’s not necessary.  It is not easy to get the money out of the 401k before 59.5 either, so retiring in your mid-forties requires some other sort of savings.  A Roth IRA allows you to take the contributions out tax-free at any time, so it would be a much better choice for someone retiring early.  Leave the growth money in until 59.5 and you’ve saved yourself a bunch of taxes vs saving the money outside a retirement account. 

Interesting Money Photos From New York City: These are great pics.  Having spent some time in NYC though, the locals don’t really drive.  That’s why there are so many taxis.  The difference in prices in parking garages is a good example of tiered pricing.  People who don’t care about price pick the parking garage closest to where they’re going, while people who do care go further looking for a bargin.  The operators of the garages (and many are part of a couple big chains) make more money off of lazy people while not driving away the more frugal ones.   Plus there’s always street parking, if you’re willing to drive around until you find a spot. 

Review on Prosper.com – Can We Leverage on it to Achieve Financial Freedom?: Here’s my experience with Prosper. Since that post, the oldest of the lates has been sold for pennies on the dollar.

Don’t Be Fooled Into Thinking an Oil Change Every 3,000 Miles Is Necessary:  The headline says it all. 

Here’s how I negotiated out of bank fees — part 2:  Interesting info, but I use NetB@nk which doesn’t charge you for overdrafts.  Nice since my employment situation has been…interesting…due to a couple of buyouts, and there were a couple times in the past year when I “accidentally” didn’t get paid.  Always resolved with a call to HR, but the mortgage payment is drafted the day after the direct deposit goes in, so if the deposit doesn’t go and they have to mail me a check from HR-land, the mortgage payment causes an overdraft (which pulls from my money market, interest/fee free).

Consumerism Comentary says that renting makes you richer.

I can understand the desire to own your own home (I own mine), and the freedom it gives you.  Changing paint colors and stomping around in the middle of the night are much easier if you own.  On the other hand renting gives you the freedom to move when you want to, and if you’re moving to an area you don’t really know it might be best to rent for a bit until you know which neighborhoods are best for you.

The real reason that renting can save you a bunch of money though is that most people rent a smaller, less fancy place than they buy.  I moved from a small 2 bedroom apartment (and had a roommate off and on) to a 2/3 bedroom house.  Lots more space, so it does cost more.  When I was renting i was happy to have 600 sq/ft, but I probably wouldn’t have purchased a house that size.  More space means more furniture, more windows to drape, etc. 

If you buy a house that’s in good condition, and then choose/are forced to sell within a few years or in a down market, you will lose money.  If you pick a house/town you want to stay in the rest of your life, buying makes sense.  Once you pay off the mortgage, you live your retirement years rent-free.  So my recommendation is to buy once you’re certain you’re staying, but not before.

 On the other hand, if you’re handy, there is a benefit in almost any market to buying something that’s in bad shape and fixing it up.  Someplace that isn’t in a condition to move into is going to be fairly cheap compared to a nice house, because most people can’t afford to buy it and then fix it up before moving in.  They have to sell their old house in order to afford the new one, so they need to find something in good condition.  If they’ve got little kids, they don’t always have time to deal with ripping out sheetrock and refinishing floors.  If you’re willing to work “for free”, you can fix a place up and sell it for more than you paid.  But if you have the option of picking up more hours at your employer, that might make more financial sense than doing work on a house.  In a down market I’m not sure you’d make minimum wage once all is said and done.

The NYTimes Small Business Toolkit reviews “The Small Business Savings Plan” by Timothy R. Gase.  The take-home bullet points are “involve your employees — reward them for saving money” and “ask what you’d do if a recession hit, and start doing those things now”.