Freezing in NH

I need (ha, what a word) a scanner.  With the current price of gas and needing to be able to photocopy important things before they go in the mail, a scanner seemed like a good idea.  I had a $25 off of $75+ coupon from Staples for being a Business Rewards customer (we used to do a bunch of printing there) so I looked at their website.  Scanners run $80 and up, but multifunction machines (scanner, printer, copier, fax) start as low as $60.  I guess all that color ink will subsidize the cost.

Anyway, I ordered the cheapest machine over the weekend (got the free shipping on orders over $50 and discovered a $20 rebate during checkout, so it should come to about $40 total).  It arrived on Tuesday and I just went to set it up to scan something.  Plugged it in, beep, beep, beep.  You can’t do anything until you insert four ink cartridges (black, yellow, cyan, magenta).  Literally nothing can be done, I tried holding down the power button but it won’t power off, just beeps.

Okay, I dig those out of the box.  Insert all four, and it goes into some sort of ink setup process.  I check the manual…that will last four minutes!  Four whole minutes!  Plenty of time to write this post.

I’d been skeptical about people’s claims that they were going to save their rebate or pay off debt with it.  While that might be true for PF bloggers, I suspect it’s not that true for the general public.  Oh sure, it goes in the savings account or off to the credit card company right away, but in the back of your head you’re thinking “it’s a free 600 dollars, I can treat myself to dinner out just this one time”.  And eventually you’ve spent a good chunk of it.  Everyone who pays down credit cards this month is going to spend them up a bit more next month. 

But mostly this was idle speculation and pessimism.  Until I read a Freakonomics blog post today.  They linked to three studies of the 2001 rebate.  The first said basically what you’d expect.  Some people planned to spend it (1/4 of respondents) and the rest were going to pay down debt or save.  They seem surprised that the richest folks were most likely to spend it, but those are the folks who have their savings and debt all planned out and know they have it to spend. 

But the third had the most interesting information.  Here’s the recap from the Freakonomics blog:

This paper begins with one particularly compelling observation: credit card companies know our social security numbers (and hence who got their rebates when), and they also know a lot about our spending and saving patterns.

And so once the authors were able to get a large credit card company to share with them (anonymized) data, their research project was made.

Recall that paper #1 had found that nearly half of all respondents expected to use the rebate to pay down their debt. It turns out that this was the initial response of many, but then over the ensuing nine months, spending rose by enough to account for around two-fifths of the average rebate. And for those who were liquidity constrained, spending rose even further.

Yup, they paid it down and then spend at least 2/5 of it later.  Actually a lower percentage than I thought, so maybe I’m too pessimistic.

According to CNNMoney, it looks like those rebate checks will start coming a week early.  Everything seems to be in the same order, but some people will get moved up a week.  I guess I would do the same thing if I had an important deadline…looks like they’re only going to do 800,000 the first day (out of a total 130 million).

At the grocery store the other day I saw an interesting machine just inside the door.  It scanned your savings card and printed out a theoretically individualized sheet of coupons.  Several people had left their sheet so I could see that they weren’t really individualized, just pushing whatever the store wanted to sell.  But it’s an interesting concept for the future.  Advertisers could target people who bought brand X with a coupon for brand Y.  Unlike the coupons that print at the checkout, you are sure to have these with you while you’re shopping.

Most of the coupons on my sheet were for things like store brand ice cream.  Not something I buy, but one coupon was special this week for earth day…$2 off of any 2 “full circle organic” products.  Since Full Circle has canned beans for 99c, I picked up two free cans of beans.  Not bad for a quick investigation of a new machine. 

ABC News has an article Small Businesses Feeling the Squeeze.  I think these folks are going to end up somewhere they don’t want to be.  They claim that they’re keeping an eye on the bottom line, but in an economy like this they need to be pretty proactive. 

They have cheaper competitors in China, they are having trouble getting paid by buyers, heating costs are going up, it doesn’t look good.  They’ve got to economize and adapt, or close.  They’re dipping into personal savings right now.

“With the recent pay cut that we both just took at the business, I’m concerned that by now our outgo is more than our income and that means it would only get worse, not better,” Diane says. “If it should come to another round of layoffs, my son is next on the list. And that would break my heart.”

I understand that she feels bad, but maybe your son should take a look at what it’s doing to you and go get a different job.

Diane says she is constantly assessing what she calls “the point of no return” for the company and she says she is determined not to let things get so bad they would face insolvency. But some weeks now — to stay afloat and make payroll — they dip into their personal savings.

While that takes the pressure off at work, it adds to the stress at home. The Dearings are more than $100,000 over budget and wondering how to make a dent in that debt.

“The business is in difficult straits,” Diane says. “We are overextended personally because there is no profit to bring home.”

Sounds like they’ve got some difficult choices to make.

I personally like the Hitchhikers Guide to the Galaxy, and right now it’s good advice.  The NYTimes actually titles the article Time to Assess Finances, but they really mean “don’t panic”.  The basic advice is sit tight, don’t make any emotional decisions, don’t sell stocks you meant to hold long term while they’re down.

“Small investors always make the worst timing decisions because emotion is involved,” Mr. Tysk said. “This is precisely the wrong time to move to safer options. The stock market has dropped dramatically and now is the time to invest — don’t close the stable door after the horse has left.”

They do talk about TIPS, which is something I hadn’t seen much of in the press until very recently.   They’re a good choice for folks who need stable money, such as folks past retirement who have a significant chunk of their portfolio in bonds but need to worry about inflation as well.

Treasury Inflation Protected Securities, known as TIPS, are securities whose principal is tied to the Consumer Price Index.

With inflation, the principal increases, while with deflation, it decreases. When the security matures, the United States Treasury pays the original or adjusted principal, whichever is greater.  

The one thing they just gloss over is job security.  It would probably be a stronger article if they left it out entirely, here is everything about your job:

The first thing to do is take stock of your life. Determine how secure your job is, which, in these uncertain times, may not be easy.

If your job is relatively safe, step back and look at your financial situation.

And if your job isn’t safe?  That advice must be in a different article, because it’s not in this one. 

I like to have a larger, but not too large, goal in mind at any given moment.  It gives me some focus and a reason to do things like pass up a daily latte.  (I don’t drink coffee, but you get the point.)  For various reasons, at the moment I don’t have a good mid-term (3-6 year) goal.  I have some long term goals, e.g. retire at 50, but that’s relatively nebulous and subject to course corrections along the way.  I also have some short term goals, but since my debt except mortgage is paid off, most are very short.  E.g. a vacation at the end of the summer, a new vacuum cleaner, etc. 

I have an emergency fund set aside, and I could increase it but it covers 6 months and increasing it isn’t a priority.  I’m covering all my bills out of current income, including the outrageous heating bills (not on budget plan this year), so my frugality has seemed a little wan and lackluster.

There are some (personal) reasons that I don’t have a medium term goal.  There are some very good reasons for abandoning my previously set one, and I’ve accomplished the one before that, so I’m kinda adrift.  So I did some brainstorming.  Originally I was just going to pick one of the goals I brainstormed and go for it.  But it’s hard to go after a goal with gusto if you’re not committed.  Brainstorming is a fun procrastination technique, so I did it anyway.  Out of all those ideas there are a couple of winners, and a couple that are exciting to think about (e.g. I could buy a boat and sail around the world) but wouldn’t necessarily be that great to live (I get seasick).  I took all the ideas that were either rational or very exciting, and figured out what the next steps would be.  And in most of the cases they really are the same.  Save up some cash, get rid of clutter, get things in order, get a better job, finish up here. 

Having all the goals need the same steps seemed like a clear sign that those steps needed to be done no matter what.  In six months or so I’ll be in a better position to choose a medium term goal, and I’ll be part way there already.  Obviously the goal will dictate the amounts (e.g. amount of money, amount of clutter to get rid of), but I can still head in the right direction.  So I printed out a few things to remind me of all of the goals and stuck them up on a bulletin board.  I’m sure most of you out there use this technique, but I heartily recommend it.  So now there’s a picture of a lake house, an apartment building, a boat and a flat in Paris.  Instead of feeling adrift, goalless, and spending money frivolously I’m looking at the board excited with all the possibilities. 

After using ING’s Electric Orange account for a bit (since the Netbank debacle last fall) I figured I’d share my thoughts.

The website is relatively easy to use, though sometimes it takes me an extra click or two to find a feature.  The billpay works great, I like that it reminds you what you paid last time when you are setting up the next payment.  It’s quite easy to have multiple accounts and change the nicknames on those accounts (”emergency fund”, “vacation”, etc).   It’s easy to set up recurring transfers from one account to another.  All these are great features for saving and paying bills.

Now the downside: no checks.  This isn’t a big deal if you’re paying VISA for example.  You put your account number in the little box and click “pay”, and VISA handles it quite nicely.  But I live in a relatively small town.  When you get your water bill it doesn’t have a return envelope.  You’re expected to take the two part form down to town hall where there is one clerk and have her take your check and stamp one half of the form as your receipt.  I suppose mailing a check is acceptable, but the water department doesn’t have account numbers, just name/addresses, so I don’t know what I’d put for account number (can I fit my whole name/address in that box?) nor do I know what they’d do with the billpay at town hall.

So, to make my life easier (hah), I now have two checking accounts.  One is Electric Orange and the other is a local account with real checks (but no interest).  It makes it easy to deposit checks and cash, and to write checks for occasional things like the quarterly water bill or the handwritten renewal notice for a local magazine.  I can transfer money to/from Electric Orange using ING’s system.

One other interesting thing that has turned up is the difference in overpaying my mortgage.  I have a standard first mortgage and then a second mortgage which is technically a home equity loan (I got it at the closing, and it has a 30 year amortization).  Both are with the same company.  Both have tickets you’re supposed to send in with the check indicating the amount of the check that’s for “current payment”, “principal”, and “late fees”.  But those tickets are different and go to different places.  And when I overpay my primary mortgage using the E.O. billpay they apply the overage (without a ticket to guide them) to the principal. 

When I overpay the second mortgage, they apply it to the next payment.  It took a while for me to discover this, but my last bill from them showed my next payment due in August.  In other words, the amount I’ve overpaid in the last six months is equal to the payments for April, May, June and July.  Oops.  Anyway, to make a principal-only payment, I have to send a letter asking them to apply the enclosed check to principal, and send it to different address.  Hard to enclose a letter with billpay.  So I’ll be using my local account for that as well.

I’ve been thinking about the amount to set aside for an emergency fund lately.  I do have cash set aside, but my house needs some repairs and I need to figure out if I have the money for everything or not.  There are a couple of factors involved in the calculation, but it basically comes down to “how long does the fund need to last” and “how much do I need each month”.  Then some simple math determines what the fund ought to be.  Saving up that much is another topic entirely.

I’m single, and while I’m confident in my ability to find another job, I’m not confident in my ability to find another job HERE.  Since I own a house, that could be trouble.  Actually I could find a job, just not a job that pays all the bills.  I could be employed in retail just above minumum wage in less than a week.  

It’s hard to immediately cut back (if you had a sudden job loss) because everything has a final bill.  Drop cable and you get one more bill.  Drop the land line and, yes, one more bill.  And I put everything on a rewards card and pay it the next month, so that bill too will come after the day I decide to cut back.  So when you plan, you probably need to include one month at your current spending levels before assuming you’d cut back. 

I’ve decided on an amount that works for me.  My current e-fund amount will cover 3 months of living like I do now, plus three more months of bare-bones living.  I’d probably cut back to bare bones after 1 month, so it might stretch to 7 months total.  I do have friends and family I could lean on in a pinch.  Specifically several folks a few hours away near lots of jobs.  I could crash on various couches during the week if I ended up getting a job down there while I was waiting to sell my house.  If I didn’t have that fallback plan, I might want a few more months of bare-bones living in that fund.

I finally got around to dealing with my local phone service today.  As a small (very tiny) business owner, I have to have a phone number that is public info in NH’s business system.  So I have a local phone even though I use a cell phone for most things.  Anyway, I jumped through all the hoops to set up an online account with them and downgraded some of my services to save money. 

I don’t make that many local calls since most people I know locally only have cell phones (and those are from the nearest “big city” and not a local call).  If I go over 150 minutes a month, I’ll pay a per-minute fee, but I make maybe one call for an appointment and two calls for takeout a month, and that’s it.  And I hate the call waiting, why have I been paying for it for a year?  So my next bill should be 16.93 cheaper, possibly more since some of the “federal” fees/taxes seem to be based on amounts. 

Now for the funny part: when I checked out, I got a message about a reward.  Heck, if I’d known I would get something, I’d have done all this earlier.

***Congratulations you are now eligible for a $20.00 AMEX Rewards Card.*** Upon successful completion of your service order your AMEX Rewards Card will be mailed out to you. Please allow 8 -10 weeks for delivery. Terms and conditions apply.

I wonder if I accidentally signed up for something I didn’t intend?