Cheaper Housing Options For The Mortgage-Battered

(This article is part of a weekly guest column by Claire Moylan*)

Housing used to be a solid investment, but it has become less so over the years. Now, we don’t know with any certainty when housing will recover enough to be worth looking at it as an investment again. Of course, the American Dream is all about owning your own home, and this has plenty of emotional payback, but if you want to just buy a home as an investment, you might want to compare several choices: renting an apartment or home, co-housing, and buying a smaller home.

How Housing Has Changed
There were red-hot areas in the United States that were seeing double digit appreciation on homes. Now, these same areas might be experiencing thousands of dollars in devaluation. Until the inventory in housing starts to lessen, the odds of getting a home that will retain or gain in value is an iffy proposition in some markets. Even if you find a home you want to buy, it has also become much more difficult to qualify for a mortgage because even lenders have gotten scared. Gone are the days of no down payment. Now, you will be expected to have at least 10% available for a down payment. Your credit score will also be very important. Your income will be scrutinized much more severely to make sure that you can make the payments on the home. If after all this, you qualify, you still might find your lender has collapsed and the deal has been canceled. If you do not qualify for the home, you still have an option to rent until the market changes or your financial situation improves.

Why Renting Can Be Good
Renting can be a positive experience, when compared to owning a home you can’t afford. You won’t be responsible for maintaining the structure of the apartment or home that you rent. In a market where the housing prices are dropping, people who own housing may try to meet their financial obligations by renting it out instead of selling it. This can lower the price of rentals. You can get all of the emotional benefits of being in a house without feeling the pain of having a mortgage over your head. You won’t get any tax write-offs, however.

If you don’t mind being in an apartment community, you can also wait for the housing prices to bottom out in a more luxurious setting. Apartment complexes do many things to attract renters, adding pools, clubhouses, and sometimes even on-site gyms. Any money you save when renting can be put aside for your down payment, when you see the housing prices start to recover slightly.

Co-Housing To Share Expenses
Some people get tired of buying a house with everything in it and instead opt for co-housing communities. These communities can offer a very neighborly feel and they share many resources too. You probably won’t save money on a price per square foot basis, but the homes are also built in these ecological-friendly communities to be smaller and more energy efficient than today’s standard McMansions. People who live in these communities are usually more involved in sustainable living and are apt to share anything from tools, to kid’s toys, and everything in between. Often, such communities have childcare options for the people living within the community that can be a substantial savings for family with children. Many offer community meals that can help save on food and preparation costs. The common areas are maintained and held in common ownership by all the members of the co-housing community. This means that you probably will have to give some of your time back to the community on a monthly basis.

Living Within Your Means
Sounds old-fashioned and boring, but it’s also the best way to have a sound financial footing when buying a home. It also means that if prices drop, your loss is less too. Most experts agree that drops in housing prices are temporary and if you plan on living in a home more than five years, you probably can ride out some if not all of the damage. In the meantime, you can get a smaller home that you can afford with your income. This will give you a tax write-off and the capacity to build some equity. This is good for people starting out buying their first home or for those who wish to downsize. By buying a smaller home, you save money on the mortgage, on the utilities, and on maintenance too. Plus, you won’t be tempted to buy a lot of extra stuff you don’t need to fill the house up. While it may not be the house of your dreams, it can be a very wise step towards your final goal of getting into another home that does meet the standard for being the home of your dreams.

About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.

*Image Credit: cumortgageservice.com

Some Thoughts on Debt Aversion and Employee Stock Purchase Plan

After several years of being debt-free (apart from the mortgage), we now have an auto loan. A rather huge one at that :( And it is driving us nuts. This is in spite of the fact that getting the auto loan is a well-thought out decision. Over the past year, we knew that our old car would die sometime soon and we needed to save to buy another car. And we did save quite diligently. But every time the cash reserve crossed $5K, we consciously made a choice to invest it, since in the long term a higher interest rate and the compounding of our savings account will yield far better fruits than the interest we have to pay for the car loan in the short term. The auto loan we have is at 5.25% and most of our investments (knock on wood) are doing better than that.

That said, a loan is a loan. And we hate it :(

So last week, I sold the stock I have purchased over the past year by participating in the employee stock purchase plan and applied it to the car loan. Here are some thoughts on the reasons for our decision and about debt aversion in general.

Most advice I have read, says not to own the stocks in the company you work for
In other words, don’t put all the eggs in one basket. If the company goes bust, you not only lose the job security but also a lot of your savings. Unless the company is doing very, very well and you know with a high level of certainty that you can make positive earnings on your stock, it is better not to put too much of your savings in the company stock. My company allows us to purchase stock worth 10% of the salary via the employee stock purchase plan and I have always participated to the maximum extent. That is a significant amount of money that I did not feel comfortable leaving in the company stock since the company has not been doing too well of late.

I got pretty good returns on my investment by selling when I did
The way they calculate the purchase price for the employee stock purchase plan is to take the lowest of the price on the starting date and the ending date of the purchase period and offer a discount of 15% on that price. The best way for me to take advantage of participating in the plan, since I don’t foresee a huge bump up in stock price any time soon, is to materialize the guaranteed 15% return. Also, fortunately for me, the day I sold the stock some industry news temporarily bumped up the price resulting in an overall return close to 25%!

Taxes suck :(
Even though the overall returns look good, we don’t really make that much since taxes take a huge bite out of it. If we had hung on to the stock for a year, it would have qualified for being taxed at the rate of capital gains. But because we sold early, it gets taxed as regular income. Boo.

Debt aversion can be a nasty thing
When we had the check for the money in hand, we had several options of what to do with it. We could reinvest it in diversified index funds or in real estate back in the home country that will most likely yield far better gains than the 5.25% we are paying for our auto loan. Or apply the amount to the emergency fund since we know for a fact that we will soon have some huge medical bills and there isn’t enough in our emergency fund to cover it. Or save it for travel expenses, since we plan on visiting our home country soon and the trip costs a lot! But the thought that is the foremost in our minds was the auto loan. So we decided to apply the whole check (with some additional amount that we added!) to bring the auto loan down by about 35%. I don’t know if it was the smartest thing to do, but boy it felt good to see the auto loan shrink :)

I just don’t understand why some people do not participate in the employee stock purchase plan!
Soon after the stocks for this period were granted, during lunch when we were all talking about it one of my colleagues revealed that he does not participate in the stock purchase plan! I was quite stunned. I am not very close to this person, and in my personal life, I tend to keep my mouth shut when it comes to other people’s finances, so I did not ask him why. But I can’t help but wonder. What motivates an otherwise perfectly smart person to make such a dumb decision? If the company allowed me to put more of my salary in the stock purchase plan, I would, even if it meant I would have to cut some corners due to a reduced take home salary. 15% of guaranteed returns (minus the taxes of course) is no joke. And still here was a perfectly sensible person saying no to that kind of returns. Why?

What do you do with the stock purchased through your employee stock purchase plan? If you don’t participate in the employee stock purchase plan in spite of you company offering one, will you please explain to me why not? And do any of you get so emotional about debt that you are willing to do anything to get rid of it? It can't just be us making some financially stupid choices! :)

*Image credit: Student Action Network

Personal Finance: Leave-it-to-Fate Vs Self-Discipline Approach

What could you do if you could earn 10% more? Think about it for a while. If you got a raise tomorrow with a 10% bump in your salary, what would you do? If you are a business owner and if your business income rose by 10% how would you spend it? Would you pay off your debt a little faster? Add more to your retirement account? Add more to your kids’ college education fund? Start a new car fund?

Now think about this, how much control do you actually have in making your earnings go up by 10%? Let me use my own example. I am a software engineer. Last year with less than one year at my new work place I qualified for a measly 3.33% raise. This year, since I have been in the company for over a year maybe I will qualify for a higher raise. “Qualify” does not necessarily mean that I will actually receive that raise. My manager gets allocated a certain percentage that he can give to the engineers as performance based raise and in order to justify me receiving a higher percentage, I need to work hard. So, if I managed to spend *much* more than 40 hours a week at work, and am careful not to screw up throughout the year, then may be I will qualify for a 7-9% raise. Add to that the potential “extra” money I can make through this blog and maybe, just maybe, I will be able to make my income go up by 10%. Note that none of this is really under my control, it is just something I can hope and work hard for.

Now let’s look at it from a different perspective. I am sure all of you have guessed by now where this is going :) What could you do if you can save 10% more? Potentially the same things as above, except that we have a much better control over the money now. How much we earn is not something that we can determine. But how much we spend, and hence can save, is a lot more in our control. We may not always exercise this control, but we do have it.

If you spend $50 per month on a cell phone and $50 per month on a land line, can you get rid of one of them to be able to pocket $50 per month? $50 may not sound like much, but we have been landline-free for over 4 years now and the savings over that period is $2400 (I don’t remember exactly how much we paid for land line, so I am using a rough estimate of $50 per month for the calculations here). That’s a hefty chunk of change to be thrown at the debt. Or into a retirement account – imagine how much compound interest it can generate over the next 30 years!

What about eating out? How often do you eat out? Can you reduce the number of times you eat out? Or find alternate places that are less expensive? Less expensive does not always mean unhealthy. When we started looking in this direction, we were surprised at how many places we found which serve relatively healthy food for under $10 per person – sometimes as low as $6 per person. Our favorite is a healthy Wok place that offers a Mongolian style wok dinner where you pick your own vegetables and meat and they stir fry it for you, but with little or no oil, so the food is very healthy. And the cost per person is $6 - $10 depending on whether it is a week day, weekend or when they have a sea food special (Sunday night only). It is a completely nondescript place in a strip mall in a residential area. Finding such places is not easy, but if you are willing to experiment a little and keep your eyes and ears open, they are not very hard to find either. We have a list of about 4 - 5 such places in our neighborhood ranging from soup/salad places to Chinese to Thai to Indian food, but all of them healthy and cost under $10 per person for dinner (much lesser for lunch).

There are many, many ways that you can trim the fat in almost any budget. If you cook at home all the time, then cooking from scratch can save a bundle compared to cooking from packaged food. If you have a coffee/cigarette addiction, then reducing the number of times you get coffee/cigarette or switching to a lower priced brand could save some money. Shopping for used items, using coupons, picking up some skills to manage DIY projects… I could go on and on, but you get the point. Almost any budget has some room for trimming. Apparently, Lee Iacocca, responsible for the turn around of Chrysler once wrote that you could trim 10% from any budget without going through too much personal hard ship. If he can do that for a corporate budget, shouldn’t we be able to do better on a personal budget?

The approach 1, where we wait for a raise or increase in income to be able to meet our goal is a perfect example of the “Leave-it-to-Fate” approach. The approach 2 where we trim the fat off our budget either by living frugally or cutting some corners is a perfect example of the “Self-Discipline” approach. Obviously, the “Best” approach would be to combine the two. Here is a visual that explains what I mean.

The Best of Finance Blogosphere

Here are the articles that caught my eye during the last week. There’s quite a few of them, so let’s get right to it.

• This first article is actually not from the “Finance” blogosphere. But it is so beautifully written that I thought you all might enjoy reading it. The article is titled The Truth About Debt and Dreams and is published on the blog I will change your life.


• ”Frugal Vs. Cheap” is a topic that keeps popping up on the Frugality blogs every so often. But once in a while, one of the articles is so well written that in spite of having read about this topic several times before, you still enjoy reading the new article! One such article popped up this week at Being Frugal. The article - Crossing the Line: When does frugal become cheap? - has a bunch of examples, and what makes it interesting is that, it first makes you think and then walks through the examples one at a time. Nicely done!


• And while we are on the topic of frugality, you might want to check out Cheap dates for college students @ Tips from a College Student. And don’t be fooled by the name – there is nothing “cheap” in the sense of “cheap vs. frugal” about these 15 odd tips, and no you don’t have to be a college student (or even on a date) to use these tips. It’s a really good list for anyone looking for frugal ways to have some fun.


• Nick at Punny Money has an awesome flowchart to help you never buy useless garbage ever again. It really works! I liked it so much that I thought of buying it in pdf form for $39.99, but when I used it to make the decision, it told me not to buy it. ;)


• Halloween is apparently the second most expensive holiday in the US, coming up right behind Christmas. If you want to keep the cost low, check out these great tips for a frugal Halloween by Kyle @ Rather Be Shopping.


• Frugal Pride writes about how expensive architecture school can be. When I was in school, the architecture students had the most expenses due to all the supplies they needed to buy for their projects, and ironically, the assistantships in the architecture department paid much less than other departments. Hang in there Olivz!


• Frank @ Finance and Fat write about small steps and accountability. After years of being debt free (apart from mortgage), we now have an auto loan, and boy, I can totally relate to what Frank writes. We can’t seem to get rid of it soon enough, but it is key to remember that it is not going to happen over night but if we keep taking small steps (and big strides when possible), we will eventually get back to being debt free.


• Nivek @ Money Clipped has a great find – a witty wise-crack spoof news clip from DNN the Debt News Network. It is an 8 minute clip, but if you have some time one your hands, definitely worth a watch!


• Sun @ The Sun’s Financial Diary has a great article about global REITs. He argues that the correlation between the US real estate market and that in other countries is quite weak resulting in good diversification if you invest in a global REIT.


• Patrick @ Cash Money Life has an interesting comparison between credit cards and guns. I think it is a fairly extreme comparison, but it does convey the point – credit cards are not inherently bad, unless they are in the hands of people who misuse them!


• Lazy Man @ Lazy Man and Money has some neat commercials to help you think about your future and money management.


• Pinyo @ Moolanomy has a great article about choosing the best investment option available for various savings goals.


• Dawn @ One Woman’s Journey has a short but inspiring post about Financial Goals vs. Financial Hiccups.


• Creative Investor wonders if the financial sector will rebound again.

Should You Get a Store Credit Card?

(This is a guest post by Jim Corbett.)

Sometimes it seems that, wherever you go, someone’s trying to issue you a credit card. This is especially true of discount and department stores, which tempt potential cardholders with promises of hefty up-front savings.

But what is the long-term value of these cards? How can you tell if they’re right for you?

Store credit cards have pros and cons. Experts agree that you should avoid them if you’re likely to carry a balance, if you already have several credit cards, or if your credit score can’t afford a twenty point bruise simply from obtaining a store card!

Interest rates are definitely something to consider before you get one of these cards. Store credit cards have interest rates that are, on average, six to ten percent higher than those of bank credit cards. This isn’t such a big deal if you pay off your balance in full each month. But cardholders who maintain a balance will quickly find that their initial savings are being lost to interest charges. This defeats the purpose of a store credit card, which is to help you pay less for your store purchases.

But there are some good reasons for getting store cards. If you have a favorite store where you’re likely to use the card on a regular basis, getting a credit card from them could be beneficial. Some stores offer substantial discounts to cardholders, in the form of specials, coupons, bonus points, advance notice for upcoming sales, and discounted goods and services. These savings can add up. They also tend to be easier to obtain than a bank issued credit card and can be good for those wishing to build their credit history.

It has been estimated that 500 million store credit cards are in circulation at any given time, and most of them were issued during the holiday season. When you’re frazzled from gift shopping and alarmed by your dwindling bank account, the ten or fifteen percent savings you could get by opening a store card might sound like a good deal. And it can be – provided you pay off the balance before you accrue interest.

Always read the fine print before filling out any credit card application.

Also remember, if you sign up for a store card, you might be signing away your privacy. Some stores are notorious for selling your contact information to third parties, who will then use the information to bombard you with marketing material. Once you are placed on a marketer’s list, you might find it difficult to get off again – and you might regret selling your privacy for that ten percent discount.

Jim Corbett is the CIO of Credit Web which offers Student Credit Cards as well as offering an in-depth supply of credit related information.

Bank “Upgraded” The Account and Started Charging Fees without Authorization!

I am a bit obsessive about my financial accounts. I check all my bank accounts and credit card accounts at least once every other week. The better half on the other hand is the exact opposite. He never checks any of his bank accounts, unless he is forced to go in there to make any changes. Since we have pretty much automated everything, this doesn’t happen often. This weekend was one of those rare occasions, where he had to log into his account to transfer some money.

So, imagine his surprise when he found out that his account had been upgraded and he was charged a monthly fee of $25 for the past 5 months for the upgrade!

He immediately called the bank and asked them for details. It turns out that about 6 months back a joint CD that both of us held had come to term and I had requested that it be transferred into his checking account. Since it was a CD for $50K+, the lady had said that transferring the amount to my husband’s checking account would qualify his account for an upgrade to a premier checking account. But we never intended for the money to stay in that account since it was from a credit card arbitrage and it was time to pay back the credit cards. So I politely declined. She was quite insistent that we should check it out and offered to send us some material to read over and see if we would change our mind. I was at work and wanted to end the call as soon as possible and so agreed to read over the material when she sent it. I specifically remember telling her *not* to upgrade the account and that my husband will call back after reading the material if here is interested.

In about a week or so, we received the material in mail. Frankly, it was one of the crappiest proposition I have ever seen. We actually had a good laugh at it! We were required to maintain a minimum balance of $25K in the checking account at all times to avoid a fee of $25 per month to qualify for the premier status. And the premier status offered a special APY of … drum roll please… 2.25%! This was around the time when HSBC was offering 6.00% APY for their online savings account. So you can see why we found it completely whacky. Other additional benefits of the “premium” status were, we would qualify for platinum check card with better rewards program, have access to lines of credit without fees and a “potential” discounted rate if we decided to go for ARM mortgage. Are you kidding me??? We promptly dumped it in the recycle bin and forgot all about it.

Notice that throughout this entire process, my husband was never really involved or contacted directly by the bank, and it is his account that we are talking about here.

But the lady seems to have gone ahead and marked his account for the upgrade. And since we are not idiots to leave $25K lying around in a checking account (we don’t even have $25K to leave lying around in a checking account even if we wanted to!), the account violated the condition for being a premium account and got charged a fee of $25 per month.

It took a while to sort things out, but finally the bank agreed to reimburse the fees, since nobody from the bank has ever really spoken to my husband about an "upgrade" to his account. But it does shake up our confidence in a bank that both of us have used for quite some time now! Was it just one over-eager banker or is it the ethics of the banking company itself that is skewed here? I don’t think we will ever really know. For now, we have decided to give them a second chance. But they are on probation watch and better not try any stunts with us again!

Do you check your bank accounts often enough to catch any anomalies or unusual activities? If not, now may be a good time to do a quick check to confirm that everything is as it should be.

*Image Credit

Is Working Smart Really An Alternative To Working Hard?

If you read personal productivity or career related blogs/websites, you see one topic gets a lot of coverage – “Working Hard Vs Working Smart”. The problem I have with many of the blogs/websites that discuss this topic is that they convey the message, either intentionally or otherwise, that working smart is an alternative to working hard. I agree that just working hard is not enough. But I also think that only working smart quite won’t cut it either.

We lead a very hectic life packed to the hilt with things to do and errands to run. Balancing a career and family is not easy. So when someone comes along and argues that we don’t need to work so hard as long as we work smart, we are all only too happy to grab on to that argument. And that is what makes this argument so dangerous - the susceptibility of the listeners and to a certain extent the basic laziness in all of us that wants us to avoid hard work if possible.

During the past few weeks I have stumbled across several blog posts by young authors bragging about their ability to work smart and how they can get away without working hard like the rest of us mice in the corporate American rat race. I have no doubt that these young bloggers are smart and indeed get a lot done efficiently. But I think their pride in being able to do away with hard work is misguided.

It’s a lot more difficult for us immigrant workers to think of work from a different perspective, especially since we were raised to believe that hard work is what takes you places. And hard work did take us places. Coming from a middle class family in a third world country and establishing a place for ourselves in the most affluent country has not been easy. So it is ingrained in us that we need to work hard. But I do see that to get any further in life, just working hard is not going to be enough. I get that I need to be smarter in managing my time and effort. And in hind sight I do see that it was not just working hard that got me here – if that were the case there would be even more immigrant workers here than there already are :)

But I just can’t subscribe to the theory that working smart is an alternative to working hard. Working smart is a great way to get things done more efficiently. In a way, it can be seen as a means to cut the fat out of the tasks we do regularly. But unless you are willing to get your hands dirty and pour your sweat into what you do, I doubt that just working smart will get you anywhere in the long run. It can offer success in the short term, but if you want to really be successful in the long run, you need to start working hard too.

Come to think of it, Bill Gates is smart right? What if he just worked for 8 hours and called it a day? I am sure in those 8 hours he could get quite a fair amount accomplished and impress a lot of people, but do you think Microsoft would be the giant that it is today? The same goes for Google and You Tube. Yes, it looks like they all have it easy now, but imagine the elbow grease they would have put in during the early days to make themselves the giants they are today.

I have no ambition to be the next Microsoft or the next Google. But I do want to make sure I can retire early and retire financially comfortably. While at the same time providing my (future) children with comfortable lives and good education. I agree that just working hard is not enough. But working only smart isn’t quite the recipe either. I hope to find a good balance of the two to take me where I want to be. And like all the other cocky youth out there, I am pretty sure, I have found the right answer :)

If you liked this article, you might also like Why You Should Work Smart, Not Hard @ Money Smart Life and Hard Work @ Neville’s Financial Blog.

How Much Credit Can a Student Get?

Turns out almost $130,000 based on what this high credit IQ student has managed to do!

First for some background information. As you might know I am a huge fan of credit card arbitrage. There are two ways to do this. (a) Build up your credit slowly and accept an offer every now and then (my preferred approach) or (b) an App-O-Rama. For those of you who are unfamiliar with it, an App-O-Rama, is a word coined on the Fat Wallet Finance Forums (as far as I know) and involves applying for many credit cards in a short period of time, mostly within a day or two. Since the credit enquiries will take at least a day to percolate back into your credit history, this gives you the best chance to get approved for multiple credit cards before your credit score takes a hit. This is the approach taken by Paul, the student mentioned above to obtain almost $130,000 in credit!

Now, maybe Paul knows what he is doing. In which case, I would like to say to him, congratulations and good luck. He has plans of parking the cash in a high yield savings account and earning $600 in interest per month. That is great! But for every student like Paul who makes $600 from credit card companies, there must be a hundred or maybe thousand more that pile up $600 in credit card debt. That bothers me!

Let’s take a closer look at the credit lines Paul was approved for. The highest credit line Paul received was $25K! There were 2 more cards with credit limits higher than $15K and 6 more with credit limit in the range of $8K - $10K. Agreed that not many students are going to attempt an App-O-Rama and gain access to a large amount of cash like Paul did but each of those individual credit lines, in the wrong hands is enough to ruin lives! It might be legal for credit card companies to grant such large lines of credit to cash strapped students. But is it moral?

Sometime back Golbguru at Money, Matter and More Musings had written a (sarcastic) article saying there must be a test to qualify people for credit. I had a good laugh at it then, but now I think I agree. Here is an example of a student that Golbguru mentioned –

“I had Visa, Visa MasterCard, First Financial Bank, Visa, Gap, Target” says college senior Sara Magee. She was lured at 18 by the promise of a free Frisbee. A dozen credit cards later, she’s working three jobs to pay down $6,000 in charges, fees and interest.

“I didn’t understand interest and what a high APR was — I really just didn’t understand the concept, and it seemed like a good idea — like (I) can’t afford it now, but I will pay it off later,” she says.

Now imagine if Sara was approved for credit cards with limits more than $10K!

So what can we do? Well, the qualifier test Golbguru suggested would be a good idea, even though it might be a difficult to determine who exactly offers those tests. Here are a few other ideas -

• Parents should proactively teach children the intricacies of credit cards so they are prepared for and educated about it when it comes for them to get credit cards.


• Colleges and universities should take proactive steps to ban credit card companies from luring kids to apply for credit on college campuses.


• People should be required to use a debit card for a certain number of years before being allowed to apply for a credit card.


• People should have small *combined* credit limits for a while and prove they can make payments on time and not carry balances before being approved for larger credit lines. These days credit card companies do check whether you should be allowed credit based on your credit history, but instead of declining you credit, many just offer you more credit with higher interest rates. That to me feels predatory!

Offering $25K individual credit lines to college seniors (and $130K in combined credit lines) sends out wrong signals - that it doesn’t matter how long it will take you to pay it back or even if it will ever be possible, but here you go, enjoy it now! How long before some "party animal" college students find out about the App-O-Rama and start abusing it? Here is a excerpt from Paul's introductory post -

I wanted to be able to have an online diary where I will be updating my progress every couple of days as I try to make thousands of dollars per year just like many others have successfully done so before me. I will share the good the bad and the ugly as I take on this new project and hopefully it will help everyone out there trying to make a few extra bucks whether it’s to help pay for their college, car, hour, or an expensive coke habit :)

(emphasis on the last part of that quote by me).

A Response to the "Open Letter to the Wii Winner"

Last week I won a Wii. (I just love saying that! It doesn’t happen too often and the thrill of saying it still hasn’t worn out :) Anyway, here’s the conversation between the better half and me about it.

Me: Do you want a Wii?

BH: No, it’s too expensive. (Our anniversary is coming up and he probably thought I was probing to see what gift to get for him.)

Me: Hmmmm. OK, maybe I will give it off to my nieces then. (Trying to suppress an impish grin)

BH: Give what off to your nieces? (Confused)

Me: The Wii I won. (Hardly able to suppress my grin anymore)

BH: You “won”? (Still a little cautious, but starting to get excited)

Me: I participated in a blog project and the blogger gave away a Wii for one of the participants and it happened to be me. (B. H. doesn’t care much for blogs and doesn’t have a clue what I am talking about, but is totally excited.)

BH: You won it? It’s free?

Me: Um…hmmm. (Grin from ear to ear.)

BH: I want it. I want it. It’s mine. It’s mine.

So we are keeping the Wii :)

Neither of us are much of gamers anymore. I used to play a bit and the better half used to play *a lot* when we were younger. But over years it fizzled out. I don’t know what caused the addiction to wear out. Maybe we just got busy with work and did not have the time to play. Or maybe when we started attacking our debt, we had no room in the budget for gaming and even after the debt was paid off the thought that “spending money on games is frivolous” stayed on. Anyway, we have not gamed much in years except during the times when we were at an avid gamer friend’s house and he would challenge us to a game of something or the other.

Well, what started this whole post is that one of the fellow bloggers, Mrs. Micah wrote an open letter to the Wii winner on how to make the most profit from a Wii, if the winner was not a gamer, or had a Wii already. It is quite fascinating. I think we would qualify as non-gamers. But I don’t think I want to sell the Wii though.

I agree that the Wii is essentially a want and not a need. And a want we did not even have until a few days back at that. With that said however, we are on budget and on track for our financial plans and we don’t desperately need the money that we can earn from selling the Wii either. Sure, we have some new debt now (auto loan) and it is driving us nuts to not be “debt free” anymore, but we have plans to pay it off quickly and again, are on schedule. Do we really need to sell the Wii to pay off a little more?

I think there are a few behavioral psychology issues coming into play here. One of the books I read (Why Smart people make big money mistakes) talked of a similar thing, where we view earned money differently than windfall money. People tend to buy frivolous stuff with windfall money, where as they are more careful about earned money. (I wrote more about it here). But in our case, it is not like we won the money and chose to buy a Wii. We actually won the Wii and chose not to sell it. I don’t know if it’s the same or not – maybe some of the psychology majors among can help us understand it.

My only worry is that by having the Wii we may open up another “line of expenses”, you know, the temptation to buy new games and new add-ons etc. We used to love gaming before and maybe we will wake up a sleeping monster. But, I trust us to be smarter about our money now and think that if we do choose to buy an additional game or two, we will make up for it by not going out for our weekend dinner or a movie and make it balance out. This is what I talked about in my entry to the giveaway and looks like J. D. has decided to give us a test to see if we really are successful at handling our money better or not! Only time will tell whether we pass or fail the test :)

For now I am off to join the better half at the door to wait for the mailman :)

(P.S.: While I was looking for a nice image to add to this post I came across this interesting article that claims you can lose 27 lbs a year by playing Wii! I don’t particularly care about the weight loss, but sure could use some exercise. So, one more reason why the Wii stays!)

Image Credit: Wikipedia

The Best of Finance Blogosphere: “I won a Wii!!” Edition

I still can’t believe it! I never win anything… and here it was, a mail from J. D. announcing that I had won a Wii in the giveaway for the group writing project! My entry to the contest made it in with just a few hours to spare before the deadline! Wow, talk about luck! I am so excited. It is just in time for our anniversary too – now we won’t go and throw money on buying gifts for each other. I will keep one Wii controller and the better half gets the other controller :) Thanks, J. D.!

Now on to some of my favorite posts from the past week.

• I love long lists, and here is a great one by Ben @ Instigator blog titled An Introductory Guide to Startup Funding. Definitely something to bookmark for future use!


• And while we are talking about lists, here is another great one. MBH @ Mighty Bargain Hunter has put together an excellent collection of money-related forums and discussion boards. There are 28 forums in that list! And I follow only one (Fatwallet Finance) and that too, quite rarely these days. Why are there only 24 hours in a day?


• Ben @ Money Smart Life has a great post titled How to Work Extremely Hard and Get Nothing Done. I do this a lot with my “online” fun projects – currently I have two ideas in the incubator that show no signs of coming to life :( Thank god though, its not so much of a problem in my regular job where things move a lot more smoothly!


• I have heard the phrase “Cut your losses early” several time, but never really paid much attention to the math behind it. Pinyo @ Moolanomy does a great job in explaining the math.


• And here is a nice article by Sun @ Sun’s Financial Diary about rate chasing. Hmmm, I have my credit card arbitrage money still sitting in HSBC earning only 4.5% APR – maybe chasing credit card offers is not enough to play this game, maybe I should be chasing rates too to maximize my returns. Something to think about.


• GolbGuru @ Money, Matter and More Musings has a heart wrenching money story by Dough Roller. It’s reading personal stories like these where people have overcome tragic past to create a fantastic future that keep me addicted to personal finance blogs!


• Frank @ Finance and Fat shares his personal finance success story as part of J. D.’s group writing project.


• And back to lists. Financial Hack has a massive list of 117 quotes about procrastination. Hmmm, maybe I should read it tomorrow :)


• Christian PF points to a study that indicates that swearing in the workplace can benefit morale because it helps employees bond to each other. Hmmm. Interesting. I did believe something along these lines while I was in undergrad, but hey, grow up already!


• Clever Dude is on a donating spree and has given away 132 items of clothing, valued at $707, to goodwill. Wow! I used to clear out my closet every time we moved apartments, but now that we have a house, I have a feeling 10 years down the line, I will be writing a post exactly like that (if there is still such a thing called blogging at that time :)


• Mrs. Micah revisits the latte factor discussion but has a unique perspective that will help you feel-good. Something to think about.


• And finally, SVB at Digerati life celebrate her first Blogiversary by sharing her Silicon Valley job history. And she also has a giveaway to celebrate the blogiversary. Check it out!

So much for now. Hope you all have a great weekend

Victory Over Debt, Credit, Frugality – Which Of These Qualify As A Good "Success Story"?

J. D. over at Get Rich Slowly is celebrating 18 months in the personal finance blogospere and as part of the celebration, he asks his readers to share their personal finance success stories. I thought for a while about what to write. First I wanted to brag about going from over $40K in debt to a healthy positive net worth in just six years. But somehow that didn’t feel right. Frankly, I am itching to brag, but I don’t think I will be able to sleep the sleep of the righteous if I do :) So next, I thought of talking about the success we have had with credit card arbitrage. I consider it a bit of a success story because we have gone from being ignorant and piling on debt, to leveraging the credit card to make money from it. But then, I have already talked about it several times before. So, I thought maybe I should talk about my success at an effort to a frugal life style. But, I don’t think I am quite there yet. I am definitely making progress, but not yet at a stage where I can write about it as my “success story”.

And then it occurred to me - my real success story is that I have grown up and become mature in the way I handle my finances. And that is far more important than any individual success stories I can share.

Personal finance and money management is more about attitudes than anything else. Without the right mind set you could be making a $100,000 a year and still not get anywhere. On the other hand, if your have the right mentality, you can still manage to live a proud self-sufficient life right through retirement, even if you have an income of $30,000 and feed a family of five.

I have come a long way from neither knowing nor caring much about money matters. Statements like “spend less than you earn”, “pay yourself first”, “save some for the rainy day”, “don’t try to keep up with the Joneses” to me are no longer just rote catch phrases, but have become a form of secret guiding lights. They seem to influence my decisions without me actually being aware of it. While I still get tempted to buy stuff just because some of my friends have them, I have learnt to rationally think about my temptations and make a conscious decision about whether to buy or not. And during the times when I decide not to buy something, instead of feel deprived, I feel a sense of pride in making the decision that is right for us. And this has helped me to stay free of envy about what my friends own too.

When you start thinking about money all the time (which you do, when you are addicted to personal finance blogging), there is a chance that you could go too far and forget to enjoy today in the attempt to save for tomorrow. We have been fortunate enough to not get into this trap. Tomorrow, if I were to be run over by a bus, I am sure my last thought won’t be “Alas, I have so much money in my savings account that I never got to enjoy” :) Recently, we decided to buy an expensive-ish car. It went against all the best personal finance advice I have ever read. But it was a conscious decision. It has been our dream car and we wanted to buy it some day. So when my faithful 14 year old car died we sat down, took stock of our financial situation and decided to go for it, surprising even ourselves with our decision. It’s been over a couple of months now and we have no regrets. Every time we drive that car, it reminds us of what we have achieved and motivates us to do more. And we have already started paying off the auto loan very aggressively.

On the career front, I have learnt to value my salary whereas earlier I used to only care about the kind of work I did. I still don’t know if this is a good thing or not. But if you are obsessive about the quality of work and tend to get depressed when you aren’t doing something special, it is good to have an alternate thought that brings some satisfaction. I have gone from being disgusted by those that were proud of the dollar amount of their salaries to being one who uses it to calm myself down during times when quality of work just plain sucks. On the frugal living front, I have learnt to enjoy some of the simpler things in life. Why bother paying a heck of a lot of money for something that you can enjoy at a much lower cost? On the relationship front, we are a lot more in tune with each other. On the investing front, we have got over our stock market phobia and dipped our feet into index fund investing. We are aggressively chasing our dream to own property in our home country while at the same time paying off our mortgage here as soon as possible. So, knock on wood, overall we have made a fair amount of growing up and becoming mature. And that I am proud of and have no hassles bragging about :)

Use Halloween to Teach Kids Money Lessons

How can one thing mean two totally different things to different people? Take Halloween treats for example. Kids are delighted by it. Parents, not so much. Candies filled with high fructose corn syrup and food coloring, and kids that are hyper-active with so much sugar intake that they literally bounce off the walls. It’s every parent’s nightmare and the perfect scary ending to the Halloween holiday! But here’s a trick that will sound more like a treat – this unsavory situation can easily be turned into a money lesson for kids!

Let me explain.

The day before Halloween, you make a deal with the kids. When they return back from trick or treating, you will buy their candies from them for real money. From the day after Halloween they can buy the candies back from you. For every day past Halloween, the price of candies falls by 5%. Each day, they can spend only a preset amount of money on buying back candies. Knowing kids, they will want to eat the choicest candies in the first few days and in the later days as the number of candies they can have for the preset amount increases, the candies are no longer their favorites and so may choose to keep the money instead of throwing it away on candies they don’t like. They learn a few important money lessons while at the same time eating fewer candies. It’s a win-win situation.

Here is an example.

Say your daughter has collected 110 pieces of candy. You set the price of each piece of candy to say, a quarter. So if you can convince her to sell you 100 pieces of candy, then she will earn $25. Each day she is allowed to spend $2 of that money to buy back the candies. Each day the price of candies falls by 5%. Say you round up the number of candies she gets. Then for two days after Halloween, she will be able to buy 9 pieces of candy for $2. For two days after that, she will be able to purchase 10 pieces of candy for $2. And so on, until the candies run out on day 10. So, she gets to have all her candy back over a period of 9 days for $18. That leaves her with $7 to keep. Pretty good deal. Here is a table that I generated using excel to explain it better. You can do something similar with the exact numbers that work for your family and print it out so your children can easily understand the concept and keep track of it every day.

Day	Price per candy	# of candies for $2	Actual candies bought	Money in Hand
On Halloween	0.25			$25
1	0.2375	8.421053	9	$23
2	0.225625	8.864266	9	$21
3	0.214344	9.330806	10	$19
4	0.203627	9.821901	10	$17
5	0.193445	10.33884	11	$15
6	0.183773	10.88299	11	$13
7	0.174584	11.45578	12	$11
8	0.165855	12.05872	13	$9
9	0.157562	12.69339	13	$7
10	0.149684	13.36146	2	$7
		Total	100	$7

The beauty of it is, you can tweak it indefinitely to suit your family’s needs. For instance, if you want to teach the concept of interest, then instead of discounting the cost of candies by 5% you can let them charge you interest of 5% and let them earn more for their money. The math works out to be the same as above.

Or, you can match what they save at the end dollar for dollar, and that way entice them to give away some of the candies they don’t like. So, if they only buy back candies worth $1 a day for 10 days and have $15 left over they get to keep $30. It’s a very nice way to have them eat less candy.

Or, you can vary the price of the candies based on the calorie count. So the higher the calories, the lesser the price drops and so it will be less lucrative for them to buy back high calorie candies compared to healthier ones.

Depending on your child’s temperament you can make any number of changes. As long as you make it a fun game and not a math exercise, kids are bound to love it since they get to eat their candy and make some money too. All of it while learning the valuable lessons of delayed gratification! Small lessons like this can go a long way in protecting them in the future where credit comes easy and temptations are strong!

Get Rid of Unwanted Mail. It's Bad for your Wallet and Bad for the Environment

(This article is a part of the Blog Action Day that brings together 14,000+ bloggers from different walks of life in a global effort to increase awareness about environmental issues.)

In an earlier life, I would open every piece of mail I received in my mail box to look for coupons. And if I found a coupon that I liked I would be off shopping. I mean, what’s not to like about 20% discount at Bed, Bath & Beyond, right? Well, here’s what – I did not really need anything from Bed, Bath and Beyond! I was essentially being conned into spending for the purchase of an item that I didn't particularly care for. That is just one of the evil ways that junk mail can harm your wallet. And the evil it wreaks on the environment is so much worse!

How Unwanted Mail Costs you Money!

• They are a source of temptation to spend money.

Marketing people have spent years and years learning the human psychology to figure out how they can con consumers into buying more stuff. As mentioned above, it may be a coupon or a discount or a check for some money if you start a service etc. Or it may be catalogs with pretty pictures that instill a yearning to go buy stuff. Overall, the unwanted mail instigates a desire to buy stuff that you otherwise don’t need or think of.


• They add clutter and clutter can cost money.

If you do not immediately sort out the necessary mail from junk mail and throw away the junk mail, you will soon find your house/apartment cluttered with paper. Some important mail can easily be lost in this clutter resulting in late payments (and some hefty fees) or lost opportunities.


• Your tax dollars are spent to get rid of the junk mail you throw away.

According to the Stopjunk website, it costs 320 million of tax dollars for disposing off the unwanted mail! That’s money not spent to improve our schools, public transportation, roads and other really worthy causes. And that’s our money that is getting wasted!


• You spend precious time to sort through them and time is money.

According to the New American Dream website, Americans throw away 44% of bulk mail unopened, yet still spend 8 months per lifetime opening bulk mail. OK, those statistics could be quite hoakey and not all of our time may be spent in productive money-earning tasks, but do your really want to spend that time in sorting through junk mail or would you rather be spending it with your kids or watching TV or reading books etc?

How Unwanted Mail Hurts the Environment

• Unwanted mail = wasted paper = cutting trees unnecessarily.

According to the New American Dream website, more than 100 million trees’ worth of bulk mail arrive in American mail boxes each year – that’s the equivalent of deforesting the entire Rocky Mountain National Park every four months. According to this newsletter article an average American family receives more than a tree’s worth of junk mail every year! Each of us who has not got rid of unwanted mail is directly contributing to deforestation.


• The Energy cost of producing and disposing junk mail is exorbitant.

Not only is unwanted mail causing a lot of trees to be cut, it is wasting a lot of resources as well. If Americans receive several million tons of unwanted mail, imagine the energy used up in printing these material. And the fuel consumed to transport these to your door step. And the chemicals spent and the green house gasses generated in the process! According to the fact sheet on the New American Dream website, the production and disposal of direct mail consumes more energy than 3 million cars! That is just not worth it!


• Not all junk mail can be recycled!

Some smart dumbass marketing manager some place decided that glossy paper will entice more people into buying their product and convinced the powers that be to finance a marketing campaign that only uses glossy paper. As if that were not bad enough, they decided to use colorful ads and probably staples too. The result is that I end up with a fantastic looking catalog that I am not interested in, but cannot recycle!


• Not everyone recycles their junk mail.

Even if the junk mail was recyclable, not everyone makes the effort to recycle the junk mail. It is sad to see millions of tons of paper go directly from mailbox to trashcan to landfills after having consumed so many of environmental resources!


• Unwanted junk mail fill up landfills.

The unwanted mail that is not recycled or cannot be recycled ends up in landfills. According to the statistics on this website 40% of the solid mass that makes up our landfills is paper and paperboard waste. By the year 2010, it is predicted to make up about 48%. While not all of this may be due to unwanted mail, considering that about 40 pounds of junk mail is sent to every adult each year and approximately 44% goes to a landfill unopened, I would think junk mail makes up for a large percentage of the paper that gets into land fills.

What you can do about it.
It’s simple. If every household makes an effort to minimize the junk mail they receive, together we can stop this monster that wreaks havoc on our money and the environment.

• Opt Out of Prescreened Credit Card Offers

A joint venture of the three credit bureaus helps stop prescreened credit card and insurance solicitations from landing in your mail box. You can opt out by calling the toll free number 1-888-5-OPTOUT or online through the website www.optoutprescreen.com.


• Register for the Direct Marketing Association’s “Do not mail” list.

While there is no law at this time that requires companies to not mail you because you have registered with the “Do not mail” list, most companies recognize that if you have gone so far to add your name to the list you will likely just throw away any offers they send you. So in the interest of saving money and guarding their reputation, many companies who are part of the DMA stop sending you offers. There is a charge of $1 for this service though and the response is slow since the main database is not updated on a continuous ongoing basis. You can register online using this form.


• Turn down local coupons and fliers.

According to postal regulations, all fliers must be accompanied by an address card or an address label. This may be in the form of a post card with a missing child’s photograph or a label on one of the fliers and will likely be addressed to the “current resident” or “occupant”. This card/label will have information that will help you identify the company that is mailing out the fliers. Look online or in yellow pages and call the company directly to have your address taken off the list. Here is the contact information for three of the major flier/coupon/catalog mailing companies –

• ADVO, Inc.: Call up (888) 241-6760 or use this online form.


• Val-Pak Coupons : Call up (888) 797-1896 or use this online form.


• Abacus, Inc. : By e-mail: optout@abacus-us.com with “remove” in the subject line and name and address in the mail.



• Cancel catalogs from individual stores.

When you receive catalogs in mail, look for a customer service number and call up right away before you forget and ask them to stop sending you any more catalogs.


• Opt for E-bills and electronic statements.

Every time I receive my credit card bill or a bank statement, I find that the envelope is stuffed with a bunch of fliers and offers. This junk can be reduced by opting for e-bills and e-statements. But it may not work for everyone. If you are like us and paranoid that you might forget to send a payment without the regular paper mail reminderrs, then you may not want to go for this option.


• Unsubscribe from unwanted magazines.

Magazines are one of the biggest leaks in most people’s budgets. If you have a credit card that gets automatically charged every year, then you may not even realize that your subscription has been renewed. The magazines that you liked last year may not appeal to you now and may end up in a pile on your coffee table without ever being read. Please call the unread magazine companies and cancel your subscriptions. This way you can not only plug the money leak, you can save the environment too.


• Mention explicitly that you do not want information sold.

When you sign up for any new service or subscription, clearly write the following next to your address – “Please do not sell, trade or make publicly available”. It may or may not help, but hey, no harm trying!



• And finally, if some unwanted mail sneaks into your mail box recycle it.

Recycling is catching on in most big cities in the US. Here in Texas, there is a scheduled recycle pick up that is aligned with regular trash pick up, in most cities. Also, many apartment communities offer specially marked trash cans for recyclable items. Actually, at our previous apartment there was a recycle bin right next to the mail boxes so we could dump the unwanted mails as soon as we picked them up and have them recycled. I am not sure how widespread the effort to recycle is, but do your part. If in spite of all the steps above you continue to receive unwanted mails, try to dispose them off in a responsible manner.

More resources for learning about junk mail
If you have more questions and are looking for more information, check out these resources for more information.

• New American Dream website.


• Frugal Green News Letter.


• Smart Money Article.


• Ecocycle article.


• Privacy Rights Fact Sheet.

If each one of us does our part, we can make sure that our environmental footprint is kept small and our future generations can continue to enjoy this planet as much as we do. And saving some money in the process is a nice bonus :)

*Image Credit: Photograph by sparkyourart [via Flickr]

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~~~o0o~~~

The Best of Finance Blogosphere: The Reminders Edition

Before we go to the round up of my favorite posts from this week, here are a few reminders.

One of our own, Stephanie Collins, from the ever-interesting blog Poorer than you is among the finalists for $10,000 student blogging scholarship! Don’t forget to vote for her!

If you are a personal finance blogger please consider participating in the PF Blogs Financial Literacy Challenge. It will be great if you can contribute, if not, I hope you will help spread the word. Every bit helps!

I currently am running a giveaway of a fascinating new book called “Your Money and Your Brain” that explores the psychology of personal finance with a lot of examples, stories and surveys. All you have to do to win is leave a comment on this post.

Finally, Monday is Blog Action Day where a lot of bloggers come together to write on one common topic – the environment. If you are a blogger, consider participating in this fun event.

Now onto some articles that caught my eye on the blogosphere.

• Achieving Financial Freedom - I've Retired In My Forties @ My Wealth Builder. (This is undeniably the best post I have read this week. It fills me with so much hope, reassurance and motivation…


• 5 essential tasks to minding your online business @ Mighty Bargain Hunter. I have a major dilemma on this topic that I have been avoiding for a while. I am currently on blogger. On the one hand, it offers a lot less flexibility than wordpress and so I would love to move. On the other hand it helps me avoid hassles about hosting mentioned by MBH and my lazy ass loves not having to worry about these things. Blogger has been able to handle the couple of surges I got due to being digg’d and I love this hassle free hosting. For now, I will put off the dilemma for some more time :)


• Snowflaking – a primer @ I’ve paid for this twice already. A must-read if you are a fan of the debt snowball method!


• 5 types of credit card users @ Cash Money Life. I am a hybrid of the Max Payer and an Arbitrager. What are you?


• 6 ways you are passing up free money @ Brip Blap. Some great tips here. In addition to these tips, I use credit card arbitrage, employee stock purchase plan and services that give back (eg. realtor who gives back 1%) to make some free money.


• Fat tax @ Thrifty Penny. Boy, if there was really a tax for not going to the gym, I’d be so broke! :)


• Best and Worst Financial Decisions @ Plonkee Money. My best decision has been to invest in the 401K too!


• Willing to pay more for... @ Saving for a Home of My Own. I personally will pay more for quality.


• How to make money from merger arbitrage @ Creative Investor 101. This is some hard core stuff! I am still dipping my toes into the work of investing and find such articles so fascinating :) Some day hopefully I too will be a part of the elite investors club!


• No rush to pay off my student loans @ Money Blue Book. This is a very good read if you have student loans at low interest rate.


• Top 10 cheapest ways to exercise @ The Digerati Life. Boy, SVB just took away one of my excuses (going to the gym costs too much). Wonder how I will over come the other excuse (don’t have enough time).

Whoa, Pets are Expensive!

Here is something I overheard during lunch yesterday. I know eves dropping isn’t exactly good manners, but in my defense, these ladies were talking very loudly, and I was sitting all by myself with nothing to do, waiting for my friend to join me.

---

Lady 1: “My mom gave Vic (son?) a dog for his birthday, and its killing me!”

Lady 2: “Um… hmmm….”

Lady 1: “My apartment charges $500 pet deposit. In addition to that I spend $12 a day on doggy day care since both Tom (husband?) and I work. And today I got a call from the day care that Timmy (the dog?) had swallowed something and was coughing and dry heaving. So they took him to the vet. The vet charges $43.99 for inspecting the dog. But since Timmy was very agitated and snapping at them, they wanted to sedate him first. That would cost an additional $100. And if he has indeed swallowed something then it would cost an additional $159.99 to retrieve it. It’s crazy. I asked Tom to handle it.”

Lady 2: “You can’t be serious! That’s over $300 just because your stupid dog swallowed something? You need to get rid of that dog!”

Lady 1: “I don’t know. Vic is so attached to him. And Timmy is really very sweet and affectionate…”

---

At that point my friend arrived and I had to leave to get my lunch. But boy, was I shocked! That’s a lot of money they were talking about. When we moved into our own house, one of the first few things I wanted to get was a dog. I pestered my husband about it (and still give him a hard time sometimes), but he managed to talk me out of it saying its too much work and the dog will be “depressed” if there is no body at home all day. (I think the thought of having to pick the doggy doo was what really persuaded me though – but that’s a different conversation). After listening to the ladies today however, I am glad we didn’t get a dog!

When I came home I remembered that conversation and thought I would just check online if it really cost that much. I came across this site which has the national average vet costs. Reading this, it seems like the lady in the restaurant was actually getting away cheap :) Here are some of the costs from that site –

Gastrotomy (to retrieve swallowed object): $274
X-rays: $58 for the first, $36 for each additional
Anesthesia (per half hour): $56
Preanesthetic sedation: $23
Preanesthetic exam: $28
Anesthetic monitoring: $19

I have no idea what Preanesthetic sedation is or why it would even be needed, but boy, those costs are quite staggering. I browsed a little more and found several articles that talk about similar high costs. Wow, that’s something.

I really love dogs and would love to have one, but seriously, I doubt if I can afford one at this cost!

If you are thinking of getting a pet, be sure to think of the financial aspects among other things and make an informed decision!

If you already have a dog and love it, here are some articles that might help you keep the costs down. I understand that once you get attached to a pet, and it becomes a part of the family, you will not want to “get rid of it” or be too stingy with medical expenses. We had dogs in our house all through my childhood and I cannot imagine giving away the dogs that we had come to love because they cost too much. But I hope, some of these articles will help you find a way to keep the costs down and manage the expenses as efficiently as possible!

• 57 Creative Ideas to Save Money As a Pet Owner at the Frugal Panda.


• Outrageous Vet Bills at the Dollar Stretcher.


• Put Fido on a Budget: How to Save Money on Pet Care at Googo bits.


• 13 ways to save big on pet care at MSN Money.

"I'm Bored. I'll Go Shopping"

I can’t even remember how many times I have said that! During the last year though, thanks to blogging about money and frugality and consumerism and what not, things are a lot more under control. Here are a few things I learnt along the way about dealing with the bored-shopping syndrome.

Recognize the pattern.
Do you go shopping because you have to buy something or just because you are bored and want to kill some time? The first step to control the expenditure is to recognize the behavior!

Budget for it.
Once you admit to yourself that you sometimes shop “just because” you can be prepared for the next attack by budgeting for it ahead of time. In your weekly/monthly budget, make sure you set aside some money for “indulgence”. Remember though, just because you have an “indulgence fund” doesn’t mean you have to go shopping. If you don’t have a spontaneous shopping attack, let the money roll over to the next month’s budget.

Don’t exceed your budget.
It is OK to go indulgence shopping as long as you don’t over do it. Now that you have an indulgence fund, make sure you always stay within the limits allowed by the fund. If you think you will be enticed by the items in the store then leave the credit cards at home and only carry as much cash with you as your indulgence fund allows.

Keep a list of items you need.
During the course of the week, when you need something (eg., run out of makeup, the room freshener ran out, pillow not really comfortable, etc.) add it to a written list. When the shopping attack strikes instead of going to the mall and looking for things you can buy, start out with some of the items on the list and take it from there.

Buy gifts in advance.
I can spend hours looking for the perfect gift. So when I head out for a bored shopping trip, I try to remember if any birthday or anniversary is on the horizon. I enjoy looking for unique gifts that are customized to a person’s taste and bored-shopping trips are great times to go pick up some of these items. Recently a friend of mine got married and both she and her husband are big party throwers. So I spent a couple of trips putting together a “cocktail basket” equipped with everything from the margarita shaker to a martini mister to a cocktail recipe book to cocktail glassware etc. I doubt I could find a pre-packaged gift like that anywhere and even if I did, I doubt I would be able to fit it into the budget I had.

Hit the clearance racks.
When I have to go shopping and recognize it as an attack of the bored-shopping syndrome, and I can’t think of anything particular to buy, I tag those trips as clearance shopping trips. Any store I go to, I go directly to the clearance aisles. Only if I find a dramatic deal will I actually buy something. I enjoy deal hunting and finding a great deal that is within my budget really makes the whole trip worth it.

Finally, pick up an all-consuming hobby.
Ever since I starting blogging, I have hardly had the time to feel bored and as such my got-to-shop attacks have dramatically reduced. Every now and then, I still “need” to shop, but the damage is a much limited :)

Do you go shopping “just because”? What are your tricks to limit the damage?

Student Debt, Entitlement Attitude and Other Thoughts

I came across an interesting report titled Living With Debt: A Life Stage Analysis of Changing Attitudes and Behaviors by Lending Tree and this particular paragraph caught my eye

Like young families who view consumer credit as a reward for their hard work, college students similarly justify their elevated lifestyle demands as a reward for unpaid “work” in school. Significantly, this generationally perceived social “right” or entitlement to material goods is no longer tied to one’s current level of income or to a realistic budget that includes a savings component. Moreover, it is reinforced by college administrators and loan providers who assert that higher education is the most important investment that students will make. According to this perspective, students can and should enjoy their college social life since they will obtain a great job and salary after graduation.

The reason this paragraph stood out for me was that it could easily have been written about me while I was in grad school! As I have mentioned before by the end of two years in grad school, between our education loans, credit card debt and auto loans, we had piled on a whopping $42,500 in debt! I did my undergrad back in the home country where everyone around me was equally broke and we did not have access to credit cards. So it was normal to be a “starving student”. However, in grad school, not only was credit easily available, there was this prevalent attitude among all my friends that we would soon graduate and get high-paying jobs. So there is no need to be “starving students” anymore. In addition, both the better half and I and most of my friends had worked for a couple of years before deciding to go to grad school. And sure enough, after about a semester of struggling with the reduced income of the student life, we bounced right back into our earlier lifestyles by supplementing the difference in the income on credit. We justified that we deserved it, since we had given up well paying jobs to pursue a grad degree that would land us in better paying jobs!

Adding this sense of entitlement to the unbelievable ignorance about how credit really worked spelt disaster and it took us more than two years of completely stripped down lifestyle to get rid of our debt. Here are a few things I wish I knew then.

Separate the good debt from bad debt.
Some of the debt that we incurred, for example the education loans that we had to take out, was necessary and was in fact an investment into our future. In that sense, it would qualify as “good debt”. Since we did not go to private universities, this loan was a reasonable amount and was in fact justified based on the return on investment. But the trip to New York city that I charged to my credit card so I could visit some of my old friends or the number of gifts I took with me when I visited my family – now, that was certainly an example of “bad” debt. If I wanted to travel or buy gifts, I should have saved up for it instead of charging it to the credit card and burdening my future self to pay it off. Before accepting more credit, think if it really an investment or a dead load!

Stop being a sheep!
Everybody around me was doing the same thing. Not just people in my friends circle, but pretty much every other person on campus that I knew seemed to charge everything to credit cards. So, it didn’t even occur to us to question the complete lack of rationality of our actions. By the time we took our heads out of the clouds, the damage was already done. Stop to think – just because everyone jumps off the cliff, will you?

Take your head out of the sand.
Both the better half and I were raised to believe that debt is bad. And so when we started piling on debt, we hid it from our family. That should have triggered us to think that maybe what we are doing is not right. We should have just got our head out of the sand and seen how terribly wrong we were in the way we were handling our finances. Are you trying to hide your finances from others (other than for privacy-related reasons)?

Know how much debt you are in.
Our debt was spread out across several different accounts. So we saw it as $500 on the Citicard, $1200 on the Discover etc., but never really summed it up and saw exactly how deep we had dug ourselves in the debt pit. Also, when we looked at our debt, we completely ignored the education loans since we did not have to start paying them until after we graduated from school. The total was quite whopping! Do you know how much you really owe?

Know how long it will take to pay off the debt.
What finally triggered us to realizing the mess we were in, was when the better half started working and we started to make our first real effort to clear up the debt. Month after month, it seemed like our checks were dumped into a bottomless pit. We kept only that much of the paycheck we needed for meeting the basic necessities of life and directed the rest towards debt, but the total debt amount hardly seemed to change. I wish before we piled on the debt, we had realized how much time and effort it would require to eventually get rid of it! Use this bankrate.com calculator to see the effect of just paying the minimum amount on your credit card debt and you will surely be shaken into some action! For instance, if we paid only the minimum payment on the $42,500, it would take us 40+ years to clear up the loans, during which we would have forked over an additional $20,000 in interest payment!

If you are a student and carry any debt I hope you will learn from some of the mistakes we made and avoid making those mistakes yourself. Believe me, that iPhone that you charge on your credit card may feel cool now – but not when you have to work from 9am to 8pm every day for several months just to pay it off! I am not saying you should deprive yourself of all the good things in life. Go right ahead and indulge yourself as much as you like, as long as you can truly afford it!

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Putting My Money Where My Mouth Is

If you are a regular visitor to this blog, then you have probably heard me complain that schools don’t do nearly enough to teach kids the value of money. Well, last week an opportunity to do something about it presented itself in the form of an email from HC, the author of the blog One Big Mortar Board. HC proposed that we PF Bloggers participate in the Blogger Challenge by the charitable organization Donors Choose that hooks up donors with public school teachers. HC picked four projects that are focused on spreading financial literacy among young kids. Now it is our turn to make it a success.

The goal is to raise $1500. If we are successful at this, we can aim for a stretch goal of $2400. That covers the four projects that were originally suggested by HC. There are four more projects in the pipeline, if we manage to exceed the stretch goal as well. I sure hope we will !

I made my contribution yesterday. I hope some of you readers will consider participating in the challenge as well. Even $1, $5 or $10 can go a long way in making this campaign a success. If the projects from this challenge can change the financial perspective of even a few students, then the money donated is money well spent!

Here are the other bloggers (that I know of) who have made a pledge so far -

• HC @ One Big Mortar Board.


• Flexo @ Consumerism Commentary.


• Mapgirl @ Mapgirl's Fiscal Challenge.


• Single Ma @ Single Ma's Fabulous Financials.


• English Major @ An English Major's Money.

Together, we can make a difference!

10 Steps Using Which Even a Lazy Person Can Be a Millionaire

A million dollars is a lot of money. And generally the perception is that you have to work very hard to have a million dollars to your name. You need to pick up new degrees, new skill sets and work 100 hours per week. I agree. All that certainly helps. But if you are a content soul that finds life is most enjoyable when you can just go to work in the morning, come back in the evening and hang out with the family or veg out in front of the TV/Internet, then here is some good news for you. Follow the steps below, and you can still be a millionaire without overarching yourself or burning yourself out. All it takes is some patience and some change in everyday habits.

Part 1 has a summary of steps that you can skim through if you are in a hurry. Part 2 has a detailed example that shows it can really be done with as little as $200 per month and practically no effort. By the way, if you are looking for a get-rich-quick scheme, you should probably stop reading now. This here, is an outline of the good old time tested slow-and-steady approach.

Part 1: A quick summary of steps

1. Start early

Put the power of compounding on your side. The earlier you start the more time your money has for compounding. When you can have interest earning interest, you would be surprised by the way in which little amounts of money can turn into large fortunes.


2. Don’t ever turn down free money

Be it your employer offered 401K match, employee stock purchase options that offer immediate 10-15% returns, bonus for using one realtor versus the other when you buy a home, cash back on credit cards etc. I could go on and on, but you get the picture.


3. Make savings automatic

We are human and if things were left to us to do everything on our own, we would still all be stuck in the Stone Age. Just as we trust everything else in life to automation, put your savings on auto mode too. Make sure that every month, before your paycheck is delivered to you, a part of it is deposited into a savings account.


4. Invest wisely

If your money sits in your bank, then over the course of time due to inflation, it actually shrinks instead of growing! So choose your investment vehicle wisely, preferable something like the stock market or real estate which can offer you a growth percentage that is much more than the inflation rate. And a quick reminder – don’t get too greedy and gamble away your money on high risk investments.


5. Plan for everyday expenses

Be sure that you have planned for your everyday expenses in such a way that small variations will not force you to abandon your above savings plan. People use all sorts of budgeting with different degrees of granularity. Pick the one that works for you.


6. Be prepared for unexpected expenses and emergencies

The steps above can help you start building a nest egg. But, life has a way of throwing curve balls at you just when you start to get comfortable. And at such occasions, if you have to dip into your nest egg, you wipe out the benefits of compounding and your nest egg will never get a chance to grow exponentially. So make sure you have a separate fund to deal with all sorts of small and large unexpected expenses and emergencies.


7. Live below your means

Make sure you manage to live within your means. This doesn’t mean that you start depriving yourself and not indulge in any of life’s fine things. It just means that you prioritize your indulgences and give into only those whims that offer you the most pleasure and are things you can afford. Before you spend your money think if it is something that will bring you or your family joy or if your are just doing it to show off to your friends and relatives.


8. Avoid consumer debt at all costs

If you have a great offense but your defense sucks, you will still not be able to win many matches. Same thing applies to your financial plan. Unless you beef up your defense against consumer debt such as credit cards debt, auto loans etc., you will find it hard to reach your financial goals.


9. Stop the money leaks

Look at your personal life – do you have any weak spots that are causing money leaks? These could be harmful addictions such smoking, alcohol, drugs etc. or harmless ones such as addiction to buying the latest CDs, books, shoes whatever. If it is something you do compulsively and is draining your bank balance, you should look into plugging them or at least getting them under control so the little leaks don’t turn in to gushing money drains.


10. Build up equity, set up streams of passive income etc.

Finally, in addition to the money you are saving make some provisions for yourself as you retire. Buy only as much home as you can afford and pay towards equity instead of rent, so someday in the future you can have a roof over your head without paying either rent or mortgage. Set up a stream of passive income to help you retire early or enjoy additional indulgences while you get there. While setting up additional income streams will in general need you to do some additional work, there are a few lazy options like investing in dividend yielding stocks or funding an energetic friend’s upcoming startup :)


11. Bonus step: Eat and live healthy

This is really not obvious, but if you don’t take care of your health today, then as you grow older, a lot of that money you are saving will go toward paying your medical bills. Try to eat a balanced diet and incorporate some exercise in your daily routine. If you can go to the gym, great. If not then choose walking instead of driving, stairs instead of the elevators etc. Small changes can pay off huge dividends in the long run – both in your and your bank balance’s ability to live long and healthy lives.

That’s all it takes to make a million dollars. Those of you who are skeptical and don’t believe that you can do it (for any number of reasons), let’s work through an example and see if I can convince you.

Part 2: An Example

Step 1 says start early. Let’s say you start at 25. If you can start earlier – that’s great. If you are starting a little later, make suitable adjustments to the numbers in the following steps (which as you can see have a lot of leeway) and you should still be able to make it.

Step 2 says not to turn down free money. I am sure over your lifetime you will find a zillion different ways to get some free money. But for this calculation here, let’s focus on the 401K match from the employer. For ease of calculation, let’s say you save $100 every month in your 401K and get a match of $100 from your employer. These numbers are obtained assuming a salary of 40,000 a year and an employer match of 3% - if you earn more salary or can get a better match, you should increase your contribution.

Step 3 says make savings automatic. Say you set up an automatic deduction from your paycheck and put away $100 every month towards savings. Remember this is just an example. Depending on how soon or late you start and how your personal financial situation is, you should be able to tune that number to suit your needs.

Step 4 says invest wisely. I don’t want to give out investment advice but if you want a lazy way out, pick a reliable, diversified mutual fund or ETF such as a target retirement fund. These funds are usually a diversified mix of funds with the aggressiveness balanced based on your risk tolerance which in turn is calculated based on how close to retirement you are. Let’s assume that there is no severe recession or gotchas in our lifetime and we can get the average 8% returns over the long run, which is about what the stock market has been able to give over the past 20 years or so.

Using this calculator, you are already at a little over million dollars when you retire at 65! By just saving $200 per month and availing $100 from your employers 401K match you can become a millionaire!

Steps 5 and steps 6 will make sure that you can meet the financial requirements of your every day life without having to dip into the nest egg above that is on its way to a million dollars. Note that the main reason that just $300 per month allows you to become a millionaire is that you allow for the interest to earn interest in a continuous cycle. Having a budget and an emergency account is crucial to let your nest egg snowball into a fortune.

Think of steps 7 through 9 the protective casing they use for selling eggs in the grocery store. Your nest egg is fragile and there are a zillion things out there that can crack it. Living frugally, avoiding debt and plugging money leaks can offer some protection and cushion to make sure there isn’t an unnecessary pressure that will crack your nest egg.

Finally step 10 and the bonus step is that make sure that when you do retire as a millionaire, you can continue to enjoy the life of a millionaire :)

Remember that the example above assumes you can only save $200 per month beyond your everyday obligations and building the emergency account. If can manage to save more, imagine how much money you can have and how much sooner!