Holiday Incentives

Many traditional retailers are offering incentives on financing. Just what a nation that has lived on credit for the last ten years needs – more debt. I do believe that the main stream media, with a the constant barrage of negativity toward the economy, has scared the average person into saving more money. (The only good thing the media has accomplished over the last few months.)

Some recent statistics show that many Americans are not taking on any credit card debt this holiday season and that is certainly something that has changed from recent years. With mortgages getting harder to qualify for, the importance of a good credit score has finally hit home with American consumers.

Many consumers have also said that they are planning to spend significantly less money this holiday season overall. Again, a profound change from the overspending that plagued recent years.

Will this Be  Lasting Change?

One has to wonder if these changes will become habits that will last and be ingrained in the generation like the spendthrift and frugal survivors of the great depression era, or if the ideals of the recent “have it now” ideology will return with a vengeance at the end of this economic downturn.

I must say that I personally do not know which one is the lesser of the two evils? There must be a reasonable balance between spending and saving that will both benefit the economy and businesses as a whole and the individual. That is the balance that we seek as a society.

Today’s Investors Will Benefit

I am certain that this economic downturn will offer today’s young investors, who continue to buy stocks, an opportunity at wealth in their later years.

No matter how much money you spend this holiday season, I urge you to not only look in your favorite stores, but look at them as well. Who knows, the best bargain you find this season may be that beaten down retail store stock you’ve always shopped at!

According to them, the financial industry, with its ostensibly objective online calculators, overstates how much money someone will need in retirement. Some, in fact, contend that financial firms have a pointed interest in persuading people to save much more than they need because the companies earn fees on managing that money.

The more realistic amount could be as little as half the typical recommendation made by Fidelity, Vanguard or any number of other financial institutions.

For a middle-income couple, that could mean trading $400,000 in retirement money for about $3,000 a year more during prime working years to spend on education or home improvement. For a middle-class household, that’s a lot of money, said Laurence J. Kotlikoff, a Boston University economics professor, who is on the forefront of this research into spending and savings, and is selling his own retirement calculator.

Andrew Behla is a case in point of someone who is not saving enough. Mr. Behla, a Los Angeles graphic designer and consultant, is at age 38 just starting to think about retirement. He and his wife, Michele Krolik, a payroll manager, together have just $70,000 squirreled away for their old age.

I think we will have to save a lot more, he said, a point on which the economists and the financial planning industry would agree. Even so, the couple recently bought a house and put extra money they had into improving it, figuring that over their lifetimes it will add handily to their net worth.

But other people like Beverly Alexander, 49, an energy consultant in Marin County, Calif., might be able to slow down. Her financial planner has her retirement finances mapped out to age 105 (her parents are still alive in their 90s), a plan that gives Ms. Alexander, a former utility executive, the freedom to quit her corporate job and live on her consulting income.

One reason I could retire, she said, was that I saved and I always lived below my means.

The findings of the economists are being met as most challenges to orthodoxy are: with stony silence or extreme umbrage.

I count myself as deeply skeptical, said Christopher Jones, the chief investment officer at Financial Engines, a financial planning software company.

The big financial services companies refused to comment on the research but they did say that their use of simple rules of thumb keeps the process of retirement planning less complicated, and thus, less daunting.

After the recent events in the market, we might be hard pressed to find anyone who thinks they have saved too much for retirement.
Nevertheless, I think the key factor in the entire article was the quote from M. Alexander who simply stated the most basic tenet of financial success…”I saved and always lived below my means”.

I don’t think that we need a “professor” to tell us that!

Putting my personal ideas of ”cheap” and ”frugal” aside, I’d like your opinion on whether or not I crossed the line on this one.
In the interest of fairness, let’s visit Wikipedia to get neutral definitions for both terms.

Cheap: Wikipedia re-directs the word “cheap” to Miser

A miser is a person who is reluctant to spend money, sometimes to the point of forgoing even basic comforts. The term derives from the Latin miser, meaning “poor” or “wretched,” comparable to the modern word “miserable”.

Frugal:

Frugality includes the reduction of waste, curbing costly habits, suppressing instant gratification by means of fiscal self-restraint, seeking efficiency, avoiding traps, defying expensive social norms, embracing free (as in gratis) options, using barter, and staying well-informed about local circumstances and both market and product/service realities.

The Scenario

Yesterday my office had a guest speaker in during lunch hour to discuss a product that we have been under utilizing in our office.  It was very apparent that the product provides the company with significant revenues and provides great value to a certain number of our clients.  One of the rare instances that these “learning” sessions provide significant value.

Due to this session being held over lunch hour, the company picked up the tab for lunch and had sandwiches and refreshments delivered to the board room for the meeting. We all enjoyed the food and refreshments as well as the information that was delivered during the meeting.

Honey, Supper Is On Me Tonight

At the end of the day I noticed a few sandwiches left over and asked our administrative assistant what she was planning to do with them. When she responded that they were likely going to be thrown away, I asked (maybe too quickly) if I could take them home.

To make a long story short, my wife and I enjoyed sandwiches (me for the second time that day) for supper yesterday evening.

It wasn’t until after we finished eating that I told her how I had obtained the sandwiches, to which she responded “you are soooooooo cheap”!
(Expletives have been removed in the interest of good taste)

I pose this question to you

Did I cross the line from being frugal to being cheap?

Tell me your cheap vs. Frugal stories or leave a comment and let me know if I crossed the line.

My wife and I made our weekly trip to the grocery store last evening.  We normally shop for groceries on Sunday evening, but this week was different.

It is important to take advantage of sales on items that we purchase on a consistent basis, especially those that do not spoil.  The Simple Dollar has a nice coupon strategy for this type of shopping that can often allow you to get items for free by using multiple coupons on a sale item.

No Tax!

Yesterday evening from 5:00-9:00 PM our local grocery store was having a no-tax sale.  This even happens maybe a couple of times per year and we always make sure to take advantage of it.

Our grocery store also has a gas program whereby each gas purchase gives you $0.05/liter in store coupons.  We have been saving these coupons for the last couple of months in anticipation of the no-tax sale.

When we heard that the no-tax sale was coming up, we made sure to add up our gas purchase coupons and search for additional coupons on staple food items during the month prior to the sale. (See coupons.com etc.)

With the arrival of our new baby, we have been intensely developing a price list at several stores for essential items such as diapers, baby wipes and baby clothing.  We buy most of our baby clothing used from a local classifieds site or garage sales, but diapers and wipes are constantly on our watch list and my wife is always getting diaper coupons in the mail!

The Perfect Savings Storm!

With crippling gas prices hitting the nation, even my household with our two gas-sipping Honda’s is starting to feel the pain!

Enter the best coupon we’ve had to date!

We just received a coupon in the mail last week that offers double the cash back on one fill per month from our grocery store gas bar.  Sweet!  That means instead of $0.05 per liter of gas, we will get $0.10/liter for one fill only.

Knowing that the no-tax sale was coming up, drove both of our vehicles until they were bone-dry and proceeded to use the double savings coupon.

I know what you are thinking- “I thought you said it was only good for one fill”?

The coupon actually states that it is good for one gas “purchase”.  So, without hesitation I filled both vehicles from the same pump so that it read one transaction of ~88 liters, or $8.80 of store credit.

I view gas purchases as somewhat of a necessity, so the additional $4.40 in grocery store credit was certainly worth it to me.

Adding Up The Savings

When all was said and done, our grocery bill shrunk substantially from $86.48 all the way down to $53.11.

A savings of $33.37 just by using some simple planning and being aware enough to combine a few savings strategies into one shopping trip.

One of the many complaints that I hear about people who don’t use coupons is that it takes too much time in comparison to the savings that can be had.  While I did not count the minutes that it took to decide on the choices to make in order to make this shopping trip, I highly doubt it exceeded $33.37 worth of my time.

Do you have any favorite money saving tips or tricks?  If so, please leave them in the comments…I’m always up for saving a few bucks!

• Update estate plan and will
• Increase life insurance policies
• Start education savings plan for child
• Increase monthly expense budget
• Increase emergency cash fund

Where To Start?

The biggest thing on my list of to-do items was to increase the amount of money that we saved in our ING Orange Savings Account cash reserve fund each month.

The reason that this was the most important thing was because the money in a high yield savings account could be easily re-directed where it was needed most. There were several larger items that we had to purchase. We tried to purchase the majority of the required items second hand (except for a car seat for safety reasons).

In addition to physical items for the baby’s care; we also had to do some minor renovations to our house such as painting the nursery room, decorating and updating the air exchange system. All of these require cash!

New Financial Territory

While I am OK with the increased spending due to the addition of another member to our family, it is very unfamiliar territory to me financially. Because it is such new territory for our family, we are going to begin tracking our monthly expenses even more closely(using Quicken) until we can determine the actual additional requirement. Prior to that, we have decided on a relatively arbitrary amount to add to our cash reserve.

We decided to add an additional 5% of our net income to our emergency fund due the arrival of the baby. This figure was arrived at by using a rough estimation of the added cost of the baby’s essentials to our own essentials. Of course everyone has a different interpretation of “essentials”, but I am still wondering if this amount is enough?

I will certainly find out how close my estimates have been after a couple of months of tracking the expenses in our new catgories…What do you think of my estimates?