Free Money Finance

The Key to Successful Negotiating

In this article on how to get rich, I found a very useful comment:

I absolutely promise you, in every serious negotiation, the man or woman who doesn't care is going to win.

I couldn't have said it better myself.

What he's really talking about is "walk away power" -- the ability of the potential buyer to simply walk away from the deal if it's not good enough. If you literally don't care about a deal/sale/whatever (or at least don't care so much that you HAVE to do the deal), you have a great advantage in negotiating terms, price, and so on.

So, how does this work in practical application? Here are a few examples:

• If you're willing to walk away from buying a car, you can get a great deal (worked for me TWICE within a six-month period in 2004 when I bought two cars).

• If you're willing to walk away, asking for a discount is much, much easier (check out how this works when negotiating cable rates).

• If you're willing to take/find a new job, it makes it way easier to get a raise (though you have to be careful with this one -- you don't want to appear to be holding them for ransom).

• For us, this is also playing out in the housing market as we look for a new home. Since we're emotionally detached during the buying experience, we have a great advantage when it comes to dictating price (though it hasn't gotten us that far yet.) :-)

How about you? Have you ever saved a ton by simply being willing to walk away from a deal?

Don't Let Shipping Fees Sour a Good Deal

Here's a reminder from Consumer Reports not to let shipping fees sour a good deal. He didn't go exactly where I thought he was when the piece started, but it made me think of a situation I ran into this past Christmas and how I almost let "high shipping fees" keep me from a good deal.

I was looking for a hard-to-find video game for my daughter. I saw it at a local store for $19.99 (a good price from what I found online up till then), but she was with me so I couldn't get it then. A few days later I went back and they didn't have it. It was a "classic" game and they rotate those in and out on a random basis. I'd missed my chance.

So I went to Amazon to see what they had to offer. To my surprise, they now had a copy of it online -- and for only $9.99!! Sweet!! However, there was a catch. The product wasn't from Amazon directly but from one of the many "stores" that sells through Amazon. As such, I couldn't get my free shipping for ordering over $25 -- I had to pay the store's shipping rates. And they were charging $7 to ship it to me (yes, this rate was the lowest-priced option.)

I was outraged! $7 of a $10 video game? No way! What crooks! They were trying to rip me off! There was no way I was buying from them, so I logged off and decided to look for other avenues to get the game.

Now at this point I'm sure you've already seen what it took me a couple days to figure out. Once I calmed down, I realized that the $9.99 plus $7 shipping was a better deal than what I was prepared to pay at the local store (especially when you consider I'd have to pay tax locally.) But I had gotten so worked up over them trying to rip me off with the high shipping fees that I lost perspective. I went back to Amazon, found the video, ordered it, and received it a few days later. My daughter loved it when we opened it on Christmas.

So here's a reminder of a basic shopping tip: consider total price of a purchase and don't let one out-of-whack component (like shipping) make you pass up a good deal.

Five Times Haggling is Likely to Pay

Following in the spirit of my post titled Six Times It's Easy to Ask for a Discount, Smart Money has a piece on five times haggling is likely to pay. Here's their list as well as how you can save in each area:

1. Medical bills

• Doctors, labs and other medical providers are often willing to negotiate, with both uninsured patients and those whose insurance only covers a portion of their health expenses.

• Pay cash upfront. Doctors may offer you the same low rate that they charge insurance companies, if not an even cheaper fee if you agree to pay them at the time of the appointment.

• Compare costs. Check your provider's rates against those of other doctors in the area.

2. Retail stores

• Point out flaws. Floor models, sale items and products with visible damage (like a scuff or missing button) are ripe for discounts.

• Be flexible. Substantial flat-out discounts aren't always possible, so ask about extras such as free shipping or an extended warranty.

3. Cars

• Incite dealer competition. If you're buying a new car, collect quotes from local dealers.

• Assess market value. Buyers should use sites like Kelley and Edmunds to estimate the used car's value, then talk up the factors they don't like (i.e., not the ideal color, too many miles) to work down the price.

4. Financial aid

• Leverage competing offers.

• Ask for a reassessment if you encounter financial hardship.

5. Tag sales

• Go late. Early on in a sale, vendors have little incentive to haggle.

• Bring small bills. Exact change makes it easier to enforce your maximum price.

Here are a few thoughts from me:

1. Overall, good ideas/tips.

2. Many of the suggestions are the same or similar to those I listed in Six Times It's Easy to Ask for a Discount.

3. For details on how to save a bundle on a car purchase, check out Buying a Car Using the Web.

4. For a larger list of how to save money (as well as how to earn more), read How to Make Money and Save Money.

5. #5 is hit and miss. Yeah, if you go late you can likely get a great deal, but oftentimes there's nothing left that you want.

Seven Ways to Avoid Buying a Used-Car Lemon

When we buy a car, here's what we do:

• Save up for it in advance -- starting when we buy the previous one for cash
• When our current car gets to the point where it's getting unreliable, a pain to fix, and/or costly to repair/maintain, we identify which models we might be interested in
• We check out Consumer Reports to see which of our favorite models have good reliability
• We test drive all of the cars from our list that Consumer Reports likes
• Once we decide on a model we want to buy, I head to the web to do any final research and start the buying process
• While negotiating, I use a variety of tactics to get the best price possible
• When I pick up the car, I make sure they don't try to tack on needless costs
• I pay cash for the car -- and start the savings process all over again
• I drive the car until problems/issues arise (which is usually 7-10 years), and then start the process all over again

Now I know that you can save a good amount by buying used cars, but I'm not mechanically minded and don't want the time, hassle, potential "lemon" problem associated with buying a used car. But I know many of you do buy used and many more would like to. For all of you, Bankrate offers some thoughts on how to avoid buying a used car that's a lemon as follows:

• Get a CarFax report.
• Beware of cars with out-of-state titles.
• If you're looking at a 4-year-old Ford, for example, copy the vehicle identification number and take it to a Ford dealer and ask if they will run the service record through their computer.
• Beware of cars with no records of oil changes and other routine service.
• Look for evidence of major body or paint work.
• Pull up some of the carpeting and look for sediment or signs of mildew.
• Here's an oldie but goodie: Check for excessive wear in the rubber brake pedal pad.

They end with another bit of useful advice:

Lastly, if a deal on a used car seems too good to be true, it probably is. Even in a bad economy, no one is going to give away a car that's worth $6,000 for $3,000.

Ok, all you used car buying experts out there -- anything else to add?

Generic Prescription Drugs Can Save You a Boatload of Money

I've talked a lot about using generic/store brand products instead of name brands in order to save a bundle of money. We do this all the time -- especially on over-the-counter medicine. Well, a new study shows that in at least some cases (it focused on heart issues), the same can be said about choosing generic prescription drugs versus their name-brand counter-parts. The summary of the study:

There is no evidence that brand-name drugs given to treat heart and other cardiovascular conditions work any better than their cheaper generic counterparts, U.S. researchers said on Tuesday.

Ok, so what does this mean to your pocketbook?

"Brand-name drugs for cardiovascular disease can be as much as a few dollars a pill, whereas generic drugs might be as little as a few cents a pill," Kesselheim said.

Let's say you take one pill a day. If the name brand is "a few dollars a pill", let's assume it's $3 per pill. And if the generic is "a few cents a pill", let's assume it's $0.10 per pill. So for a one-year period, the choice is to pay $1,095 or $36.50 for something that has the same level of effectiveness. Now, which one do you think is the better deal?

Should Vegetarians Pay Lower Insurance Premiums?

We've discussed how people at the right weight and non-smokers pay less in insurance premiums because they are generally more healthy than those over weight and people who smoke. Seems fair to me -- you have less of a chance of needing insurance, so you should pay less for it, right?

So when US News asks if vegetarians should pay lower insurance premiums, it's a valid question. Of course there are issues like how to enforce such options, but if it's true that vegetarians are less likely to need insurance, shouldn't they pay lower rates? Personally, I'm ok with it (though I'm not a vegetarian). What do you think?

BTW, I'm not going into it in this post, but the issue of people who choose to lead less-than-healthy lifestyles and the cost of their medical care/insurance is a HUGE issue to consider as the U.S. looks at national health care. I'm fine with people doing whatever they want to do (smoke, eat like pigs, etc.) as long as they're paying for it. But if I'm going to pay for it, I think it's reasonable to ask them to do their part and maintain their weight, stop smoking, etc. I'll talk more about this issue as Obama gets into office and we start seeing his specific proposals for health care reform.

An Easy Way to Save When Shopping?

I recently found this fact in Parade magazine:

People buy roughly 30% more items when they shop with a big cart than when they don't.

So, what's their suggestion? A simple one:

Avoid a shopping cart altogether and use a small basket with handles.

Now I'm not 100% sure that "having a big cart" causes you to buy more (maybe people with big lists simply select big cart because they know they'll need them.) That said, I know it's a LOT easier to slip a few extra items into a cart than it is to carry one more thing if you have no cart.

What do you think -- is this a real money saving tip or a case of stats gone bad?

Gas Savings of Smaller Cars Eaten Up by Higher Insurance Costs

Back when gas was $4 or more per gallon, everyone was clamoring for smaller cars that got great gas mileage. Now that gas prices have dropped big-time, the fickle American consumer will probably forget about the "crisis" and go back to buying big gas-guzzlers. But that's for a different post.

What I'd like to highlight is the fact that those people who moved from larger cars to smaller ones to save money might actually not save much (if any). The reason: insurance costs for smaller cars are much higher. Here are the highlights from a recent Wall Street Journal piece on the issue:

Small cars generally cost more to insure than larger ones because they're involved in more accidents and incur bigger claims, especially for injuries. That's true regardless of the driver profile, though younger and less-experienced drivers tend to buy smaller, cheaper cars.

A 40-year-old male driver would pay an average of $1,704 to insure a 2009 Mini Cooper that gets 37 miles per gallon on the highway, according to a study by Insure.com, an online insurance broker. That same driver would pay only $1,266 -- a difference of $438 -- to insure a Toyota Sienna Minivan, which gets 23 mpg.

Similarly, a Honda Civic compact that gets 36 mpg on the highway costs $412 more a year to insure than a Honda CR-V, a small sport-utility vehicle that gets 27 mpg.

After soaring earlier this year, retail gasoline prices have lately been tumbling, making the higher insurance costs for smaller cars even more of a consideration. Alternative-fuel vehicles in general are even more expensive to insure, though several insurers offer discounts for hybrids. In this case, the main culprit is higher repair costs.

Here are my comments on these thoughts:

1. I'm surprised I didn't see an article like this during the time when gas was going up. All we heard about was the cost of gas and how people were moving to more gas-efficient vehicles. Why didn't someone point out that smaller cars lost much (or all) of their cost advantage when insurance was factored into the equation?

2. There are some reasons people may be ok with a break-even cost comparison -- like maybe they want a smaller car because it's better for the environment.

3. That said, there are also reasons people choose larger vehicles -- like safety and comfort.

4. In the Mini Cooper versus the Sienna comparison above, the Mini Cooper has a $438 disadvantage in insurance costs. If you drive 12k miles a year and gas is $2 per gallon, the Mini Cooper will save you $395, so it's a wash. Of course, if gas is $4 a gallon, the Mini Cooper is a much better deal (saving you almost $800 a year in gas.) Then again, this is a pretty broad range in gas mileages -- 37 mpg versus 23 mpg. It just shows you how much of a spread there needs to be and how high gas prices need to go before gas savings overcomes insurance costs (at least in this case.)

5. When the mileage difference isn't as large, it's even harder to re-coup the higher insurance costs. In the Civic versus the CR-V comparison above, the Civic has a $412 disadvantage in insurance costs. If you drive 12k miles a year and gas is $2 per gallon, the Civic will save you $222. Even at $4 per gallon, the Civic barely covers the insurance increase (it saves you $444 in gas.)

6. Of course, there may be some smaller, more gas-efficient cars that get decent mileage and don't have insurance costs that are that much higher.

7. The bottom line is that we need to consider ALL costs in operating any vehicle as part of the buying process (including expenses we haven't discussed here like maintenance costs).

Ten Ways to Save This Holiday Season

US News lists ten ways for retirees to downsize holiday spending, but most of these suggestions can be used by anyone (not just retirees). Here's their list:

• Frugal gifts.
• Hunt for deals.
• Fewer gifts.
• Travel digitally.
• Donate time.
• Regift.
• Downsize the party.
• Go gift free.
• Gifts for kids only.
• A gift pool.

There are some decent money saving suggestions here for those of you looking to save a bit this holiday season.

We're not really doing anything different from a spending standpoint this Christmas. Our budget has been about the same for the past four or five years, and we're sticking with it. Seems like we do always add one or two people to the list each year, but one or two drop off as well, so it's usually a wash.

How about you? Anyone cutting out gifts, making versus buying, limiting your list, or something similar?

The Oldest and Often Most Effective Way of Saving Money

What's the oldest and one of the most effective ways of saving money? Simply asking for a discount. US News reminds us of this and gives the following thoughts:

To get the best deal possible, we followed the golden rule of negotiating: Just ask. Simply saying "Could you give me a discount on that?" knocked a couple dollars off each purchase, from jewelry to food.

After buying a salmon dinner and two pairs of earrings for a total of $20, the camera crew and I visited a woman who was trying to get a better deal on her homeowners' insurance. It had gone up by about $20 from the previous year and she wanted to see if she could persuade Allstate to lower the price. So, once again, we called, she asked, and they said yes—they knocked $12 off right away, and offered a bigger discount if she also purchased her auto insurance through the company.

As most of you know, I'm a big fan of asking for a discount since it can save you a good amount of money on all sorts of goods and services. And for those of you nervous about asking a seller to take a bit off, start of with these six times it's easy to ask for a discount. They'll get you off to an easy start. Then you'll have some early success and build confidence, and before you know it, you'll be asking for discounts all over the place! ;-)

How to Save Money on a Digital Photo Frame

A reader left this great money saving idea on my post titled Thoughts on Digital Picture Frames:

I actually made one from a few laptops that my office was trashing. Great quality, high resolution, 10GB of pictures and a 17" screen to boot! All I did was disassemble the laptop, flip the screen around (like a tablet PC) and mount it in a shadow box with a custom matte. All-in-all I only spent about $15. A great use for that old laptop you have laying around. My wife, the decorator, even approved! There are a few DIY instructions out on the web and I would be happy to answer any questions if anyone wanted to give it a shot. I have a few pics of the finally product as well. Definitely the frugal alternative to a 9" $150 version.

Good idea, huh?

Does Everyone Really Have Cable TV?

Recently I saw that the BCS games were moving from Fox to ESPN. In commenting on this move, Sports Business Radio made a statement that caught my attention:

But for all of the people who are griping today about the fact these games won't be aired on free TV starting in 2011 I have three words for you - GET OVER IT.

I mean really. How many people out there don't have cable? Even basic cable with ESPN. The days of free TV and cable TV being different are over. If you don't have cable/satellite TV you are definitely in the minority.

Really? The way they write this makes it sound like three people out there don't have cable TV. So I went googling and found out the answer (basically) to their question -- 20 million fewer homes get ESPN than receive the major broadcast networks.

Ok, so it's a bit more than SBR seems to think. But this led me to start thinking -- is having cable TV a "basic service" in today's home? Does "everyone" have it (or will "everyone" soon have it)?

Then I got curious -- what does the average person spend on cable TV each year (PDF)? It's not a trivial amount:

Cable customers report spending $58 monthly—down $1 from 2005—while satellite subscribers report spending $61 per month for service—up $3 from a year ago.

In other words, the average cable subscriber forks over almost $700. Think it's a good deal? Oftentimes it's not. Why? Because many people don't actually watch that much TV and as a result, cable TV becomes as expensive as going to a movie when viewed on a per-hour-watched cost basis.

We're currently looking at basic cable (we currently have no cable TV, just rabbit ears) as part of a TV, phone, internet deal. It's pretty clear that we can get more phone time and a faster internet connect versus our current set up by bundling these two together. However, we're deciding whether or not to add the cable as part of the package. On the plus side, we'd get ESPN and similar channels. On the down side, do we really watch that much TV -- and do we want the extra expense?

Decisions, decisions.

Be Careful of Car Dealers Trying to Add on Needless Sales

I'm always fascinated by car buying stories, especially when a dealership tries to pull the wool over the eyes of a knowledgeable buyer. In this case a Bankrate writer specializing in car buying advice gets a new car for his wife and in the process the dealer tries to sell him:

• An extended warranty
• A four-year "service package''
• Wheel and tire insurance
• LoJack theft protection
• Paint protection
• Leather conditioning

Here are his thoughts and advice to those thinking of buying a new car now:

If I had given in on even half of these items it would have added thousands of dollars to my purchase price. In the end, I got the deal I wanted, but I had to endure a nearly three-hour process to close a deal that was essentially a cash transaction for the dealer.

The lesson here for other buyers is that with sales way down, dealers are going to be even more aggressive to bolster the bottom line with add-ons.

Buy an add-on if you see some value in it. But be aware that for most of these add-ons, the only person who benefits is the dealer.

My experiences have been similar to his. In general, dealers try to add on anything they can (much of which is a questionable purchase at best) in order to increase their profits (don't believe me, check this out.) Of course, many businesses try to do this. However in this case we're talking hundreds or thousands of dollars in added on expenses, so you have to be very cautious and diligent when these products and services are pushed on you.

I have an interesting, though different experience of a dealer trying to jack up costs on a buyer. When I bought my Subaru, I set the price with the salesman and then went in to close the deal. When I saw the paperwork, he had added a $300 "advertising fee." I asked what that was for. He said it was the advertising cost the dealership assigned to every new car and told me that "everyone pays this." I pointed out the irony of me having to pay for advertising that was designed to get me to buy from them, then told him I wasn't going to pay it. He said I had to. I said I didn't and either he'd remove it or I'd walk and buy elsewhere. He removed it. But if I hadn't been paying attention or if I'd been less firm, that would have been an easy $300 in his pocket.

Sheesh! The things we all have to go through just to buy a car!

How Americans Are Cutting Back

This Wall Street Journal article on store brands also contains a chart of how Americans are cutting back on their spending during this rough economy. Here's the list along with the percentage of people surveyed that said they were cutting back in each of these areas:

• Eat out less often -- 61%
• Buy fewer prepared meals at grocery stores -- 50%
• Try to make cleaning products last longer -- 49%
• Go to spas/hair salons less often -- 45%
• Buy fewer convenience foods/eat more from scratch -- 43%
• Do more at-home beauty treatments -- 32%
• Share more products across household members -- 25%

We've been on the "frugal" end of the spending spectrum for quite some time, so we never did much eating out, buying prepared meals, etc. As such, we're not really doing much different. That said, we are holding off on some purchases -- thinking that there will be sales galore in the months to come.

How about you? How are you cutting back (if at all) these days?

The Cost-of-Living in the Cities I've Lived In

As most of you know, I've suggested quite often that one way you can impact your net worth positively is to live in a lower cost-of-living city. So I thought it would be fun to look at the cities I've lived and worked in (I'm putting them in alphabetical, not chronological, order) including a couple internships I had that were on the "higher end" of internships.

So I went to Sperling's Best Places and used their cost of living calculator. A score of 100 is the national average -- that this particular city is equal in cost to an average US city. A score below 100 means that the city has a lower cost-of-living than average (for example, a score of 80 means the city's cost-of-living is 20% lower than the average US city) and a score above 100 means that the city has a higher cost-of-living than average (for example, a score of 120 means the city's cost-of-living is 20% higher than the average US city). With that said, here's a list of the cities I've lived in and their cost-of-living scores:

• Cincinnati, OH -- 80
• Grand Rapids, MI -- 83
• Indianapolis, IN -- 75
• Nashville, TN -- 89
• Pittsburgh, PA -- 84
• Washington, DC -- 166

A few thoughts on these:

1. See, I practice what I preach. ;-)

2. The most expensive I've ever lived in was DC -- but that was just for a summer (thank goodness.) I loved the city (lots to do) but it was very, very expensive. I paid more for a small apartment (with a roommate) back then (20 years ago) than I would now on a $300k mortgage! Yikes!

3. One of the arguments people have for living in more expensive cities is that they can make more money. I have two responses to this: A. Living in smaller cities hasn't stopped me from making a good income and B. Yes, on average, you'll make more money in larger, more expensive cities. But living there will cost you way more than you'll make in a higher salary.

4. Living in these cities has helped me save a BUNDLE throughout the years and, as such, helped me accumulate a decent net worth.

5. I'm sure many of you will hate this advice. ;-)

6. Obviously, you're free to live where you like (and doing so is one of the freedoms of choice we have in our finances.) I'm just pointing out the impact of these decisions and submit these thoughts for your consideration.

If you like, give your city a run-through of Sperling's cost-of-living calculator and see what it comes back with. Then come back and share your results in the comments below.

Six Ways to Save on Pet Costs

The following post is from Dr. Scott Line, associate editor of the The Merck/Merial Manual for Pet Health. Note: The following tips do not replace consultation with a licensed veterinary practitioner.

With economic pressures on the rise, consumers are looking for ways to tighten their belts while maintaining the best level of care they can for their pets. In the midst of the downturn, veterinarians around the country have observed a decline in visits and spending for recommended procedures.

Pet health and quality of life don't have to become economic casualties. Through a not-for-profit pet health resource - The Merck/Merial Manual for Pet Health - Merck and Merial, leading global pharmaceutical and animal health companies, are teaming up to educate pet owners about the power of preventive measures as the cornerstone of a sound financial strategy for pet care. The book is an easy-to-read version of the manual veterinarians have been using for years, and it might be one of the most thoughtful and practical gifts you can give to the pet lover in your life this holiday season.

"We have known for a long time that early detection of ailments and proactive health maintenance can extend a pet's life by years, but it can also help your pocketbook as well," said Scott Line, DVM, associate editor, The Merck/Merial Manual for Pet Health. "In the long run, it is dramatically cheaper to prevent health problems than it is to treat them, and consumers need to keep this in mind when seeking ways to reduce costs in their pet care budget."

1. Be a Grooming DIYer: Grooming is an important part of maintaining your pet's health and condition, but it is a skill anyone can perform with practice. An added incentive for taking an active role in your pet's grooming is that you can identify problems early (e.g., bumps, lumps, changes in coat quality, etc.) that a groomer may not think to tell you about. Doing the grooming yourself can save as much as $400 to $1,000 per year, but to avoid a costly mistake be sure to use products, such as shampoos, that are designed for pets and not people.

2. Bulk Up: Resist the urge to buy pet food, heartworm and other preventatives in smaller quantities to cut immediate costs at the cash register. The reality is, as long as you're mindful of expiration dates, buying in bulk is generally cheaper.

3. Don't Wait to Vaccinate or Medicate: Making sure your pet is current on all recommended vaccinations will save you a bundle in the long run because you'll help ward off preventable diseases. Vaccinations such as one that prevents rabies, for example, are particularly critical and may save your animal's life. Similarly, routine medications such as heartworm preventives should be given every month. Skipping doses can be expensive, as treating heartworm costs as much as $800 - $1,000. In addition, treating the disease is risky and can be painful for your pet.

4. Spay and Save: For the average pet owner, spaying or neutering is a must. If you have a limited income, you may be able to save by taking advantage of low-cost clinics for these services. Keep in mind that spaying or neutering your pet can prevent the immediate expense of new pets in your family and the societal expense of unwanted pets being turned in to shelters. It also reduces the occurrence of some common diseases, such as breast cancer in pets.

5. An Ounce of Prevention: Prevent an unplanned, emergency vet visit this holiday by doing your part around the house. Many items that are a routine part of holiday celebrations could be toxic or harmful to your pet. Examples include:

• Mistletoe and even poinsettia, while beautiful, are highly toxic to dogs and cats

• Chocolate and macadamia nuts are toxic as well, and yeast-based bread dough can actually be fatal to your pet as it causes intestinal bloat

• Tinsel, if swallowed by a curious kitten or puppy, might cause intestinal blockage. Consult The Merck/Merial Manual for Pet Health for more in-depth guidance.

6. Brush Up: Proper dental care is an often-neglected component of the pet health regimen. Regular use of an inexpensive toothbrush and toothpaste designed for pets can delay or avoid a professional cleaning costing several hundred dollars. You also can purchase pet food designed to help eliminate tartar.

A Couple Reminders that Where You Live Can Cost You Dearly

I've talked quite a bit about the fact that where you live can make a big impact on your finances (in fact, moving to a lower cost-of-living city is one of my most-hated money saving tips.) And recently, I ran into a couple of articles that reminded me of this fact. Here are some highlights from each of them:

• Where Everyday U.S. Costs Are Cheapest and Priciest -- Yes, some cities are more expensive to live in (no surprise here.) These cities also generally have higher salaries, so some of the high costs are offset. But as I've shown, the higher salaries don't make up for the higher costs.

• The Best Places to Raise Your Kids -- Combines information to get "best" and "most affordable" all in one shot. Interesting piece.

Obviously there are tons of other reasons you might live in one place versus another (family, weather, enjoyment of city's entertainment opportunities, etc.), but if you have a choice, cost-of-living is certainly one factor you'll want to consider since it can make a HUGE impact on your net worth over the long haul.

Give Yourself Financial Peace This Holiday Season

The following is a guest post from Marotta Asset Management. The attitude he suggests and the tips he gives works not only for Christmas, but for anyone celebrating any holiday this season.

In Charles Dickens's "A Christmas Carol," Ebenezer Scrooge calls Christmas a "humbug" because of the foolish way people celebrate it. He asks his nephew, "What's Christmas time to you but a time for paying bills without money?"

Sadly, that sounds like Christmas for many American families binging on expensive gifts.

Every year, Americans seem determined to be more frugal than the year before because of the latest economic conditions. One year it is rising energy prices; another year it is rising interest rates. This year, of course, the drop in everyone's investments looms large. And so once again Americans will promise to cut back on presents, food and decorations and to fund their celebration from actual income instead of savings or credit cards.

But while the retailers worry, cut prices and may have an off year, the credit card companies are never concerned. One in every five families won't pay off their credit cards in January. They will pay exorbitant interest rates instead and begin the downward spiral into financial ruin. Many families, in fact, are still trying to pay off their credit card purchases from last Christmas.

We are a nation of consumers and debtors. Total U.S. credit market debt has reached an all-time high in 2008 at 350% of gross domestic product (GDP), up from 255% a decade ago. This increase over the past 10years is not due to the federal deficit. Only a paltry 37% of GDP is federal government debt, which is down from 46% a decade ago. The largest increase has been in financial institutions, whose debt rose from 64% to 114% of GDP. The second largest increase has been in household debt, which rose from 66% to 100% of GDP. Now the country is de-leveraging, and American families must do the same.

Christmas is an emotional time. Few families set a budget for spending, and consequently credit card debt spikes considerably. Our materialism urges us to show our love for friends and family members with big and expensive gifts. As a result, we often buy even more lavishly than the receiver would have wanted us to.

It's time to differentiate between the celebration of Christmas and the commercialization of Christmas. This year, give your family the gift of financial peace of mind. Celebrate the season simply.

Four decisions, if made together as a family, can help reduce the frenetic materialism of the season and bring back the holiday's warm fuzzy feelings: Cut back your gift list. Limit how much you spend. Decide to be charitable. Determine which activities bring you real joy.

We get into trouble when the number of people we buy for increases beyond our means. Make a list. Cull the list. Engage in a little honest financial talk among friends and family. Copy this article and highlight this section. They will understand that your retirement account is way down, finances are tight and you need to be saving more money to get back on track. Other family members may be equally relieved to cut back their own gift list.

For example, you might decide that only children 12 and younger among extended family members will get gifts. If that decision doesn't keep gift giving reasonable, ask each extended family member to draw the name of one child under 12 and buy a gift. These seem like sensible rules.

Limit how much you spend. All of your excess holiday spending should fit inside 1% of your annual take-home pay. So if your net income is $40,000, you have a $400 budget for Christmas. If you bring home $100,000, you can spend $1,000. If these amounts seem small, you are in good company. On average, people spend about $800 on gifts alone.

Try taking care of all of your friends with a single baking project. Cookies, homemade granola, Russian tea, or herb mixes are easy to make in quantity and always welcome during the holidays.

Family Christmas letters are a wonderful way to keep distant friends up to date on your life, but consider sending them via e-mail or posting them on a blog or website for free. It is better for the environment--and your budget.

For family members, consider buying gifts that are already part of your budget or that encourage your children to develop their inherent talents. My favorite Christmas gift idea comes from "The Homecoming," the first movie about the Waltons, in which the father buys John Boy paper and pencils. His gift, which affirms his son's choice of writing as a career, is the emotional climax of the story. Many parents' gifts at Christmas have changed the course of their children's lives or careers by inspiring them thoughtfully in one direction or exposing them to a new interest.

Decide to be charitable. We either choose to be the kind of people who take delight in giving generously or we are not generous. Jesus, whose birth we celebrate at Christmas, saw a poor widow putting two small coins worth only a fraction of a penny into the treasury. He called his disciples and said, "Truly I say to you, this poor widow put in more than all the others. They gave out of their wealth; but she gave out of her poverty."

Giving ungrudgingly can be an act of faith, a recollection of all we have been given. It is ultimately a declaration that we want to be generous people.

Finally, decide which activities bring you real joy. Dickens himself understood this. As his son explained, Christmas was "a great time, a really jovial time, and my father was always at his best, a splendid host, bright and jolly as a boy and throwing his heart and soul into everything that was going on. . . . And then the dance! There was no stopping him!"

Take a lesson from how the reformed Ebenezer Scrooge celebrates Christmas. He does six things, and only first two of them cost money.

First, Ebenezer buys the Cratchits a prize turkey anonymously. He decides to treat his employee Bob Cratchit like family. Sharing a festive meal together promotes community. Today less than 20% of family meals are eaten together. Even if all you did during the holidays was to share a meal, it would make the season unique and special.

Expensive food does not make a meal a feast. In fact, it is eating out at fast-food places and precooked convenience foods that burden our budgets. The leisurely pace of homemade family meals costs a fraction of our typical eating on the run. Fold the napkins fancy, and use the good china.

Second, Ebenezer gives generously to the portly gentleman who was collecting for the poor. Ebenezer decides he wants to be charitable, and so he includes a great many back payments in his donation.

Third, Ebenezer is kind and gracious to everyone he meets. This attitude costs so little, but it sometimes seems as scarce as the latest sold-out fad toy. Ebenezer smiles. He is pleasant. He says, "Good morning, sir! A merry Christmas to you!" When he previously would have responded with a gruff word, he reacts now as a shock absorber with forgiveness and forbearance. These simple gestures cost us nothing but are all too uncommon.

As Ebenezer's nephew Fred describes Christmas in the opening scene of Dickens's famous story, it is "a kind, forgiving, charitable, pleasant time: the only time I know of, in the long calendar of the year, when men and women seem by one consent to open their shut-up hearts freely, and to think of people below them as if they really were fellow-passengers to the grave, and not another race of creatures bound on other journeys."

The fourth action of the reformed Scrooge is going to church. Worship is an act of celebration that helps us remember with gratitude all that God has provided. Our community provides scores of opportunities for free celebration during the holiday season.

Fifth, Ebenezer walks about the streets of London enjoying the sights. Sometimes a celebration can be simply taking time out of our busy lives to notice what is noble and beautiful all around us. Pausing and reflecting gives us time to refresh our bodies and renew our minds. It allows us to see beyond the ordinary and routine and appreciate life to its fullest.

Perhaps you don't feel that way. All the more reason to stop and reflect. Feelings often follow thoughts. Having an attitude of gratitude, being mindful of others in the present and looking confidently and eagerly toward the future encourages us to be people who live life with more satisfaction.

For his sixth and final new way to celebrate Christmas, Ebenezer goes to his nephew Fred's party for fun, games and music. Christmas provides the unique opportunity for the bonding that comes from joyful laughter.

After a musical interlude, the partygoers play "Forfeits" because "it is good to be children sometimes." The commands are usually silly requests intended to get everyone at the party laughing, such as "dance a jig," "tell how to make a pie without talking," "yawn until you make someone else yawn" or "try to stand on your head."

Next they play the games "Blindman's Buff," "How, When and Where" and then "Yes and No." None of these pleasures cost a cent, which is a lesson Scrooge as well as many of us have forgotten. Your best holiday delights need not even show up as a line item in your budget.

This year, take the hype out of the holiday. Feast merrily, give generously, show kindness, worship thankfully, live mindfully and laugh playfully. Cut back your gift list. Limit how much you spend. Simplify your Christmas, and set your family on the road to a lasting peace about finances.

Help a Reader: Saving on Moving

Here's an email I recently received from a reader:

I'm leaving my job as a management consultant in Washington, DC to work as a teacher in the Los Angeles Public Schools.  I'm trying to move across the country with my wife over the summer and make it as cheap/painless as possible, especially because we're taking a 60% pay cut.

Here's what I've been thinking:

• Sell almost everything that's large that we own on Craigslist.
• Ship most of our clothes and hiking gear, should be 3-4 medium boxes for $50 a piece.
• Drive across the country with our books and kitchen stuff in our car.
• Buy new things on Craigslist in LA.

I'm trying to weight the costs/benefits of moving vs. selling and buying new things.  The items we own and I'd like to keep that won't fit in our tiny, old Mazda are:

• A $300 mattress from IKEA (special for wife's back problem).
• An oak kitchen table I got on Craigslist for $50, but have been told it's worth $300+ which I really like.
• An old bike that I love, my wife's bike which is not so great.
• A nice futon that I could potentially return to my parents, who live 4 hours east, more or less on the way to LA.
• Some IKEA lounge chairs, ~$100 a piece new.

What advice do you have for this reader? Do you like his plan or have any other suggestions/thoughts?

How to Save Money on Your Monthly Technology Bills

Here are some thoughts from Kevin Brand, EarthLink's SVP of product marketing on how to save on tech bills.

Assess your Needs

Look at the ways you use technology in your home. Take a week and monitor how often you are on the phone, watching television, or surfing the net. Once you see how much time you are using these services, compare it to your plan. Many people have access to high-speed Internet at work, making it unnecessary to pay for high-speed bells and whistles at home. The key is to avoid paying for excess.

Downgrade

Once you assess your needs, get rid of services that you aren’t fully using.  Are you downloading video and playing games or just checking email and sports scores on the Internet? If it’s the latter, it doesn’t make sense to pay for a high-end, super-fast Internet connection. A less expensive but safe and reliable service such as dial-up service – which some providers offer with a special Accelerator option – may be just what you need.

The same applies to your cable bill. Do you need the premium channels or DVR? Better yet, if you can watch most of your favorite shows online or you predominately watch shows on only a few channels, you may be able to downgrade your service to a cheaper plan. Be honest about what you really need, and don’t pay for services you aren’t using to their fullest potential.
       
Take Advantage of Freebies

Look for companies that offer free services. Some Internet providers offer free virus protection, which saves you from buying costly software yourself.  Others offer free spam protection and other security enhancements, a good bet if you’re looking to maximize savings and still surf safely.  Also, leverage your Web access by surfing special cost-savings sites, like www.pricegrabber.com, www.bizrate.com or www.thedailydeals.com.  Look for any special promotions your provider might offer on their home page.  A lot of Internet providers have partnerships with other online merchants to offer special savings to their subscribers. If yours doesn’t, consider looking for one that does. And sign-up for the email alerts from the companies that you already do business with to take advantage of special promotions.

Avoid Bundles

Advertisers may create a “need” that might not really exist for you. If you’re a cost- conscious consumer, look closely at how much you’re paying for popular, but often pricey, bundle packages that include phone, cable and Internet. It may be easier to pay all-on-one bill, but it doesn’t allow you the flexibility to choose the best individual services that fit your lifestyle. Nor will a bundle provide the flexibility to adapt your services based on lifestyle or location changes. Also, promotional pricing may exist initially, but the price may go up while you’re still locked into your bundle.  So, you may not need all the “bells and whistles” or restrictions of a high-cost bundle. In fact, if you opt for options like Freestanding DSL for your Internet access, you might be able to ditch your home phone altogether.

Study your Bill

Read the small print. Know what you are paying for and make sure you’re only paying for services that you actually use.  Also, be familiar with your contracts and look for changes to the Terms of Service. Know when your contract ends, so you don’t unwillingly default into another one. And be aware, not all Internet providers offer free, 24/7 customer support. If your provider doesn’t, you could be eating up dollars you don’t need to spend.

Pay Smart

Finally, make sure you are taking advantage of special deals and incentives. Some service providers offer discounts up to 40% for annually pre-paying. Others offer special pricing for a year’s commitment.  And always ask for what you want from your provider. A customer-service focused Internet provider may be willing to give you a credits if there’s been a serious issue involving your service or account.

Reminder: Keep a Sharp Eye on Medical Bills

Here's a reminder from NCN that you need to keep a close eye on your medical bills. He was being charged "out-of-network" prices even thought they were in network. After 30 minutes of sorting out the problem, he ended up saving $208.34. Not bad at all.

I have to say that medical bills are among the hardest to understand of almost any we receive. In fact, they may even be more difficult to sort through than taxes. That's why I turn them all over to my wife and let her handle them. ;-)

Anyway, NCN's post made me think of the various tips I've given to those looking to save money on medical bills/costs. Here's a quick review for those of you interested:

• How to Get an Incorrect Medical Bill Corrected

• Another Way to Get an Incorrect Medical Bill Corrected

• A Third Way to Get an Incorrect Medical Bill Corrected

• CPT Codes Can Save You Money on Medical Bills

Ideas on Winterizing

Here's a good piece on how you can winterize your home, car, and small gas-engine machines -- something that will both save you money and extend the life of your belongings. Here are a few of the tips I found especially interesting:

• Wallhangings. A quilt or decorative rug will insulate interior walls, keep your room cozier, and allow you to turn down the thermostat a few degrees in the winter without a noticeable difference.

• Cheap firewood. If you live near a national forest, you may be entitled to several cords of firewood for a small fee. Check with your regional office of the U.S. Forest Service. Warning: It is illegal to pick up firewood in a government-owned forest without a permit, so don’t skip that part.

• Fuel. Unless you live in the tropics, put a bottle of fuel de-icer in your tank once a month to help keep moisture from freezing in the fuel line. You can discourage moisture from forming in the gas tank in the winter if you keep your fuel tank full.

• Car locks. Dab a little petroleum jelly on your keys and move them in and out of the locks to keep them working smoothly during the winter months. Petroleum jelly doesn’t freeze.

My thoughts:

1. I never really thought about how wall hangings can help insulate a home, but it makes sense now that she brings it up.

2. We don't live near a national forest and don't have a wood-burning fireplace, but if you do this seems like a GREAT way to save money.

3. I use de-icer in my gas during the winter, but wonder if it's really necessary. Anyone have thoughts on this?

4. Another interesting idea. That said, does anyone use keys/locks on a car anymore? I always control my locks electronically.

Another Example

Here's another example of the fact that where you live can have a HUGE impact on your net worth:

In some places of the country, a $200k per year income isn't enough. In others, you can thrive on a teacher's salary.

;-)

How to Make Money and Save Money

I'm getting a lot of email lately from people who are going through tough financial times. They usually ask me for ideas on how to make money and/or save money, so I thought I'd do a post on the topic for everyone's benefit.

If you're coming to Free Money Finance and want some tips on how to make more/some extra money, here are a couple links for you:

• Pre-2008 money making ideas

• 2008 money making ideas

And here are some tips (several hundred) on how to save money:

• Pre-2007 money saving ideas

• 2007 money saving ideas

• 2008 money saving ideas

Each of these links leads to a "category" here at FMF and contains a series of posts on either how to make or save money. If you want to see all the ideas (in reverse chronological order), simply scroll down and read as you go. It's that easy.

Obviously, not every idea is for everyone. But with almost 270 posts on how to make money and over 950 posts on how to save money, surely everyone can find at least a few ideas that they can use to improve their finances.

A Salesman Tells How to Negotiate for the Best Price on Electronics

As many of you know, I'm a big advocate for asking for a discount on items you are buying. And the higher the price on the items, the more important this is. So when I saw a comment by a reader about how to negotiate when buying electronics (which we all know can be expensive), I emailed him. Turns out he's a salesman at a major electronics retailer. I asked him to give us the "inside scoop" on how we can best negotiate savings on electronics and here's what he suggested:

• The best time to negotiate is end of the month.  I don't mean like two weeks before.  I mean like the 30th or 31st.  Sales managers are usually willing to take a lower amount because they have to "get stuff out the door" to make their bonus.  I'd also say for end of the pay period, but you never know when that is.

• If it's an entry-level TV (say a 720p or a manufacturer's low-end 1080p) or a TV below 42", don't expect much of a discount.  These items usually have the least markup percentage-wise.  If, however, you're going high-end, you'll find people more willing to work with you.

• Don't negotiate only on price.  Most managers don't want to just give away money, but if you're buying a TV and a home theater system, there may be some leeway when it comes to any accessories you need.  Maybe throw in the HDMI cable, or free delivery or setup.

• A local or regional store is more likely to be movable than a big-box like Best Buy or Sears.  Although, recently, Best Buy has been haggling more and Circuit City is DESPERATE, so who knows.

• Buy from a commissioned sales person.  We are professionals.  We know our stuff.  We want to make a deal with you.  We want your business.  We are there after the sale.  You think that part-timer that makes $9.00 an hour cares if you're happy with your purchase?  I sure care.  If you're not happy and return the TV, I don't get paid.  If your delivery gets screwed up, it comes partly out of my pocket.  Most of the commissioned sales people I've met over the years know this.  Some don't, treat their customers like crap, and don't last long because they have a 30% return rate (yes, we do track that).  We've always said at work that the reason Circuit City, CompUSA, and Sears went downhill was because they got rid of their commissioned sales staff (or seriously hindered their earning potential).

• Do price research.  If you see the TV on the Internet at a lower price, print the page out and take it with you.  Be wary, though, a lot of Internet retailers are not factory-authorized dealers, and we will tell you that if you buy from them, any manufacturer's warranty will be void (which is true).  We may not match it, but you may get a better deal from us.  Be prepared though, we WILL figure out your shipping charges (on a big TV, this can be as much as $200!) and adjust our quote.

• Mention that you've been other places.  We're suckers for market share and taking you out of the market, so if we can get your business over the other guy, chances are, we'll do it.

• Don't go too far.  We have our limits of what we're willing to do.  If you're mean, pushy, bossy, or set ultimatums, you most likely won't get what you want.  We have pride too.

• Some brands will get you a better deal than others.  LG may have a deal with Joe's Electronics, Samsung may have given ABC Video a volume discount.  If you find a salesman pushing a brand that's questionable for odd reasons (Best Buy's notorious for this), chances are that's the brand they have the best margin with.

• If you do negotiate with us, be discreet.  It's because of people that don't negotiate that we can with you.  If the guy next to us hears you, he'll want a better deal.  That'll make that salesman hate me, which means I in turn won't like you as much.

• Don't expect too much right now.  Video margins are the lowest I've seen in the five years I've been in the industry.  There really aren't any "crazy" deals like there were last holiday season.  Sure, you'll find a 50" plasma for $899, but you can get that most of the time.  Now, if you want to buy audio with your TV (which you probably will once you hear the craptacular sound those 10 watt speakers on your new $2000 TV produce), then you can snatch a bargain.  You can usually haggle down to 30-45% off hang tag.

• Don't hold off for the "bottoming out" that newspeople are predicting.  Trust me, they can't go much lower.  You're talking about going from 45% margins to 13% in 18 months.  Thirteen Percent!!  That's the average margin in a flat-panel TV.  If anything, I think prices will head UP in 2009, and most retailers agree.

How to Get the Most Out of Holiday Sales

Smart Money tells us all how to get the most out of holiday sales including the following:

• Compare prices -- One easy way to find the best deal on the item you're eyeing is to use a price comparison site like PriceSpider, which tracks a product's price history for six months, or PriceGrabber.com, which lets users calculate and compare the total price of an item, including shipping and tax.

• Don't jump the gun -- “If you can wait three weeks [to do your shopping], you should wait because the deals are going to be a lot better than what they are now,” says Jon Vincent, owner of BlackFriday.info, one of several sites that publish Black Friday sale ads before the big day.

• Black Friday previews -- Black Friday deals are typically advertised on retailers’ web sites on Thanksgiving Day, says Vincent. Other sites, like Vincent's BlackFriday.info , bfads.net and blackfriday.gottadeal.com usually list deals at major retailers even earlier than that since they get the sale circulars in advance, scan the ads and post them online, says Dworsky.

• Check for price adjustments -- If you buy the Guitar Hero World Tour band kit and later see it advertised for less at another store or on sale at the store you bought it from, your credit card may refund the difference.

The tip I use the most is #1. I go online and find the various prices on items I want to buy. Then I either purchase them online or look and see if I can find them for comparable prices locally. If I can, I buy them here so that I 1.) support local stores and 2.) can return them easily if there's a problem.

And, of course, I'll get several calendars from Costco this year. My family loves them, they're inexpensive, and they are very easy to "make" online.

For the most part, I like to shop early and/or during the week if I can. I used to like the crowds in stores and the "excitement" of shopping season. Now I avoid it like the plague.

Americans Finally Getting a Clue

It seems that mainstream Americans are finally realizing that store brand products are often just as good as name brand items (or maybe they've known it all along and the press is just realizing it.) Anyway, here's a summary of a Wall Street Journal article on the issue:

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses. "I thought I'd be able to tell the difference, but I couldn't -- I looked at the ingredients and they seemed almost the same," says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, "I'm going to buy the store-brand moisturizer and cleanser -- it's less money."

Retailers are also sensing more shopper experimentation. This fall, supermarkets Safeway Inc. and Kroger Co. noted that sales of their store brands are on the rise. "In this economy, customers are much more willing to try a private-label item, and we're seeing signs that this is happening more and more as the year progresses," Kroger CEO David Dillon said on a conference call.

To be sure, overall sales of name-brand goods are still higher than those of store brands. Still, about 40% of primary household shoppers said they started buying store-brand paper products because "they are cheaper than national brands," according to a September report by market-research company Mintel International, which interviewed 3,000 consumers. Nearly 25% of respondents reported that it is "really hard to tell the difference" between national brands and store brands of paper products. Store brands on average cost 46% less than name-brand versions, Mintel found.

Well, the word's finally getting out that store brands are:

• Much cheaper than brand-name products.
• Often as good as or better tasting/in effectiveness/etc.

And even if you're wary about store brand items, most stores offer a no risk guarantee. If you try one of their items and don't like it, bring it back for a full refund with no questions asked.

Given all of this, why not buy the store brand?

My prediction is that store brands will become a bigger and bigger part of total sales as people try them, see that they are as good as/better than brand name items, and that they cost less -- then keep buying them over name brands. After all, why pay more for the same thing?

We've purchased store brands for quite some time and LOVE them. They save a ton of money and are very good/effective. For details, see Generic and Store Brand Products -- Much Cheaper and Just as Good (Or Even the Same Thing!) as National Brands.

The Biggest Raise You'll Ever Get

I found this piece from Money magazine (and its funny title) to be quite an interesting take on a personal finance issue. So what do they say is the biggest raise you'll ever get? The summary:

The oldest of my three children started college this year, prompting me to flash forward to the day when my kids have all left home and the expenses of child rearing - from piano lessons to orthodontics, summer camp to undergrad tuition - are firmly behind me.

Yes, this time of life may be bittersweet. Reduced expenses will come with the emotional baggage of living in an empty nest and experiencing a few more aches and pains from aging. Financially, though, this turning point may amount to the biggest pay raise you or I will ever get.

Yes, kids are expensive and once they are off and on their own, it IS likely that your finances will be in a position to improve greatly. It's a wonderful time to kick the pay off all debt/save more/invest more plans into hyper-drive.

Then again, you don't need to wait so long to get a raise. Instead, plan to ask for raises at work on a regular basis. And when should you ask? When you can show that you deserve a raise.