Managing your money in retirement is often depicted as a problem of how to allocate your portfolio, how quickly to draw down your net worth, when to begin taking Social Security and whether or not to buy long term care insurance. But managing one's financial assets is only part of the picture. Consider how you spend--the less your cash outflow, the easier it is to afford retirement. And you don't necessarily need to become a connoisseur of cat food or learn the dozens of ways to prepare rice and beans.
Pay off the mortgage. One of the most surefire ways to reduce month expenses is to pay off the mortgage. Since your retirement income will probably be less than your income while working, offloading the mortgage will improve the quality of your sleep.
Take the auto mechanic off your speed dial. Buy cars that are reliable and known for longevity. With the increased computerization of cars, the cost of repairs is skyrocketing. You don't have to buy a tinny econobox. If you can afford a luxury car, choose an Acura or Lexus, not some other brands that enrich repair shops.
When it comes to appliances, spare your back. High quality in home appliances isn't, to borrow a stock market phrase, closely correlated with price. The most reliable and long lasting washing machines and dryers tend to be the traditional, modestly priced top loaders. Currently fashionable side loaders have their attributes, but at the cost of higher purchase prices and less longevity. Plus you have to bend over or kneel down to get access to them. Your back and knees may have an opinion as to whether or not that's a good idea. Cheaper, more reliable, longer lasting, and easier on the back and knees is a pretty good bargain.
Use generics whenever possible. Generic drugs can be much cheaper than name brands. Why pay for a fancy name when the medication is the same at a lower price?
Avoid credit card debt. The most expensive loans most Americans take are credit card balances carried over from month to month. If you use credit cards, only charge what you can pay off at the end of the month. That way, you earn rewards, cashback bonuses, etc., without paying any interest. Why enrich banks in your golden years?
Showing posts with label smart spending. Show all posts
Showing posts with label smart spending. Show all posts
Monday, December 5, 2011
Sunday, November 27, 2011
Hidden Bargains
If you want a Black Friday bargain, you have to be ready to be pepper sprayed, horse collar tackled, and perhaps trampled a few times. There are easier ways to get bargains.
Business Laptops. If you're in the market for a laptop, look at less expensive business models. Unlike laptops specifically aimed at consumers, business laptops are designed for heavy duty use, careless handling (it's the company's property, after all), and enough longevity that sales reps can convince corporate buyers the equipment is cost effective. Many business laptops are shock and spill resistant. They are often preloaded with good quality software. This, all for a price in the $500 to $700 range. Business laptops don't come in pastel colors, and are heavier than personal laptops (the additional ruggedness adds weight). But a well-made one delivers good value for the dollar.
Prepaid Cell Phone Plans. Prepaid plans give you direct feedback about your usage, by forcing you to buy more time when you're running low. These periodic demands for money teach you how much your yacking actually costs. You learn to reduce this negative feedback by controlling phone usage. You save by not paying for time you don't use.
Balanced Investing. A portfolio that's about 50% stocks and 50% bonds offers comparative stability in returns (see http://www.cnbc.com/id/45454073). Investors who enjoy stable returns are less tempted to trade, incur lower transactions costs, and face less of the volatility that tempts one to buy high and sell low. By reducing these negative factors, balanced portfolios can deliver good long term returns.
Renovated Homes. It's axiomatic among real estate professionals that home renovations, with rare exceptions, boost the value of a house less than 100 cents on the dollar cost of the renovations. This necessarily means a recently renovated home is a comparative bargain for the buyer who carefully researches prices and figures out where the actual market price is. A home that was renovated in the past year or two has a good chance of being a bargain. One that was renovated five or ten years ago may have appreciated enough that buyers don't really get a discount from the renovations (depending on the market). A beat up, water damaged foreclosure sale may a good deal. But so may be a sparkling recently renovated home. Do your research.
Year Old New Cars. Cars on a dealer's lot that are brand new, but one model year old can be an excellent bargain. The dealer will seriously discount them (sometimes with a quiet subsidy from the manufacturer) in order to make room for current year models. Year old new cars can be a better bargain than year old used cars, because they have no mileage but sometimes sell for not much more than a used car with 10,000 miles. Buying what the seller doesn't want is a good way to get a bargain.
Business Laptops. If you're in the market for a laptop, look at less expensive business models. Unlike laptops specifically aimed at consumers, business laptops are designed for heavy duty use, careless handling (it's the company's property, after all), and enough longevity that sales reps can convince corporate buyers the equipment is cost effective. Many business laptops are shock and spill resistant. They are often preloaded with good quality software. This, all for a price in the $500 to $700 range. Business laptops don't come in pastel colors, and are heavier than personal laptops (the additional ruggedness adds weight). But a well-made one delivers good value for the dollar.
Prepaid Cell Phone Plans. Prepaid plans give you direct feedback about your usage, by forcing you to buy more time when you're running low. These periodic demands for money teach you how much your yacking actually costs. You learn to reduce this negative feedback by controlling phone usage. You save by not paying for time you don't use.
Balanced Investing. A portfolio that's about 50% stocks and 50% bonds offers comparative stability in returns (see http://www.cnbc.com/id/45454073). Investors who enjoy stable returns are less tempted to trade, incur lower transactions costs, and face less of the volatility that tempts one to buy high and sell low. By reducing these negative factors, balanced portfolios can deliver good long term returns.
Renovated Homes. It's axiomatic among real estate professionals that home renovations, with rare exceptions, boost the value of a house less than 100 cents on the dollar cost of the renovations. This necessarily means a recently renovated home is a comparative bargain for the buyer who carefully researches prices and figures out where the actual market price is. A home that was renovated in the past year or two has a good chance of being a bargain. One that was renovated five or ten years ago may have appreciated enough that buyers don't really get a discount from the renovations (depending on the market). A beat up, water damaged foreclosure sale may a good deal. But so may be a sparkling recently renovated home. Do your research.
Year Old New Cars. Cars on a dealer's lot that are brand new, but one model year old can be an excellent bargain. The dealer will seriously discount them (sometimes with a quiet subsidy from the manufacturer) in order to make room for current year models. Year old new cars can be a better bargain than year old used cars, because they have no mileage but sometimes sell for not much more than a used car with 10,000 miles. Buying what the seller doesn't want is a good way to get a bargain.
Thursday, August 13, 2009
Understated Economizing
It's become chique to be cheap. But conspicuous penny pinching can have the same declasse overtones as buying expensive things. If you're doing it to impress people, you've only proven yourself a nouveau-pauvre. Understated economizing, just like understated elegance, connotes good taste. How, then, to maintain grace under financial pressure and not appear like a parvenu?
1. Buy brand names on sale. Just about all brand name goods go on sale eventually, especially now that the economy is slow. Or else, they are sold by high end retailers to discount outlets that sell them for a fraction of the full retail price. Think of yourself as a bargain hunter, not a penny pincher. Every time you get a good deal, consider it a success, not parsimony.
2. Don't buy services you don't need. Maintain cars in accordance with the manufacturer's recommendations. But don't buy the additional services recommended by dealers. They can double the cost of routine maintenance while adding little value. For example, many car dealers will recommend changing the oil every 3,000 miles or 3 months, whichever comes sooner. If you're an ordinary suburban driver, that kind of maintenance hasn't been necessary since leisure suits were the rage. In addition, don't buy service contracts or extended warranties for quality equipment (computers, household appliances, etc.), unless you're going to use them a lot. A small business may wisely buy an extended warranty for a computer, but the ordinary home Internet surfer is probably wasting money. Consider whether the $120 haircut is essential to your image; maybe a less expensive hair stylist would offer new, refreshing ideas.
3. Save where spending more wouldn't matter. Buy the cheapest gas you can find. There's no real difference between gasoline brands. Use the cheapest vino in a box for cooking wine. The cooking process ruins a wine's bouquet, so there's no point putting Chateau Arriviste in a frying pan. Re-use bags from grocery stores. Kitty litter doesn't mind if it's disposed of in a grocery bag used a second time.
4. Spend more when it gets you more. Buy nonperishable goods in bulk when the bulk sizes go on sale. For example, toilet paper is inevitably on our shopping lists, so buy it when the family-size packages go on sale.
5. Spend less when it gets you more. Invest in low cost mutual funds. Index funds, and other low cost investments like exchange traded funds, are often a better bet than managed funds. Many and perhaps most managed funds don't meet, let alone beat, the performance of index funds or ETFs. Spending less on management fees and the like means more investment gains for you in the long run. In this case, less really is more.
6. Eat where the Chinese eat. If you want to find the best Chinese food, ask the local Chinese people where they eat. You'll probably end up at a cubbyhole of a restaurant in a strip mall with an aura of vinyl and formica. But the food will be great and modestly priced. The Chinese are genetically wired to be gourmands and they'll sniff out a good meal wherever it can be had. Since it's no longer fashionable to be seen in the restaurants where people go to be seen, you might as well go the ones with the best food.
1. Buy brand names on sale. Just about all brand name goods go on sale eventually, especially now that the economy is slow. Or else, they are sold by high end retailers to discount outlets that sell them for a fraction of the full retail price. Think of yourself as a bargain hunter, not a penny pincher. Every time you get a good deal, consider it a success, not parsimony.
2. Don't buy services you don't need. Maintain cars in accordance with the manufacturer's recommendations. But don't buy the additional services recommended by dealers. They can double the cost of routine maintenance while adding little value. For example, many car dealers will recommend changing the oil every 3,000 miles or 3 months, whichever comes sooner. If you're an ordinary suburban driver, that kind of maintenance hasn't been necessary since leisure suits were the rage. In addition, don't buy service contracts or extended warranties for quality equipment (computers, household appliances, etc.), unless you're going to use them a lot. A small business may wisely buy an extended warranty for a computer, but the ordinary home Internet surfer is probably wasting money. Consider whether the $120 haircut is essential to your image; maybe a less expensive hair stylist would offer new, refreshing ideas.
3. Save where spending more wouldn't matter. Buy the cheapest gas you can find. There's no real difference between gasoline brands. Use the cheapest vino in a box for cooking wine. The cooking process ruins a wine's bouquet, so there's no point putting Chateau Arriviste in a frying pan. Re-use bags from grocery stores. Kitty litter doesn't mind if it's disposed of in a grocery bag used a second time.
4. Spend more when it gets you more. Buy nonperishable goods in bulk when the bulk sizes go on sale. For example, toilet paper is inevitably on our shopping lists, so buy it when the family-size packages go on sale.
5. Spend less when it gets you more. Invest in low cost mutual funds. Index funds, and other low cost investments like exchange traded funds, are often a better bet than managed funds. Many and perhaps most managed funds don't meet, let alone beat, the performance of index funds or ETFs. Spending less on management fees and the like means more investment gains for you in the long run. In this case, less really is more.
6. Eat where the Chinese eat. If you want to find the best Chinese food, ask the local Chinese people where they eat. You'll probably end up at a cubbyhole of a restaurant in a strip mall with an aura of vinyl and formica. But the food will be great and modestly priced. The Chinese are genetically wired to be gourmands and they'll sniff out a good meal wherever it can be had. Since it's no longer fashionable to be seen in the restaurants where people go to be seen, you might as well go the ones with the best food.
Sunday, June 10, 2007
Smart Spending Builds Wealth
Spending money can help to build wealth--if you spend the right way. Buy things when they are inexpensive. If you like tuna, wait until it goes on sale and buy a dozen cans for 1/3 or ½ off. As for meat or poultry, buy several pounds on sale and freeze what you don’t eat right away. If you like whole wheat bread, buy the brand that’s on sale. At most grocery stores, there will a dozen brands of whole wheat bread and one or another will usually be on sale every week. Also, read the nutritional labels. Sometimes, the supermarket’s generic brand has more nutritional content than more expensive and heavily advertised brands (no, not a joke). If you can get over the image problem, buying generic may be cheaper and better for you.
The next time you’re near a cheap gas station, fill your tank up completely. Then, top off at less expensive stations, even if you still have a half a tank. That way, you’ll always buy less expensive gas. Don’t wait until your tank is almost empty and you have to buy at whatever station is nearby regardless of cost.
On a larger scale, don’t buy expensive clothes until they go on sale. All stores have sales. Be patient and get suits, shirts and ties for 30%, 40% or even more off. If you want a large, flat screen TV, wait until a major holiday with a three-day weekend. The big box stores often drop prices to draw customers. Or find a discount outlet, either at a strip mall or online, and buy below the nationally advertised price. On an even larger scale, pay cash for your cars if you can. You may be able to get a very good price on a new car by asking for quotes from the dealer’s Internet departments. See our blog about buying a new car this way: http://blogger.uncleleosden.com/2007/05/buy-new-car-without-haggling-and-save.html.
When it comes to your credit card, don’t carry a balance over from month-to-month. Once you start rolling over a balance, the interest and other charges become a part of your financial life. If you pay off each month’s balance, you are effectively getting a loan at zero percent interest. That’s bargain basement credit. (Don’t feel sorry for the credit card companies—they ding the merchant a percentage of each charge, so they make money anyway.)
Think of smart spending as an investment. When you buy tuna at 50% off, you effectively make a 100% profit, because you save as much as you spend. When you buy a suit at 35% off, you effectively make about a 50% profit. The amount of money you “make” on a dozen cans of tuna this way is a few dollars. But if you approach all your spending this way, you could save hundreds and even thousands of dollars a year. Assuming you have a 50 to 60 year adulthood, your lifetime savings can amount to tens of thousands, and maybe more than a hundred thousand, dollars. Invest the savings, and you’ll notice an improvement in your retirement. To learn more about the power of compounding, go to our earlier blog at http://blogger.uncleleosden.com/2007/04/love-in-time-of-financial-planning-part.html.
This technique is most effective if you don’t buy when prices are high, and then buy in quantity when prices are low. Also, don’t buy things on sale simply because they are on sale. Use sale prices to your advantage, and purchase what you would buy anyway—when prices are low.
In order to buy things when they are inexpensive, you have to have some extra money around. An $800 charge for suits, shirts and ties at a sale may cause an unexpected jump in your credit card balance. It takes money to make money, even when we're talking about smart spending. So keep some cash on hand to cover these uneven expenses. How much you keep depends on your spending needs. A couple thousand dollars may be all you need for most household expenses. Obviously, more would be needed for something like a large high definition flat screen TV or a car. Set aside some money for spending capital. “Buy low, sell high” is an old adage in the investment business. Buying low is also a good way to spend.
Crime News: Here’s a criminal twist on a shopping list. http://www.wtop.com/?nid=456&sid=1162977.
The next time you’re near a cheap gas station, fill your tank up completely. Then, top off at less expensive stations, even if you still have a half a tank. That way, you’ll always buy less expensive gas. Don’t wait until your tank is almost empty and you have to buy at whatever station is nearby regardless of cost.
On a larger scale, don’t buy expensive clothes until they go on sale. All stores have sales. Be patient and get suits, shirts and ties for 30%, 40% or even more off. If you want a large, flat screen TV, wait until a major holiday with a three-day weekend. The big box stores often drop prices to draw customers. Or find a discount outlet, either at a strip mall or online, and buy below the nationally advertised price. On an even larger scale, pay cash for your cars if you can. You may be able to get a very good price on a new car by asking for quotes from the dealer’s Internet departments. See our blog about buying a new car this way: http://blogger.uncleleosden.com/2007/05/buy-new-car-without-haggling-and-save.html.
When it comes to your credit card, don’t carry a balance over from month-to-month. Once you start rolling over a balance, the interest and other charges become a part of your financial life. If you pay off each month’s balance, you are effectively getting a loan at zero percent interest. That’s bargain basement credit. (Don’t feel sorry for the credit card companies—they ding the merchant a percentage of each charge, so they make money anyway.)
Think of smart spending as an investment. When you buy tuna at 50% off, you effectively make a 100% profit, because you save as much as you spend. When you buy a suit at 35% off, you effectively make about a 50% profit. The amount of money you “make” on a dozen cans of tuna this way is a few dollars. But if you approach all your spending this way, you could save hundreds and even thousands of dollars a year. Assuming you have a 50 to 60 year adulthood, your lifetime savings can amount to tens of thousands, and maybe more than a hundred thousand, dollars. Invest the savings, and you’ll notice an improvement in your retirement. To learn more about the power of compounding, go to our earlier blog at http://blogger.uncleleosden.com/2007/04/love-in-time-of-financial-planning-part.html.
This technique is most effective if you don’t buy when prices are high, and then buy in quantity when prices are low. Also, don’t buy things on sale simply because they are on sale. Use sale prices to your advantage, and purchase what you would buy anyway—when prices are low.
In order to buy things when they are inexpensive, you have to have some extra money around. An $800 charge for suits, shirts and ties at a sale may cause an unexpected jump in your credit card balance. It takes money to make money, even when we're talking about smart spending. So keep some cash on hand to cover these uneven expenses. How much you keep depends on your spending needs. A couple thousand dollars may be all you need for most household expenses. Obviously, more would be needed for something like a large high definition flat screen TV or a car. Set aside some money for spending capital. “Buy low, sell high” is an old adage in the investment business. Buying low is also a good way to spend.
Crime News: Here’s a criminal twist on a shopping list. http://www.wtop.com/?nid=456&sid=1162977.
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