Why do some companies make it so hard for you to spend money?

April 15th, 2007

Many moons ago, I had came across Roboform, a program that saves passwords and fills out forms for you on the net. It seemed nifty, but it didn’t excite me enough to want to buy it at the time over utilizing exisiting features within my browser, so I stopped using it. While messing around with Cashduck and the whole GPT scene, I decided to give Roboform another shot though. The more I used it, it seemed handy enough so I plucked down a few bucks and got the full desktop verision, but did not opt for the Pass2go (Roboform for flash drives) verision or additional license for another computer since I didn’t think I would need them.

Some time passes and I picked up an Ativia flash drive on sale at Office Depot. Its one of the new U3 variety and includes a trial of the Pass2go. I sync my data from my main Roboform database and start messing around with it. It does seem handy to have, espically since my main computer has been having problems with its graphics card so I have been using another computer more often or doing stuff at work. I decide to check out purchasing a license for the Pass2go and it turns out the company offers discounts if you have already purchased a license from them. But I cannot from my order id number anywhere. I checked all my emails and I either did not get one with this number or long since deleted it. The software itself nor does their website offer an easy way to get another copy of this number. How hard would it be to make a little form that lets you put in your email address or something like this and have them email you the info or else accept an alternative method of proving your egilibity for the discounts on the extra licenses.

I would gladly pay the few bucks to get the new license if only they would let me!

Edit: On a hunch, I checked my paypal history and started inputting numbers from the order history there from when I brought Roboform orginally. One of the numbers worked so problem solved!

Living off your nest egg?

March 30th, 2007

If you have listened to Dave Ramsey’s radio show or read one of his books, you have probably come across his discussion of living off your nest egg, particularly for this in retirement. He suggests putting money in a good mutual funds that should average a 12% annual return and then take 8% out of that to live off or supplement your income and then the remaining 4% is essentially a cost of living increase to keep up with inflation. Now barring any unexpected lottery wins or similar windfalls, I am far away from retirement; I got curious how this would work out numbers wise. This particularly came to mind after reading a comment on http://allfinancialmatters.com/ discussing some related ideas of Dave Ramsey where someone asked what happens in the years that the stock market does not return 12% since that figure is an average over the long term, particulary if the return for the year was negative.

To make matters simple, I looked at the S&P 500 index for period of 1988 to 2006, which could equate to a nice long retirement for someone. Over that period, the overall index returned 13.44%, not adjusted for dividends. Here is a chart with what would have happened: 

Period End       Initial Amount   Return  Amount Spent  Left Over
12/30/1988      $100,000         16.61%            $8,000             $108,610
12/29/1989      $108,610         31.69%            $8,689             $134,340
12/31/1990      $134,340         -3.10%             $10,747           $119,428
12/31/1991      $119,428         30.47%            $9,554             $146,263
12/31/1992      $146,263         7.62%              11,701             $145,708
12/31/1993      $145,708         10.08%            $11,657           $148,738
12/30/1994      $148,738         1.32%              11,899             $138,803
12/29/1995      $138,803         37.58%            $11,104           $179,860
12/31/1996      $179,860         22.96%            $14,389           $206,768
12/31/1997      $206,768         33.36%            $16,541           $259,204
12/31/1998      $259,204         28.58%            $20,736           $312,548
12/31/1999      $312,548         21.04%            $25,004           $353,304
12/29/2000      $353,304       -9.10%             $28,264             $292,889
12/31/2001      $292,889         -11.89%          $23,431           $234,634
12/31/2002      $234,634         -22.10%          $18,771           $164,009
12/31/2003      $164,009         28.69%            $13,121           $197,934
12/31/2004      $197,934         10.88%            $15,835           $203,635
12/31/2005      $203,635         4.91%              16,291             $197,344
12/29/2006      $197,344         15.79%            $15,788           $212,725

(I don’t know if this table will display right in your browser, but will try to find a better way of displaying it later.) As you can see the person would end up with an extra $112,725 over their initial principal amount and got supplemental income over the period. Can someone live the 8% amount? Nope, to start getting near those figures you need to save up a lot more money (like $40,000 a year if you saved $500,000), but if you could do that, you probably would also be used to a higher lifestyle than even that 8% figure could provide.

Interest Rates got you down?

March 26th, 2007

It seems like a familiar refrain of people with debt, particularly of the credit card variety to emphasize their interest rate. It could be that it is 0% and talking about interest arbitrage or it could be 25% and that is the scourge keeping them in debt. Therefore, it follows that the advice goes, call your credit card company lots of times and ask them to reduce your interest rate or threaten to take your business elsewhere.

Now that is not bad advice in general, but that is only half the battle, how much are you throwing at that debt to get rid of it The amount of your payment matters a lot into the debt repayment equation. If you are only paying the minimum payment, which is often 2%, you will be paying off the debt for the next 30-50 year and that assumes you do not charge another dime for that entire period. Even a few bucks a month can make a big difference. Pretend for a moment that you manage to rack up $11,000 in credit card debt and are tagged with an interest rate of 25%. If you make only the minimum payment, you will probably be paying roughly $231 as your minimum payment at 2%. It will take you 235 months or 19 ½ years to repay the money back and cost you $43,181.95 in interest charges.

Yikes! Let us say you skip Starbucks twice a month and pay $240 instead. That cuts your repayment time down to 151 months or 12 ½ years and would cost you $25060.03 in interest. You reduce your repayment period by 7 years and save $18,121.92 in interest. If you got crazy and found an extra $100 every month for that bill, you would reduce your repayment time to 4.8 years or 58 months. The cost of borrowing your original $11,000 is now only $7,923.37 in interest charges. If you did go back to the original idea of calling to get your interest rates reduced or moving the balance to a new card with a lower interest rate, you can still save a bundle in charges. By using the same example if you had a 14% interest rate instead of 25%, the same extra $100 would mean you could repay the bill in just over 4 years or 49 months with $3438.20 spent in interest charges. That is $4,485.17 saved if you can do a little shopping or negotiation.

After a certain point, lowering your interest rate will only make so much difference, even if you could get yourself a 0% rate for life on your balance, you still owe $11,000 and how fast that goes away depends on how much you are willing and able to devote to getting rid of it. How much are you willing to cut and sacrifices for a little while to get your debt paid off?

Drive through to skyhigh interest

March 24th, 2007

While driving to get dinner tonight, I happened to notice a local cash advance / check-cashing store advertising their drive through window. Now granted, this store used to be a Wendy’s back in the day so there is a logical reason for the window to be there but it still took me slightly aback. If you are really going to get a loan that charges you interest rates that can total in the thousands on a APR basis, you could at least get out of your car (that you probably cannot afford either) to do it. 

Now, I will the first to admit a bias here, I do not really like using drive-though. There is no real logical reason for this, I just prefer going inside and dealing with a person face-to-face. There are environmental benefits such as you save a little bit of gas by not idling your car and stuff like that, but mostly I just prefer to avoid drive-through. Then you combine it with a cash advance (yuck) store, which is another rant that could easily be made, but how many people out there do not know it is not the wisest financial move to borrow from the cash advance place and still do it? Another time of someone saying, spend a little less, save up an emergency fund, even if it is only like $500 or $1,000 probably will not change his or her behavior.  

 

 

I’m back baby!

March 20th, 2007

Hey!

I finally got this blog back working again! I made a change to my hosting setup and couldn’t figure out how to migrate my WordPress database from the old setup to the new one, but finally got around to messing with it tonight and got it working!

Now I just need to sit down and starting figuring more about some of the advanced features and oh yeah, write a bunch more!

Btw, as a followup to my post about the car payment blues, I did pay my car off in December. I had some overtime and wanted to knock it out even if it did make me cringle a little to write a large check like I had to than I would if I would have waited till the loan was offically due. I know I would have paid about the same amout, give or take a few dollars in interest, but it was the psychologically hit of giving up the security of having that little extra cushion in the checking account.

The fun of making car payments.

November 16th, 2006

I’ve had my spiffy current car for several years now and thus my car loan is coming due in February 2007. Because I was silly enough at the time to get talked into getting the extended warranty and not being too aggressive about paying extra towards the loan, I had a nice balloon hurding towards me.

Sure I could hope for a good tax refund and use to pay it off or refinance it..blah blah blah. Instead I decided to try to take the more reasonable approach and just try to put every extra nickel and dime towards it that I could and get it over with. Before I did anything, I stopped by my local credit union that has the loan and made sure I had all my facts correct such as I indeed had the balloon or would need to refinance it, etc. While I was there I made a decent size payment and noticed on my receipt, it said the next payment was due in January. In effect, it was skipping over the November and December payments because in theory I had paid ahead. I asked the teller to make sure that was correct and everything and they assured me it was.

I normally don’t keep the payment amount in this account because I use another bank as my primary account. I just get the money out of the one account and deposit into the other a few days beforehand. I had planned to go ahead do just that and deposit my normal payment anyway and just transfer it just to knock down the payment that much faster. But I got busy that week with just everyday life stuff and figured I could take care of it later.

Imagine my surpise when I got a little notice from my credit union a few days ago. It was an overdraft notice. They cleaned out my checking and savings accounts that had about 2/3rd’s of the payment amount and threw on a overdraft fee for good measure. I didn’t even think about my car payment when I got the notice. I haven’t used my checkcard nor written any checks on this account in ages so I thinking how could I have an overdraft? I’m pretty good (well usually) about this stuff and never had an overdraft before. Apparently even though my next payment was not due until January, their system automatically makes the transfer anyway.

I even got my statement that same day in the mail and it said the next payment was January. So I had a the original teller, the bank statement and a couple reciepts from where I had made loan payments that all said January. The teller was just sorta like thats just how things are and refunded my overdraft fee. I don’t really know what I had been wanting done, but I left feeling unsatisfied. I know there wasn’t much the teller could do besides refund the fee, but I guess its a prinicple at stake thing. If they would have said, you still need to pay November’s payment even with the extra payments, I would have been cool with that. I would have made 100% sure the money was in the account before the due date. Instead I trusted them saying January and got my first overdraft ever.

I deposited the amount for December while I was standing there with the teller to make sure it didn’t happen again. Of course though I happened to check my account tonight while setting up Yodlee and they automatically transferred out the remaining 1/3rd of the payment so I need to go back and deposit more anyway.

Cashduck

October 28th, 2006

Since I have been on vacation this week, I had a bit more time to mess around with stuff I normally don’t get a chance to. One of the things I decided to try out was the paid to try offers sites such as Cashduck and Deal Barbie that I had read about a bit about on a few blogs. Although the various sites have similar offers I’ve mostly been exploring Cashduck because Kira from Penny Foolish runs it.

It has been said noone hires a stranger, which is why networking is so important in job hunting, but I had similar reasons in choosing Cashduck over the others. With Kira there is a real live person that you can read about and relate to, whereas the others are just websites. They are fine websites, but as dumb as this might sound, the connection isn’t quite the same. True I don’t know Kira any better than reading a few blog entries, but that was enough to make a difference in picking one set of offers over another.

Comment Spam

October 18th, 2006

Comment Spam just plain sucks.

That is all.

(At least I finally found Akismet so I don’t have to delete so many of them)

At what price, loyalty?

September 11th, 2006

One of the first items in about every article you read about saving money is to shop around your auto insurance for cheaper rates. While this is not a bad idea, I will be the first to admit I have not been aggressive about switching mine around even though I could probably save a few bucks a month by doing so.

The reason I have not is my agent whom I have had insurance with as long as I have been driving. He is the brother of a person who went to school with my dad and became my agent by default because he was my parent’s agent when I started driving. When I had my first accident that required claims and was freaking out after talking to other insurance people, who was there to calm me down and explain what to do. Well in that case it was his wife, but in some ways that is the point, he is not some guy on an 1-800 number looking at a policy number on a screen, but a guy who I can call and reach him or a member of his family and they recognize who I am by name. When my little brother wanted to know what and why he was paying the amount for insurance that he did, he was the one who sat patiently and went over line by line explaining all the factors and benefits received.

I know I could probably receive good service from some other company whether the person was across town or 1000 miles away via the phone, but I don’t feel the need to rush out and make a bunch of changes because of the loyalty factor. Does this mean I would not switch if I found out I could save a serious amount of money? No of course not, but the threshold is probably a bit higher than otherwise.

I know that this all comes in large part from my parents. They are the type that tends to stick with those they know. I get my glasses from a local optical store that my dad once wrote a story about and got to know the owner. The owner liked the story and gave my family a discount that continues to this day even though a new generation has taken over the store.

Of course, the loyalty can vary over time, which can lead you to reconsider the basic question, at what price, loyalty? In the case of the optical store, as new people take over, the same connection as with the original owner does not exist. Maybe they are not as aggressive about the discount or would prefer to get rid of it, but then again they do not have quite the same connection with me or the parents that existed with the original person. (As a disclaimer, in this case, I was speaking in part hypothetically; they have always honored the discount without saying one word of question as far as I know.) It is a two-way street though; I do not have the same connection to them either as my dad has. Although I have always gone to them for my glasses, my level of loyalty is not the same as my dad’s. Similarly if my auto agent were to retire and his son or someone else take over the agency, the level would not quite be the same because the connection with the new person has not been established to the same extent. Sure the relationship could built over time, but maybe along the way, cheap glasses at the Wal-Mart optical department or great rates from another company capture my attention in the meantime.

I am not trying to make the point that loyalty is good or bad, but instead to consider the impact that it has on our day-to-day decision making when it comes to our finances. It is a never ending aspect of the consumer experience, businesses are always trying to find new ways of increasing consumer loyalty, and consumers always have a choice where to make their next purchase from. So what is the price of your loyalty?

Follow up to Single Lender Blues

July 21st, 2006

Awhile back, I wrote about my lack of ability to conslidate my student loans with a company besides Sallie Mae due to the single lender rule. Congress finally repealed the single lender rule as of June 2006, which should make for a more competative loan market for students. At the time I conslidated my loans, there were some nice offers that I had considered before discovering I couldn’t easily take advantage of any of them. I can only imagine how the market might change and the deals that could be down the pike if people are freely able to change their lenders.

     My conslidation did go through without a hitch and my bill gets paid to Sallie Mae every month without any problems so far. I’m locked in at 2.875%, which isn’t much to complain about espically compared to the 7% and 8% that I’ve seen other people have. Of course I have many many years of repayment to look forward to, but I got two degrees at least right?

     But seriously for anyone in college or about to go into college, take a moment to consider some random free off the top of my head advice.

  • First, find and apply for lots of scholarships even if you think you may not qualify for anything, it doesn’t cost you anything but some time and the worst they can say is no. But you may get lucky and get a decent amount of college covered through this manner.
  • Second, don’t just take out student loans for whatever maximum you can. Take a moment to consider what you really need and what you can cover through other sources like a job.
  • Third, once you have that job, live within what you make. You’ll tell yourself its okay to spend money now because after you graduate you’ll make lots to make up for it. But make things easy on your future self, work a few extra hours and save a few bucks up.