Five Great Ways to Save

If you’re struggling to free yourself from debt, there are a lot of ways you can do so that may not readily spring to mind. But in the UK debt management has become big business as the whole country seems intent on freeing itself from the burden of debt that was taken for granted just a few short years ago.

In making savings to help reduce debt, it’s important to remember that saving what might seem relatively small amounts of cash each month can make a huge difference over time.

So here are five top tips to achieve your goals:

1. Shop around for the best possible mortgage. The current lowest-ever interest rates mean there are some great deals around – so seek expert advice to make sure you have the best deal possible.

2. Clear your credit card debts if you possibly can. The interest rates on credit cards are generally very high.

3. Try to cut the cost of your household bills. Make sure you’re getting the best possible deal for your gas, electricity and telephone bills (including your mobile(s). The market is constantly changing as companies introduce new schemes to lure in new customers. The switched-on householder who’s prepared to make the extra effort can benefit hugely from these deals.

4. Save on food shopping. The discount supermarkets offer excellent value – and even shopping online can be cheaper despite the delivery costs. This is because you aren’t as readily tempted to buy the things that would tempt you from the shelves.

5. Sell the things you no longer use. Is your home full of clutter you really don’t use or appreciate any more? If so, consider selling it at a car boot sale or in the local paper – or on E-bay, the online auction house. There’s always someone looking for something and you may surprise yourself by how much money you’ll receive. This also helps psychologically as you realize how little the things that may tempt you now will be worth in a year or two’s time.

These are just a few of the way you can grow your savings which will gradually free you from the nightmare of personal debt.

Photo by _J_D_R_.

Find Cheaper Premiums for your Home Insurance

Part of living frugally is making sure that you’re not overspending on necessities in life. There are lots of areas where you can easily save money – if you’re prepared to do your research. One classic example is home insurance. Nobody wants to pay out for home insurance, but it’s not something you want to be caught without in case of a fire, flood or burglary in your home.

To reduce the cost of home insurance, you first need to make the effort to get a number of different quotes. You’ll then be prepared to go back to your current insurer at renewal time and ask whether they’re willing to match the lowest quote you’ve found to keep your business.

There are many different optional features on a home contents insurance quote and not having these is another way you can make savings on your annual costs. Each optional feature brings potential benefits, but it really depends on how much you think you will have need of the features whether you decide to add it to your annual costs for insurance or not.

Home emergency coverage is an extra feature that many people choose to pay more for. If you have a home emergency, like the boiler breaking down or the washing machine flooding, then home emergency coverage will mean that a tradesman comes to your home to deal with the problem within a short time frame and that the cost of the repairs and parts will be covered up to a ceiling amount.

Another extra feature on home insurance is accidental damage coverage. This is particularly popular with households that include young children and will cover you in the case of jam sandwiches being shoved into the home entertainment system or blackberry juice being spilled on a white carpet, for example!

Not everyone realizes that their contents coverage only covers their possessions when in the home, so if you lose your tablet or phone while out and about, your insurance doesn’t cover it. The only way around this is to include personal possessions coverage on your contents insurance, which means that items with you when away from the home will be insured. Again, this is down to personal judgement whether the extra premium costs will be worthwhile.

Look carefully at what you current home insurance covers and decide whether this is the right coverage for you. Then get some comparative quotes to check whether you're getting the coverage you want at the best possible price.

Do Balance Transfers Always Make Sense?

Balance on this!

If you've ever carried a balance on a credit card, you've probably also considered setting up a balance transfer to "hide" that balance and not pay interest on it for a while. I don't know about you, but I receive a handful of balance transfer offers in the mail every month, and those "0% APR for 12 month" offers can be very tempting.

But hang on a second. Does it always make sense to transfer a balance from one credit card to another, even at 0% APR? Let's take a look at the fine print.

I was perusing just such an offer from Discover Card when I saw that the balance transfer charged a 5% immediate fee to facilitate the transfer. Big deal, you might say. If I'm being charged a 19.99% APR on another credit card, surely paying 5% instead makes more sense.

The problem comes from just how that interest is charged. As I stated, the 5% charge is immediate, but what you might not realize is that the 19.99% charge is spread out over the year. What does that mean in real figures?

If you transfer $1,000 to Discover, you will immediately pay a $50 fee to do so. This balance will not be charged interest for a year, however.

If you kept that $1,000 on the original card at 19.99% interest, you would only face an interest charge of $16.66 the first month. This is because while the interest is higher, the charge is then divided across the 12 months. Therefore, your monthly interest charge equals $1,000 X .1999 / 12 = $16.66. With this being the case, it would take over three months for that $1,000 on your original credit card to cost you in interest what you'd be paying immediately with balance transfer.

What should you do in this situation? It depends on how quickly you can afford to pay down this debt. If you think you pay an extra $333 per month towards the principal, it makes more sense to keep it on the original credit card (particularly since the interest will be reduced with each payment). If, however, you think you need to pay this amount down over the course of a year, then the balance transfer is the better option.

So what should be your takeaway? Balance transfers are the Trojan Horses of personal finance, and, in this case, it makes a lot of sense to look this gift horse in the mouth.

Photo by SeeMidTN.com.

Lending Club Update - September 2012

As you can see in the graphic to the right, I'm finally out of the negative return area with Lending Club. In fact, since the last time I posted an update, my returns have increased by roughly 5%. To make sure my returns increase, I've changed how I look at investing with Lending Club.

How, specifically, have I adjusted my investing strategy with Lending Club? Well, in the first place, I've increased the number of loans that I hold. As I mentioned before, having so few loans in the first place is really what caused the one default to affect my returns so grievously. As of today, I have 36 loans, all of which are current in their repayment. I do plan to keep investing more with Lending Club, but I'm holding off until I get a better sense of how much I'm going to be able to work when I go back to grad school in a few weeks.

The other way that I've changed my strategy is that I am much more vigilant now concerning late payment. As you may know (and as you probably know if you're reading this in the first place), Lending Club has a trading platform with which you can sell off any of your notes at whatever price you choose (assuming you can find somebody to buy them). The drawback is that Lending Club charges a 1% fee per note sold.

How exactly have I been more vigilant? Well, as soon as I notice that one of the people that I've lent to misses a payment, I put their note up for sale. I start the price at what is owed plus the current amount of interest, and I adjust that price downwards every few days until somebody purchases it. My thought is that it's better to get most of my money back on that note, even if I end up selling it for a loss. That is, a small loss is more appealing to me than the prospect of getting larger returns due to extra charges to the borrower that accompany late payment with the risk of a large loss (the entire value of the loan).

Perhaps I'm oversensitive on this topic, but after the one note defaulted (by someone who later filed for bankruptcy), I want to limit my risk with the notes as much as possible. As I mentioned, Lending Club does charge late fees for people who are late with a payment (which would mean extra money if the borrower brings themselves up to date with their payment), but I'm a happier person by selling the notes off and not having to worry about them.

What do you think? Am I too conservative in my Lending Club approach? Let me know in the comments.

Will You Support Your Parents?, or, A Post That's Mostly Unrelated Footnotes

When you start wearing Crocs all the time,
it may be time to throw in the towel.

A recent study mentioned in the New York Times states that 35% of adults near retirement age expect to not retire at all. Their reasons for not being able to retire included, perhaps obviously, the need for the income that working provides and the insurance benefits that accompany working.*

I don't know about you, but whenever I read articles like this, I tend to reflect on the ideas put forth by personalizing those ideas. That is to say, how does this information affect me and mine?

To answer, let me start by stating that I'm pretty lucky to still have one set of grandparents alive and in relatively good health.** My grandpa still owns a laundromat which he continues to run at age 89 (though he relies more and more on my dad for the day to day duties). My grandma never really had a professional career, per se, though she did work various jobs in her life, and she also helps grandpa with the laundromat. So, while I suppose you might consider my grandma retired, my grandpa is not retired by his own choice.

And bully for him! If we're being honest, owning a laundromat is almost as passive an investment as running a business can be. Further, I don't know that grandpa needs the money that the business brings in at this point; while I'm not privy to all his finances, I don't think they're hurting. As an example, five years ago, grandpa bought the land his business is on, and three or so years ago, grandpa bought grandma a bigger house (as our family grows, so too do family holiday gatherings). In talking with grandma a few months ago, she seemed to think both of those purchases were pretty much paid off. For grandpa, continuing to have the business seems like it's his choice to help provide for our family even after he's gone.

With all that said, I wonder how many of the 35% of people in that survey are like my grandpa, who have sweet, relatively easy gigs?*** I suspect he's probably more of the exception.

However, when it comes to my parents, I don't think they're quite as set. My dad (69) retired a couple of years ago, but he still gets called in from time to time to his old work as well as helping out at grandpa's store. My mom still works during the school year. Again, while I don't know everything about their finances, I estimate that they have some money in retirement accounts, but what's there may not be enough to live on (for what I'm hoping will be a long time). On the plus side, they'll both get Social Security, and the house that they live in (that I grew up in) is nearly paid off.****

Still, I think my parents will probably be okay when they both retire. I know my mom could have started receiving Social Security benefits a few years ago, but it looks like she's planning on working at least one more year so her Social Security checks will increase.*****

So, I think that I'm in sort of lucky place. My family seems like it will be able to continue to provide for themselves into their twilight years. Still, I wonder if I should start saving a little extra money for my parents in the event that they run out of money.

What do you think? Are any of you planning on supporting your parents? Should you be? Should I be? Let me know in the comments.

*Not to get too political, but Obama wanted free healthcare for Americans, and, instead, we got legislation that says, "Buy health insurance or else we'll, fine, er, tax you." I have a hard time believing either party is happy with that outcome. After all, when not having health insurance is outlawed, only outlaws won't have health insurance. Maybe I'll drop off the plan I'm on so that I can get "Thug Life" tattooed across my chest.
**I'm very lucky in the case of my grandfather; three months ago it looked like he was going to die in a matter of days. His doctor told my family that he was just getting old and that his body was starting to shut down. It's worth noting that this is the same doctor that "missed" my dad's cancer. My parents eventually took him to the emergency room, where they, too, were unable to figure out what was wrong with him, but, not willing to give up, they took him off the various medications he was on, and he immediately regained strength and started to get better. The short of it is, a pharmacist had mislabeled grandpa's blood-thinning medication, and so grandpa was taking twice as much he should have been. The old saying is that blood is thicker than water, but it seems like there was a time for grandpa where water was thicker than his blood.
***I don't think it's 100% easy, though I do think the primary difficulty in starting a laundromat is the start up costs. Commercial washers and dryers aren't cheap, and they do need to be replaced eventually. That said, I do think the day to day aspects of running a laundromat are pretty easy.
****That said, a house as a retirement asset doesn't always seem like a great idea. After all, how many people lost 40% of their home equity in 2007-2008 that were hoping to retire? Also, if you sell your house, where will you live?
*****Eligibility for Social Security renews each year in January, so, for you extreme penny pinchers out there who are worried about your kid's retirement, you might want to start "getting busy" around March or April so you can get a January baby who will be able to suckle on the government retirement teat as quickly as possible. My dad with his December birthday had to wait nearly a whole extra year to retire.

Photo by boliston.

On Eating Out - A Tale of Two Families

"See, and if there's 6 or more, we'll charge an extra 18%!
It's brilliant!"

Both my family and my wife's family live far away from the San Diego area, so when either set of family comes to visit, my wife and I are on the hook to find exciting things to do and fun places to eat (services that Yelp and I are happy to provide).

For meals especially, my family tends to have positive experiences. For instance, they were in town yesterday, and we ate breakfast at this charming little cafe. The food was delicious, it came in a timely manner, and the waitress even squeezed fresh orange juice for me after I had requested some and been told that they had run out. We also went out to dinner the night before, and we had a similarly excellent meal (in which we were comped a dessert).

However, when I go out to eat with my in-laws, we almost uniformly have a bad time, usually in regards to service.

Now, I know what you're thinking. If one family is always treated well and the other is always treated poorly, it stands to reason that each family is getting back what it's putting out there. I've spent a fair amount of time thinking about just this topic, and, honestly, I think both families are equally as friendly. While my dad is one of the most gregarious people I've ever met, it's not like my in-laws are sullen cranks. I really think both groups are pleasant and polite.

As an example of what happens when I go out with my in-laws, last week (yes, I've eaten out a lot in the last week -- both sets of parents were here on different days for different reasons) my wife and I suggested that we go out with her family to this restaurant that my wife and I had eaten at previously and had had a good experience at.

We went on a night that wasn't busy (I think there were maybe two or three other groups there, not counting the handful of folks at the bar). We called ahead for reservations (it's kind of a swanky place, and we were bringing some aunts and uncles in addition to my wife's parents), and this was our experience.

It took probably forty-five minutes to an hour for our orders to be taken.

The food was good, but it took a long time to come out.

Finally, the waiter refused to split up our bill, even though it was obvious that there were probably 5 groups that wanted to pay separately (the math portion of this comic is so, so right on). I assume this was due to the automatic 18% gratuity due to the size of our party, and if he had split the checks, that might not have come through. This event in itself probably added 30-45 minutes to our evening because we had to go back through the bill, figure out who ordered what, and assign each a percentage of the gratuity and tax.

I don't know, when I write it out, it might not seem so bad, but I was pretty frustrated at the time (first world problems, right?). Even though it was a leisurely-paced meal where the family was mostly concerned with catching up, certainly a three-hour-dinner implies something about bad service, doesn't it? Maybe I'm just being cranky, but when we pay close to $50 per head, I expect to have an easy-going, pleasant experience.

On the other hand, maybe I'm just over-sensitive because I especially want my in-laws to have a good time (you know, so they'll like me).

What do you think? Do any of you ever have consistently bad experiences with one group of people when you go out versus consistently good experiences when you go out with a different group of people? Am I just crazy? Let me know in the comments.

Photo by Seattle Municipal Archives.

What Is It to Succeed?

In his Democracy in America, Alexis de Tocqueville asserts that "In democracies the love of physical gratification, the notion of bettering one's condition, the excitement of competition, the charm of anticipated success, are so many spurs to urge men onward in the active professions they have embraced, without allowing them to deviate for an instant from the track." While I can't speak for all democratic countries, I certainly think the "charm of anticipated success" has spurred many Americans, in particular, to create their own businesses. 


Whether these businesses end up being profitable in the long-term is frequently beside the point.  According to the U.S. Bureau of Labor Statistics in 2005, only 66% of small businesses remained in operation two years after opening, and only 44% remained in business four years after opening. Still, 100% of these businesses were started by people who expected to succeed.

See? It's not your fault, Kristen Wiig in "Bridesmaids!"
Cupcake shops have tough business models.

I guess this is what's intriguing to me. When the majority of small businesses fall apart in under five years, how can so many Americans expect success?


This topic was brought to mind as I was reading this article about how Curt Schilling, former baseball player and probable future Hall of Famer, started a video game company because he was looking to continue making money after his retirement from baseball.* All in all, he poured over $50 million of his own money into the company, to say nothing of millions of dollars in loans that the State of Rhode Island gave him.


As you can probably guess by the fact that I'm writing about it, the company went belly-up. Still, even as the company was crumbling around him, even as million dollar plus checks were bouncing, even as pregnant wives of employees were finding out at doctors' offices that they no longer had medical insurance, Schilling remained optimistic. In thinking back on the experience, Schilling said, "I had to beat the Yankees three times in nine days. I never doubted I was going to do it. My whole life was spent doing things that people didn't believe were possible, because God blessed me with the ability to throw a baseball. And I carried that same mentality into everything I did here."


In short, he expected to succeed, and this expectation cost him (and many of his employees) everything.


In bringing this up, I don't mean to subject Schilling to more ridicule than he's already received (as if Curt Schilling gave two craps about my humble dot net). All I mean to suggest is maybe, just maybe, we all shouldn't expect to succeed quite so much. Maybe we shouldn't start video game companies without having a background in programming. Maybe we shouldn't bundle good mortgages and bad mortgages together and sell them as a financial instrument. Maybe we shouldn't run for President and refuse to share our tax returns.** 


Look: I'm guilty of this thinking as well. I audition for plays expecting to get cast. For the show that I'm in now (which is a great show, a lot of fun to be in, and furthers my professional goals), I have to drive an hour and half round-trip to get to performances. So, I work from 8-5, rush home, drive up to be there by 7, get out by 11, and get home by midnight. Wash, rinse, repeat.


Look: I know a person has to work hard to get anywhere in the world. I even think this is reasonable, just, and equitable. However, my question is, at what point are we defining success? In my case, is my great success getting cast? Getting to rehearsal on time? Getting to opening night? Getting to list a decent credit on my resume?


And how much is that success worth when compared to getting to spend time with my wife? This variable has been sadly lacking for the last several weeks. I miss spending good time with my wife.


Success and reasonable living seem to be at odds.


*It's like rich athletes who go bankrupt have never heard of an index fund.
**To be fair, I don't really like either candidate. I was just having a difficult time finding an expectation of success comment for the President.