Budget Archives - Page 6 of 11

What’s Motivating Me To Save?

Hamster Wheel — *Photo: Dan Derrett/Flickr*

Most days I live a chaste life. If they created a reality TV show of my life, it would be cancelled before the air date. Hell, the film crew would probably fall asleep in production. It’s a simple, hamster wheel existence that consists of getting up, making breakfast, reading for hours, working, and repeating that all the next day. The bummer is I want more than this.

Over the last few weeks of summer, as I’ve been on my constant rinse and repeat cycle, a growing desire to travel has crept up. More than travel, it’s a desire for more adventure. But then there’s my life and reality.

Being a 25-year-old doctoral student is a lesson in delayed gratification — working hard now to find enjoyable work and a reasonable paycheck later in life. Like many times before, on this frugal journey, I look at my budget. The numbers don’t add up. I can’t spend the money to travel to England, France, or visit Montreal. I just don’t have it, as I would need to take out student loans again to support the travel. That’s unacceptable to me. The psychological burden of student loans was too great and the interest rate of 6.8% is punitive.

I’m struggling to see the path and reason for my frugality. It’s here that I introspect, “What’s motivating me to save money and avoid more student loans?” There are both great opportunities and real challenges that create this defensive personal finance stance.

One of the biggest motivators is fear. Constant rises in income inequality, climate change, and a political environment that is skewed to the wealthiest are frightening me. If you’re not part of the bourgeois, you’ll likely be fighting, clawing, and begging your way out of lower income categories over the next few decades. Knowing that the foreseeable future will likely include environmental refugees (e.g., economists and researchers have increasingly theorized that the Syrian civil war was motivated by drought and the Pentagon has suggested that climate change may be a global threat) and massive changes in employment possibilities (I have no idea where or when I’ll be hired when I finally graduate), I’m eager to sock away some cash. Accurate or not, these are the challenges that drive me to save.

On the flip side, I’m motivated to save for a number of fun, experiential opportunities. I want to travel the world, develop a fluency in a foreign language (if I still have the brain power at that point in my life), give to the scholarship I started at Colorado State University, and develop a thriving practice as a counseling psychologist. These will all require a steady and safe savings. More importantly, they’re all worth the delayed gratification and relative banality of my life right now for more later on.

It’s with this yin-yang relationship — balanced — that I’m forgoing the travel now to live a better life later on. Until then, I’m diving into a good book and pretending to travel to faraway places and positions — loving every minute of the dream and working my butt off to make that happen.

4 Ways Coupons Manipulate Spending Habits — Watch Out!

By Frugaling 13 Comments

Every Wednesday and Sunday — if you subscribe to a paper — you generally receive a healthy dose of coupons. Everything from soups to toilet paper to deli meats are frequently included in the pile. With open arms, many clippers sift through the mass to find a couple deals.

Some people collect them, place them in binders, and combine coupons with store deals. Websites and shows like The Krazy Coupon Lady and TLC’s Extreme Couponing examine, research, and find incredible coupon-based deals. Everyone seems to love coupons!

You should be concerned.

Coupons are developed by vast marketing and advertising teams for corporations. The advertising industry as a whole is estimated to be in the hundreds of billions, and a significant portion is outlined for couponing. But subtly, clipping those weekly coupons affects the psychological decision making in the supermarket. Here are 4 ways that coupons manipulate your spending habits.

1. Clip, cause cognitive dissonance

Every time you clip a coupon, your mind buys a product. Even though you haven’t gone out and purchased the item, to clip a coupon, it’s a commitment of time and action. This has a direct effect on your wallet.

A powerful psychological effect that can occur when you clip a coupon: cognitive dissonance. If, for instance, you decide to clip a coupon and then later question whether you really need the product, this may lead to dissonance. Essentially, this is a distress associated with spending the effort to clip a coupon that you now might not use. For many people, they’ll use a coupon just because they clipped it — regardless if it’s the cheapest option once they get to the store.

2. Exposure predicts spending

Exposure is the key to purchasing a product. What a simple conclusion, right? Well, stores know that the more face time you have with a product, the more likely you are to buy it. If the exposure begins prior to entering the store, you’re effectively being primed for the future purchase.

With coupons, your eyeball sees the product at home. If you clip it out, you are further intensifying the duration of the exposure. More time in front of you equals more money for the grocer and advertiser. How easy!

3. Is that really any cheaper?

One of the most important reasons that people clip coupons is to save money. Ironically, this may not actually lower your shopping bill. Coupons are not usually offered for generic, store-brand merchandise or fresh produce. Instead, they’re frequently marketing name brand items that already have a built-in premium. This added cost often voids any discount associated with using a coupon.

It’s very important to pay careful attention to the coupon you’ve clipped out. At a store, you need to look for generic items, and then compare them to the name brand item for the coupon. All of this takes a level of vigilance and time that many don’t have or care to have at the grocery store. For both time and money, just buying generic items is normally the best bet.

4. Coupons are getting smarter

Smartphones, apps, and online coupon sites are increasingly digging into your spending habits. Your rewards credit card, frequent shopper card, and web browsing history may be leeching your data to third-party companies. These organizations then will compile and predict what you want. They’re so accurate that Target can tell when you’re pregnant, about to have a child, and/or the ages of your children (read Brandwashed for more on this tactic).

By using these predictive tactics, companies can practically read your mind. If they know all your purchases and habits, coupons can be created that make you look at new, similar products. These choices may cost more over time, but offer a great deal at first. If you like the newer product more, the system has worked and you’re hooked. Now, the money is theirs to reap.

It’s not that coupons are always bad or more expensive than generic brands, but they can sometimes change your spending habits for the worse. Moreover, think about all the time that’s necessary to clip those coupons and find the special savings — this adds up. If you spend your time making more money and buying generic, this could actually be smarter in the long run!

Account For Depreciation, Save Your Budget

By Frugaling 7 Comments

Broken Computer Flickr Creative Commons Tech Devices — *Photo: flickr/youngthousands*

The 21st century doesn’t seem to prevent technology from aging rapidly and becoming obsolete after a couple years. A couple of my devices recently died, and I’m on the cusp of another big tech failure. I just don’t have the money to replace anything. This could spell trouble for my precariously balanced budget.

My devices are failing me

Three months ago, my Amazon Kindle broke. I traveled the globe with that device and read hundreds of books over its lifespan. After four years of heavy use, the screen died and the internal motherboard stopped working properly. It probably didn’t help that I spilled a glass of orange juice in the keyboard of this device (watch out for this theme). Rather than simply throw it away, I auctioned it off on eBay and recouped about $25. Not bad considering it was broken and about four years old.

Amazon’s Kindle costs about $120.

I just chucked my Apple headphones in the trash. After nearly two years of intense use and travel, they’re broken. I don’t go a day without listening to music on my iPhone, and most of the time I used those headphones. I had tried extending the life by using electrical tape and trying to reseal certain areas on the headphones. For a while, that worked. Unfortunately, they worsened. They’ve been answering/ending phone calls automatically and starting/stopping music at random. Not a pleasant surprise when you begin answering phone calls to telemarketers.

Apple’s in-ear “earpods” cost about $30.

What if my computer breaks?

I bought my 13″ Macbook Air in mid 2011. It’s my favorite computer I’ve ever owned, and I’ve avoided an upgrade. While I still yearn for a newer model, I can’t afford to buy one right now.

Like my other devices, it gets exposed to some serious travel and abuse. After about a year of owning the laptop, I spilled a full glass of chocolate silk in the keyboard (notice the theme?). It fried the top assembly. I brought it to a repair store to try and save it — the cost was about $400 to fix. I remember looking at that price and thinking, “I could buy a brand new Windows laptop at that cost.” I decided to go ahead with the repair, as the system could be saved.

Now, about three years old, my trusty laptop is starting to slow down. I can tell that the cooling fans aren’t working properly. This is likely damaging important processor components and could threaten my data. It’s a recipe for disaster. At some point, my laptop will likely overheat and fry itself. Until then, I work on nearly everything in the cloud and save frequently.

Apple’s Macbook Air costs about $1000.

Account for losses, use depreciation schedules

When you purchase a computer, like a new car, it immediately loses a bit of value. Over time, the depreciation continues. The Internal Revenue Service (IRS) has specific tax depreciation rules that can be used for the following:

Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable.

These properties can be deducted from income schedules, but are only to be used by businesses. You cannot deduct for physical product depreciation as an individual. Luckily for me, my computer is primarily a business tool — seeing as I use it to write.

Modified Accelerated Cost Recovery System MACRS — Screenshot of a Modified Accelerated Cost Recovery System calculator

Irrespective of whether you can claim a tax deduction, it’s important to learn to account for depreciation in vehicles, electronics, and intangibles (i.e., software). But this is where calculations get sort of complicated. Essentially, depreciation is a governmental science that averages your losses on a product, which is based on your cost basis (the original price paid). If I bought my computer in 2011 for $1000, then the depreciation expense that can be deducted from my taxes is $58. That’s a loose estimate from this calculator.

Even if you don’t claim business tax deductions, calculating depreciation through this method and then including the $58 loss in your budget for 2014 is very important. If I had properly accounted for the further losses of my headphones, the Kindle, and my Macbook Air, I would be in a better financial situation.

Eventually, things fall apart. It’s a known truth. After losing my Kindle and headphones to failure, I looked at about $125 in losses. If my computer goes, too, I’m in trouble. In the future, I’ll be looking to account for depreciation to avoid budgetary surprises that could leave me reeling.

Also, I’ve learned that I need to keep liquids away from keyboards.

Relationships And My Leaky Budget: Learning To Fix Myself And Save Money

By Frugaling 5 Comments

Single, lonely, and spending money

When I was younger, I felt lonely. We’re talking a crushing, oh-shit-the-world-is-empty type. I wouldn’t say I was a deep thinker, but my questions seemed more macro — larger than the everyday.

I use to draw a lot. My art was dark and moody. Often, I seemed to be expressing my disdain for life, and the sadness I felt inside.

I spent money like it was going out of style. I couldn’t resist buying a $1,000+ dollar road bike on a whim, even though I had barely showed any interest in cycling. Oh, and there was that gambling problem, too.

The cash in my wallet was merely an intermediary between work and stores — singlehandedly feeding the consumption our economy supposedly needed. I didn’t save money. It was meant to be spent. I was definitely dissatisfied with life. Another part was fearful of dying too soon. I spent so much money trying to avoid those feelings.

Looking back, I know I made huge spending mistakes. Only now can see how that affected me.

Coupled, insecure, and still spending money

Unfortunately, my spending didn’t resolve itself because I was suddenly in relationships. I thought that would fix everything. When partnered, I felt compelled to impress, treat, give, and spend. I wanted to be easygoing — I tried so hard to be — and spent like it was the end of days.

I couldn’t save money. I was spending whatever I had to make someone else happy. In the process, I only grew more unhappy and indebted to a bank; that affected my girlfriends, too.

Deeply insecure and and spending without pause, my budgets always crumbled. My desire for frugality was bashed in by insecurities and inner loneliness. I cannot tell you how many times I thought, “Am I worth it?” That question always hurt.

Put the oxygen on mask on yourself before helping others — Maybe it’s a trite cliché, but sometimes you have to put the mask on yourself before helping others.

Single and saving money

Back then, I was withering under the pressure. Something shifted in me. Nowadays, things are slightly different; not perfect, but better. I’m able to evaluate situations in fairness and calmly make the next steps for a longer-term future.

I’m single again. Rather than feel lonely, I notice a new security and happiness. I’m surrounded by friends and people I care deeply about, while working tirelessly to help others through my work (counseling).

Every now and then, hunger pains for spending stir in me. I sit before my laptop — a four-year-old Macbook Air — as it whirs away inefficiently and slower than it used to operate. I feel a pull to spend more than I currently have to buy a new laptop. I’ll wait.

I see a wonderful Patagonia shirt, which is accidentally being advertised to me through a YouTube personality. It makes my mind cue up a desire for one of my own. Before I buy that $70+ shirt, I remember what I’m trying to do, and resist the purchase. I’ll wait.

Staying present, focused on my goals

Unlike past years, when I felt isolated and alone, I’m (mostly) secure and hopeful. I’m excited with my days — blown away by the meaning I derive from both my play and work. Somehow the spending is more on my terms.

When I pull out my cash or cards, I know why I’m doing it. I’m not paying off demons inside my head or distracting myself through conspicuous consumption. No, I’m interested in being intentional, thoughtful, accountable to myself and others. When I have a healthy, balanced budget a remarkably simple consequence occurs: I feel positive, too.

That’s what I’m working on.

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