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Account For Depreciation, Save Your Budget

By Frugaling 7 Comments

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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.

Filed Under: Save Money Tagged With: Amazon, Apple, Budget, Depreciation, Devices, Earpods, Headphones, irs, kindle, Macbook Air, Tech, Technology

My Amazon Kindle: A Eulogy

By Frugaling 12 Comments

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Amazon Kindle Broken Photo Ereader
My Amazon Kindle is broken…

From drooling wimp to reading aficionado

I don’t think I read one required book cover-to-cover in all of high school (sorry, teachers!). I didn’t enjoy reading, much to my mom’s dismay. Spark and Cliff notes eliminated the “need” to dig through the deeper meanings with tomes like Homer’s The Odyssey. I skated through high school, inspired by my brief overviews and a charismatic charm that filled in the missing plot gaps. It mostly worked.

In college, reading for enjoyment actually clicked. My grades improved and I found extra time to catch up on what I had missed. There was a simple equation: Read more to write better. Suddenly this drool-inducing, boredom-ensuing activity became relaxing and rewarding. I saw the value of it all.

A 21st century device for an age-old pastime

The transition from book avoider to avid reader was cemented by the purchase of an Amazon Kindle in college. As a nerd, geek, and all-around techie, the Kindle was the perfect blend of generations – reading power in the 21st century. When the slimmer, sleeker 3rd generation device launched, I purchased one immediately. It’s been with me ever since.

From Costa Rica to New York City, it was always with me. I chucked it onto the kitchen table, stuffed it into my backpack, and spilled a glass of orange juice into the keys. Frankly, I treated it like another paper-based book. Despite my harassment, the Kindle followed suit and kept up with my travels. Now, around four years of age (about 40 in tech years), I regret to inform you that it’s died.

When I got to school today, it refused to turn on. I followed a number of troubleshooting guides, too – no luck. There was nothing I could do, as the screen simply wouldn’t wake up or change pictures.

This shouldn’t be my gut reaction…

You might wonder why I’m writing about an inanimate object, when I aspire and espouse for a minimalist and anti-materialist lifestyle. Thanks for keeping me honest, readers! The real reason is that the loss of one object often begets a question: What’s next?

What should I get? What will be a frugal upgrade? Should I even buy another? How about a tablet, instead? What’s my price range?

Despite the eulogy, it’s felt more like an inconvenience on the way to an upgrade – another lifestyle inflation. The rapid replaceability swept the feelings of loss quickly under the rug. As I work to right my budgetary problems, this seems like room for error. The immediate reaction to buy another something – better and possibly more expensive – speaks to a disrespect for the exchange of money.

In the past, my gut reaction would be to purchase that next new device. Instead, I’m going to wait and make a frugal, informed decision that feeds my desire to read and fuels my budget. That is what’s next for me.

When you break something, what’s your gut reaction? Have you ever immediately purchased a new item to replace the broken? Or, do you take time before buying another?

Filed Under: Minimalism Tagged With: Amazon, Books, broken, ebook, ereader, kindle, Lifestyle, Minimalism, Tech

Fitness Trackers Should Be Free From Health Insurers

By Frugaling 6 Comments

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Fitness Tracker Photo
The Fitbit Force is a popular fitness tracker, but pricey at $129.95.

College campuses are hotbeds for new technologies, fads, and styles. Over the last couple semesters I’ve noticed a sizeable uptick in people wearing fitness trackers. These sleek, bracelet-like devices can track your steps, calories burned, food eaten, exercise routines, and sleep habits. Many can wirelessly sync to computers and smartphones.

Fitness trackers have long intrigued me, as a runner and frequent exerciser. Personally, I think the feedback would be helpful and encourage more healthy routines. I’ve seen both athletic and overweight populations wearing them. They seem perfectly suited to both populations’ needs. Despite these ample benefits, I haven’t purchased one because I think they should be free.

Running Budget Save Savings
Photo: brianac37/flickr

Insurance Companies Want Healthy Consumers

Health insurance costs escalated rapidly in recent years. Far surpassing inflation and comparable countries’ medical costs per capita, health coverage is a thorn for many individuals and small businesses. At times, the price of quality health care can be hard to come by if you’re on a tight budget.

Certain health provider groups started catering to athletes and highly-active individuals a few years ago. By developing a niche group of actuarially healthy individuals, the company could lower the cost of everyone’s premiums. Quite simply, it’s profitable for health insurers to encourage healthy choices in their clients.

Let’s Use Fiction To Inspire

Last year, Dave Eggers published his latest novel entitled, The Circle. Set in San Francisco and other parts of Northern California, the book takes the reader on a journey around a company that largely resembles Google. It’s a tech savvy, forward thinking company, that aims to collect everything and give people access to all the world’s information. Despite being insanely creepy at times, The Circle introduces some brilliant tech revolutions.

The one that is most apropos to this article is about a fitness tracker health insurance program. A free part of having this imaginary company’s health insurance is the access to one of these devices. It’s always on and managing your heart rate, calories burned, and tracking your sleep. The device is given at no cost to the employees because they can manage and encourage healthier habits – helping people live longer and cutting costs in heart-related procedures.

The Perfect Price Is Free

I have a serious bias because I’d like a fitness tracker. I think it would encourage me to exercise more regularly and eat healthier. Recognizing and tracking the strengths and weaknesses in your activity choices could positively influence much of the countries heart-related complications.

Ideally, health insurers will recognize the financial appeal of such devices and encourage certain clientele to use these trackers. By encouraging people to engage in more healthy behavior and connecting it with a financially solvent future, it may make the impetus and desire to exercise more potent.

The perfect price is free. This would eventually be a win-win for consumers, innovators, and the health insurers. This leap into technology has been stifled by prices that tend to be over $100 for trackers. As prices begin to decline (inevitably with all technology), fitness trackers may be a more easy choice for everyone involved.

Have you thought about getting a fitness tracker? Would you like your medical insurance to offer a free one?

Filed Under: Save Money Tagged With: fitbit, fitness, force, Free, health, insurance, jawbone, nike, smartphones, software, sync, Tech, tracker, tracking

Media Confuses Consumerism And Ads With Success

By Frugaling 2 Comments

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Related post: Too Poor To Protest: How Income Inequality Silences Your Voice

The Daily Show CNN Walk to the Couch Ads
The Daily Show’s Jon Stewart makes fun of CNN’s walk to the couch ads

Reader happiness versus advertising revenue

This is infuriating and intoxicating all at once. When you start a site and begin to build an audience, monetary consequences become more important. There’s serious money to be made. If I place in-text ads in front of my readers’ eyeballs, I risk alienating them while also skyrocketing my earnings. As an author, I constantly wonder what’s more important: A comfortable reading experience or pure profits?

This equation is delicate for any news source. Without ads, they cannot operate. Share too much, and you may lose your avid readership. There’s been a push in recent years to make ads more seamless – an effortless part of the process of consuming media.

CNN took this to the extreme recently, as they turned a simple walk to a couch into an advertising opportunity. A satirical critique from The Daily Show’s Jon Stewart ripped the idea apart and brutally made fun of the network. Clearly, the balance and boundary for advertisements had been crossed. Shortly after displaying this depraved attempt at money making, CNN cancelled the in-show advertising segment.

Ad revenue is falsely, grotesquely linked to success

A recent article in Business Insider catalogued the many ways Android was failing in comparison to the iOS/iPhone platform. In particular, the article focused on the Christmas shopping season purchases between the platforms:

Apple users on iPhone and iPad accounted for five times what Google’s Android users did when it comes to online shopping.

This is certainly a story and interesting financial question: Why are Google’s Android users spending less than their iPhone carrying friends? But here’s where many media outlets take this one step further and assert an ad-friendly correlation that doesn’t necessarily exist:

What the heck is wrong with Android users?

Android people just seem to be sitting on their hands. Their phones are just as powerful as iPhones are. They have bigger screens, too. But they don’t do anything with them.

Simon Khalaf, CEO of Flurry, one of the larger mobile ad companies…had a surprising answer for us: Androids are simply dumbphone replacement devices…

…It seems like the users on the majority of the island aren’t interested in modern life.

By not supporting big business – as much – this Christmas, Android users are being vilified. This contempt for a population seems to be solely motivated by advertising revenue. They’re described as inferior and worthless in the eyes of this media outlet. Why look for Android users when iPhone users will buy more?

Unfortunately, this is an incorrect, vapid conclusion. The author seems to stop short of actually looking for reasonable conclusions about what is happening. Androids make up about 80% of all smartphones. There’s a great diversity in Android users, as many are more affordable than iPhones. Androids can be applied to less expensive prepaid cell phone plans and off contract. These options cater to a different, more frugal audience than iPhones. Shouldn’t these frugal users be exalted for spending less?

Apple appeals to many audiences, but its affordability is better suited to the wealthy. The company’s margins are well known for being industry setting limits, with some products garnering 50% or more markup on actual build value. The person that buys an iPhone is likely in a different income class than an Android user.

But all these reasons are simply a defense of Android users, and that misses the greater point. Larger media outlets often get distracted by revenue and profits as the sole barometer of success. These news sources even go so far as critiquing less ad-friendly executives as being childish.

Embrace ads and be revered by Wall Street

If you’re not developing a way to monetize your platform, Wall Street isn’t interested. When technology darlings rise beyond startup status and begin entertaining an initial public offering (IPO), investors analyze the earning potential. For instance, Snapchat may have a multi-billion dollar valuation, but it’s not making money yet.

Angel investors have pumped hundreds of millions into the company for development. The future looks similar to Facebook: mine user data without explicit permission or choice (accept the terms or get off the app), and plaster intrusive ads that capture your attention and wallet. But who decided Wall Street was the bastion for business acumen and respect for users’ wants?

This is a narrative that major media outlets across the board tend to support. One of my favorite websites, The Verge, suggested that Mark Zuckerberg was childish when he didn’t support advertising as much. Likewise, they suggested that the major turnaround in Facebook’s stock was associated with his new embrace of ads:

Zuckerberg decided to buckle down, grow up, and start focusing on the nitty-gritty of the business.

He got trusted engineers to give up coding and start working on spreadsheets and mobile ads instead. He began taking face-to-face meeting with important clients like McDonalds. And he embraced more ads in both the news feed and in the company’s mobile products. The result has been a strong turnaround that has boosted the stock to new highs. (The Verge)

The Verge’s article seems to portray an atypical business desire as wrong or inferior. Zuckerberg is painted as an idiot that needed to “grow up” to recognize the basic business needs. Instead of being considered a hero for trying to stand up to investors, the media tends to focus on something that supports the mass-media-advertising model.

Consumerism, ads, and real progress

Corporate America would like you to think you’re merely an employee that aids profitability. Why exist if you are not contributing to a bottom line? As a company, there’s this assumption that you should take any and all profits you make – no matter the cost. But there are limits to corporate greed, and a backlash may result from poor planning.

CNN was privy to a major critique of their strange advertising practices. Clearly, a line was crossed. It’s easy to confuse advertising revenues with success. Honestly, when I have months that make me less money on Frugaling, I wonder what I did wrong. Fortunately, there’s a healthier reality that includes the users’ perspective. Success should be gaged in sharing and commenting rather than the profit model.

When your goal is a powerful reading experience – versus profits – you’ll likely end up with more in your pocket anyways.

Filed Under: Social Justice Tagged With: ad, ads, CNN, Consumer, Facebook, Frugal, Jon Stewart, money, readers, revenue, Salon, Snapchat, Tech, The Daily Show, The Verge, User, walk to the couch

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