Archives for May 2010

I Won the Lottery! Almost.

May 26, 2010 By Shane Ede 5 Comments

I won the lottery last week. Almost. Not quite, but almost. I suppose I would have had a better chance if I still played the lottery. I used to play the lottery off and on by myself, buying a ticket now and again, when the jackpot was several hundred million. Then, I joined a group of people at my work that pooled our money together and bought lottery tickets with that. Eventually, when I began listening and reading more on personal finance and then found Dave Ramsey, I quit paying the idiot tax. Happily, I spent that $10 a month on something more worthwhile. Like debt repayment. And it was a good decision. Until last week.

Last week, the group of people that I used to play the lottery with won. Not the jackpot, but the second highest prize. All 5 numbers without the magic ball. $250,000. There were 19 in the pool, and, after taxes, each will receive about $9700. When I first heard, boy did I feel stupid. What was I thinking? I could have had a share of that! Do you have any idea what $9000 could do to my finances? It could eliminate my remaining credit card debt. What was I thinking, dropping out of the pool?

Then, as I had more time to think about it, I came to my senses. The odds of winning that prize were 1 in 3,900,000. You have better luck finding a fresh lightning strike and getting struck by lightning right then and there. Which doesn’t mean it couldn’t happen. It did. But, for each of those 19 very lucky people, there are thousands of people who bought a ticket and will never win. I can’t say that I’m not still slightly jealous of the winners. More so because of the “it could have been me” mentality than because I begrudge them the money. Some of them truly could use it. But, if they could use it, why are they playing the lottery.

Which is why I wasn’t playing. I could use the money. So, rather than spending my money on things like lottery, I was putting it to work for me. As fate would have it, the pool that I used to play with won. I see it, now, as a test of my financial resolve. How many of those 19 will have spent the money on frivolous things and then be complaining in a month or two about how they have all these bills? All while putting their money in to play the lottery, just in case lightning does strike twice?

I’ll keep plugging away at my debt. And one day, when they’re still playing the lottery, hoping to hit it big and get rich, I’ll have made myself rich with the money I’m not spending on debt. Now, does anyone know a good way to make my friends understand that?

Coupons: Are They Worth The Hassle?

May 24, 2010 By Heather Sokol 5 Comments

If I told you, I would give you $5000 for groceries every year, if you’ll spend an extra 30 minutes planning your shopping list, would you do it?

That’s exactly what the stores & manufacturers do every week with sale ads and coupons. Yet, nearly 90% of coupons go unredeemed each year and countless shoppers buy products without ever glancing at the sales ad or price tag. A little extra effort, a bit of advanced planning and mastering the art of couponing can go a long way towards reducing your monthly expenses.

Coupons are a multi-billion dollar industry – last year, over 500 billion dollars worth of coupons were distributed. Most of them landed in the garbage (or, hopefully, the recycle bin!). So, why are consumers throwing all that money away? The answers I hear when I ask readers, friends & family this question typically include “it takes too much time,” “it isn’t worth the effort” and “I can’t find coupons for the things I buy.”

Coupons take too much time.

I spend an average of 20-30 minutes clipping coupons each week. I spend about half an hour in the store doing the actual shopping. I don’t count the time I spend putting together grocery lists for Inexpensively, since there are literally hundreds of blogs dedicated to creating coupon ad matchups. The average shopper can completely skip that step (but, for the record, I spend about 30 minutes per store). Grand total? One hour for coupon clipping & shopping.

How much time do you spend wandering the aisles at the grocery store?

Coupons aren’t worth the effort.

We’ve already discussed the time spent, which I think is the bulk of the “effort” people refer to with a statement like this. Clipping coupons isn’t too taxing – I promise. I typically cut coupons in front of the television. I’ve even let my children help out now & then. If a 7-year-old can handle it, I think most adults could manage as well.

The question becomes one of time again – does the money you save really justify the extra time? My grocery bill typically shows a “total saved” (including sales & coupons) of around 50% – sometimes way more, sometimes less. I once tracked every penny saved & spent in Quicken. My monthly grocery budget was $400 per month. That year, I saved over $3000 in store sales & $2000 in coupons. It breaks down to about $95 per hour.

How much do you make for an hour of your time?

There are no coupons for {insert your favorite product here}.

Maybe not, but I promise it will eventually go on sale. Everything does – even the pricey gluten free foods my own family requires. Even if you don’t use coupons, pay attention to the weekly sale ad, check clearance racks and know where to find manager specials. You can find discounts on meat, produce, bakery goods, deli products and organic foods.

Plus, you’ll be surprised at the wide variety of coupons you can find if you start to look. Contact your favorite companies, and they may add you to their mailing list, send you loyalty offers or tell you where to print their coupons online. The store coupon machine (called a Catalina machine) will frequently spit out coupons for $2 off your next $25 purchase – you can buy anything you want!

Why would you throw away a coupon that’s good on anything in the store?

Getting Started with Coupons

Once you start to see the impact coupons have on your budget, it’s easy to dedicate an extra 30 minutes to planning a shopping trip. Here are a few quick tips to help you make the most of your time:

Collect multiple coupons so you can really stock up on your favorite products.
Don’t stress over clipping every coupon or missing an expiration date – it will cycle back around again soon enough.
A sale is great and a coupon is awesome, but using a coupon on a sale item will cut your costs drastically!
Google “your favorite store + weekly deals” to find a grocery deal site that covers the stores in your area – they match the weekly sales with coupons so all the hard work is done for you.
Get into the habit of carrying your coupons everywhere you go – you’ll be prepared for spur of the moment trips and ready to take advantage of unadvertised specials & markdowns.
Sort the coupons for your weekly grocery trip in order of the store aisle – you’ll save time, using the stack of coupons as your grocery list as you shop.

I have been using coupons for almost 15 years now, and I know they’ll be a part of our life no matter how far from broke we become. Hey – if it’s good enough for Warren Buffet, it’s good enough for me!

401(k) Loans as Recession Insurance?

May 21, 2010 By Shane Ede Leave a Comment

With a recession (depending on whom you ask) upon us, would it have been wise for us to have taken a loan from our 401(k)s before it started? Bear with me here for a second. A loan from your 401(k) is pretty simple. You borrow the money from yourself and then repay it to the 401(k) with interest. The interest is usually something low. Normally, it’s a bad idea, as the market usually performs as well, if not better, than the interest on the loan.

But, if (and that’s a big if) you were able to time the market relatively well to know there was going to be a downturn, you could loan the money to yourself. Because the money would not be in the account, it wouldn’t suffer from the loss of value in your investments. And instead, you’d gain whatever the interest rate was that you loaned the money for. Instead of a double digit loss, you could have a relatively decent gain. In theory it could work.

In theory. The catch here is that you would have to time the market correctly. If you missed it by a day, you could cost yourself some money. If you were totally wrong and the market rallied, you’d end up missing out on possible gains. But, if it worked, it could work out pretty well. In the end, the more I look at it, it’s really a form of gambling. You’re gambling that you can time the market and save your money.

Gambling is never a safe bet when it comes to your retirement. It’s always tempting though. It’s important to remember that a fall like we had over the last few years almost always comes back up. You haven’t really lost money so much as lost value. There’s a big difference there. And if you keep contributing, which you should, you’re buying the very same investments at a bargain price. So, instead of trying to minimize your losses by pulling your money out, you should be increasing your investment to maximize your return when the account finally bounces back up.