Beating Broke

Personal Finance from the Broke Perspective

Ways to Save with Banking and Recurring Payments

By 17 Comments

If you are new to saving money and cutting expenses, you may search the internet where you will find such tips as “Skip your daily coffee fix” and “Buy store brand foods instead of name brand foods.”  While this advice is good, it only offers a superficial way to cut expenses.  You may need to look beyond this generic advice to find other ways to trim costs.  My family is in this situation currently; our income does not add up to the equivalent of our expenses.  Not only are we making less than we spend, we are not able to add to our savings.  This situation is temporary, until my husband finishes his post-doc, but obviously it is not sustainable for the two years he will be in a post-doc position.  Here are some of the extra ways we have found to trim our budget:

-Stop writing checks.  We have automated our bill paying online.  At first I was resistant to do this, but when I added up how much I was spending on checks ($38.12 for a year’s worth) and stamps ($52.80 a year) for a total of $90.92, I decided to do it.  I can’t eliminate all check usage, but automating our bills has reduced our check usage by 3/4s, which will save because I won’t have to buy checks as frequently.

607 - Money Whirlpool - Texture-Cancel automatic payments for services you no longer use.  One downside of automating payments online is that you may stop using a service and yet forget to stop the auto payment.  I recently closed an eBay store that I had.  As part of my eBay business, I had automated payments to a template service (that basically made my auctions look prettier by putting a design in the background) at $12 a month and to a selling newsletter for $8 a month.  I was annoyed when, a month after I closed the eBay store, I discovered I was still billed the $20.  I forgot to cancel the subscriptions.

You may find that some companies make it difficult to cancel online subscriptions.  (Remember the old Friends episode where Chandler wants to cancel his gym membership, and every time he tries he is instead convinced to stay?)  While it may be very easy to sign up for recurrent payments on your credit card, when cancelling you may need to call the company and listen to them try to upsell you.  Persist because it is not worth paying monthly for a service you are no longer using.

-Change to online bank statements.  My bank recently began charging $3.00 per month for paper statements.  That adds up to $36 per year per account.  Because I have 3 accounts with them, it adds up to $108 a year wasted.  Yes, I prefer to have physical copies of my statement, but not at a cost of $108 a year.

-Consider changing banks if the fees get too high.  Last January, my bank started charging me $9.99 per month for my eBay business checking account.  That is $119.88 a year just for the joy of banking with them.  I have since cancelled the account.  I am now in the market for a new business account for my writing and blogging service, and you can bet I won’t be going with my current bank, and I’ll be looking at well reviewed banks that maybe have good new account promos.

There are plenty of ways to save money if you look carefully.  These are just a few ways you can save at your bank and online, but they clearly add up.  Making these small changes has saved my family $230 a year!

What other ways do you use to save money?

photo credit: Patrick Hoesly

Opportunity Cost is Bull

By 10 Comments

That’s right.  Bull.  All these experts go on and on about calculating the opportunity cost of something and adding that in to your cost analysis when deciding whether you should do something yourself, or hire it out.  Heck, even I have used it before.  But, we’ve all taken it way too far.

Let me ask you this; What is your opportunity cost of reading this post?  Of eating your breakfast this morning?  Not relevant?  Bull, again.  We use it to determine if we should keep cable T.V.  We use it to determine the added cost of our daily commute.  Personally, I’ve used it to validate paying people to do all sorts of things.  Mechanics?  The cost of doing it myself is too great, let them replace those brakes!  Plumbers? I hate doing plumbing.  Let them fix that leak!  We’ve become so obsessed with being frugal and pinching our pennies that we figure out the cost of everything that we do.  If the cost is too high, we should avoid doing it, or do it ourselves, our mantra goes.  But, that isn’t always true! Sometimes, it’s just straight up bull.

We all want to improve our finances.  That’s why we do those calculations.  It’s simple mathematics.  The problem with opportunity cost, however, is that most people assume a 100% efficiency.  I hate to be the one to break it to you, but there is nothing that is 100% efficient.  Not you, me, or anything ever created.  There’s gonna be some loss.  So, yes, I can figure the opportunity cost of my time.  But, it depends on my using that time to be efficiently working on something that will make me money.  The opportunity cost of my time at work is about $25/hour.  But, that doesn’t mean that every hour I sit at home watching T.V. has an opportunity cost of $25/hour.  I can’t stop watching T.V. and replace that time with paid time for work.  They don’t like paying overtime.  Plus, I’m paid on salary, so every extra hour I work at work, reduces the effective hourly pay.  Did you catch that?  Every hour over 40 hours a week that I work reduces my efficiency to earn money.  If I were paid hourly, that might be slightly different.  But, I’d be willing to bet, my employer would still have an aversion to paying overtime and would not allow me to work many more hours over 40.

If you’ve got side projects, like I do, there is a opportunity cost for every hour that I’m not working on them.  Some side projects are extremely easy to figure the cost of.  If I contract out my work on an hourly basis, my cost (for every hour I’m not working that project) is that hourly rate.  But, just like my job, I can’t be 100% efficient at my side project either.  I’ve got to sleep sometime.  (Egads!!!  The opportunity cost of sleep!!!)

The point is this; If you’re going to try and figure the opportunity cost in order to validate a decision, don’t do it blindly.  Realize that you won’t be 100% efficient.  Just because you disconnect the cable T.V. doesn’t mean you’re going to replace all that T.V. watching time with efficient money making time.  Some of it might be spent reading a book.  Or playing with kids.  Or napping. 😉  Each of those may have some benefit to you, but they really don’t have much place in a financial cost analysis.  Sorry, you can’t bill your kids for playtime!

The personal finance world is full of stuff like this.  Mantras and rules-of-thumb that we use like crutches to validate and justify why we do what we do.  It’s like an addiction.  If you truly want to take control of your finances and live a better life, you’ve got to discard those addictions like you would a pack of smokes and begin to analyze what you do with a critical view.  Nothing is worth using in your finances until you’ve tested and proven that it is.

photo credit: zogh

How to Implement a Weekly Menu Plan

By 5 Comments

We talked last time about why you should create a menu plan.  Today, we will tackle how to menu plan.  Honestly, there is no correct way to menu plan, but here are some of the most common methods:

Assign a Meal to a Day of the Week

Some people make it very easy on themselves and create a designated meal for each day of the week.  For instance,

  • Monday—Mexican
  • P1640073Tuesday—salad
  • Wednesday—pasta
  • Thursday—pizza
  • Friday—casserole
  • Saturday—leftovers
  • Sundays—soup and sandwich

Then, they just plug in a meal for each day.  Maybe one Monday they will have fajitas, the next Monday they will have tacos, the next quesadillas.  Whatever they eat on Monday is some type of Mexican food.

Make a Menu Plan Once a Month

With this method, you look at your upcoming monthly calendar and plan meals accordingly.  For instance, in my case, my son has tap dance class every Wednesday night.  I know on these nights not to plan anything time intensive.  On Wednesdays, I either choose crock pot meals that allow me to do the prep work in the morning and then require no additional work from me, or I schedule that day as a day to eat leftovers.

Similarly, if you look at the calendar and see that you are taking Uncle Joe out to eat on the 20th and you know he will want to go to a steak house, you probably won’t schedule another beef meal on the 19th or 21st.

This method works great for people who generally dislike menu planning and prefer to get a month’s worth of planning done in one setting.

Choose Your Menu Plan Based on What Is on Sale

Probably the most common method of menu planning is to center your meals around what is on sale at the grocery store.  So, you get your supermarket ads on Sunday and see that ground beef is on sale as well as whole wheat pasta.  Salmon is also on sale.  Maybe you choose to make spaghetti (spaghetti sauce recipe) on Tuesday night, lasagna on Wednesday night and a salmon salad for Friday night, for example.

If you don’t regularly stock up on groceries when they hit rock bottom prices, this is the method of menu planning that will net you the largest savings.

Choose Your Menu Plan Based on What You Have in the Pantry

This is the method that I prefer because I regularly stock up on groceries when they are at rock bottom prices.  Before I make my menu plan for the week, I look at what ingredients I have at home and make a menu centered around those items.  Recently I bought Tilapia on sale, so we will be having a fish meal this week.  I also bought imitation crab meat on sale two weeks ago (prepackaged), so I will be making crab cakes.  However, I don’t want all of my meals for the week to be seafood based.  I see that chicken is on sale for $1.49 a pound, so I plan two chicken meals and also buy some extra chicken to stock up in the freezer.  I also have tomatoes and avocado that need to be used up, so I plan on having taco salad another day.

Final Thoughts on Menu Planning

The most important part of menu planning is choosing the method that works best for you and your family because then you will be most likely to stick with it.  In addition, remember to be flexible with yourself.  If you have a meal planned on Monday that you don’t feel like cooking Monday night, it is okay to jump to Wednesday night’s meal.  It really doesn’t matter which day you prepare which meal as long as you prepare all of the meals within a week’s time so you don’t waste ingredients.

Finally, if you are ready to take the leap to menu planning, one of my favorite free online resources is food.com.  You can easily search for the type of meal that you would like to make and find hundreds of recipes, many of which have been ranked by other users.  I tend to only use recipes that earn 4.5 to 5 stars out of 5.

You may feel as if you don’t have time to meal plan, but often menu planning saves an enormous amount of time.  If you don’t  do it already, I hope you will try it.

photo credit: Emily Barney