Money for the Rest of Us

There is been much talk in the blogsphere lately about HSBC’s “new money” offer. The deal is that any new money you put in an existing account, or all money you put in a new account will earn 6.00% interest now through April 30, 2007. Many people seem to be debating whether or not it is worth it to transfer their money over. The general consensus is that if you already have your money in a high interest bank account (like at ING or Emigrant) then it’s not worth it to transfer the money over. I would probably agree with this. Unless you are considering transferring accounts anyway, then 1% for three months isn’t going to make much difference. But that’s not the point.

The HSBC 6.00% offer is a great deal and anyone interested in personal finance should be taking advantage of the offer. How?

Use the HSBC offer to educate people. Tell your family, friends, co-workers, anyone. Even if you have previously told these people about high-interest bank accounts, tell them again. A 6.00% interest rate is enough to get even the laziest people off of their feet and to actually do something. So, while the HSBC offer may not be worth it to you, it is worth it to many other people. Use your power of persuasion to convince others to put away their money in a high-interest account.

I personally bank with HSBC for two reasons: 1) They give you an ATM card. If I ever need to dip into my savings for emergency cash quickly I can. 2) There is a branch office near me. This means I can deposit money and not have to wait 2-3 days for an online transfer. Also, if needed, I can get cash from their ATM without fees. 3) I travel internationally a lot. HSBC has branch offices in a number of different countries and I can take cash out of their international ATMs without a conversion fee.

As a final note: If you are one of those people who keeps thinking about or talking about getting a high-interest bank account and has yet to do it—NOW IS THE TIME. Spend the 20 minutes applying for an account. Don’t pass up on a 6% rate.

On the way home from a recent family vacation I was shopping duty free and found a bottle of a particular vodka for only $7 compared to the $25+ I pay in the States. How could I pass up this savings? I couldn’t and so I bought a bottle.

When I returned to the gate and told my dad about the great deal he thought about it for a minute and said, “It’s not worth it to me.” He explained that the hassle of lugging around a heavy bottle of liquor for another 9 hours wasn’t worth the money he’d save. He said, “If someone offered to pay me $18 to carry their alcohol home for them would I take it? Not a chance.”

I think my dad had an interesting point that can help us figure out how much we value something. We can ask ourselves the question: “How much would someone have to pay me for/to do X?” If, when you calculate the savings, you would take someone up on their offer then you should buy/do whatever it is that you are deciding on.

In the example above I would have gladly taken $18 to carry someone’s liquor home. Thus, it was worth it to me to buy the liquor.

Let’s take another example: House Cleaning. At my apartment we always talk about how nice it would be to have someone clean the house each week. The cost is $60. If I ask myself the question: “If someone offered me $60/week to clean my apartment would I take it?” The answer is yes. Thus, I should do it myself and not hire a housekeeper. But, what if the cost was $20? If someone offered me $20/week to clean my apartment would I take it? Probably not. Thus, assuming I can afford it, I should hire the housekeeper.

Try asking yourself this question next time you are trying to make a financial decision. “How much would someone have to pay me to do X?” The answer may surprise you—and point you in the right direction.

Ever notice how high Roth IRA mutual fund minimums are? (And Mutual funds in general.) At Vanguard, most Roth IRA minimums are $3000; which is 75% of the maximum yearly contribution ($4000). Because of financial uncertainty, I chose not to max out through automatic contributions last year. Thus, I still have about $2000 that I can contribute to reach the $4000 max for 2006. I have this money in savings and am planning on contributing up to the max. But, I would also like to open a new fund so I can keep my savings diversified (my current Roth is an international fund, and I would also like to have an index fund that is more US focused).

The problem is that because Vanguard sets their minimums to $3000, I can’t couldn’t open a new fund in 2006 because legally I could only contribute $2000 more to a Roth for that year. But, between now and tax filing I can contribute for both 2006 and 2007. I called Vanguard just to check and they told me that when I open a new fund it will ask me to specify which year I want my contributions attributed to. So, I can contribute $2000 from 2006 and $1000 from 2007 and I will have reached the $3000 minimum without running into any tax issues. Genius!

For some reason I get all of the Consumer Reports “Free Samples.” I’ve gotten a free sample of their main magazine, their health magazine, and now their money magazine. (Trust me, I’m not complaining here, but it just strikes me as odd seeing as how I’ve never subscribed.)

I like Consumer Reports and was very curious about the advice they would give in their new “Money Adviser.” I’ll run my review of this “sample Money Adviser” in 2 parts each time ranting and raving about different pieces of advice.

First, the raves: On the cover they have “21 ways to cut your bills.” They only list 7 of the ways in the sample but I liked two of them:

1. “Save on Gas: Fill up Early in the Week.” I have long known that Monday-Wednesday are the best days to buy cheap gas, but I never seem to remember to do this. Yes, it’s only a couple of dimes per tank that I would save, but those dimes could be going elsewhere.
2. Another good tip was “Save $30 on a Dozen Long-Stemmed Roses.” Money Adviser says that by buying roses directly from a grower’s website like montereyrose.com you can save $30 compared to 1-800Flowers.com

My advice on buying flowers one is to buy them on the street. In DC there are always people on the street corners selling flowers. Last year on Valentines Day I bought 12 roses for $12. (Usually you can get 12 for $10, but they were playing the holiday mark-up.)

Now for the ranting: Tip 7 and the entirety of page 5 was about how you can save money by applying for credit cards. They recommend signing up for a store card in order to get the 10% discount when buying a lot of clothes or major appliances.

I think this is a terrible idea. Consumer Reports Money Adviser should not be encouraging anyone to apply for a large number of credit cards just to get a 10% discount. This only promotes overspending. Honestly, a half of a page is “How the Cards Stack Up.” If you can’t afford to buy something without the 10% discount, you shouldn’t be buying it at all. I would agree that it is fine to apply for a credit card every once in awhile if you will save a lot of money (more than $50 or $100) and you will be able to pay off the bill at the end of the month. CR needs to warn their readers that applying for all of these cards could actually cause their credit scores to go down.

Thus far, I wouldn’t buy a subscription based on the pages I have reviewed. I’ll let you know what my final verdict is next time.

I recently got the book Rich Woman by Kim Kiyosaki. I haven’t started reading it yet, but I’m looking forward to reading and will post my comments on this site. prlinkbiz at No Limits Ladies has started a discussion forum for “Rich Woman” and has posted her first comments about the introduction today. I encourage others will pick up a copy of the book and follow along.

1. Drink water

This is the easiest way to save on lunch costs. A soda will cost you anywhere from $0.60 to $1.50. If you don’t buy that soda you will save anywhere from $149-$370/year (assuming you work a 5-day workweek).

2. Skip the Chips

Again chips not only cost money, they cost your waistline. J.D. has an interesting post at Get Rich Slowly about the cost of being fat.

3. Buy pre-made

Burritos, SmartOnes, Michelina’s, Lean Cuisine, etc. All of these are cheaper than eating out. Trader Joe’s also has some amazing pre-made meals (like their rice bowls) that will cost you a little less than $3.00/meal. Sometimes you can get the TV dinners on sale for only $1.00. (But, remember to make smart choices here; don’t buy fatty, high cholesterol items that will drain your energy).

4. Prepare Ahead of Time

Make a bunch of lunches ahead of time. If I know I will have a busy week I often make my whole week’s worth of lunches on Sunday night and freeze it all. Peanut Butter and Jelly, Bean and Cheese Burritos, even Spaghetti—they all freeze well.

5. Leftovers

Make a little bit more of your dinner and put it in Tupperware.

6. Buy in bulk

I’m not saying you have to get a Sam’s Club or Costco membership, but if something you take for lunch goes on sale, buy a few more boxes.

7. Think outside the container

Instead of buying individual yogurt or cottage cheese cartons, buy a large container and partition it out into small Tupperware. You won’t believe how much money this can save (and it’s much better for the environment).

I don’t really care about clothes or shoes or designer labels. So, I think it’s crazy when I find out my friend spent several hundred dollars on a pair of jeans. But then again, she thinks it’s crazy that I would spend $15 on a notebook or $50 for a nice dinner. One of the people I love most in this world buys cast iron pans—spending upwards of several thousand dollars per year on antique metal pans. But, she wouldn’t spend the thousand of dollars I spend a year on travel.

When I recently berated my friend for her jeans purchase she reminded me of my own unique spending habits. And then it really hit me: everyone places a different dollar value on different things. It’s impossible for me to judge the joy that my friend gets from wearing her jeans, just as she can’t appreciate how much I love writing in a new notebook.

Because we can’t understand how much pleasure or benefit someone gains from a purchase or experience, it is important, in any sort of relationship, to keep from judging someone else’s spending. Because when you criticize how someone spends their money you are criticizing their values.

How does this translate back to our own spending habits? It can help us figure out what we value and what we should spend money on. We should ask ourselves: “What’s it worth to me?” When you ask yourself that question you can get a better idea of whether or not to make a purchase. For example, when I’m at the grocery store buying a bottle of wine, occasionally I will come across a bottle that’s on sale for $15 down from $20. I think to myself “that’s a great deal, maybe I’ll buy it.” But then it occurs to me, $15 isn’t worth it (to me). I like wine, but I don’t love or appreciate wine enough to buy an *expensive* bottle.

Another example of this happened to me today. The Powerball lottery happens to be up to $240 million. I know buying lottery tickets is a complete waste of money. But, that one dollar lottery ticket was worth it to me today for the minutes (hours?) I spent thinking about what I would do if suddenly I had that much money. (I wouldn’t change much, actually.) I’m not encouraging you to go out and buy a lottery ticket; I only buy one a few times a year. But, if you can afford it, and it’s really worth it to you, buy the expensive pair of jeans, the cast iron pan, the wine, lottery ticket, or notebook. Just remember, first ask yourself, “What’s it worth to me?”

There is a very interesting article on Bankrate.com today about the effects of money on independence and helpfulness. There are a number of interesting points which I’ll discuss below, but if you’re just looking for a quick summary here’s what they say:

“A new behavioral study finds that folks with money on their minds are less helpful, less considerate and less willing to ask for assistance or engage with others than those who have not been preconditioned to money. On the bright side, the money-minded tend to be more independent and focused and they tend to work longer on a task before asking for help.”

They find that money (or the thought of money) doesn’t make you mean, but it might make you Clueless (just like in the movie…):

“We didn’t find any animosity; it was more of a sense of social cluelessness. They’re not mindful of other people. We don’t have any indication that they were being rude to these people. It was more ‘I can’t help you’ or ‘I don’t know how to help you.’ Granted, being helpful would be a nicer thing to do, but the intention wasn’t to be selfish or mean; they just didn’t see that they had a role in this person’s life.”

I think the most interesting aspect of the article is in terms of what implications the findings have–specifically the finding of money=independence.

The article brings up two implications. One, stating that if you want to get people to work in groups you should downplay the money factor. But, if you want people (like employees or children) to be independent and work hard on their own, you should stress money and use money to motivate them.

I haven’t thought about this in great detail, so I may come back to it; but what about the difference between men and women? Does gender impact this study? Also, in the broader scheme of things: if men or women (in aggregate) think about money more, then are they going to be more selfish/clueless/independent (as a group)?

I’ve put together this list of eight ways to get more money, benefits, experience, value and more from your non-profit:

1. Understand Your Non-Profit

An underlying factor in getting more value from your non-profit is understanding what type of non-profit it is. Many people don’t understand how different non-profits can be—there are large, corporate feeling non-profits and there are small, jeans-only non-profits. Some non-profits are activist organizations, while others are research organizations. Unless you understand the type of non-profit you work at you won’t be able to maximize your pay, benefits, and other things you might want.

2. Consult

As a non-profit employee you have expertise in something that many other non-profits need. A lot of start-up non-profits need a part time grant writer, website designer, or project manager because either they don’t have enough money or enough work to hire someone full-time. Check Craigslist, Idealist, and Guru for consulting opportunities.

3. Contribute to your 403(b)

Contribute to your 403(b) plan (if your employer offers one). A 403(b) plan is a retirement plan offered to employees of tax-exempt organizations and is very similar to a 401(k) plan. See this article for more information about 403(b)s. If your non-profit doesn’t offer a 403(b) plan ask for one. (See Tip 8 below)

4. Get a Tax Credit

Chances are you don’t earn a lot as a non-profit employee. If you earn very little find out what tax-credits you qualify for. One such tax credit is for single filers with an AGI of under $25,000, married filing jointly under $50,000, and head of household under $37,500. If you fit into any of these categories you can get a tax credit for up 50% of your contributions to a retirement account (including a Roth IRA). The maximum credit is $2000. See pages 70 and 71 of Publication 590 and complete Form 8880. There are some restrictions to this credit—including that full-time students don’t qualify—so read carefully.

5. The Value of Liking What You Do

Non-profit employees are happier with their overall work experience than other employees. According to a recent study by the Brookings Institution, 97% of non-profit employees surveyed feel good about the work their organization does. Believing in what you do cannot be translated into a dollar amount.

6. Don’t feel bad Asking for a Raise (or if you’re not-yet employed- negotiating your salary)

I know several people who have “felt bad” asking for a raise or negotiating their salaries because they work for an activist non-profit and they don’t want to take the non-profit’s money. This is just dumb.

7. Take on More Responsibility

One of the best things about working at a non-profit is the ability to take on more responsibility. Because non-profits are notoriously short-staffed there is almost always another role that you can fill. Maybe you have always wanted to write a grant, coordinate an event, or advocate legislation. When you work at a non-profit it you can get involved in additional areas of work. This is free training. The value of this additional experience cannot be monetized and will translate to future jobs.

8. If there is something you want ASK

If there is something else that you want from your non-profit then ask for it. Maybe your kitchen needs a toast-r-oven or you want to get a new lamp for your office. These are small things, but they can make a big difference. It doesn’t hurt to ask.

Even better: do a little leg-work before you ask. I know a few people at a non-profit where they don’t get Metrocheks (public-transportation cards). These friends always talk how they want Metrocheks, but no one has yet printed out the simple online form and completed the parts that they are able to on their own. I would bet that if they filled out this form and gave it to their Executive Director she would send the form in. Sometimes asking and taken the first step are all that are needed to get what you want. One of my favorite posts is from Ramit over at I Will Teach You to Be Rich. He writes:

But Ramit…You say $6.00 is nothing. Maybe that’s true for your fancy-pants technology companies, but I work for a small/poor nonprofit and they can’t spare any money. You are wrong!! Everything you say may be true, but my response is simple: Have you asked? We love to make assumptions, but the truth is that you have to measure the $6.00 in terms of how much your nonprofit would lose if you quit (recruiting costs, training costs, costs for stupid mistakes of the new person, etc) versus your paltry $6/day. Maybe you’re right. Maybe I’m right. Who knows? Certainly not you until you ask.

Get the most from working at a non profit by taking a few steps to maximize your benefits.

On Monday I will be posting 7 financial money tips for non-profit employees. I’ve been working on this for some time now, so please check back.