Renter’s Insurance: Do I choose the Cheaper policy or the Better Deal?

I’ve got a dilemma- we are moving in just under a month and in preparing for the move across town I am updating our renter’s insurance. I am down to a choice between two companies—USAA and State Farm.

For the last two years we have used State Farm Insurance and paid about $160/year for a $26,000 policy with a $500 deductible. Before signing up with State Farm and renewing last year I also got quotes from USAA, my auto insurance provider. The quote from USAA for almost the exact same policy (except USAA covers flooding and State Farm doesn’t—not a concern for us) was about $30 more expensive—which is roughly 20%. Thus, we’ve used State Farm the past two years.

I got new quotes today and this time USAA is about $30 cheaper. My first thought was, well, we’ll go with USAA. BUT, here’s the catch. This tax season I got free tax software ($112 worth) through State Farm!

So, I’m torn. I like USAA more because:

  1. They have the most outstanding customer service that I’ve ever experienced and because
  2. They return their profits to the customers at the end of the year. (Like last year, we got a $35 check back from our auto insurance premiums. You can read more about it on the Wikipedia entry.)
  3. And they’re simply a good company.
  4. And the renter’s insurance is now cheaper.

However, if State Farm were to give me free tax software again next year then it would make their renter’s insurance policy a better deal.

So, do I go with what is outright less expensive and the company I feel more loyalty towards? Or do I pay $30 more in hopes that I’ll get the $100+ worth of free tax software next winter?

What would you do?

Are Personal Finance Bloggers Control Freaks?

I’ve been thinking lately that Personal Finance Bloggers must be control freaks. Who else would spend so much time thinking about money? Who else would bother to create elaborate budgets? Who else would meticulously count every cent they earn, spend, and save? Who else would not only do these things, but then write about them?

Yes, I think Personal Finance bloggers must be control freaks. I know that I’m a control freak. Once, I was talking to a pilot about how I don’t like flying and he said, “Well, you must like to be in control of things. Because I find that most people who don’t like flying don’t like it because they can’t control (or even see) what is going on.” I just laughed because it was so true. Better yet, it’s actually helped me be less afraid of flying because I know why I’m scared and I’m able to relinquish control of the situation.

Being a control freak when it comes to money can be both a good and bad thing. It’s good because it helps us to “keep control of our finances” and avoid spending too much. As control freaks we know where are money is going and how to keep it going to the “right” places. Generally, we control freaks have our finances figured out.

But, we also worry and think more about money than the average non-control freak. In doing this we spend less time doing and thinking about the things we care about.

Recently, someone very dear to me called me out on my control freak-ness when it comes to money. Something to the effect of “Who cares if we go $40 over our budget for dining out this month? We can afford it and it’s a special occasion. So why be cheap?” This really got me thinking. Is it worth it to be so concerned about money?

I’m in the fortunate enough position where if something tragic happened I would be able to manage for a few months. (And I’m sure, if it were that tragic, with the help of friends and family I could make do much longer than that.) So, why should I be so concerned about money? Isn’t it better to enjoy my todays, so long as it doesn’t dramatically impact my tomorrows?

Using Google Spreadsheets for Your Budget

I have recently started using Google Documents and Spreadsheets to manage my budget. If you haven’t heard of Google’s Docs and Spreadsheets here’s the lowdown: With Documents and Spreadsheets you can upload, create, or email yourself a document or spreadsheet and it will be saved online allowing you to access it from any computer (provided that you have a Google Account). I have found that managing, completing (and sticking to) my budget has been much easier using this method than any other method I’ve used in the past. Here’s why:

  1. You can view your budget from any computer. Having your budget available online allows you to check to see if a purchase is reasonable for that month. (For example, at the end of February I was debating whether or not to go to an expensive dinner with a friend. I wanted to go, but I didn’t want to blow my budget. So, I quickly logged in to my spreadsheet and there I had it!- I knew I had enough funds to go.)
  2. You can update your budget from any computer. You can continually update your budget and having it available online allows you to quickly go in and add an expense from wherever you are. I keep a running total of my expenses by category and log into my budget a few times a week to insert these expenses.
  3. You can share it with others. Having you budget on Google Spreadsheets allows you to share it with your spouse/significant other/partner (or anyone else you might like to share your budget with).

If you still haven’t set up a budget or don’t have one in Excel, there are two excellent spreadsheets that that you can download at I Will Teach You to be Rich. (There are two links in the middle of the post). I tested both and if you download either one to your computer and then upload it to Google Spreadsheets the equations remain intact.

Quite honestly, I have never really been able to keep up a budget before because I find it hard to sit down at the end of the month and add up all of my expenses (and I never really liked Quicken or Money). Adding expenses as I accrue them into my Google Spreadsheets budget is easy, fast, and unlike other online software programs (like Mvelopes) it’s free!

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How to Choose a Rewards Card

Rewards credit cards make sense for a lot of people and are becoming more and more popular. But, with all of the options out there how do you choose one?

Here are seven things to consider when choosing a rewards card:

  1. Your Personality: Is having a rewards card going to encourage you to spend more? This seems like a silly question, but I know people who justify their spending by saying “this really cute sweater is $100, but I get 5% back; so it’s like it’s on sale.” If you are going to do this, please stop reading now and don’t get a rewards card. A rewards credit card should be used in place of your current credit card for expenses that you already have, not to justify new expenses.
  2. Your Credit History: Do you have a solid credit history? If you don’t you may not qualify for the benefits (such as a low-introductory APR) for a rewards credit card. Also, do you pay off your credit-card in full every month? If not, you may want to stick with a low-APR non-rewards card.
  3. Non-rewards Perks: What non-rewards perks does the card offer? Is there a low (or 0%) introductory APR? What about balance transfers? Which of these do you need? Do you get some sort of cash back or gift after your first purchase with the card?
  4. Type of Reward: What kind of reward do you want? Do you want a cash back rewards card? Or one where you can earn miles? Or do you want to earn gift certificates? There are many different types of awards; you should choose the one that best fits your needs.
  5. Where you Spend your Money: Some rewards cards give you higher percentages back if you spend money at gas stations, grocery stores, or restaurants. Others give you more back for money spent at drugstores, convenience stores, or on utility bills. Still others give you a flat rate on anything. Look at a few old credit card statements and see where your money goes. Choose a card that fits your spending habits.
  6. Card Limitations: When do you get the reward? Whenever you earn enough points or only once a year? Is there a limit to the amount of points/dollars you can earn in a year? If you earn airline miles are there blackout dates?
  7. The Fine Print: As always, when considering credit cards, read the fine print. Is there an annual fee? If there is, DO NOT get the card. There are plenty of wonderful cards out there that don’t have fees. What about other fees? What will the APR go up to after the introductory period?


There are many websites that offer a side by side comparison. Do a Google search for “Credit Card Rewards” and go to a few of the websites that come up. Bankrate.com is also a good source for comparing credit cards. A non-internet place to find good deals is in the Parade or USA Weekend magazine in your Sunday paper. Chase Bank often advertises rewards credit cards in the magazines that have higher percentages cash back than you can find online.

The final and most important thing to do when choosing a rewards card is to take the time to make good comparisons. The card you choose should be one that you will stick with for awhile.

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What Does it Mean to Be Rich?

I’ve often thought that I’ll know I’ve become rich when I can do whatever I want. Period. But thinking about it more I’ve realized that that doesn’t work. I won’t ever be able to do whatever I want. I’ll always have obligations to my friends, my family, myself and to society. No matter how much money I have there will always be things that I just can’t do. For instance, I couldn’t just go kill someone. (You might argue that with enough money I could get away with it. But I think I would get caught. And even if I could avoid prison it would still be a hassle to deal with.) Maybe this is an extreme example.

But, I also couldn’t just move to a deserted island. Why? Because I would miss my family, friends, pets, etc. I could try to bring them with me, but I bet some of them would refuse. So, I guess I can’t define being rich by the standard of “doing whatever I want.”

So what if I modify that? Another way I’ve thought of it is: I’ll know I’m rich when I can do whatever I want without thinking about the financial consequences.
This doesn’t work either. I will never be able to just ignore the price tag of something. I will always think about the financial consequences. It’s just my nature.

So what about this: I’ll know I’m rich when I can buy anything I want.
Nope. Lots of things we can’t buy: love, freedom, peace, security, happiness…

I’ll know I’m rich when I can live comfortably without having to work.
Now I get into the whole dilemma of what “living comfortably” means. I suppose I can’t use that definition either.

So, what does it mean to be rich? If I can’t define it, maybe the dictionary can… Don’t even bother looking it up. “Abundantly supplied with possessions, means, funds… wealthy”

Let’s face it: there is no standard, no definition, for what it means to be rich. There is no way we can objectively say: I am rich.

So, why do so many people want to be rich? We can’t decide what it means. And we all know that money can’t buy a whole lot of things. So why bother having a lot of it?
This brings us back to the question: What does it mean to be rich and how will I know when I’ve become rich?

I don’t think I’ll know, because richness is all relative. I’m hundreds of thousands of times richer than a lot of people, but I’m also hundreds of times poorer than a lot of people. And unless something crazy happens and I really move up (or down) the ladder, this will always be the case.

Maybe the best conclusion is that we should stop caring about getting rich. Instead we should focus on setting personal goals and figuring out how to achieve those goals. That way, instead of telling ourselves that we want to “get rich” or “live comfortably” or “help people” or “be happy” we will actually get/earn/achieve these things because we will know what we mean by them.

A huge component of taking control of your finances is setting goals, defining the goals, and devising a plan to reach them.  If one of your goals is to “get rich,” I would suggest trying to define what exactly you mean by this. What specific goals do you have?  How do you plan to reach them?  And how will you know when you’ve gotten there?

‘Til Debt Do Us Part and other Great Advice from Canada

Update: The links below are no longer valid.  The page has been moved to Slice.ca (I fixed the first link) but the rest of the resources can’t be found.  I will fix the links as soon as I am able.  If you know where the pages have been redirected to, please let me know.
Gotta love our neighbors to the North. Who else would come up with such a great show? I was in Toronto about a month ago and became a little obsessed with ‘Til Debt Do Us Part. I think we may have watched 3 or 4 episodes in the two days we were there… The show is a reality TV show that takes couples deeply in debt and helps them create a budget. It’s that simple. Yet it was highly entertaining. Hopefully a similar show will start in the US one of these days.

Besides just being an entertaining show, they also have some great articles on the network’s website including

Top 10 Ways to Avoid Arguing About Money

File or Fling? (About what records to trash and when to trash them.)

12 Steps to Getting Organized on a Budget (the Initial set-up presented here is crucial)

and

Ways to Live it Up on A Budget

My favorite tip from the final article is about how to see shows (concerts, sporting events, film festivals) for free– consider volunteering! I may look into this for future events here in DC.

Putting Off Now for Later

I find that one of my problems as a young person trying to plan for the future is that I’m young and retirement (and even a real adult life with a house, family, kids) seems like such a long way off. How much of my fun here and now should I put off so that I am comfortable later on in life?

One of the first things that comes to mind is a quote from the book Tuesdays with Morrie (an amazing book, check it out if you haven’t read it):

“Life is a series of pulls back and forth. You want to do one thing, but you are bound to something else… A tension of opposites, like a pull on a rubber band. And most of us live somewhere in the middle.”

That is how I feel with my financial planning– sometimes I’m pulled towards saving as much as I possibly can so that later in life I will be financially independent and other times I feel like throwing caution to the wind and saying “screw it, I may die tomorrow so I might as well make the most of today.”

I think that many of us feel this pulling back and forth in our financial planning. But in order to come up with a plan we have to reconcile our options and figure out what we are comfortable with.

For me, that point of comfort is about 20% of my income. I could be saving more, but then I would be cutting some things out of my life that I just am not comfortable with. For instance, I love traveling. I love seeing new sights, meeting new people, immersing myself in new cultures, experiencing new foods. About 10-15% of my income each year goes towards traveling. And I would rather cut my food budget in half and eat ramen than cut down on my travels.

And that 20% of my income going into savings? I can justify that amount to myself, the amount that is not being spent on the here and now, because I plan to spend it on traveling in the future. That is my real financial dream. To have enough money when I retire to be able to take as many trips a year as my spouse and I want. And I will get there by saving 20% of my income now (which isn’t much these days, but will hopefully be more in the future).

Having goals that you can visually picture– such as a goal of visiting Australia– makes it much easier to justify saving than it would to have a goal that isn’t visual– such as being rich (what am I going to picture in my head, sitting in bags of money?). Think of what you love and set financial goals around these passions.

This post was written in response to this week’s Festival of Under 30 Finances:

“What are your real financial dreams? If you want to become rich, how do you actually plan to get there. Will you still be young enough to use that money or will you be too old to really use it?”

How Much Money would Someone Have to Pay Me to do X?

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.

What’s it Worth to You? Liquor, Lotteries, and Cast Iron Pans

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?”

Does Money Make You Mean?

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)?