Monthly Archives: May 2009

Unplanned Spending That I Hope Is Worth It

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When it comes to what I call ‘bathroom supplies’, I usually try to find things on sale. I don’t mean anything gross by ‘bathroom supplies’ but it’s probably what a lot of people would call toiletries. Things like shaving cream, shampoo, body wash and toothpaste. Usually, between finding things on sale, using coupons, and stocking up, we can find some pretty good deals.
However, I spent quite a bit of money on these supplies over the weekend and unfortunately wasn’t able to put a lot of the work that I normally do into it.
Towards the end of 2008, a small rash developed on my face directly to the left of my mouth. I had thought it might go away, but it didn’t go. I went to my family doctor. He didn’t know exactly what it was, but gave me a prescription that normally clears up rashes.
It didn’t. When I followed up with him, he gave me a referral to a dermatologist.
This was January of this year by now, and when I went to see the dermatologist, he looked at it and indicated that I had ‘contact dermititis’ which I’ve since learned is a catch-all term for a skin irritation. He prescribed something different, which was a topical steroid, that he promised would “clear it right up.”
It did and it didn’t. What happened is that the cream knocked the rash down to where it was barely noticeable, but it never went fully away. If I stopped using the product the rash would be back in full force within a couple of days.
Clearly there was still a problem, so back to the dermatologist I went. The rash was itchy and I am very self-concious about it given that it’s right next to my mouth. I always feel that whenever someone is talking to me, they’re looking at the rash and not concentrating on a word I’m saying. I’ve asked multiple people if it’s very noticeable, and nobody has said that it is, but I have always thought that maybe they’re just being nice. In other words, this rash has to go.
At this point, the doctor now recommended that I go through ‘patch testing’ which is a type of allergy testing where they expose your skin (on the back) to various chemicals and compounds that can cause reactions. After several days, they see what spots developed any rashes, and determine that you should avoid those products.
There were a few products that came up. A couple are normally things that I wouldn’t have to worry about, but there were two that were noteworthy. The first was parabens, which are preservatives that are used in a wide variety of cosmetic and toiletry products. The second was topical steroids, which if you recall, is what I had been using to treat the rash. So, what this showed is that a large number of consumer goods as well as the very product by which I’d been using to treat myself were helping prolong the problem.
I was given a new prescription and also a 53-page list of ‘bathroom stuff’ products that were OK to use. I was advised to concentrate on any products that I used from the neck up, since the rash was localized to my face.
So, I went through product by product for the following areas:

  • Shampoo
  • Conditioner
  • Face soap
  • Body wash
  • Shaving cream
  • Lip Balm
  • Hair Gel
  • Moisturizer
  • Toothpaste

I found that the conditioner and body wash that I use were on the list, but none of the other products were. Because my goal was to get rid of the rash as quickly as possible and because we’re pressed for time with the baby coming, I decided to simply make one trip to one store and take care of the entire list. I did find one coupon.
Many of the products (most notably the toothpaste and moistuerizer) required higher end, expensive products. But, in the end, the cost was roughly $50 to get new shampoo, face soap, shaving cream, lip balm, hair gel, moisturizer, and toothpaste.
Had I been buying these products over time, looking at sales and/or buying with coupons, I probably could have gotten them for significantly cheaper, but given that this rash has been with me for six months and I just want it gone, I did not balk at the cost.
All I can hope now is that this unplanned spending turns out to be worth it. I’ll report back over the next few weeks how things go. As of now, the rash is still there but the redness and itchiness has subsided, so some combination of the new medicne and the new products is working, but time will tell if this will completely knock it out.
Wish me luck.

How We’re Trying To Support The Local Economy

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Lately, I’ve been looking around and trying to support more local businesses. Michigan has been struggling more so than the rest of the country for a long time. The recession started here a couple of years before most other areas in the country, and our unemployment rate has been the highest in the country for quite a few months running, it seems.
With that in mind, I’ve been trying to support more local businesses. Here are a few ways that I’ve been trying to support the Michigan economy:

  • Shopping at local hardware stores – Normally when I needed something home-improvement wise, I’d just hop in the car and end up at Home Depot or Lowes. Lately, though, I’ve been trying so shop at the local Ace Hardware or True Value hardware store. They’re owned by local residents, and I think that does more to support local entrepreneurs than does shopping at the big box stores.
  • Shopping at the Michigan based grocery chain – Meijer is based in Grand Rapids, Michigan, and we do most of our shopping here. We have been doing so for a few years now, but we’ve made it a point to buy whatever we can at Meijer before reverting to Kroger or Wal-Mart.
  • Buying products made in Michigan – I’ve been buying Meijer brand soda for quite some time, but lately I’ve switched to Faygo, which is bottled and headquartered in Detroit. Meijer brand may actually be bottled here as well, but I can’t be completely sure, so I’ve switched to the one I know for sure is Michigan based while I do some research. Also, when we buy potato chips (which is pretty rare), I make sure we buy Better Maid, which is manufactured and headquartered in Detroit.
  • We will also be buying our flowers with a smaller Michigan-based store. We had often purchased our annuals at one of the big box stores, but we’ll be making sure to purchase from retailers that grow their products here, and whose headquarters is here.
  • Driving our GM cars – Even though our cars are six years and three years old, they are both GM cars, we still drive them proudly. The cars themselves may have been built or had components built elsewhere, but our purchase still supported the engineers, design teams, finance teams and all the other local workers who work for GM that call the Detroit area home.

I know that there are other ways to support the local economy and that these things may be mere drops in the bucket, but one thing I’ve learned is that those drops can add up.
What are you doing to support your local economy?

Net Worth Review: May 2009

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May was a pretty good month. Here is the overview. See below for a brief discussion on each area:

ASSETS:
Property -I use a combination of Zillow and CyberHomes. I make a small adjustment based on what I’m seeing things sell for, and I remove 7.75% for expected selling costs. For the month, the value continued the downward trend. You can see that it fell 2.4% for the month, and has fallen 13.2% over the last year.
Autos - The value of our two cars has held pretty steady the last couple of months as the used car market has heated up.
Investment Accounts - We had a good month, going up slightly under 9%. Still for the last 12 months, our investment account balance is down 38.84%
Cash Accounts - We slightly raised our balance for the month, but have bolstered up our cash over the last year, just to make sure we’re covered after my wife quit her job in anticipation of our baby.
Retirement Accounts – Our retirement account went up almost 9%. The total value is down roughly 19% over the past year. This would have been more, but my employer matched a good portion of my retirement contributions. Unfortunately, that is coming to an end starting this month as they’ve discontinued the match.
DEBT:
Mortgage - Nothing special, just the monthly payment. Our mortgage is a 30-year loan at 5.875%
Car Loans – We paid off our car just under a year ago and we have no outstanding car loans!
Credit Cards – This is the balance that’s accrued since the last statement. We pay our credit cards off every month. We’ve charged more than normal this month as we had some stuff to finish off for the arrival of the baby. We have cash earmarked to make that payment which will keep our monthly budget in line.
Student Loan 1 – This is the loan that had a higher balance and a higher interest rate. After paying the car loan off, we concentrated our debt payment on this loan. We’ve paid 57% of the balance from a year ago. The pace slowed now that my wife isn’t bringing home a paycheck.
Student Loan 2 - This is the second loan but it is at a very low interest rate. We make the minimum payments on this loan. After Student Loan 1 is paid off, we’ll have to decide whether to snowball the payments toward this loan, or switch to something else (such as the mortgage, investing, or adding even more to our retirement)
Overall, our net worth went up a modest 3% for the month, and is down 31% from a year ago. However, I also calculate this without the effect of our property. The reason for this is because I feel that gives a more accurate reading of how we’re doing in the short term. Plus, real estate is the thing that’s the most out of our control. With that calculation, we had a nice month with a 7.5% gain, but still down 13.5% for the last twelve months.
I think it was a good month. I’m extremely happy with how we’re transitioning into a single-paycheck household. Although the debt payment will slow now that we’re down to the single income, I still think we have made great strides and feel confident with where we’re at.

Are Rewards Credit Cards Worth It?

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Earlier, I was reading the post ‘Thoughts on Going Cash Only- The Benefits and Drawbacks of Not Using Credit Cards‘ on Think Your Way To wealth. It’s a well written post that outlines some of the benefits and drawbacks of using cash versus credit.
One of the comments struck me as very interesting. In part, Get Out Of Debt wrote, “As for the earning rewards stuff – do people really earn that much from their credit card rewards? I’m pretty sure it’s trivial amounts, and you have to spend tons to make it worth it i.e. spend money you haven’t got.”
This got me thinking because my experience has been quite the contrary. Let me go through the points here:
Background
Both my wife and I have Citi Dividend Rewards credit cards. The card pays 1% cash back for regular purchases, and 2% for purchases made at grocery stores, drugstores, gas stations, utilities, and convenience stores. Back when we first signed up, they actually paid 5% for some of the special categories.
Point 1: Do people really earn that much from their credit card rewards?
We have been collecting our rewards into a savings account with the intention of eventually replacing some of the electronics in our home. It’s total luxury but our rationale is that the money we’ve earned through this credit card has been ‘extra’ so we agreed that we can save it for some fun stuff. Our goal is to replace our 32″ tube television with a flat screen TV once the TV dies. How long this could be is anyone’s guess. The TV is about 12 years old, so it could go tomorrow or it could be another few years.
In any case, here’s how much we’ve got set aside that has been paid exclusively from our Citi Rewards cards: Over $800.
My guess is that by the time we’re ready to replace the TV, we’ll be able to buy a new one without going outside the money in this account. At least that’s my plan.
My thought: Yes, it is possible to earn that much from a rewards card.
Point 2: You have to spend tons to make it worth it
We’ve been collecting the amount we have for three years or so, maybe a bit longer. Still, in that time we’ve used our credit cards mainly for the category spending that gives us the most rewards.
Let’s look at an example.
Say you use your credit card as follows every month:

  • Groceries – $350
  • Gas – $200
  • Utility Payments – $100
  • Drugstore Purchases and Prescriptions – $50
  • Gifts – $100
  • Travel – $100

The first five categories are the ‘bonus’ categories. These total $700, so at 2% back per month you would earn $14. The bottom two categories total $200 and at 1%, you would earn an additional $2, for a total of $16 per month.
Over twelve months that totals to $192.
This is pretty typical of an average month for us. Often the gifts and travel are something else, maybe clothes, maybe a day trip, but a couple hundred dollars of ‘other’ spending per month on our credit cards is fairly normal for us.
Now, we’ve done better than that, averaging about $267 per year. I’d account the differences to:

  • Additional money earned the first year before Citi cut the rewards from 5% to 2% on the special categories
  • Charges made of large purchases during our wedding and honeymoon planning strictly for the purpose of gaining cash back rewards. One example: our honeymoon. We splurged and went to Hawaii. This was not cheap. Still, we put it on our credit card and paid the credit card with the money we had saved for our honeymoon. Even though we were ‘only’ getting 1%, that was probably $50 that we wouldn’t have had otherwise. It adds up.

My thought: You don’t have to spend a lot to make it worth it. If you find a card that rewards you for the spending that you do anyways, you’re getting something for nothing, and even with the basic $192 per year, that can add up pretty quickly. However, keep in mind that this assumes you are not carrying a credit card balance.
Point 3: You spend money you haven’t got
My wife nor I have ever carried a balance, and we haven’t spent on our credit card just for the sake of spending. Both of us pay our balances in full every month, so we don’t send a penny of our ‘reward’ back to the card company in interest.
As I said above, we’ve charged things that go to our monthly expenses, or larger ticket items that we have the cash saved for already.
My thought: It boils down to responsible spending. If you can be responsible with a credit card, then it is possible to do really well with a rewards card. But, if you have had trouble with credit in the past, then it might not be worth the risk of getting in over your head.
So, I guess I’ll sum up by saying that my experience has proven opposite of what the comment shows. But, we’ve also been very lucky as to not have had credit problems. Each situation is unique and I think everybody should ask whether they can handle the availability of credit. If history has shown that you can, then by all means I suggest considering the right rewards card.

A Tale Of Two Garbage Bins

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I wrote a while back about our new garbage service. Well, it’s been in place for a little over a month and I have to say that it is working out great!
The city provided two bins, one is a 90-gallon trash bin and the other is a 65-gallon recycling bin. The new recycling program takes a LOT more stuff than I’ve ever seen. They take cardboard, all types of paper, plastic bags, and all plastics labeled 1-7. Most recycling programs I’ve seen take only those labeled 1 or 2.
Mrs. Beagle has led the charge in our house to be more conscious of recycling. As such, we have found that we’re recycling most of our stuff and the garbage is very empty. In fact, we wish that they would allow us to switch the bins and make the larger bucket the recycling bin, which would give us more room.

Needless to say, the recycling won, as it has been since we started using the program.
One of the cool things is that we participate in a program called RecycleBank. When you recycle you get points that you can then ‘cash in’ for coupons or gift cards for local or national retailers.
We average around 70 points per week so far. Some of the example rewards are:
  • 100 points will buy you a $10 off $30 purchase at Bed Bath & Beyond
  • 125 points will get you $6 off two dinner entres at Olive Garden
  • 1225 points will get you a $10 gift card at Applebee’s, Lowes, or Borders
These are just a few of the things that you can get. While the rewards do provide extra motivation, it is reward enough to know that we’re helping save some of our precious natural resources.
One thing that they have that’s really cool is a little indicator that adds up all of the recycling you’ve done and puts it in somewhat everyday terms. They have a widget available that I can add to my blog to automatically update the information but I need to work on fitting it into the site, as it was causing problems when I attempted to place it due to the size requirements. But, here’s what it tells me:
In the five weeks we’ve been part of the program:
We have saved 0.56 trees
We have saved 37.41 gallons of oil from being required to produce new materials
And the most fun statistic,
Our recycling to date weighs as much as….

A penguin!

How cool is that?

How I Calculate Our Net Worth

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I post a net worth update every month and the update for the month will be coming up soon.
I thought I would post a little bit of information about how I track our net worth.

When

I always do our net worth on the 7th of the month (give or take a day). The reason for this is because a lot of transactions take place around the 1st of the month, and can take a couple of days to clear. I want to make sure that everything is cleared and in the right accounts, and have found that waiting a couple of days past the first of the month is the best way to make that happen. These things include:

  • Mortgage payments
  • Credit card payments
  • Transfers from end-of-the-month paychecks to savings / money market accounts

How

The tool that I use is Microsoft Excel. I actually used to use a couple of different tools in the past, but have found that Excel works best for me. The spreadsheet that I have has evolved over time.
Initially, the spreadsheet was created to track my gains/losses back when I was doing some day trading (wasn’t everybody) in the late 90’s. In fact, the spreadsheet is still called Investment Analysis even though I have moved on from my day trading ways, and have evolved the spreadsheet into different things.
I have several different tabs that I utilize.

  • Snapshot - This is a snapshot of the most current moth, and it’s broken down into the categories which I will outline in a bit. It summarizes everything that I track and rolls it up into several categories.
  • History – I roll up the high level numbers each month into a month-by-month breakdown. This lets me see how things have progressed over time.
  • Balance Sheet – This is where I separate the assets from the liabilities (yes, I took lots of accounting classes in college). I have thought about merging this with the History tab, but it has worked out OK so far.
  • Debt – This is where I break down our debt and can see the history of how it’s progressed. This is a great tab for me since we have focused a lot of our personal finance goals over the past couple of years around paying off debt. With this, I can quickly look at how long it took to pay off our car loan (23 months on a 48 month loan) or track how our mortgage is paid off a wee bit more each month.
  • Savings – I have two accounts with cash savings, an ING Direct Orange Savings account and a GMAC Demand Notes account. This is where I track things like our emergency fund, our savings for the next car, our savings for vacations, furniture, our Christmas gift fund, where we keep money for expected car and home repairs, and things like that. One thing that I’ve always done here is ‘write down’ a portion of the account based on what I know we’ll be spending soon. For example, last year we had built up our home repair fund to do some backyard landscaping. Since I knew that we’d be spending this, I started writing down the amount months before. That way, when we spent the money, it didn’t eat a big chunk of our net worth.
  • Monthly Summary - This is a hybrid of an Income Statement and Cash Flow statement that I use to track our bank account activity and spot any trends.
  • Ledger - I don’t balance a checkbook. In fact I barely write checks. This is what I use to track our day to day spending activity and to know what we have in our bank account. I reconcile this almost daily with our account.
  • In Case of Emergency - I have a tab dedicated to outlining all of the required information in the event that something were to happen to me or my wife, such as account locations, website addresses, etc.
  • A few other tabs – I track a few other things such as charitable contributions, dividends paid by our mutual funds, cost basis for our mutual funds. These aren’t used every month but kept pretty up to date, and help around tax time.

With all of this, I have pretty much everything I need all the time. I actually had attempted to use Microsoft Money a few years ago, but felt it actually restricted me and didn’t let me manipulate the numbers to the degree that I like. I tried it for a few months, hoping to be able to phase out the spreadsheet, but ended up phasing out Money instead.

The Calculations

I break our net worth down into the following four major categories:

  • Housing
  • Automobiles
  • Current (Liquid) Assets and Debt
  • Retirement Assets

Here’s a breakdown of each of those:

HOUSING

I track the value of our house based on three things: The value reported by CyberHomes, the value reported by Zillow, and my own personal adjustment based on what I’ve noticed in terms of neighborhood sales.
So most recently, I’ve averaged the two and have deducted another 3%.
This gives me the approximate selling value I would expect to receive. However, for net worth purposes, I actually deduct the anticipated selling costs that would be involved with selling the house. So, I write 7.75% off. The reason for this is simple: The only reason I would ever have true interest in the value of my house is if we had to sell it, so I want the value to reflect what we would ‘get’ if we sold it.
From there, I subtract our outstanding mortgage principle to give the total value of our home.

AUTOMOBILES

I know there’s a lot of debate about whether to track auto values in your net worth. I lean on the side that tracks it, and the reason is simple: The current value of my car will factor into the next car that we purchase. In other words, one of the two cars that we have is going to partially fund the next car, so I want to know what we can afford.
We have two cars. I use Kelly Blue Book pricing and remove 5%. We do not have any loans, but if we did, I would subtract the car loan balance from the value to come up with our total.
Because cars are depreciating assets, I expect these values to decline every month.

CURRENT (LIQUID) ASSETS AND DEBT

This is where I track anything that is cash or could easily be converted to cash, as well as what we owe for anything outside of the mortgage and car payments.
So, the things that I currently track are:

  • Bank Account Checking (asset)
  • Bank Account Savings (asset)
  • ING & Demand Notes Savings (asset)
  • Mutual Funds (asset)
  • Outstanding Credit Card balance (debt) – note: we pay our balance in full every month but this tracks the current outstanding balance at the time I do the monthly check
  • Student Loans (debt)

RETIREMENT ACCOUNTS

I have three 401(k) balances, two from previous employers and one with my current employer. I also have a Roth IRA. At some point, I hope to open a Roth IRA under my wife’s name as well.

TOTAL NET WORTH

Once per month, I log into accounts for each of the accounts and enter the numbers. From there, it calculates the value by each category and those totals equal our net worth.
That’s it! Overall, I know it isn’t the perfect system but it works well for me. There are things that I want to improve upon. I’ve got some tabs that I’m working to merge. I also need to figure out a way to clear out old information without making it impossible to review later on. But, for now, it gives me the information I need to know in a way that makes sense and lets me know if we’re making progress and meeting our goals.