2012 September — Money Life and More

Random Thoughts, Round Up and Carnivals #23

Random Thoughts

Another week gone by! It is amazing how quickly and slowly time can go by. It seems like just yesterday I was at my last job and that was over six months ago! However, while I was at my prior job time seemed to drag most of the time.

When I was working at my old job I had a long commute and my free time outside of work wasn’t spent doing productive tasks. I’d just watch TV or endlessly surf the internet (partially looking for new jobs). Time seemed to drag and the days and weeks went by painfully slow.

Now that I have a new job and a much shorter commute time goes by fast. I’ve had this blog to keep me busy in my free time and the weeks just fly by! I just need to work on being more efficient with my time so I can get even more done.

Round Up

Michelle at Making Sense of Cents is Giving Away $100! Make sure you go over there and get as many entries as you can!

Joe Taxpayer wrote a guest post for Budgets are Sexy detailing How He Made $4,000+ on a Cash Back Credit Card Offer! This is pretty amazing. You really need to have control and know your situation but if you find a similar deal it would definitely be worth looking into!

Jason at Work Save Live tells us to Stop Buying the Hype: The Average Rate of Return Isn’t What You Really Earn. If you don’t believe him do the math!

Sunil at The Extra Money Blog explains how to Travel for Free on Free Airline Travel Vouchers. My dad travels on business occasionally and has picked a couple of these vouchers up on flights he didn’t even pay for! Seems like a great deal to me if you can be flexible with your flights.

Last, but not least, A Blinkin at Funancials writes about how Pilots are the Best Credit Card Salesmen. It is interesting how different people can have different success rates pitching credit card offers. More importantly who expects to be pitched a credit card by a pilot?!

Carnivals

Below are all of the carnivals that I was included in this week… well, at least those that I could find or I got ping backs on. If you hosted a carnival that I was included in this week and I missed it please let me know and I’ll add it below!

Festival of Frugality included my post 5 Reasons We Won’t Separate Our Finances When Married.

Carnival of Money Pros included my post iPhone 5: How Cell Phone Companies Can Afford to Give You a $450 Discount.

Carnival of Personal Finance included my post Buy an Older Generation or Last Season’s Project.

Enjoy your weekend!

What random thoughts are in your head today? Care to share?

photo by: Jörg Weingrill

Filed Under: Round Ups

How I Bought A House On A Whim and Why You Shouldn’t

By Lance Mlandm 40 Comments

I bought the current townhouse we live in on a whim. We weren’t looking to buy a house and didn’t even think we’d own a house for the next few years… but here we are. So how did it happen and why shouldn’t you buy a house on a whim? Let’s dig into the details.

The Situation At The Time

I was working a job that I wasn’t a huge fan of. My girlfriend had just gotten a job in a town an hour and a half away. It also happened that my parents lived in the area. They had recently bought a townhouse near the beach to rent out to a relative. It seemed like they got a really great deal for the location and I thought that, given the opportunity, I’d like to own a similar townhouse one day…

Then it happened. A townhouse in the same exact townhouse row went up for sale! It sounded really appealing but I definitely hadn’t even thought seriously about buying a house at the time. I had been saving a bit of money for a house down payment but I thought it’d be at least three to five more years before I bought a house.

The townhouse was within walking distance to the beach and was cheap enough that I’d be able to scrounge up enough for a 20% down payment and closing costs required for my home loan. It was also within 20 minutes of my girlfriend’s new job which was a plus. Then, if she eventually got a job in the town I worked in we could rent the townhouse out easily for more than the expenses to run it.

We’d be able to afford owning the townhouse and renting a cheap place in the town I was working in at the time. It’d be tighter than I’d like but we could make it work within a reasonable budget. We liked the idea of the townhouse, the location, the rental potential and the fact that we could live in it if I got a job in the new town. We put in an offer and got the townhouse. It wasn’t quite that simple… but that’s a story for another post.

Why You Shouldn’t Buy a House on a Whim

We are very happy that we were able to and that we did purchase the townhouse. However, there are a few things we should have had in line before buying it.

First, since we didn’t plan on buying a house so soon I had to borrow money from some of my other targeted accounts. Don’t get me wrong, I had the cash available. I just had it saved for a different goal. Don’t fall into this trap or you might run into problems if you end up needing the money for something else. Luckily I was able to replenish this within a couple months of closing on the townhouse without any problems.

Second, we rushed into the deal due to high interest in the property. We didn’t look at any other houses or consider any other options. Our townhouse only has two bedrooms and one and a half baths. It is a bit small but is big enough for us for the next five to ten years… even if we get frustrated at times with some of the size constraints. When you’re buying a house you need to make sure it is the perfect fit for you. This isn’t a decision you can easily reverse without incurring some hefty costs. It ended up working out for us but once again we got lucky.

Finally, I didn’t have a job lined up in the new town. We did have a back up plan of renting the house out if my girlfriend found a job where I was living before we bought the townhouse but we didn’t have a clear plan of what we wanted to happen when we made the offer. We ended up both living in the new place despite it been an hour and a half away from my job at the time. About six months later I found a new job much closer to our townhouse. In a down economy this was a risky move but it paid off for us. Be prepared for a long hard road ahead if you do something similar.

Before you buy a house make sure you consider all of your options. Be prepared for the enormous decision of becoming a home owner.

Have you ever bought a house on a whim? What other tips would you recommend investigating before buying a house?

photo by: roger4336

Filed Under: Large Purchases

What Would You Do? Pay Off Higher Interest Rate or Variable Rate Loans First?

By Lance Mlandm 54 Comments

Welcome to the fifth edition of “What Would You Do?”! If you have a question and would like to know what others would do please contact me and I’ll keep it in mind for future editions of “What Would You Do?”. Recently I’ve asked Should I Buy a Smartphone, Should I Buy the NeatDesk or NeatReceipts Scanner, What Would You Do With $1,000,000, and Should I Pay Off My Car Loan! Now on to today’s What Would You Do…

My girlfriend has a few different student loans as I discussed in our debt paydown strategy. They are at different interest rates and to complicate things further some have fixed rates and others have variable rates. There was a clear choice as to which loan she should pay off first. She is currently working on paying off an 8.25% variable interest rate loan that originally had a pretty hefty balance. After she pays that loan off things are going to get tricky.

The Loans and Other Necessary Information

After my girlfriend pays off her 8.25% loan she will still have three fixed rate loans at an interest rate of 6.8%. These loans have a current balance of right around $20,000. She will have a variable rate loan, currently at 5.75% (based on the prime rate), with a current balance of approximately $23,000. Finally she has another variable rate loan, currently at 4.75% (based on the prime rate), with a current balance of approximately $8,000 left on it.

I personally have been saving money to help her pay these loans off. Once we get married one day I’ll take that money and apply it to her loan balances. By that time her 8.25% loan should be paid off but the question remains… which loan should she attack next?

The variable rates will change based on the current interest rate environment. For this exercise let’s assume that the rates are the same as they are today. We hope to have these paid off before the end of 2015 and the Fed (the agency that controls interest rates in the United States) seems to indicate they won’t be raising interest rates before then anyway so hopefully that is a safe assumption.

What Would You Do?

As we see it there are two options for us. We are aware of Dave Ramsey’s debt snowball method (pay the smallest balance off first) and the debt avalanche method (pay off the highest interest rate first). We aren’t a fan of the snowball method because we’d like to pay the least amount of interest possible. This would suggest we use the avalanche method and attack the 6.8% fixed rate loans next, then go on to the 5.75% and 4.75% variable loans.

On the other side, we are aware that the economy might get better faster (we can hope right?) or maybe inflation will start to grow out of control. In that case the Fed might start raising interest rates rather quickly which would lead to an increased interest rate on her variable rate student loans. If we can’t pay the variable rate loans off quickly after rates start going up we could end up paying a lot more in interest. These loans don’t have small balances that can be paid off in a month or two.

The other option (as we see it) is to pay off the variable rate loans (5.75% and 4.75%) before the fixed rates (6.8%) loans. While we might pay a bit more in interest this way there would be less uncertainty in total interest paid. Once the variable rate loans are paid off the most interest we could ever pay is 6.8% regardless of the Fed does to interest rates in the future.

Now that you know the options we have considered what would you do? Is there an option we have missed? Would you pay off the fixed rate loans first or knock out the variable rate loans? Let me know in the comments below and be as specific as possible. We’d love to get as many opinions as we can so we make sure we didn’t miss anything.

photo by: Images_of_Money

Filed Under: What Would You Do

How Life Insurance Can Provide Security

By Guest Leave a Comment

This post is sponsored by Prudential.

Security is something that is often hard to come by. The future is uncertain and that can leave many people with an uneasy feeling. Luckily there are ways to plan for your financial security in the unfortunate event that someone who you rely on passes away. Life insurance can provide that security if you purchase the correct amount. It can provide financial security for your spouse or your children if the unthinkable happens to you.

Prudential, a provider of life insurance, has put together a couple videos that show how life insurance can provide this security for your dependents if something horrible should happen and you pass away. Be sure to check them out down below. While only one video is currently showing, if you refresh the page there is another video that may replace the current video down below.

In one video a widow speaks about her life with her husband over the years and how he was always there for her and loved her. She then goes on to talk about how it was nice to have the money in a time of need and how she spent the last of the life insurance money on a new companion, her dog.

In the other video a couple talks about their family which includes three kids. They discuss how hectic raising a family can be and how they are covered by life insurance because that is the responsible thing to do while raising children. You never know when tragedy can strike. The couple discusses how their dads died at the young ages of 42 and 52. Life insurance can provide peace of mind that if you pass away your family will be able to financially survive.

I personally completely agree that when you have children life insurance is definitely a good way to provide financial security for them should something happen to you. As I have said before, I plan on getting life insurance as soon as I find out we are having a kid. I wouldn’t want something to happen to me and then have my family struggle financially without me. Be sure to check out the videos below.

photo by: amslerPIX

Filed Under: Guest Posting

4 Times When Cheapest Isn’t Always the Best Deal

By Lance Mlandm 38 Comments

I normally buy lower cost items if I have a choice. It has served me well in many cases and saved me a ton of money. Unfortunately, there have been other times in which the cheapest option hasn’t been the best deal. Below are a few reasons why buying the cheapest option isn’t always the best deal.

When It Causes You To Buy Something You End Up Hating

Have you ever debated between a slightly more expensive option when there was a cheaper option that seemed to serve the same purpose? Did you base your decision solely on price and get the cheaper one? Then, when you got it home you hated it.

I’ve been victim to this before. If you can afford the slightly more expensive item and you’re going to use it more or like it more just go ahead and get it. The key is being able to afford it! You can’t do this with everything either or else your budget will explode but don’t always buy because something is cheaper.

When It Means You Won’t Enjoy Your Purchase As Much

Another time where I often buy the cheaper item is at the grocery store. When there are two similar items sitting next to each other I compare the price per unit and normally go with the cheaper one. That has lead me to buy some food that isn’t quite what I was expecting.

I’ve learned which cheaper foods are good replacements and which ones aren’t. I don’t mind spending a bit more money for the better item, which is a matter of opinion. Recently I got some off brand candy corn. I love candy corn but it was nasty! So will I buy it again? Nope! Only Brach’s candy corn for me!

When It Causes More Spending Down the Road

Ever get that feeling that the cheaper alternative isn’t going to hold up as well as the more expensive counterpart? Sometimes it will and sometimes it won’t! It might take some experience to figure out when to go for the more expensive option here but pay close attention because this can cost you a ton of money!

My recent personal example in this category is jeans. I started my new job about six months ago and can now wear jeans instead of khakis and other dress pants. I went out and bought 3 pairs of Arizona jeans because they were the cheapest jeans in the store. I never really thought about the fact that some clothes are just cheap because they are poorly made. These jeans were those poorly made clothes.

On the first pair of jeans a belt loop just popped off within a week. I returned those and exchanged them no problem. Then about 2 weeks later another pair got a hole in a random spot at a seam. I took those back and exchanged them as well. Then about 3 months later all of the jeans had holes where the back pocket attached to the jeans… needless to say I won’t be buying Arizona jeans anymore.

When Dealing with Durable (Long Lasting) Goods

This is the category that can cost you the most. Your dishwasher suddenly breaks. You could afford a nicer model, you do have an emergency fund after all, but don’t really want to dip too deep into it for a new dishwasher. Instead you buy the cheapest version that will match your kitchen and then it breaks a couple years down the road or you end up absolutely hating it. Guess what happens next? It gets replaced with another new dishwasher… ouch!

When you’re dealing with durable goods go for quality first but still keep price in mind. Don’t go buy the absolute best version of an items because it could cost 10x more than a reasonable model. Instead make sure you do a good cost benefit analysis and buy the best of what you can afford within your price range. There are some times when this isn’t the best decision, but if you intend to use the durable good for its entire life I feel buying quality is key.

Do you ALWAYS go for the cheaper option? When has buying something more expensive benefited you and what are your rules of thumb about when to go for the more expensive item?

photo by: Juushika Redgrave

Filed Under: Basics, Save Money