It makes sense to manage even the smallest day-to-day expenses, but if you really want to maximize your money, look to your big-ticket items. That's the message of an article in the February issue of Money magazine, which said that trade-offs in what you drive (think Honda instead of Acura), where your kids go to college (think State U instead of Stanford), and where you vacation (think Mexico instead of Milan) will have a much bigger impact on your financial health than limiting your lattes.
Matt's View
Do you get excited about "$5 pizza day" at your supermarket but buy a new car every four or five years? One of the most effective steps toward living with financial margin is keeping our cars longer. Doing so enables us to break the cycle of financing cars. One-third of today's car buyers owe more on their trade-in than it's worth. Oftentimes, they roll that amount into their new loan, getting themselves ever more deeply into vehicle debt.
Keeping cars longer enables us to pay them off and then save to buy our next car with cash. With the added margin of not having a car payment we can build savings. That enables us to lower insurance costs by raising deductibles, creating even more margin.
Don't get me wrong--I'm a big fan of $5 pizza day. But I'm an even bigger fan of being both penny wise and pound wise!
We're all accustomed to shopping for things to buy, whether flipping through the latest catalog that came in the mail or browsing the aisles of our favorite stores. But have you ever "shopped" for ideas about where to make charitable donations? The Chicago Tribune recently profiled DonorsChoose
, an organization described as "a sort of philanthropic eBay." Visitors to its web site can help students in need after browsing through thousands of wish lists posted by public school teachers.
Matt's View
What makes DonorsChoose especially powerful is that donors can see specifically how their money will be used, whether buying books or helping to fund a field trip. For example, because of donations generated by the site, a straight-A 12-year-old Chicago girl will be able to attend a leadership conference in Washington. There's no way her parents, who both work low-wage restaurant jobs, would have been able to afford the trip.
DonorsChoose covers its costs via an optional fulfillment fee people can choose to pay after clicking to fund a project. The organization gets the highest possible ratings from Charity Navigator
, an independent charity evaluator.
A new organization is trying to help parents stop the one-upmanship associated with many of today's children's birthday parties. As reported by the Associated Press, Birthdays Without Pressure
was formed by a group of "concerned parents and professionals" to address the excesses they say have led to kids feeling stressed, envious, and entitled. Its web site lists some examples of parents gone wild (little party-goers arriving via limo, a 60-guest invitation list for a one-year-old's special day) along with suggestions for saner celebrations. Among the ideas: everyone brings an inexpensive gift for charity, no-gift parties, no gift bags, and family-only parties.
Matt's View
While many of the ideas on the group's web site are helpful, they seem to come from a negative angle: "no" to this, "less" of that. I've always found "yes" and "more" to be more motivating. So, how about "yes" to the simple games of our youth like pin the tail on the donkey and "more" group activities like sing-a-longs. Some parents might notice the lack of strolling musicians and Thomas the Tank Engine ice sculptures, but the kids will be too busy having fun.
These days, zero percent financing "deals" can be found on everything from trucks to TVs. But it's important to read the fine print. According to a story in the Minneapolis-St. Paul Star Tribune, the prices on some such items are often inflated to help retailers make up for lost financing charges. Or, they come with severe penalties for not paying attention and following all the rules. For example, the zero percent rate on a big-screen TV might be valid for 12 months, but if the buyer takes longer to pay it off, that rate could jump to 25 percent--and not just on the remaining balance, but on the total purchase price.
Matt's View
Besides paying close attention to the fine print, zero percent financing deals only make sense when we have the total cost of the item in savings. Otherwise we're presuming we'll be able to come up with the money down the road, and the road to consumer debt is paved with such presumptions.
