Category Archives for Saving Money & Frugal Living

eBay vs. Amazon – Part 2 – Comparison of Buying

FREE 1 Month Netflix Trials

Good evening everyone!

As I have stated in previous posts (and as you can see by the advertisement in the website sidebar), I am an avid believer is using Netflix for receiving/viewing movies as opposed to paying for cable tv. See the link below for more details.

My Money Blog – Netflix

When I came home tonight from work, by a stroke of luck, Netflix sent me 4 one month FREE trial memberships that I can share with people, so I figured I would post them on the site!

How do you get your free Netflix trial?

1. Go to Netflix.com – Tell a Friend.
2. Enter one of the Priority Codes below, then proceed through the sign up process.

• M783752024815
• M723732024475
• M773712024415
• M713702024805

What is included in the free trial?

• Everything that is included in a regular Netflix subscription!
• Watch moves instantly
• Get 1 DVD at a time delivered to your house.
• No due dates or late fees for returns
• Free shipping both ways for DVDs.

Keep on learning!

Jacob

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eBay vs. Amazon – Part 1 – Comparison of Selling

Keep on learning!

Jacob

To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:

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Should I Enroll In a Biweekly Mortgage Payment Plan?

• I would accumulate $600 more equity in the first year of home ownership by using the biweekly mortgage plan, given the same downpayment.

• I would pay off the home loan in 25 years instead of the normal 30 years with the monthly payment plan.

• Using the monthly payment plan, the $95,000 loan would end up costing me a total of ~$194,000.

• Using the biweekly payment plan, the $95,000 loan would end up costing me a total of ~$174,000.

• This would result in a savings of ~$20,000 for only this small loan amount! The magnitude of savings would be even greater for larger loan amounts!

• Using the biweekly payment plan (including a $400 one time set up fee), over the 5 years, I would pay a total of $35,461 in biweekly payments, resulting in an additional $10,273 accumulation of equity (on top of initial downpayment).

• Using the monthly payment plan, over the 5 years, I would pay a total of $32,364 in monthly payments, resulting in an additional $7,162 accumulation of equity (on top of initial downpayment).

 So, in my situation, since I am accumulating an additional $3,111 by using the biweekly payment plan, this definitely warrants the addtional $3,097 expenditure needed to make it happen.

I hope this post helps you understand the biweekly mortgage payment world a little bit better! Please let me know if you have any questions.

Keep on learning!

Jacob

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Adjust Your Tax Withholding With Your Employer, Save Money

Listed below are the amounts of my federal tax refunds from the past two years.

2008 Federal Tax Refund = $2,975
2009 Federal Tax Refund = $2,347

As you can see by looking at these amounts, they are quite high! However, it wasn’t until last Thursday when I posted the amount of my 2009 tax refund on the social networking site, Facebook.com, that I was alerted that the magnitude of these sums was much higher than necessary. Given the magnitude of these taxes, I would no doubt being looking forward to the 2011 payroll tax holiday. Prior to posting on Facebook.com, I figured that these sums were pretty normal for someone that is my age with no children to claim as exceptions.

And, what was more, I learned that I could do something about it fairly easily – just by adjusting the amount of withholding that my employer keeps from my paycheck each month. Since this realization was a fairly significant and interesting find for me, I figured I would commit a post to this topic to share my mistakes with everyone and explain how you can avoid it!

How Much Is My Employer’s Maximum Withholding Costing Me?
So, let’s get started! First, just out of curiosity, I wanted to create a tool to use to capture the amount of money I had lost out on by giving the government an interest free loan instead of investing the money in a way that I found most appropriate.

What I put together can be found at the Google Docs link below. To adjust it to your specific situation, complete the following steps below:

• Download an Excel version copy of the spreadsheet by clicking File –> Download As –> Excel sheet.
• Open the file and enter the $ values of your 2008 and 2009 federal tax refunds in the green cells in the upper right hand side of the spreadsheet.
• The spreadsheet will then automatically calculate (in blue highlighted cells) the amount that you would have made by adjusting your federal tax withholding with your employer in such a way that you don’t get any refund back when tax season rolls around, and investing the difference in an S&P500 index mutual fund.

Google Docs – How Much is Withholding Too Much Tax Costing You?

Entering the tax refunds amounts shown above that I received in 2008 and 2009, I calculated that I would currently have $795.47 more net worth than I currently have, due to the face that I gave the government a very generous interest free loan.

Dang, I really wish I would have known this before! Blast!

How Do You Adjust Your Withholding Preferences?
So, now you’ve realized that you have an opportunity to save some money by having your employer withhold less of your income for federal tax payments, how do you take action to make this a reality?

As it turns out, it is VERY easy to make this adjustment. All you have to do is either a) log-in to your employer’s online payroll management website (if available), click on the Payroll and Compensation tab, and then click on the link labeled, “Federal W-4 Tax Information” or b) call up your Human Resources department, and request that you want to view/adjust your Federal W-4 Tax Information reporting.

Please note: that the exact wording will change, depending on your employer. But as long as you know that the Federal W-4 Tax Information is what you want to adjust, you’ll find your way!

Once you have accessed the correct system (whether online or through the phone), you will then look for the field where you can adjust the total number of allowances you are claiming.

If you’re like me, you are probably wondering, “What exactly is an allowance?” Essentially, a withholding allowance is used by your employer when tabulating the amount of income tax to be withheld from each paycheck you receive. The range of withholding allowances you can choose is from 0 up to a maximum of 10. The more allowances you have, less money will be withheld for taxes. For most people, this is the same number of personal exemptions they are planning to claim on their taxes.

So, for example – if you are married and filing jointly, you would claim 2 allowances. If you are single, you would claim 1 exemption. Get the pattern?

What Amount of Withholding Is Right For Me? How Many Allowances Should I Claim?
As a general rule of thumb, a personal should claim the same amount of allowances as the number of exemptions they are claiming on their federal taxes.

However, since this is the My Money Blog, where we go all out to save every dime we can, we will use online calculators to figure out what number of allowances we should be claiming so that we do not overpay on our taxes.

The two best withholding calculators I could find online can be accessed using the links below. To use them, click on the links, print off a copy of your current paycheck with all of the deductions for taxes and insurance premiums, and fill out the required fields in the calculators.

IRS Withholding Calculator
HRBlock – Tax Withholding Calculator

Using the calculators above, I saw the following results –

Using the HRBlock Calculator, it computed that I should be claiming 10 allowances (the maximum). While this may seem pretty crazy, it may actually make sense because I will be taking a 67% paycut when I attend graduate school full time this fall. However, I am a little cautious to follow this since the HRBlock calculator does not take in to consideration the wages that I will receive while working as a graduate student this fall.

The verbatum results from the IRS Withholding Calculator are as follows. “Based on the information you previously entered, your anticipated income tax for 2010 is $1,885. If you do not change your current withholding arrangement, you will have $7,020 withheld for 2010, resulting in an overpayment of $5,135 when you file your return. If you want your withholding to more closely match your anticipated tax, adjust your withholding on a new Form W-4 as follows:

• For the only job you entered (which has a projected salary of $XXXXX): 6 allowances.
• Check the “Single” box on your Form W-4.

Assuming these recommended allowance(s) are in effect for the rest of 2010, your expected refund should be about $600. Following this recommendation will ensure that the amount withheld from your wages will cover all of your projected tax liability while minimizing your refund.”

So, looks like 6 allowances is the number that I am changing my claimed allowances to! 🙂 I tend to trust this number more because the IRS Calculator gave me the opportunity to enter my salary that I will be earning throughout the entire year.

And, do you want to know the great thing? Since I have already paid enough taxes this year for the 6 allowance level, I will not have any federal income tax withheld from my paychecks after making this change!

Do You Ever Have to Pay Penalties For Not Having Enough Taxes Withheld?
Before I jump in and increase my number of withholding sixfold from 0 to 6, I want to also know if I will be penalized for doing this by the IRS. In other words, I want an answer to the question, “Will I be penalized if I underpay the IRS for decreasing my withholding?”

According to the article at the link below, the IRS penalizes taxpayers who have to pay more than 10% of their tax when they file their annual tax return. So, theoretically, since the IRS calculator states that I will still have a refund of $600 for 2010, I should be all right and not get penalized.

Penalties for Not Having Enough Tax Withheld

When Would It Be a Good Thing to Get a Big Refund Back?
Since I am a fairly effective saver of money, having larger than necessary amounts of money withheld from my paycheck is not needed, in my opinion.

However, I do believe claiming fewer allowances than needed is good for people that have trouble saving money because it acts as a forced savings program (similar to the way paying for a home mortgage is, by nature, a forced savings plan).

I hope this post was insightful and that it helps you on the road to financial success. Please let me know if you have any questions.

Keep on learning!

Jacob

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Can Drinking Wine Make You Live Longer?

In a previous post (see link below), I described the various long-term financial ramifications and cost savings that could result, depending on the type of wine you choose to buy.

My Money Blog – Comparison of Wine Prices

In this post, I briefly mentioned the commonly known hypothesis that drinking two glasses of wine per day will result in better health and longer life. However, is this really the truth? And if so, how does it work? What causes you to have longer life? Does this benefit come from all wines or just some specific types?

The answers to these questions will be the topic of today’s post. Let’s get started.

Does Drinking Wine Help You Live Longer?
To gain an insight in to this ongoing debate, we first need to know if drinking wine helps you live longer.

And, through an investigation of the two articles from Xomba.com and Webmd.com (can be found at the links below), it appears that the answer to this question is, “yes.”

Xomba.com – Will Drinking Wine Help You Live Longer?
Webmd.com – Does Drinking Wine Give Longer Life?

The results showed that men who drank less than half a half glass of wine per day lived an average of five years longer than men who avoided wine completely. They also had a lower risk of heart disease and heart attack.

To my surprise, the results are much less clear for women. While some studies have shown that there is potential for women to improve their heart health by drinking small amounts of wine, other studies have shown that drinking even small amounts of this delightful drink could result in an increased risk of breast cancer, a disease that is already horribly prevalent in the women population.

How Does Drinking Wine Help You Live Longer?
While the study results conclusively support the finding that drinking wine improves health (at least in men), scientists are not certain of what exactly causes the improvement to occur. Nonetheless, there are several hypotheses attempting to explain the result.

Hypothesis 1) Wine is a source of phytochemicals, including flavonoids and polyphenols, that contribute to wine’s ability to increase lifespan. According to the link below, although the experiments are currently ongoing, flavonoids show potential to stabilize blood capillaries (i.e. improve cardiovascular health) and excite enzymes that destroy mutagens (i.e. reducing risk of cancer) in the body.

Wikipedia.org – Flavonoids


Hypothesis 2) Wine is a source of resveratol. According to the link below from Wikipedia, resveratol is a chemical that occurs naturally in certain plants to protect from attack of bacteria, fungi, and other microscopic predators.

Resveratol has currently been shown in mice and rats to have anti-cancer, anti-inflammatory, blood-sugar-lowering and other beneficial cardiovascular effects (similar to what is seen from a calorie-restricted diet). However, conclusive results have yet to be seen in humans.


Wikipedia – Resveratrol

What Types of Wine Carry This Benefit?
As it turns out, white wine drinkers are out of luck when it comes to lifespan extensions. The reason for this is due to the manners in which white and red wine are made. White wine is made from the juice of the grapes, and red wine is made using the whole grape.

And, since the skin is where the chemicals discussed above are created and stored, red wine is the only type of wine that offers health benefits (in small quantities of course).

What’s the Bottom Line?
So, although it is not yet determined exactly what the cause is, it is certain that small quantities of red wine (1-2 glasses per day) do improve health and increase lifespan in men. So, drink up men!

For women, even though the results are less “cut and dry,” I still wouldn’t worry too much about indulging in a glass or two every day – especially if it is something that gives you happiness!

Keep on learning!

Jacob

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Cost of Renting Calculator

As many of you are aware, one of the many perks of home ownership is the fact that you can obtain what’s called a “fixed-rate mortgage loan,” or a home loan whose interest rate and required period payments remains constant throughout the term of the loan.

However, this option is definitely not available when you are a renter.

Each year, renters are subject to rental price increases (with the exception of areas like New York where rental increase restrictions exist). The amount of the increase varies depending on location, the owner of the property, and the amount of maintenance that is required. However, a good low-ball estimate for the inrcrease in price is the average rate of inflation, 3.2%.

Side note: in my experiences, however, the rate of rental price increase has been higher. In college, I lived in/rented a room in a house for 3 years. During this time, the rent increased from $300 a month to $400 a month. This equated to an average rental price increase of 11.1% per year. Furthermore, in the house I lived in for 1.5 years in Virginia, the rent started out at $500 per month and then increased to $530 per month. This equated to an average annual increase of 4%.

In both of these cases, the value that I was getting from the apartment was definitely well worth the added increase, so paying the extra amount didn’t matter.

However, this and other evidence serves as a good reminder that the cost of rent will indeed increase over time! And, it is good to begin to quantify this increase ahead of time so you can be prepared for the financial ramifications.

To assist in capturing this picture for everyone’s specific circumstance, I created a customizable rent calculator using Excel. The link to the spreadsheet is shown below.

Google Docs – Cost of Renting Calculator

To use it, download an Excel version of the file to your desktop/hard-drive, and just enter the following information in the purple highlighted cells on the left:

• Current monthly rent
• Assumed increase in rent each year (or just leave the default value of 3.2%)
• The number of years you expect to live in the house/apartment/condo/townhouse

The spreadsheet will then automatically calculate 1) the monthly rental cost in each year that you expect to live in your housing unit 2) the % increase from the beginning rent price and 3) the total cost of renting the housing unit over the time period.

I hope this calculator helps you to achieve your financial goals! Please let me know if you have any questions.

Keep on learning!

Jacob

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Comparison of Wine Prices and Taste

Is that picture above not just making your mouth water by looking at it?! 🙂

Since wine is one of my personal favorite drinks as well as being a popular selection among the general population, I figured it was high time that I devoted a blog post to the financials surrounding this most delectable of drinks.

So, let’s get started!

First, let’s assume that you, as a loyal, free thinking wine connoisseur, drink the recommended 2 glasses of wine per day that is supposed to improve your health, prevent cancer, and extend your life.

OK! Two glasses of wine per day. Assuming that it takes the normal 5 glasses of wine to make up a bottle, this equates to drinking a bottle of wine every 2.5 days, on average.

Now that we have our bottle consumption rate, let’s look at our different options for wine bottles available to the everyday consumer!

• Trader Joe’s sells Charles Shaw brand wine (known “on the street” as Two Buck Chuck) for $2.99 per bottle
• Wal-Mart sells Oak Leaf brand wine for $2.97 per bottle
• On the other hand, you can get a perfectly drinkable bottle of good wine at the wine store for $10 per bottle

Let’s now assume that you drink wine each night at the previously mentioned rate of 2 glasses per day from when you are 24 years old until you are 65 years old.

Given these assumed conditions, just how much would you save if you opted to be a religious $3 per bottle wine sampler? Let’s take a look.

At the wine consumption rate of 1 bottle of wine every 2.5 days, this corresponds to 146 bottles of wine per year! Pretty crazy when you calculate it all up eh?!

Now, take a look at the Google Docs spreadsheet at the link below. Assuming that this consumption pattern continues until age 65, you will end up spending the following total amounts for wine:

• $61,320 for the $10 per bottle wine
• $18,396 for the $3 per bottle wine. This represents a real cost savings of $42,924 total! Wow!!

Google Docs Spreadsheet – Cost Comparison of Wine Purchases

Even though a cost savings of $42,924 total is a pretty impressive total, for the sake of interest, let’s see what happens when we throw Time Value of Money (or the idea that money grows over time exponentially when invested properly) in to the mix.

Assuming that the $1,022 cost savings that results each year from buying the $3 bottle instead of the $10 bottle is invested at a 10% rate of interest each year, we see in the spreadsheet at the link above that at age 65, this results in a savings of $549,465.01. This is even more impressive for sure!

Key Takeaways

This findings are no doubt impressive, but what does it mean overall for the every day consumer? Well, what it means for me are the following key takeaways:

• First, it definitely makes me even more cognicent of the fact that every day expenses add up quite greatly over a long period of time.
• The second key takeaway relates to the topic of wine taste.  Essentially, what we all need to consider is this – Is the increased “quality” of taste of a more expensive bottle of wine absolutely necessary for you to have in a wine you drink every day?
• What I like to do is to have several good quality bottles of wine at my apartment for sharing with friends when they come over or for entertaining guests for dinner. However, on the days when it is just me at my apartment, and I feel like having a glass or two of wine with dinner, I prefer to drink more economical wines.

I hope this helps to get you thinking about little things you can do to restructure your spending and save money. And, as always, please let me know if you have any questions!

Keep on learning!

Jacob

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Verdict Is In On Amazon Prime Program

One month ago, I wrote the post at the link below supporting a potentially incredible new program that Amazon started offering named Amazon Prime. In this post, I encouraged everyone to sign up for the free 90 day trial that is being offered.

My Money Blog – Review of Amazon Prime Program

However, after giving the free trial a go, I regretfully have to withdraw my support for this program.

Before I explain my reasoning for this, let’s do a quick recap on what the features of the Amazon Prime Program are. Essentially, what happens is that after the free trial ends, you pay $79 per year to Amazon, and you then receive the following benefits associated with the service:

• Unlimited FREE 2-day shipping
• The ability to upgrade to one-day shipping for only $3.99 for domestic US purchase destinations
• No minimum order size.
• You can even share your membership with someone else in your household (they just have to know your birthday).

Why Is the Amazon Prime Program Not Suited To My Needs?

In my first post about the program, I added up the total amount I spent on shipping during the past year to an amount of $101. I was thinking that since the program only costs $79 per year and would give me free shipping, I would recover this initial outlay of cash in savings throughout the year. Boy, was I wrong!!!

After signing up for the free trial, I was anxious to make my first Amazon purchase and use the benefits of the program. However, what I soon found out was that for the most part, the Amazon Prime Program ONLY works for NEW items that are being sold BY AMAZON. Because I principally purchase used items from 3rd party sellers on Amazon, I soon realized that the amount I would save using this program would greatly decrease.

As an example, let’s take a look at a scenario of wanting to buy a Harry Potter DVD. Since you are a penny-pinching consumer, you want to watch the movie, but you don’t particularly need it to be brand new in the shrink wrapping.

A quick Amazon search yields the page result at the link below. In examining the page, you can either 1) buy the DVD brand new from Amazon for $9.49 (and get free 2 day shipping with Amazon Prime) or 2) buy the DVD used for $7.10 + $2.98 shipping = $10.08. As you can see from the used DVD search results, none of the used products qualify for the Amazon Prime program. So, you are really only saving ~ 50 cents overall buy using the Amazon Prime program. This to me, is not a significant enough savings to warrant the initial cash outlay of $79.

Amazon.com – Harry Potter and the Half Blood Prince DVD

This was merely a small-scale example. In the example at the link below, you actually end up spending approximately $6 more in order to buy the new version of the book through Amazon and take advantage of the Amazon Prime Program.

Amazon.com – Jim Cramer Mad Money Book

Even though the Amazon Prime program is not well suited for me, it would be appropriate for the following types of Amazon purchasers:

• If you are a consumer that demands to buy new versions of everything on Amazon
• If you are a consumer that wants items shipped VERY quickly (2 day or overnight), and cannot wait for standard shipping.

So, if the Amazon Prime Program is well suited to your needs, just keep your membership active, and you will be charged the normal yearly fee at the end of the 90 day trial. However, if you are like me, and you will not be continuing using the program, you will want to do the following to make sure you aren’t charged the $79 fee at the end of the 90 days:

• Go to Amazon.com, sign in to your account.
• Click “Your Account” link in the top right corner.
• In the “Orders” rectangle at the top of the page, you will see a “Manage Prime Membership” hyperlink. Click it.
• Then, click the button half way down the page to instruct Amazon to not automatically upgrade your account after the 90 day trial.

Please let me know if you have any questions.

Keep on learning!

Jacob

To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:

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Dog Fostering – Low Cost Alternative to Pet Ownership

In a previous post (My Money Blog – Cost of Pet Products), I discussed how the cost of pet products and pet ownership can be very substantial, sometimes even totaling approximately $10,000 over the lifetime of the animal). I also briefly stated that I had just signed up to provide foster care to dogs through a local dog rescue in my hometown.

In today’s post, I want to provide details of the financial benefits of dog fostering based on my experiences and explain why it can be a great lower cost alternative to dog ownership. Why is this you might be asking yourself? Easy! Because the dog rescue you work with covers the cost of almost everything incurred for the animal. Your job as the foster is simply to care for and love him/her.

Cost of Animal Health / Vet Visits
When I received my first foster dog, I was instructed by our rescue president to take the dog’s first droppings to the local vet to be analyzed for stomach parasites. I simply collected the sample and dropped it off. I did not have to pay for anything. After I got the results back of the dog being positive for several parasites, the dog rescue I work with also paid for the Panacur medicine treatment as well.

Amount saved – $25 for the fecal matter analysis, $50 for the Panacur medications = $75 total

Cost of Dog Food
As mentioned in my previous post about pets, the cost of dog food can vary greatly. However, since pet stores donate so much food to the rescue, I was given high quality food for free!

Amount saved – $25 for the bag of food = $25 total

Cost of Dog Toys, Leashes/Harnesses and Chew Bones
Essentially, the sky can be the limit on how much pet accessories cost. However, the dog rescue I work with has many of these also donated to their cause, which I was able to receive for free.

Amount saved – $20 toys, $20 leashes/harnesses, $10 chew bones = $50 total


Cost of Dog Grooming
Many of the local groomers have deals worked out with the dog rescues in the area, and as such, perform grooming of many rescued dogs for free! Very nice!

Amount saved – $65 for a full grooming (wash included, Northeast pricing) = $65 total

Totaling all of these savings up, I have been able to save $215 total. Now, in my situation, $215 is not very much for all of the companionship that a dog provides. However, because my apartment doesn’t have a yard for the dog to play around in, it is better for me to just provide foster care vs. owning a dog.

However, if you are in a situation where you really want to help out with pets, but cannot afford one, please consider fostering!!

The bottom line is that each dog/cat/whatever fostered is a life saved!

Keep on learning!

Jacob

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