In frugal land, the thief saves you money.

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The Android bug game

I’ve taken a hiatus of sorts from writing this blog.  And I thought I would have some profound, captivating topic to start back with, if ever.  But this is the way the cookie crumbled.

Well, I let my phone get stolen in the most hipster way possible: I forgot and left it on my bike outside the library while I was checking out books.  Womp womp…

But all is well because I get to save some money.  See, I had been floating along luxuriously with an elaborate but expensive AT&T plan at $60/month (an outrageous 5 GB of data per month, free texting till the cows come home, etc.).  My contract ended in March, and my intention had always been to switch to Republic Wireless as soon as my AT&T contract ended.  But here I was at the end of July, still luxuriating.

Maybe on some level I was following my natural instinct to put off making a large purchase if possible.  But this is one of those rare cases in which a large purchase would actually allow me to save money.

Here’s how I figure: the traditional major carrier model was to sell you a subsidized smart phone for about $100 as long as you agree to a two-year contract with a monthly service fee of about $60.  Presumably some of the comped cost of the phone is actually hidden in the $60/month fee.  And then if you lose/break your phone within the two years, you’d be on the hook to buy a full price phone (about $600 for a Samsung Galaxy S6) without “upgrade.”  (Put this way, I am starting to see why someone would steal a relatively functional and well cared-for Samsung Galaxy S3.  I assume thieves do not take care of their things.)

On the flip side, you could try to hold out with your phone beyond the minimum 24 months to forestall the next $100 phone purchase.  But the spread out-cost of $4.16/month if you keep your phone for 2 years or $2.77/month if you keep it for, say, 3 years is really negligible compared to the $60/month ongoing plan fee.  No matter what, you are paying at least $60/month over time, and potentially much more if you lose a phone and need to buy another.

Republic Wireless has two modest phone models which use VoIP when within WiFi range.  You must buy one up front, at full price: $130, or $300, respectively.  Then they have a variety of plans from $0/month (WiFi use only) to $40/month (unlimited everything I think).  They assure you that with the VoIP capability and automatic WiFi switching, you will only ever need the $10/month plan max.  But I signed up for $25/month just in case.

Republic’s monthly fees are so low that it does not matter even if you spring for the $300 phone.  When you average out the $300 phone and a $25/month plan over two years, it comes to about $37/month vs. AT&T’s approximately $64/month from above.  If you can keep a Republic phone running for 10 months, your Republic plan will pay off (relative to my $60/month AT&T plan anyway).  Imagine that: maintaining an AT&T plan costs the equivalent of buying a brand new, full price Motorola smart phone every 10 months at Republic.  Now that would be indulgence!

So this turn of events helped me start saving money earlier.  I might have gone on with the old phone another 6 months maybe, but that would have actually cost me $162 (difference in averaged monthly costs * 6 months) for the luxury of not getting cheaper sooner.

Thanks clown!  I will go enjoy my cheaper, state of the art phone now.  You can have my cracked, sweat-soaked AT&T shackle.

UPDATE: I checked out the phones on AT&T’s site out of curiosity, and it looks like now they force customers to finance the entire cost of a new phone, over a required 30-month contract.  Did my eyes deceive me?  That arrangement is totally bogus.

By comparison, my new Republic Moto X has solved a number of my life problems since I took it out of the box 16 hours ago.  And I was asleep for 6 of them.

Update to earlier today: no more REDcard scam as of TODAY

I’m going to file this under “Wow, insanely crazy timing!”

One of my friends just pointed out that REDcard is no longer allowing credit card loading, as of today.  This was announced unofficially throughout the internet basically yesterday.

As my clever friend pointed out, the credit card companies are probably losing money giving away free points/miles/cash back *in addition to* losing out on being able to charge high interest rates for cash advances (my original observation).  This is probably a money loss situation because, I am assuming, credit card companies calibrate their points systems based on thoroughly researched and statistical data about how much money people tend to spend with credit cards, and what kind of balances they carry.  Just like life insurance companies do with actuarial science.  So if people are coming in and flooding the market with spending (which is promptly paid down, as it would only make sense for people do when using this scam), then the points are, as my friend put it, devalued.  And the bank is giving away free asset in exchange for no interest collected.  Good point Jorge!!!

So I don’t mind if it makes my last post look dumb.  This scam is getting shut down like I figured it would.  Just too soon for me to get in on it!

The REDcard strategy: clever deal or money laundering?

“Wouldn’t it be nice,” you might think to yourself, “if I could pay my rent/mortgage with my credit card and get points for that, since it is my biggest bill.”  Well a reputable resource showed me a hipster glasses-adorned article about how to “Pay your mortgage with a credit card and meet minimum spends.

This REDcard …strategy… turns a credit card charge into cash.  In the article, Mr. Hipster Specs precipitously flies through a set of tedious and brain-twisting steps to accomplish this alchemy: you get a pre-paid Target card, load it up with funds from your credit card, yada yada yada, then use the Target card like cash.  Even at the ATM!

I gathered from the article that there are two main motivations for doing this:

A) To get lots of credit card points by paying for large purchases generally restricted from credit cards, if you’re into that.  Basic examples are mortgage, utilities, etc.  Or, if you have a big purchase, such as a bike or car.  You can load up a REDcard almost infinitely, with a monthly limit of $5,000.  So theoretically if you wanted to buy a $20,000 car, you could plan 4 months in advance, load up a REDcard $5K each month, and buy the car with the REDcard (which is higher than most CC limits and therefore off-limits generally).  And this way you get to collect $20,000 worth of credit card points for a purchase you would not normally charge, which would otherwise take well over a year just using a credit card for normal spending.

B) When you need to spend a lot on a credit card quickly, e.g., to meet a minimum expenditure (or “minimum spend”) requirement to get a sign-on bonus.  Some credit cards do have pretty unreasonable thresholds for the sign-on bonus (e.g., spend $2K in 3 months). This method solves the problem of “what would I spend $2K on in 3 months??” without you having to take a vacation just to get airline points.  By moving money through the credit card to a pre-paid card, you can collect points up front and spend at your convenience.

Here are my thoughts on this:

  1. This is the first legit credit card points scam I have heard of, since it does not require you to ruin your credit applying for 6 credit cards every year.  It seems feasible.  However…
  2. I don’t see how this is any different than a cash advance, which has the highest interest rates going in the whole SEC-regulated world of lending.  So I’m not sure why this is allowed… I am guessing the SEC or another regulatory agency will stop it before too long.
  3. What happens if this REDcard gets stolen?  I doubt it is FDIC-insured.  Given that it requires some amount of personal information for setup and can be used as a debit card, I assume it can also be electronically hacked.  I guess you could diversify against the risk by distributing laundered money across several cards if you are planning to load up a big balance.  But this seems to go even further into the quicksand.
  4. Yeah, I just said ‘laundered.’  As in money laundering.  Isn’t that what this is?  It may not be illegal but it does not seem normal…  The credit card companies may not care, and who knows what is in it for Target, but what about your bank?  Would you get flagged for depositing a strangely uniform amount of money each month not through ACH?

So… do people do this?  I have heard of “airline points scamming” generally, but not this specific method.  When it comes to scamming the system and sticking it to the Man, I prefer safety in numbers.

Also, it seems too good to be true, other than the legwork of setting up and maintaining this card.  But the reward in points definitely justifies the trouble and risk if you do it right.  So I do not understand why all people are not doing this, unless this is one of those “why doesn’t everyone make their own hummus because it’s so much more delicious” things.  In which case the answer is that most other people find this more tedious than I do, or are not aware of the option.

But the question for me is really whether it is worth it to me.  Because of the inherent risk of losing the card or it getting stolen or hacked, I would be unlikely to pool up large funds over time (as in the buying a car example).  It might be worth it to use it as a mortgage card and just load it up with the monthly value of my mortgage payment on the last day of each month, then withdraw the next day.  This would reduce loss risk and minimize the racket to a single but significant monthly transaction.  And I’d get a bunch of Jetblue points on my AmEx card.

But……at the end of the day, I am a minimalist.  I have been mulling over this idea for over a week and it still has not happened.  So let’s face it, it probably won’t!  Would you do it?

First, Try Selling: Spring Edition

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Today I bring you a spring edition of First, Try Selling: the crappy bike.  It’s really bad.  The front tube is busted.  And it came from Walmart in the first place.

Or at least a Google search says it came from Walmart.  I bought this bike from someone through Craigslist about 5 years ago.  This was back when I didn’t know much about personal finance or bikes for that matter.  I just wanted to ride a bike and figured $20 was all I had to spare.

Since then I have learned that you just need to spend good money on a bike to get something out of the experience.  And you need to try to sell off or get rid of whatever you wasted money on before that.  You don’t need reminders of your pound-foolish days.

So up this bike went on Craigslist on Monday for $10, with an honest account of all its flaws.  And someone has already replied!

Now, unlike the couches, the relative cost of unloading this bike is not so bad.  If no one wants to buy this by Saturday, I would just need to throw it on the bike rack and leave it at the swap shed at the dump.  I think they would let me leave it there.  So that would be free, with the only cost of my trouble for 20 minutes on a weekend.

Or, I could probably leave this bike on the sidewalk near my house and it surely would be gone within the day.  (Funny side story: I live in a pretty cute little town, but noticed one day that neighbors needed to stake a sign in front of their house that the Persian rug they were airing out on their driveway was not free for the taking… hmm.)  I would not want to confuse people into thinking that they can cruise by my place for free stuff all the time.  So I would be inclined to just go with the dump option.

But between the two options of a) schlepping to the dump or b) someone paying me $10 to take this item away, I would obviously choose b.  And then go drink some “free” beers with bike money!

Lending Club Update: Making $50 a month while doing nothing

Thought I would share my Lending Club experience so far, though several other financial/frugality blogs have already covered this topic as well.  After one month (January) of getting my $5,000 invested and allocated, and another month (February) of letting the borrowers’ accounts set up with the one month of grace period, March was the month with the first full return.

Brass Tacks

I found that in March I had received about $52 in interest ($126 principal) across the 200 notes each worth $25.  And, because I have auto-investing turned on, LC automatically bought two more $25 notes (leaving $2 left out of the $52) which will in turn start generating returns.

So far the projected annualized return is 13.5%, but the adjusted return is 11.6% because one note has slipped to grace period.  Even after being taxed at my income tax bracket, this yields 7-9% return.  Not bad for sitting around doing nothing!

Mitigating Risk

1) I am glad I followed the standard advice to purchase >200 notes for diversification.  I have not had any bizarre charge-offs (some theories say that charge-offs are more likely to happen immediately).  But if one or two notes charged off, I would not sweat it because there are so many others.

2) Unlike some investors out there, I did not bother filtering excessively to try to maximize.  I actually believe in the safety of diversification over many notes.  I also think that if investors profile and exclude a segment of borrowers, LC will get an unnecessarily negative reputation for strict lending criteria when it was the investors, not the criteria, that prohibited lending.  LC already requires a minimum credit score of 660 and turns away 2/3 of all applications.

3) However I did turn off 60-month loans (LC issues only 36- and 60-month).  I thought about it, and decided that Suze Orman is probably right that a 5-year loan is a loan you cannot really afford.  Lots can happen in 5 years.  A lot of these loans are for debt consolidation and credit card payoff, so the temptation to backslide over 5 years seems too great.  A person who plans to pay off in 3 years is serious.

4) I will probably make another lump sum investment in 18 months to create a ladder system.  That way, there will be a batch of notes only halfway through their schedule when the majority of the original notes expire in 36 months.  I wouldn’t want a droopy, no-returns 2-month dry spell like I saw at the beginning, would I?

Other thoughts…

It really blew me away that my relatively little investment of $5K just made me $52 last month.  It is my first investment ever; having read up about P2P lending, I had no difficulty letting go of the money.  And suddenly I am $52 wealthier.  I have never had any income at this rate that I did not have to earn with my labor.  Investing is cool!

And of course, I like taking banks down a notch, and helping other people get up a notch.  I had student loans for years and would have considered this option had I known about it.

I would definitely recommend LC as relatively stable investment with solid returns, as long as you understand the exotic cocktail of risks, and have a plan about how to mitigate risks and maximize profit.

And if you want to see, oh, more than one month of data, check out Mr. Money Mustache’s review of his 2 years of LC investment data.  Unlike me, he is actually legit!

 

Obviously I did not buy a Camaro.

I know all you peeps are far too clever to have fallen for that April Fools’ prank.  Anyone who knows me knows I’m painfully truthful and cannot even bring myself to lie much.

So I will tell you this!

  1. Camaro *is* my dream car.  I will probably buy one some day.  After I make my first million.  Come on, it’s not like it’s a Porsche or Tesla.
  2. I *would* only buy manual cars, as is mine now.  Because stick shift is still a sign of coolness in my book.
  3. I *do* think the new Camaro headlight design is weak.  It’s like Chevy is trying to make the Malibu cool and get the Camaro stuffed into its own locker at school.  Priorities all mixed up.
  4. I would *never* call my Subie ‘old’ and was pained to even joke about that.  She’s a sinuous polo pony of a car, right in the prime of her age.  And always will be.

Happy Thursday!  Or ‘fake Friday’ for those of us on the 9/80 work schedule!

What do you do once you have paid your debt and saved up?

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I’ll tell you what I did… I bought a Camaro!!!

After three long years of paying off $83,000 of student and car loans, and another year of saving approximately a year’s worth of living costs, I decided to buy the car of my dreams.

http://boston.craigslist.org/gbs/cto/4950259633.html

Of course it is manual (would I drive anything else?).  And it is pre-2014, because let’s face it: the new 2014 Camaro headlights look like a cheap throwback to the 1993 Camaro style.

And my Subaru turned 5 this year.  That’s practically old age for a car.  So with bittersweet feelings I traded her in while she still has good trade-in value.  Surprisingly, I got $6,000 for her, which offset the price of the Camaro down to $21K.  That’s actually a pretty good deal for a Camaro!

I know this nevertheless sounds like unbridled luxuriousness.  But I have been saving money for a year now, sitting on it, because there is no other good place to put it.  Stock market is too high, real estate market is too tight.  So for once, I am turning my car fantasy into a reality.  At least I will be driving around having a blast until the stock market takes a dump and I am ready to put money in there.

So what should I name the Camaro?

Why mall massages are the best

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Sometimes you need a massage.  I think of this as medical, like the chiropractor or PT for plantar fasciitis.  But where to go – a spa?  A therapeutic place where the people have medical acronyms after their name?  Or… the mall?!

I have noticed the phenomenon of asian-run massage parlors cropping up starkly in the middle of otherwise culturally-diluted malls.  Have you seen these?  The one at my mall is called Asian Island.

I used to pass right by these places, wondering how such an establishment could create the level of privacy and trust necessary to enjoy a rubdown while essentially nude.  But that was before my hospital ordeal, during which multiple strange men went rifling around under my already too-loose gown.  Now I have no sense of privacy.

So dispelled of that notion, I was free to enjoy the following reasons that a mall massage is better than a fancy spa massage.  How shall I count the ways?

1) It is cheaper of course!  Not only do the 30- and 60-minute rates beat all the spas and salons around, but Asian Island also provides flexibility at $1/minute down to 20 minutes.  The full hour is $50.  An hour-long massage at a spa is usually at least $75.

2) No weird Enya music or strange scents.  Just strains of vaguely Asian-sounding music streaming from the front lobby.  At least it doesn’t make you feel like you are supposed to be having some sort of enlightening experience.

3) The Chinese invented acupressure and acupuncture.  While I am prone to over-think choices like “deep tissue massage” or “sports massage,” I can pretty easily get behind whatever a Chinese bodywork practitioner wants to do.  Chinese medicine is ancient; they had already figured out natural cures for everything while the rest of the world got decimated by a series of medieval plagues.  Who am I to say otherwise?

4) The charm of bits of Mandarin spoken right in front of you.  While my lady laughed with a lady on the other side of the curtain and chirped little orders to the assistant in the hallway, I was taken back to a time and place where I spoke pretty decent Chinese on my own for a summer in southern China.  That language for me is like a sixth sense with a musical tonality.  But for others, this unmitigated language barrier probably increases the desirable wall of anonymity.  I could see it both ways.

5) Free hot stone treatment!  I have always boycotted hot stone massages on principle.  Hot stones usually add about $30 to a massage price.  I take exception to this because stones are basically free.  You can walk outside and find one.  And heating a stone can probably be done by throwing it in the oven.  So the hot stone fee is a huge scam.  But lo and behold, they brought out hot stones in the middle of my pretty cheap mall massage just because.

So if you find yourself needing a massage, I recommend checking the mall.  There’s, surprisingly, nothing like a scrappy, impersonal experience filled with foreign sounds and thin curtains when others would have you take out a small loan for unnecessary luxuries such as “privacy.”  As long as it doesn’t move!

Two more reasons it’s good to have an emergency fund

In paying off my $2,500 portion of the $48K hospital visit, I have learned that it is very, very useful to have an emergency fund.  And not just so you can pay the bills!

Reason #1: I was able to contribute post-tax dollars to my HSA, which will give me tax money back.

So… my employer switched our health insurance from a conventional plan to a Health Savings Account.  Basically stuff is covered similarly as before, but the HSA has a much higher deductible ($1500 vs. $300) and a much lower out-of-pocket max ($2500 vs. $5000).  To offset the high deductible, participants can contribute up to $3,300 to the HSA (in addition to the $500 my employer throws in there) to pay this high deductible with pre-tax dollars.

Not having foreseen this hospital calamity, I had not elected to contribute pre-tax dollars in advance.  But once the bills arrived, I researched and discovered that in fact you can contribute post-tax dollars to the HSA, submit a receipt to the IRS with your taxes the following year, and receive tax back with the tax returns as if the money had been contributed pre-tax.  Pretty freakin’ sweet.  My initial $2,500 bill came to $3,100 with follow-up appointments, so I put $3,100 in the HSA to “launder” my money through this system before paying.  Because this reduces my 2015 taxable income by $3,100, I will get about $868 extra at tax time next year.

Linking your bank account to the HSA website is not a stroll in the park, and each transaction takes about 5 days to clear.  So if I did not already have the money saved and was relying on excess from each paycheck, I would not have had time to do this and meet the net-30 day billing period on time.

Bottom line: I had all the money available, so I was able to funnel the money through the tax-sheltered HSA system before paying.  I will get/save $868 that I would not have been able to preserve if I did not know about or have time to make this contribution prior to paying the bills.

Reason #2: The hospital which issued the majority of my bills has a “prompt pay discount” which I was able to get in on.

And what a discount: 20%!  I could hardly believe it.

I think anybody who has ever had medical bills would know that you don’t really have to pay them on time.  It’s not like a credit card bill; they generally do not levy a late fee.  I would imagine a hospital would have a hard time getting a late fee out of someone who has not paid because they cannot afford it anyway.  And it would have to be pretty severely overdue to even get sent to collections or reported to a credit agency.  So even I have come to think of medical bills as a pesky thing to get around to.  The due date of a medical bill does not set fear into my heart and chills onto my neck the way a credit card bill does.

Then I noticed a strange little anomaly between the price on one of the bills and the price listed on the website when I went to pay.  It was lower.  So I called and the hospital billing guy said “oh yeah, that’s our prompt-pay discount, but it goes away after 30 days.”  So if you pay on time, you will get a discount relative to what was billed against your deductible, and if you pay late, you will owe exactly what got billed against your deductible.  So I proceeded to do exactly what those clever marketing/accounting executives wanted, and said to myself, “Holy shit I need to pay these bills asap!!!”

Bottom line: I had the money available, and a novel billing system got my attention.  Because I chomped on the bait to pay quickly rather than follow my instinct to get around to it later, I saved a pretty incredible $500 across the 4 different bills.  Seems like cash flow is more important to the hospital than profit margin.

Total money saved/retained: $1,368

Overall I would say that having an emergency fund also gives you the right mindset for saving more money.  I knew I could pay the bills, and had a bit of time and latitude to investigate options and get all the facts before forking over my savings.  I have been on the alternative situation as well, sweating getting the bills paid at all.  And I have to say that in that mindset, you are not cool-headed enough to get clever.  Make that 3 good reasons to have an Emergency Fund.

Ask and you may receive … “equal pay”

This topic has been in the news a lot lately.  Like other headlines, this topic strikes me as alarmingly retro.  Before you get all worked up, let me share my viewpoint:

I conducted my first salary negotiation at age 19.  I got offers for a swim instructor job at a nonprofit org at $9/hr, and at a private school at $10/hr.  I had to offset the $300 Red Cross certification course I had just taken, and both offers sounded low to me.  So I dipped my little toe into the waters of negotiation and told the private school the whopping lie that the nonprofit had offered me $11/hr.  They matched this value and I worked there, paying off the cost of the cert the first week of the summer.  It doesn’t sound like much, but it was an instant 10% raise.

Hey, if it worked for a pimply teenaged Philosophy major, everyone should give it a try!

Once I entered the real “working world” however, I received the guidance that I should not ask about salary and just do whatever convincing talking it would take to get the job.  Because I was a worthless, skill-lacking [millenial] (this term was not invented but that was the truth).

But as I got into my temp-to-perm job, the “temp” period ran out and I was tired of having no health insurance.  My boss assured me that she wanted to grant me full employment, but the HR paperwork was slow-rolling.  So I researched personal health insurance and offered my boss the low, low price of increasing my wage by the required amount per month so I could buy insurance, and I would stop bugging her about the paperwork.  Request granted, surprisingly easily.  That was about a 20% raise, plus peace of mind being insured.

Then another 3 months rolled by without full employment secured, so I turned the screws a little tighter.  I interviewed at the top competitor and disclosed the salary offered there.  Before the competitor’s determination was even made, my boss felt compelled to grant me full employment at a slightly better salary.  Good thing too, because I do not think I would have gotten the other job!  Another 5% raise.

Fast-forward two years.  I just just gotten a Masters’ degree, and once again had a large educational bill I needed to offset with a well-paying job (I would have been hopelessly underwater at my last job much longer).  I received an offer from my current employer and had the nerve to tell the HR guy on the phone that I was anticipating [about 15% more].  He said “no negotiations on this offer.”  I said “no problem, when can I start??”

Hey, you win some you lose some.  But through raises reflecting work superior to my peers both male and female, I was making the sum I had requested within 6 months.  So ultimately, a win.  And it was through my doing, not luck or another woman.  My manager was a man.

So I just puzzle over this question.  Maybe pay is not equal because women generally do not ask for more and men generally do.  Maybe some workplaces are anti-woman.  Maybe… <gasp> some men are doing better work than some women in some places, or are better qualified in some cases.

I do not think it is possible to really know whether someone else, man or woman, is really doing better work than me and deserves better money.  But I do know that you do not get what you do not ask for, and what you do not work for.  I am all about pushing limits – those of others, reality, and myself.  And it has worked for me in different areas of the country, in different industries, and in organizations of different gender makeup.  And so I hope this approach is working for others as well!