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Saving You Money through Simple Methods

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How I earned 6% Cashback and 20 points per dollar on Spending this year

 

“Daddy, can we fly on a plane someday?” A simple question set forth by my daughter January of this year. As a father and husband I wanted nothing more than to book a flight to some beautiful destination at that moment. Unfortunately, in my capacity as the personal financial planner I am much less flexible. Absent a wealthy philanthropist deciding to sponsor our family sometimes we will not be afforded certain luxuries.

 

 

A few days later my brothers returned from a ski trip and my mother suggested that we take a big family ski vacation during Christmas Break. In the same way that my daughter’s idea to fly on a plane sounded fun, this also sounded great. However, my mind slipped back into the “how can I make this happen” mode. Obviously to even consider this kind of endeavor we would need to tighten our purse strings and save as much money as possible. We would need to purchase at least 3 plane tickets, which would cost at least $300 each. At this point I stumbled upon credit card offers that may help my family out.

 

 

I have been a long time user of a couple different cashback reward cards and feel that these are fantastic. The first card I signed up for was an American Express Blue Cash Preferred Card that would earn me $200 sign up bonus and 6% cashback on any grocery purchases. At this point I figured that I would buy gift cards from Kroger and use the extra $200 bonus to pay for these. This card also has a 0% intro rate for 12 months so it was nice. This card is very nice, but is only part of my overall spending strategy. It seemed that the more I looked into credit card offers the more benefits I found.

 

 

After that card I found the Chase Sapphire Preferred Card which has a 40,000 point signing bonus which can be used as a statement credit and be worth $400! I signed up for this card as well, met the spending and got the bonus points.

 

 

My biggest score of the year I will be writing in more detail about in a few days, but I was able to sign up for 2 Southwest credit cards. This netted me 106,000 points which are good toward about $1,908 worth of flights, but it actually gets better. When you earn 110,000 points in one year you earn a “Companion Pass”, this allows me the opportunity to bring a companion (my wife) along with me for free on any trip I book. Even if that flight is booked and paid with points. This effectively doubles the value of my points.

 

 

So far this year, as of 7/30/2013, my wife and I have racked up many miles, points and cashback. These have been earned through cashback portals and credit cards. In cashback alone we earned more than $775 in cashback. Even after paying the $75 annual fee on my AMEX we have earned over $700 cashback this year on our AMEX, Discover, Gas Reward Card and TopCashBack. We earned nearly 6 cents back on every dollar spent. We used this money to purchase a computer, which I built.

 

 

Even more amazing is our return on points and miles! We have earned over 400,000 miles! Even if you value these at only 1 penny each this means we have $4,000 worth of travel in our future. However, 235,000 of these miles can be used toward Southwest, which means they are worth about 1.8 cents per mile (doubled to 3.6 cents per mile with Companion Pass)! If we used all of these for flying Southwest we could get as much as $8,460 worth of travel on those 235,000 miles. Most of these points and miles came from bonuses and they all came from spending money normally. We earned nearly 20 points per dollar spent. That is like getting a 20% (or more) discount on everything we bought, even after finding the lowest prices.

 

 

In order to maximize our points per dollar spent we focus our credit card spending on those cards that provide the biggest payoff. I have a 6% Grocery Card, 5% Gas Card, 2 points per dollar on restaurant and travel. Even with these bigger returns my focus is on meeting spending limits on individual cards that offer big bonuses. If I need to spend $5,000 in 3 months to earn 60,000 points this is far more lucrative than the 5% or 6%. So if I am at the grocery and have not hit my $5,000 amount I will use the card with a spending goal rather than a 6% grocery card.

 

 

Using credit cards has been very lucrative for us this year and we look forward to taking many enjoyable trips at a deep discount. The use of credit cards inappropriately can be very dangerous. If you do not have the money to spend in cash, then using a credit card for spending is out of the question as well. We pay off our bills every month and have not paid any credit card fees over this amount of time. Also be sure to not bite off more than you can chew. For instance if you spend $1,000 a month normally do not sign up for cards that will require you to spend $4,000 each month in order to get the bonus.

 

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Identifying and Stopping Your Disguised Luxury Category

When you read the word “Luxury” what kinds of things immediately come to mind? Yachts, diamonds, private jets, private islands and other extravagances likely take shape in your mind’s eye.  All of these items are fine examples of luxury in celebrity terms.  The term luxury to the common man does not need to be quite as lavish.  The term luxury as I am addressing it concerns an item or service that is not a necessity.  Food is a necessity, but dining out is a luxury.  Clothing is a necessity, but $100 jeans are luxuries.

Looking over budgets of other people and examining my own spending habits I have picked up on a strange trend.  It seems like almost every person has at least one category where they are unfazed by their spending.  We all share a common category, in gasoline, that relates to my observation.  We can buy fuel efficient vehicles and change our driving habits, but ultimately when it’s time to fill up our gas tanks we pay whatever price is asked of us.  This is because gas is viewed primarily as a necessity.  In my family I have found this category is food.   I can go back and forth in an internal dilemma with myself before making a $15 purchase, but for some reason spending $15 on food never really phases me.  My wife has the same ability with food, but also has no trouble buying new clothes even when she would not spend otherwise.  Other people may smoke a pack of cigarettes every day, even though this is a $1,500 per year luxury they don’t even flinch.

The main point in finding these categories that you spend easily is to allow yourself to prevent unnecessary expenditures.  This is the category that needs more vigilance to keep expenses at bay.  Also, you can use these categories to buy other great things.  For instance, at one point I had a phone that would shut down, not get service much of the time and just be generally inefficient.  I wanted a new phone that was $250, but found the expense to be excessive.  Then I looked at my spending and realized that I could cut my food spending by $10 a day by eating at home more often.  After one month that would save me $300 compared to the previous month’s spending.  Even though each meal only lasted for a few minutes I had no problem spending that money, but a phone that I use everyday needed to be justified.

I try to evaluate what is important to me on a regular basis and can create short term goals for myself.  If I can cut these menial luxuries then I will have money to spend on the luxuries I really enjoy.  If I could save $10 on food or cigarettes I would have an extra $3,650 every year that I could put toward new phones, vacations or other aspects of life that are more fulfilling than spending money to fund bad habits.

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Never Pay Full Price When Better Deals Exist

How often have you seen a great deal offered, but you are ineligible because it’s for new customers only?  Many companies offer special deals to new customers while existing customers are left high and dry.  Obviously companies have an incentive to offer new customers better deals to get them in the door.  You are a paying customer already and they have already won your business.  If they can make hundreds or thousands of dollars on your business what could possibly make them consider cutting their income in half?  As a customer your biggest asset in a negotiation is your loyalty and ability to go elsewhere.  You should evaluate the money you spend and value each service based on its individual value to you.

Anyone who has read this blog before knows that my philosophy revolves around maximizing value.  I believe you do this by buying quality products and services at prices which are in line with your individual valuation.  This is an even better proposition when you can attain these things at below their value. Suze Orman will chastise her callers for making small expenses that they “can’t afford”.  I prefer to think about how this item fits into your lifestyle.  If it is something you will use often it is a better investment than something you use rarely.  The personal aspect of the valuation is important because no matter how inexpensive an item is it’s not worth it to you if you do not have a use for it.  If you do not own a TV, computer or smartphone then a subscription to Netflix would be a terrible investment, even thought I find $8 a month to be a great value. Other times services are nice to have, but only when the price is right.  A service that fits this criteria to me is Sirius XM satellite radio.  I am a subscriber, but would never pay full price because it’s not worth much more that $10 a month to me.

So how can I use the fact that I enjoy the Sirius XM service, but do not find value at full price?  First off, I know that there is no way that I would pay more than $20 per month for Sirius XM.  I purchased a radio last Christmas for $30 (currently $70 at Best Buy).  In January I called to connect the radio and told them that I had gotten the radio for Christmas (didn’t mention I had purchased it for myself).  I told them that I had seen good sign up deals online, but did not have any code.  I have found that they are really good at offering a deal to a new subscriber.  They signed me up for 6 months and told me that on the July 24th my contract would automatically renew at the going rate.  After activating my radio I got off the phone and put a reminder to “Call and Cancel Sirius XM” in my calendar for July 24th.  Today, my new bill posted for $127 for 6 months of XM Premier (the package including Howard Stern).  This works out to over $21 a month for satellite radio which is far beyond my personal value.

I picked up the phone intending to cancel my service because there is absolutely no way that I would even consider paying 21 bucks per month.  I gave the operator my account number and told him “I’d like to cancel my service please”.  He said, “OK sir, I can help you with this, but can I first ask you why you want to cancel?”  I told him the truth, that I enjoyed the service, especially Howard Stern, but the price was more than I would be willing to pay so I would like to cancel.  I was sure to mention that the price was an issue and that I loved Howard Stern because I did not want to be offered a lower price on a lower plan.  He then looked at my account and said, “You’re paying $127 for 6 months which is $21 a month.  I am authorized to offer you two options:  I can change the term from 6 months to one year for the same price which reduces your price to under $11 a month or I can offer you 5 months for $30 which is $6 per month.”  I told him I would take the $30 for 5 months.  He let me know that on December 24th my account would be auto-renewed at regular price.  By accepting a 5 month contract I take the risk that when I call back in December that they will cancel me, but since I am willing to cancel then they can either make a few dollars from me or zero dollars, it’s their choice.

This is not a method that only works for XM.  I successfully called and got Time Warner to reduce my mother’s bill by $20 a month while throwing in an extra box and adding HBO and Cinemax.  Just be aware that the more competition that exists makes a better environment for the consumer.  Personally, I had to beg Time Warner to add me as a customer because the options in my area are very limited.  However, the customer service people you talk to will likely know nothing about your area.  When I called for my mom I just told them that I “would like to switch to AT&T Uverse, because their service is a better value”.  This was true that I would like to do that, but the reality is that AT&T Uverse are not available in our area.  He put me on hold for a few minutes and came back with multiple offers all were significantly cheaper and provided more services.

Just remember that it’s your money and you should not be ashamed to ask to spend less of it.  Also remember that the people on the phone are people and that they like to be treated politely.  I have found you get far more by playing to a person’s ego.  Tell them that they are doing a great job and that you appreciate someone so knowledgeable about their services.    Ask for what you want and if you are not treated fairly then go to a business that will value you as a customer.

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The Most Important Financial Tip (and Weight Loss) You Will Ever Read

 

 

The most important financial tip (and weight loss) you will ever read! This same advice can be generalized to other aspects of your life and help you there too!  This one tip can even help you manage money, lose weight, reduce stress and become a more informed person! This sounds like a late night infomercial claim made by a greasy guy (probably sporting a pony tail) in a cheap suit, but it’s actually the truth.  For my money this is a tip that I would be absolutely lost fiscally if I did not do this.  The answer of course, as you have probably guessed, is winning the lottery.  Then when you win the lottery hire a dietician and personal trainer and you will look great!  Unfortunately there is no easy fix such as this that is 100% foolproof even having great sums of money (I’m looking at you M.C. Hammer and Mike Tyson) is absolutely useless if you do not follow my real financial tip.

Make that cheddar

 

Let’s imagine that we have some weight to lose.  You go to your doctor and say, “I’ve been trying to lose weight for a month and have not lost a pound”.  Assuming that this doctor does not go immediately to some weight loss drug or recommend lap band surgery what will she need to know?

She will ask, “What have you been doing to lose weight?”

You will obviously reply, “I have been eating really good and working out”.

At this point is where there is a problem because your data are flawed.  Many people who are unsuccessful at losing weight or reshaping their body do not know what “eating really good” is in the first place.  I remember for about 3 hours 10 years ago I had a six pack.  This was achieved through disciplined exercise and eating.  I remember at a work potluck I remained in my office.  One of my co-workers came into my office devouring a giant slice of cake, “Hey you need to get some food back there”.

I said, “No thanks, I brought a lunch.” As I ate my grilled chicken breast and broccoli secretly wanting to eat some cake and other baked goods.

She responded, “Come on, you don’t need to eat that, you’re not even fat”

This exchange was immediately reminiscent of the old Head and Shoulders commercial where the woman says, “You use Head & Shoulders?  But you don’t have any dandruff?!?!?!?” and the guy says, “Exactly”.  Knowing that his lack of dandruff was due to his diligence in choosing a shampoo that kept his scalp flakes at bay.  Equally important when I lost weight and had a six pack was making my goal and sticking to it.  I knew that eating healthy food and exercising were very important to implement my plan.  However, when I was starting I did not realize how unhealthy I was in the first place.

It is impossible for a doctor or accountant to develop a plan for you based on “I have been eating really good and working out”.  We need to have a detailed account of what we have been doing as it relates to the aspect of our life that we would like to change.  If you come to your doctor with a baseline of all the foods you have consumed and exercise you have done she can help you from there.  It is too easy to say that you have been eating really good, but leave out the Coke you drank or maybe you are eating “Fat Free” cookies thinking that these are healthy snacks.

Using Financial Software

Since May 2004, I have tracked every dollar I have earned and spent.  This is the most important financial tip I can share!  With more information available one can make better, informed, decisions.  If I am not tracking my spending and spend a few bucks on lottery tickets every few days that is no big deal.  Where did all the money in my wallet go?  If I am recording every dollar I will see that I am spending $500 a month on lottery tickets, then I know where I need to cut expenses.   This is a drastic example and I would hope that if you are spending six thousand dollars a year on lottery tickets that you are at least cognizant of this wasteful spending.  This record keeping is useful in multiple ways.  Obviously it allows me to track the money I have made and how that money has been spent.  In many ways it also acts as a personal diary.  I can look at a few consecutive transactions and recall specific events of a day from nearly 10 years ago.  Sure, I already have a fantastic memory, but if I allow myself a few pieces of information it allows me to be transported back to that day (YMMV).

Why I Started this Record Keeping

In May of 2004 I bought a new computer and had a free copy of Microsoft Money.  I found myself constantly opening my wallet and thinking, “Where did my money go?”, I usually did not have an easy answer.  Sometimes I could retrace my spending, but usually I just let it rest.  Once I had the program and more financial responsibilities I decided to give it a try.  Although I spent less money in 2004 it was actually more labor intensive to track.  Most of my expenses were paid with cash which is not exactly optimal for recording expenses.

Recording Cash (Tip)

One trick that I developed at that time was to create a category called “Cash” and whatever amount was in my wallet was reflected in this account.  The first few transactions I would laboriously track all of my spending down to the penny.   I quickly learned that this was not time efficient, nor was it a viable option for long term spending.  I decided to devise a rounding system that worked for me.  If I went out to the grocery and purchased a soda that was $1.06 and I handed them two dollar bills,  I would record it as $2 and then put the change in a jar.  If I paid with one dollar bill and six cents of change I would record it as $1.  I only treat dollar bills as money for the sake of recordkeeping in my wallet.  I found that this minimalizes the work involved in recording money spent.  It also acts as a form of savings by never spending change, even quarters, I was saving a fairly substantial amount.

Recommendations

I personally use Quicken, but mostly because it was very easy to import my data from Microsoft Money which I used because it was included with my computer.  Mint is a very good free internet based platform that even includes an app for your phone.  If I were just starting out with keeping my data I would start here.  The most important thing is that you keep it in whatever manner is most conducive to you actually doing it.  You can have the most advanced financial software developed by NASA, but if you never use it then it is useless.  If you would use a notebook or ledger on the other hand you should definitely use that instead.  Maybe I am too trusting, but I link all of my banking accounts into Quicken and Mint and download these transactions every few days.  I then go through and categorize spending appropriately.

Using Data

Once you have data on your spending you will be able to use this to implement changes nearly immediately.  Another funny phenomenon happens by virtue of your own awareness you may actually spend less.  You start to make the decisions up front about purchases you may regret.

This same thing happens even more when you are trying to keep track of what you are eating. You look at the number of calories per serving and rethink even eating it.   If you are losing weight write down what you eat and round up on the servings you are consuming.  These kinds of data are not only important for getting help from others, but greatly improve self reflection.  It’s easy to say I don’t spend much money on food, but when I break down spending it becomes a little more clear.

 

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Where Would I be without my TV and Computer and Cell Phone?

I often wonder where would I be without my TV, Computer and Cell Phone?  Although I am less dependent on my TV, the other two items I have become dependent upon.  Much of my usage can be done without dependence on the internet. The past few months have been disastrous for technological devices in my household.  The first casualty was our 5 year old 50 inch plasma television.  It had performed valiantly since 2008, but I guess it was overcome with grief from moving to a new home because it did not survive the move.  So we are down one television, but we just moved our bedroom television to the living room so not a big deal.  Our family trip to Florida was especially detrimental to our technological health as a cell phone and a laptop quit working.  My Samsung Galaxy S2 drowned in a 1 centimeter pool of drippings from my bathing suit.  The computer had been on its last legs for the past 6 months and the hard drive failed.  Luckily I had a separate boot drive and kept all of my data on another drive that remains unscathed at press time.

The point of all this is to make an obvious point on how dependent we have become on our technology.  All together I do not think that this is necessarily a bad thing either.  I use my computer to become more organized.  I keep track of finances, photos, videos and many personal documents on my computer.  My filing cabinet is utilized much less than would have been necessary years ago.  I would also like to underline the importance of having a backup drive for important things.  The main thing I have learned in the past few years of computer dependency is that even the best hard drives can (and will) fail.  The last hard drive failure that I had endured I actually lost my computer hard drive AND my external backup drive.  I had another copy of most of my important files and pictures, but I did lose a few things permanently.  I try to email documents to myself so they are stored by Google.  An ounce of prevention is worth a pound of cure as it relates to retrieving lost data.  Just email yourself an attachment with the subject to identify everything.  After I complete my taxes I will email myself a copy of the PDF with the subject “Federal Tax Return 2012” then if I need my tax returns I can easily search my email with no problem.

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Lower Grocery Budget without Extreme Couponing

 

junk-foodphoto

Food expenditures are probably the easiest places to make budget cuts for younger Americans, but the grocery budget is also the easiest to justify keeping.  After all, statistics show that most Americans eat food on a regular basis (citation needed).  In fact, many scientists would probably agree that food is nearly a necessity for human survival.  With all of these facts buried in your brain, spending money on food is viewed as a necessity and unconsciously we reason that “our bodies need the nourishment and our bodies are worth the expense”.  There is nothing wrong with this assertion on the surface we do need to feed our bodies quality foods in order to keep them working in optimal condition.  Unfortunately, drawing a line between expense, nutrition and necessity is based on flawed logic.

Let me be clear, I am not advocating only consuming a dense diet void of any taste, but I would reason that spending more on your groceries does not make you healthier or love yourself any more than the rest of us.  I have drilled down into my spending data for the past few years and have noticed some amazing trends.  The statistics show (in my household), that those times when our food bill is lower correlate with better eating habits.  So, I can back into the reasoning that spending less on food makes my family healthier (not even considering less stress that accompanies bettering your financial situation).

I know that there are those among you that will argue, “it’s cheaper to eat unhealthy foods than it is to eat healthy.”  In many ways this assertion is correct, but there are moves we can make that swing the scale in our favor.  We must learn to value our food differently.  Rather than looking at food’s value on a calorie per dollar basis, we need to evaluate foods on a nutrients per dollar basis.  It’s much easier to get full on high quality foods.  Try this experiment, eat as much chicken and broccoli as possible, then eat a similar meal from McDonald’s.  You will consume more nutrition, get full on far fewer calories and spend less.

Eat at Home

Without question eating at home saves money.  If you are spending more by eating at home, you’re doing it wrong.

 

Go to the Grocery for Big Trips After Dinner

The times when we eat most unhealthy and spend the most money happen to coincide with those times when we have less food available at home.  Too often my wife and I will look in the refrigerator or pantry and say, “You want to go get some dinner?”.  This plays out poorly and expensively in two ways.  First, if we go out to dinner we will spend between $10 and $30 for that meal.  Option 2 is that we go to the grocery with our hungry eyes.  We purchase those items that would not be part of a normal shopping list.  From a psychological perspective it’s much easier to handle these smaller expenditures.  You don’t feel like you’re spending much money if you just spend $25 on most of your grocery trips.  It’s easy to splurge when your total is relatively low, plus you’re hungry and you’re worth it.

Going to the grocery for one big trip each week is easier to handle because you are less likely to make off the wall purchases.  Going to the grocery on a full stomach keeps your brain in control of food purchases.

Make a List

Knowing the items that your family consumes is important for shopping successfully.  Some items that we always try to keep in our house are Bread, Chicken Breasts, Ground Turkey, Ground Beef, Frozen Vegetables, Cottage Cheese, Peanut Butter and the list goes on.  The point is that we have taken a mental inventory of those items we eat on a regular basis and we buy them when they are on sale.  These tips also can be applied to other non-food items as well.  We are not super rigid with our lists, but we know that keeping these key items on hand around our house give us many of the ingredients needed for dishes we eat regularly.

Shop the Sales or go to a Salvage Grocery Store

This likely goes without saying, but making purchases when items are on sale is pivotal to saving money.  Knowing the list of ingredients your family enjoys is key, but so is purchasing these items when they are at their lowest prices.  At our local grocery store the regular price on a loaf of “Nature’s Own” bread is about $3 per loaf, but at the local Salvage Grocery Store they sell the same exact bread for $1 per loaf.  It’s the same delivery guy and everything.  Very often, going to a salvage grocery store is a better deal than even regular couponing and sale shopping.  Most recently, I found a 10 pound  “Black Forest Ham” that is normally found behind the deli counter.  At the local deli they charge more than $5 per pound on this item, but I bought this for $2 a pound.  Always keep stocked up, it might cost more up front, but you spend much less over time.

Buy a Freezer

Frigidaire Freezer

Around the holiday season 2012 my wife and I really started to embrace the stocking up on sales mentality.  We found turkeys were deeply discounted for Thanksgiving.  We ended up buying 6 of them in total and each one was a great deal.  I think the two cheapest were less than 20 cents per pound.  We also found glazed hams for at GFS for $1.30 per pound and ground turkey for $1.45 per pound.  We bought 100 pounds of the ground turkey and 5 hams.  We spent a ton of money, but we used my parent’s spare freezer to store these items, but it was running out of room.  It was then that my wife and I decided that we needed our own freezer.  We ended up purchasing a stainless steel upright freezer that was on sale at Lowe’s.  We ended up spending about $600 for the freezer, but by having the freezer we were able to capitalize on sale prices.  One of our first purchases after buying the freezer was buying boneless skinless chicken breasts by the case at Sam’s Club.  Normal price for chicken breasts seem to hover around $4 per pound or more.  We ended up buying 100 pounds for $1.77 per pound.  Our freezer has already saved us more than it cost in the ability to always eat sale priced food.

Credit Card Cashback

Of course anyone who has read the blog knows that I advocate getting money back by using credit cards for purchases you are making anyway.  So while you’re buying food on sale you might as well get a bonus discount after all your sale prices, coupons and smart shopping are considered.  With the exception of Sam’s Club, I can get cashback for grocery purchases.  One card give 5% at grocery stores, another gives 6% cashback at grocery stores which can really save quite a bit of money over the course of a year.  If I spend $6,000 a year at grocery stores then I will get $360 cashback on my American Express card which is pretty great for expenses I would incur under any scenario.

Start a Garden

Vegetables can be quite expensive when purchased at the grocery store.  My dear wifey bought bell peppers last week at Kroger for 50 cents each because she needed them for a recipe she had been eying.  We have grown accustomed to having a garden, but with the move and home renovation we did not get one planted soon enough.  Today we went to the local farmer’s market and actually purchased pepper plants for 50 cents each.  Even if each plant only produces one pepper we will be ahead.  We planted a late summer garden today and all of the seeds were a bit over $10.  Hopefully this small investment and minimal sweat equity will end up paying for itself many times over as we enjoy our fresh organic vegetables this fall for minimal cost.

 

 

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Selling a Home and Protecting Equity

When my wife and I decided to sell our home earlier this year it was not a long, drawn out process (Selling a home by owner).  We had a rare opportunity to avoid the trap of buying and selling a home at the same time.  My grandparent’s 100 year old home had been rented for the past 10 years, but when the tenant moved out in December it sat vacant.  A 100 year old house, without proper maintenance and a little TLC will not make it too long.  We decided we could move into this house, show it some love and free ourselves from the chains of a mortgage so we could make the right decision on our next home purchase.  Although I have never undergone the buying and selling process simultaneously, I can imagine it is harrowing.  Therefore if you have the opportunity to sell, move into another place and then deliberate your next move I would absolutely recommend doing such.

Now that we had lined up a place to stay upon selling our home we were ready to do the dirty work.  We entertained the notion of hiring a realtor, but the economics of it simply didn’t work out for me.  Over the course of 5 years we had built up about $5,000 in equity.  If we sold the house for $100,000 (less than we gave) after the 6% commission we would owe the realtor $6,000 then after paying our portion of taxes and closing costs we would need to bring $1,500 to the closing.  Even if it meant spending a bit of money upfront it was worth it to me.  The way we looked at it was “we’re paying ourselves 6% to sell our house”. Given the stakes involved it seems a little bit strange how few people sell a house on their own.  I know people that drive 5 miles to save a dime on a gallon of gasoline, but they list their house with a realtor, immediately forgoing 6% of their most valuable asset.    We had never sold a house before, but how hard could it be?

 

Staging the House

The first thing we did was repaint the vibrant colored rooms a neutral tan.  This is not exactly a trade secret, but it is astonishing to see the number of sellers that neglect this important detail.  We then began to move out any unnecessary clutter in the house.  We had the option to go ahead and move it to our new home, which was convenient.  Even if this is not an option for you then rent a storage unit.  We moved quite a bit of furniture including our loveseat (leaving only a couch, but making the room look much bigger).  We moved out the computer desk, printer and other items that looked out of place.

Living Room

After minimizing the clutter we moved around our furniture for pictures.  The home should look picturesque, not lived-in.  If moving furniture from your house permanently is too much of a burden at least move the excess out of the room for pictures.  If you have wall to wall furniture in a room it will look even more cluttered in pictures.  After arranging the room the way you like and cleaning it thoroughly, take your photos.  DO NOT use an old Nokia camera phone or a polaroid.  We used our Canon t2i digital SLR, but there are plenty of point and shoots that offer quality photos.  Memory is cheap, so take hundreds of photos from every angle the photos are what will sell your house.  Hopefully you have taken photos over the course of living in the house and stored them somewhere you can find them.  For instance, when we were starting to list the house there were only dreary days and the grass had not greened up.  I had photos of the exterior of the house from the previous year after all the flowers had bloomed and the grass had pretty stripes.

Selling The House

Although I would contend that pictures sell the house, they are absolutely useless if nobody sees them.  So now is the easy part, we will just list them online and wait for the calls.  Unfortunately this is where we hit a bump in the road as “For Sale By Owners”.  With the exception of Zillow, the majority of the big home sites did not allow FSBOs to list their own homes.  We put our home up on craigslist, Zillow and got people to share it on Facebook (don’t laugh).  I even made a website that included all of our pictures, descriptions, maps to the house and everything.

After a few days of these marketing tactics my dear wifey was ready to give up her career as a realtor.  She recommended that we hire a realtor to sell the home for us.  I could not stomache the thought of parting with a minimum of $6,000 to do work that we could do.  We had already taken better photos than most realtors, we had already done their job for them.  I told her to give it a few more days while I walked the information superhighway in an attempt to circumvent the listing services.  Finally after much searching and deliberation I solved our problem.

We Hired a Realtor?

Yes, it turns out the best way to gain maximum exposure in marketing your home is to use a realtor.  Then the realtor loads your home on the MLS and then that data feeds all of the other pertinent websites.  It seems really unfair that I can do most of the work and I have to pay the guy 6%, so I found another way.

I Googled “MLS Flat Fee Listing Kentucky” and found http://www.getonmlscheap.com .  Chuck is a realtor in Kentucky that charges $199 and he will load your pictures, descriptions and important data onto the MLS.  If a buyer’s agent sells the house then you pay them an agreed upon commission (in our case we offered 3%), but the most the listing agent makes is the Flat Fee.  So even if the house sold through an agent we would only pay $3,200 in fees (per $100,000 sales price).

The regulations are much more strict when working with an agent even in this capacity.  By law we were no longer to say “For Sale By Owner”, even though we were doing all the work.  To make matters worse, we did not know that there are multiple MLS for each area.  All of the agents in my city use a local MLS, but my home was placed on the regional MLS, making it less useful.  However, we were listed on all major websites and even with hindsight I would probably do the same thing again.

Marketing

My wife spent the next day emailing and calling every realtor in our town to let them know that our home was on the market.  In fact, we got a showing the very first day, within minutes of posting on the MLS.  The realtors told us our home was beautiful and it “showed very well”, but we did not get an offer that day.  A few days passed and nobody called.  My wife continued to notify realtors in the area, update Craigslist and Facebook.  Then we randomly got two calls in one day.  A realtor called and scheduled a showing for Sunday and an unrepresented buyer saw our pictures on Facebook and asked to see our home that day (Friday).

Cleaning and Showing

My wife cleaned the house all day and had it looking flawless for our second showing.  The woman and her family looked through the house and she seemed to light up.  She was definitely an interested buyer!  We showed her around the place, left her alone and she continued asking questions.

Offer

She asked if she could come back later that same night at around 10 and we told her that would be fine.  It was at this point that she made us an offer that came in a little low, but we countered with an offer that met in the middle, but allowed us to keep our kitchen appliances.  She said she already had kitchen appliances anyway, so it was a fair deal for all.

Recap

The best part about selling without paying commissions is that you actually get the vast majority of the selling price.  If I had sold my house for $100,000 without a realtor, I would need to sell it for $106,000 with an agent and at 6% commission on 106k I would actually only make $99,640.  Including the Flat Fee MLS listing of $200, the $50 lawyer fee and the $400 tax bill we only paid $650 to sell our house.

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Living Off the Grid

Earlier this year my wife and I came to the realization that the 1,200 square foot dwelling that we have called home for the past 5 years was getting smaller.  She kept on me, asking if I was ready to move and sell our house, nearly every day.  Then the perfect opportunity presented itself to us.  We would sell our 2008 model brick home and move into a 1913 model, converted school house.  Obviously this was a no brainer for us and we lept in with both feet.

I will address the move, selling the home, fixing up the home etc in some detail in the near future, but this entry is not about all that.  For the past month living in this house we have had no cable, internet, or even decent cell phone data speeds.  This includes losing a beloved Samsung plasma TV and Samsung Galaxy S2 in separate mishaps.  All of these absent modern amenities are in addition to getting our water from a well.  These changes are drastic enough without making mention the washer and dryer sitting lonely in the kids’ room waiting for proper wiring in order to fulfill their life purpose.

My wife has been into the “crunchy” lifestyle for a while now, but unlike many of these posers she actually embraced the lifestyle.  No city water? Check.  Clothesline?  Check.  Free Range Chickens?  Check.  Cloth Diapers?  Check.  Really, when you break it down that way it just seems like all these other girls use “being crunchy” as an excuse to grow out their armpit hair, the one lifestyle modification my wife did not adopt.

It is truly amazing the extent to which we, as a society, have grown so dependent on the internet.  With my internet absent and my main computer on the fritz, I constantly felt like I was forgetting some payment.  I was also unable to commit any time to crapping out any new blog content.

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Reward Miles and Points Valuation

Trying to decide how to top off the extra 5,000 miles I needed to attain a companion pass I tried to do some evaluation of valuations.  I looked around to see different ways to transfer miles to Southwest that will count toward the companion pass.  I have some Ultimate Reward points from Chase, which transfer to Southwest at a 1 to 1 ratio, but do not count toward the Companion Pass.  However, transfers from Hyatt to Southwest do count, but the transfers from Hyatt to Southwest are at a rate of 10,000 Hyatt points to 4,800 Southwest points.  I would transfer 10,000 Chase Ultimate Rewards to Hyatt and then get 4,800 points.  How could I even consider such?  Afterall Chase Ultimate Rewards are worth 2 cents per mile and with this valuation I would be getting only 48% of the possible value.  A poor value proposition by any standards.  This got me thinking, what is a point worth to me?

Ultimately I did not decide to go this route, but it did make me further examine valuations that I have seen on other blogs.   The most baffling valuation to me comes from Starwood Preferred Guest points and their SPG AMEX card with a 25,000 point bonus.  It seems like many bloggers push its benefits and some say that it’s worth 2 cents per point.  Making the sign up bonus worth at least $500.  I have not signed up for this card, because it does not seem very valuable to me. Many people argue that you take the retail price of a room and divide it by the number of points needed and you come up with value.  Thus, if you spend the night in a room that is normally $900 per night and you spend 30,000 points you are getting 3 cents per mile of value!  I wholeheartedly disagree with this kind of valuation and reject the premise entirely.  Simple economics suggests that something is only worth what someone would pay for it.  I would never actually pay $900 to stay at any hotel so believing I got $900 worth of value from 30,000 points is a bit silly.  What is my opportunity cost of using these points?  Are there other options that would offer more nights?  I would be much happier staying 5 nights in a 5,000 point per night room that usually costs $100 per night even though my value is 2 cents per point, I am much happier.

Another favorite move of bloggers is to overvalue a first class award ticket.  I understand the desire to have bigger seats and more leg room on a plane.  I would also love to fly first class if anyone is interested in proving to me why it is worth doing.  However, I have read many accounts of trips stating, “I used 125,000 miles to fly first class roundtrip on a flight that would have cost $7,500 I maximized value by getting 6 cents per mile!”  Certainly telling your friends that you took a $7,500 flight for free is remarkable.  Again, this kind of valuation ignores the opportunity cost.  Let’s assume that instead you could book an international flight in coach for 50,000 points, but that flight only costs $1,500 normally this is only 3 cents per mile, which is pedestrian compared to the first class flight.  My first thought is that a plane is for transportation.  The goal is to get from point A to point B, if I want to sit in a comfortable chair I would just stay home.  I would never pay the $6,000 fare difference to ride first class so why would I sacrifice 75,000 more points?  What is my opportunity cost of doing this?  Instead of one first class flight I could (assuming award availability) invite a friend along and pay their way and still have 25,000 points to spare.  Many people use Chase Ultimate Rewards to top off their travel, but these 25,000 Ultimate Reward points are minimally worth $250 as a statement credit.  Which sounds like the better scenario, flying alone across the ocean or flying with a friend and arriving with $250 of free money to start?

When it’s all said and done only you can decide what is important to you.  I like to get more value out of my miles by purchasing more happiness and creating more memories.  Sure, I would probably love 1 night at the W. in Washington, D.C., but if I could get a week’s worth of hotel stays instead I am doing that.

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Southwest Deals Abound

If you are not a Southwest Rapid Rewards Member you should sign up now and get 750 points just for signing up!  This bonus alone will eventually be enough for nearly $15 worth of travel.  Southwest is currently offering their credit cards with 50,000 point bonuses again, which will get you at least 2 round trip tickets.  This is a very good deal, but can actually be made better with a little bit of work.

Companion Pass

I got in on the offer last time and signed up for both the Personal Premier and Business Premier credit cards.  These both offer 50,000 points after you spend $2,000 in 3 months.  Spending $2,000 in 3 months is very easy to do if you shift all spending to your card.  The annual fee for these cards are $99 each, but after the bonus and spending you will have 104,000 points.  These points count toward a companion pass!  Southwest offers anyone that gets 110,000 points in one calendar year a companion pass which is good for unlimited flying of a companion.  So if I book a flight with either points or cash my wife’s (or whoever you identify as your companion) flight is free!  So, the $198 in annual fees leaves me with 104,000 points that I can use toward travel and my wife will fly with me.  Currently there is a great sale where a trip from Louisville, KY to Denver, Colorado would only cost 10,560 Southwest points per roundtrip ticket, but with the companion pass my wife and I could both fly for 10,560 total.  This is a very lucrative bonus especially for infrequent fliers such as us.

 

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