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Does Saving Money Save You Money?

Clearance Deal of the DayCould not live without!  (never used)

 

When you read a blog about saving money, you already possess the most important aspect needed, proper mindset.  Financial awareness is a key component in saving money over the long term.  It’s very easy to think that saving a dollar here or there is no big deal.  For instance, I always use those credit cards which give me the highest return on every purchase.  I have an American Express Blue Cash Preferred card that gives 6% cashback at the grocery and I will use it every single time.  My wife on the other hand will go to the grocery store and just grab any card available.  Her rationale is that if she is only spending $20, that card would only save $1.20 so it’s no big deal.  However, every trip to the gas station, grocery store, or other retail establishment offers a chance to save.  The way I see it is that if I’m going to be making the purchase either way, why not put it on a credit card that will reward me for that purchase?  Why use cash when I can pay with a credit card and get an instant discount a discount that comes after I shop for the best prices and use cashback portals!

The biggest problem for many of us comes from trying to save significant amounts of money by purchasing things we otherwise do not need.  The “Extreme Couponing” craze is one such example of this as those people who follow these methods clip every coupon every week.  If I can buy a can of beets for 10 cents each why not do it?  Because nobody likes beets, they’re garbage, they taste gross and you just wasted your money! This is the opposite of not using your discount when the amounts are small.  You use the discount on items that are deeply discounted, but do they offer a value to you?  If you were some kind of masochist with a beet addiction 100 cans of beets is a fantastic deal and likely saved you about $100, but if you are a normal human being then you probably would have been better off burning the $10 you spent.

This phenomenon is not only present in the extreme couponing circuit.  In fact, every trip to Target provides an opportunity for those demons lurking on the endcaps to claw at your soul.  As you walk the perimeter of the store you see the red homing beacon that are the red clearance stickers.  They sing to you from the cream colored shelves like Sirens in the Tyrrhenian Sea.  Powerless over the possibility of saving tremendous amounts of money you are pulled into their orbit.  Assuming you are not currently reading this while at Target, let’s speak rationally about these fine deals.  Clearance items are only a deal if these are things you would normally buy anyway.  If you have been looking for a bedding set, and had decided on one that was $300 and you find one on clearance for $50 this is a superb deal.  By contrast if you are walking down the aisle and see 80% off a camo beer coozy that says , “My neck may be red, but I’m well read” don’t buy it.  Actually, you’re probably getting this ironically, you can go ahead and get that.  The point is that these items that are “only a dollar” really tend to add up over the course of the year.  In fact these can add up far faster than the “only a dollar” rewards my wife loses when she fails to use the right credit card.

It’s far too easy to base your savings off the MSRP rather than what you truly value an item to be worth.  A better exercise would be to look at these clearance items and ask, “Do I need it? Do I really want it? Would I buy it anyway?  What is it worth to me?”.  So if you walk past the endcap and sunscreen is on sale at 75% off go ahead and pick some up because you probably need it and if you don’t buy it now you will buy some day.  If you walk past the aisle and there is something you have always wanted, but price has kept you from buying it then I think this is a fair purchase.  The Suze Ormans of the world would disagree and advise you to only buy absolute necessities,  fund your emergency savings, fully fund all retirement accounts and then with anything leftover spend money on your wants.  My opinion on this is that sometimes you need to spend some money on the things you want.  So if there is a lamp or shirt you think looks great buy it.

The problem with these deep discounts is that we often go overboard on these clearance items.  In the haze of getting a great deal we often make purchases of things that we do not need or even really want.  As I am composing this my wife came in the door with 3 big bags from Target.  She purchased an $18 lifejacket for $5.38, not a bad deal since our kids will need a lifejacket next year and if she did not make the purchase on clearance we would have paid closer to 20.  However, she also purchased a rug which was on sale for $7.50, she wanted a rug, but I have a feeling that all things equal she never would have bought this style.

My wife happened to be the person who peaked my interest on this topic.  She said, “I used to never look for sales and just buy things I wanted.  I think that I spent less back then than I do now.”  Her hypothesis was that when you go into a store and do not look at prices (but have limited funds) you only purchase things you really want.  Both of us have been guilty of going to Target and buying multiple items, especially clothing, which were on sale.  When my beautiful wife last cleaned out her closet there were multiple items new with tags.  Just as bad there were countless items that she wore only once.  She is not the only one guilty of this either.  I have gone into the store at certain times of the year and bought 5 pair of shorts, but only ended up wearing 3 of the pairs and only a couple times.  Once it’s time to wear them again I’ve undoubtedly gained or lost weight making them useless.

Rather than buying multiples of things you like a little, buying one thing that you really love can be a better deal.  At the beginning of the summer I bought one pair of golf shorts for regular price, but only bought one pair.  I wore these shorts a couple times per week all summer long.  At the end of the year they were 50% off so naturally I bought 5 pairs!  Yet I have worn each pair only once.  One pair is still in my closet untagged.  Basically I spent $20 and wore the shorts 30 times (60 cents per wear), but spent $50 on the discounted shorts and worn those only 5 times ($10 per wear).  So even though my closet looks better with more choices, I’ve likely wasted money overall.  Of course the best option would have been to buy only 1 or 2 pair on clearance and then wear them and I’m saving money.  The problem with clearance deals is they usually don’t work like that.  You end up overspending on things that you don’t need because you feel like you’re saving money.  Unless we think about this consciously we are all subject to doing it.  Which brings me to the question, does anyone want to buy a case of corn on the cob holders?  Accidentally bought too many.  Asking for a friend.

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Going to Walt Disney World on a Budget (Part 1)

Walt Disney World

 

In February of 2011 my wife and I started discussing taking a trip to Walt Disney World.  This trip would be the third trip for me and the first for my wife and daughter. Our goal was to have a quality vacation while going to Disney World on a budget.  A trip to Disney World will never be cheap, but there are ways to incorporate more value into the proposition.   Initially our interest was sparked by low priced fares to Orlando, but eventually we decided that we had better options.  The biggest part of saving money is taking the time and energy to slow down before making financial decisions.  Spending $350 to fly 3 people to Disney World seems like the obvious best choice.  Then we needed to evaluate all other expenses that exist based on the flight.  In order to get the discounted pricing we had to fly into Orlando’s Sanford Airport which is located further form Disney World, thus requiring transportation.  If we flew we would need to either take a shuttle or rent a car in order to move around the world.

Ultimately, we chose to extend our existing June road trip to Panama City Beach.  In total, this would be an 1,800 mile round trip, compared to 1,200 miles to simply drive to Panama City Beach.  We decided that the extra 600 miles driving would be the more affordable option.  We stopped on the way down and visited my cousin which really worked out well.  With this option we drove our own car, packed everything we needed and spent a little more than $100 in gas.

The most important part of the transportation aspect is figuring out how much each decision is costing you on your trip.  Even if the cost of flying and driving was exactly the same there are other factors that must be considered when making a decision.  Bags may cost extra on some airlines, but as long as your automobile is big enough you can pack whatever you want.  No need to rent a car or rely on shuttles.  One warning about relying on shuttles if you are staying off property at Disney World be sure to check the shuttle schedule.  We had considered taking a shuttle to the Disney Parks every day, but it turns out that the shuttles only run at about 4 am and noon.  So you either need to be the kind of person that arrives at the park super early or super late.  I love to get to the park before it opens, but during our time there I did not find it necessary to arrive too early.

Although we loved driving and found it very convenient for us  especially when we arrived we are still evaluating our options.  Just to drive from our house to Walt Disney World is 1,700 miles round trip.  If we get 17 miles per gallon in the SUV, that works out to 100 gallons of gas or between $350 and $400.  The most interesting way that I am considering for our next Disney trip is to fly Southwest.  They offer flights for about $220 per ticket, which is $660 for the 3 tickets we would need.    Another way to do this is by using Southwest Rapid Rewards for 13,600 points per ticket, which is 40,800 points for the 3 tickets we would need.  Unfortunately for me I have not flown in years, my wife and daughter have never flown.  How would such a limited traveler even consider using frequent flyer miles?  This is where using a credit card bonus comes in handy.  I signed up for a Southwest Airlines card from Chase with a Bonus of 50,000 points!  This means by simply applying for a card my family will be able to take a trip to Walt Disney World.  Sounds like a pretty great trade.

Even if we fly for free we will need to make arrangements.  We will need to rent a car making sure to use a shopping portal and searching for any promo codes.  An inexpensive car can be found for the week and cost less than driving to Orlando.  Another great method is if you stay at a Disney Hotel you get free transportation from the airport.  This includes picking up your bags and delivering them to your room for you!

In Part 2 of Disney on a Budget I will evaluate how we decided on our lodging in 2011 and the ways in which we might change our methods going forward.  Should we stay at the park or out of the world?  Should I buy the dining plan option?

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Cashback, Gift Cards and Cheap Gas

amazon

I absolutely love to shop at Amazon.com (this is an unpaid shout out).  We are Amazon Prime subscribers and also own a Kindle Fire HD.  I continue to be amazed at the fact that I can order something in the afternoon and it is at my doorstep the next day (for $3.99).  The other thing I love about Amazon is that they always have low prices, the only problem with this is that they do not participate in cashback portal programs (Join TopCashBack.com) or offer coupons for large percentages off your total purchases.  Even without these money saving advantages I am working on  getting 6% off my Amazon purchases at minimal.  This strategy does not only work on Amazon, but can be used successfully for most regular purchases.  Dave Ramsey certainly will not appreciate what I have to say, but that’s just the chance I’ll have to take.

My Blue Cash Preferred AMEX card gets me 6% cashback on all grocery purchases throughout the year (First $6,000).  This cashback amount is in addition to the fantastic $250 signing bonus.  Therefore, I can walk into my local Kroger, buy a $100 Amazon gift card and I will get $6 credited to my card.  This is a fantastic deal as it is, but it is made even better by the fact that my local Kroger also has a daily offer of 2X gas rewards on all gift card purchases.  Therefore, my $100 gift card gets me $6 cashback and 200 gas points!  Fuel reward points are good for .10 off per gallon of gas for every hundred points.  Currently, the offer is even juicier!

Last month I went into Kroger and they were offering 4X fuel reward points on the purchase of a gift card!  So here’s what I did.  Knowing that we buy from Amazon.com constantly I purchased a $250 gift card and paid with my AMEX which earns 6% cashback on grocery store purchases for a total of $15 cashback.  This purchase also earned me 1,000 gas points (250 x 4) which are good for $1.00 off per gallon of gas (up to 35 gallons).  Since we buy gas no matter what, this is a real savings!  We will maximize this savings on all 35 gallons of fuel.  So the $250 gift card – $15 cashback – $35 fuel savings basically makes the $250 gift card $200!  This 4X point deal is available until the end of March and the actual points earned can be used through the end of April.

To further increase savings I will use my 5% cashback gas reward card when paying for the gas.  I do not figure this savings into my actual savings because I would use this card regardless.

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