Sunday, August 27, 2006

Pennies from Heaven - Part 2

We continue in setting up a systematic procedure for handling extra income that floats down from the sky. If you are just joining this quest, see Part 1. In this part we look at credit card cash back.

Credit Card Rebates

Some credit cards include offers for cash rebates on purchases. First of all, you should only be using zero-balance credit cards for ongoing purchases i.e. you are paying off the full billing statement balance each and every month. Hence any rebate money is indeed extra available dollars.

Such rebates typically take the form of actual cash set to you via a check after some minimum amount is accumulated ($50.00 in rebates is a typical minimum dollar amount). Since these rebates are not tied to a specific purchase, such rebate checks should be received as new income and allocated as desired. Note, only allocate the dollars after the rebate check is received and deposited into an Account as with any other income source.

However, some credit cards give you the rebate as a credit against your next billing statement. In this case, the cash saved is from the reduction in the actual bill to be paid verse the total purchases billed. These saved dollars are not “re-received” into your Checking Account, but simply don’t leave. Hence there is no income to be deposited, but only dollars to be re-allocated back to one or more Budget Categories of your choosing. Such allocations should be given some type of identifying reference such as “Credit Card billing rebate” to help in any future research.

In Part 3 we will take a look at Gift Cards.

Sunday, August 20, 2006

Pennies from Heaven - Part 1

Income is where you find it

Some of us haunt the papers for coupons and rebate deals of various sorts. Also gift cards have become popular during the Holidays or in various promotional deals. What about that folding money discovered in an old pair of pants? The processes below formalize the handling of these “pennies from heaven”.

Somewhat more complicated is the disposition of coupons, percent off deals, rebates and gift cards. These topics are discussed in more detail below. However, before considering using these arguably convoluted strategies to redirect saved money, think about whether you would just rather leave the savings where they lay i.e., don’t do anything special. In the case of the coupons and percent off deals, you could just record the reduced cost transaction and be done with it. In the case of the gift card, you could do the same either recording the reduced cost of associated purchases, or if the card covered the entire purchase, just don’t record anything at all. However, for mail-in rebates, you will get actual income in the form of a rebate check; therefore you will need to go thru the income receiving and allocation process anyway.

Even if you want to leave the savings where they occur, you may still want to go through these extra steps to allocate the pseudo income and then expense it. An example would be the receipt of some type of gasoline card for example: when purchasing a new vehicle. The inclusion of a two hundred dollar gas card could take a sizable chunk out of your near-term gas budget. If you just use the card without recording the “income” and expense, then you will not get a complete picture of your actual gasoline expenditure during the period in question. A clear picture of actual gasoline usage could be helpful in projecting needs for say the next budget year. An artificially low figure could distort your actual needs for the next yearly cycle.

Loose Change
First, I recommend keeping your “loose change” in play and not be tempted to just dump it in a coffee can. Such change, unless it’s from a physical bougette, is still in your Budget System and should be made available for future purchases. Change from a physical bougette should be used for appropriate expenses too. Loose change can quickly become unwieldy if allowed to accumulate. Therefore, the best solution is to spend it as soon as convenient i.e. carry it around with you instead of pushing it aside. Use a change purse, or a cup holder in the car to make it readily accessible. In this way, the change shouldn’t accumulate too much.

If you actually find money in your old clothes, purses, etc. then, after giving thanks, just put it into your cash account and allocate the dollars into one or more of your budget categories. The same process should also be done with cash gifts.

Big Bag of Bottles and Cans
If you live in a state with a bottle-can deposit law, then you probably build up a collection of eligible items. A garbage bag in the garage, or behind a door, or in a pantry corner is full to overflowing with a motley collection of pop (soda) and beer cans and bottles. Once you get around to dragging them to the store, there is a big lump of available cash to spend! Often such found dollars gets absorbed into the associated grocery bill and as such doesn’t actually show up as available income. Since the source of the deposits in the first place was probably the same budget as is being used for the current grocery purchases, this is okay and as such needs no separate documentation. However, if you had made a significant (like in several cases) purchase of beverages for some special occasion that was covered under a separate budget (e.g. Entertainment), then you may want to take extra care to allocate the deposit returns back into the appropriate budget.

Specific Example:
You have a graduation party for your kid. Funds for the event are expensed from your Entertainment Budget. Included in these expenses are the deposits for one hundred cans of soda at ten cents per can or $10.00. At some later point in time you end up taking the empties back to the store as a part of a routine grocery run. Your grocery bill comes up to $35.67 less the $10.00 return for the empties giving a total due of $25.67. If you let nature take its course so to speak, the Grocery Budget would simply benefit from the $10.00 in returned cans. If you instead wanted to return these funds back into the Entertainment Budget, simply do a T/T – T/F (transfer to – transfer from) of $10.00 from the Grocery Budget into the Entertainment Budget with a comment of: “graduation party can deposits”. This would then reflect the true cost of the groceries ($35.67) and return dollars originally expensed for the deposits back to their rightful place (Entertainment Budget).

Return of Cash
You faithfully order some stuff from your kids’, niece, grandkid, …, but for some reason the order went awry. Your money is returned! Since you’ve already deducted these dollars from your account and one of your budgets, you will have to reintroduce these funds to your budget via income received, deposited into an account and allocated back into a budget category. You probably would want to allocate these funds back to the budget ledger from whence they came, but you can put it anywhere you please. I would recommend including comments in the remarks column describing where the funds are coming from. You may want to include the date and category (if different) referencing the original expense item.

Of Coupons, Percent off deals, and Rebates
Opportunities abound to “save” money on various purchases with coupons, percent off specials and rebates. When you actually save money with these kinds of offers, you may consider redirecting your savings into other Budget Categories if desired. Hence savings in groceries could mean more money for your Hobbies! However, first of all you need to determine if the “savings” are real from your perspective:

1·Is the item in question something you truly want/need and is covered in your budget? This is always an important question to ask before buying anything, and the answer should always be Yes for a purchase to take place.
2·Would you consider purchasing the item at its normal price tag? A Yes here means that you are in fact saving money.
3.Is the corresponding Budget Category in good financial shape? This means that the Budget is certainly not in deficit, and its current balance looks like it can handle other foreseeable important expenditures. A Yes here is also important. We don’t want to go out to the world backwards “saving” money on non-essential purchases within a Budget Category that is currently on the ropes.

A Yes to all of the above questions means that you’ve truly saved money on the given purchase. This saved money can simply remain in it’s existing budget bag which is the default if you don’t do anything extra, or it can be moved somewhere else. For example, you may be more motivated to scour the paper and junk mail for coupons and deals if you were going to take the money saved and do something special with it such as put it toward that next cruise!

For instant-rebates, coupons and percent-off specials the savings is immediate. The extra dollars are in your budget system right now.

Example, you buy some household type items at 50% off for a total savings of $20.00. The savings is immediate and is reflected in your budget by the lower cost that shows up in your ledger. If you had planned on paying the original price and the coupon/percent-off deal was just a windfall benefit, then you could choose to allocate all or some of the $20.00 savings into other budget categories. Use “T/T” in the Household budget to transfer funds (up to $20.00) to one or more other Budget Ledgers: Vacation perhaps? The receiving Budget Ledgers would have a “T/F” Household entry. You should also include a note in both the T/T and T/F entries of why the transfer is being made (something like “windfall”). At the end of this process, the savings made on the purchases would reduce the Household balance and it would appear that you just paid the regular prices. Your Vacation budget would show an increased balance reflecting a redirection of the savings you obtained in your household purchases.

Note, if it was an instant rebate, then treat it like a coupon and proceed as outlined above except that you will probably pay sales tax (if any) on the pre-rebate price. If a real rebate check is involved, then I recommend that you take the approach outlined in the topic: Rebate Well - Detail on page 175.

Taking these extra steps can allow you to see the positive efforts of clipping those coupons, waiting for the special deals or mailing in those rebates! Especially by transferring the saved dollars into one of your oft-neglected categories or into a troublesome (deficit laden) category.

Five Dollars off for a limited time
Received a coupon for $5.00 off your next purchase of $25.00 or more. But must use by a date a month or so away. Great, but you need to plan this out carefully. Such a coupon is a great percentage off, but use it wisely. You will want to purchase items that you would normally have bought anyway at the prices available. Then you will receive the true benefit of the savings. Let’s say the coupon is for the local hardware store. You already shop there on a routine basis for say light bulbs, batteries, hardware, paint stuff, and so on. The present issue is whether or not you need $25.00 or more worth of such stuff within the allotted timeframe? If you are real lucky, you maybe just getting ready to go to this store and have a list totally at or above the $25.00 minimum required. Otherwise take time to make a list of needed items. Start this list right away after receiving the coupon. Waiting to the last minute (the expiration date) can result in a missed opportunity to save or worst, to buy items that you don’t really need just to get the savings. I recommend posting the list in a prominent place and let other family members put in their comments and recommendations. In this way, you can accumulate a list of needed items that total up at least to the required minimum. If you include the potential purchase of items that you would normally buy somewhere else then confirm that the store in question has a reasonable price compared to where you would normally buy the given item(s). Once you’ve reached the magic number, go ahead and use the coupon. There is no advantage to waiting unless it’s a percentage off total deal instead of a fixed dollar amount. Important: if you just can’t get to the required purchase total, then let the offer pass on by.

Next: We'll consider Credit Card Rebates and Gift Cards as Income.

Sunday, August 13, 2006

Auctions - Part Two: Internet Sites

Internet Auctions

All of the rules for live auctions regarding bidding limits, evaluation, etc. apply to online auctions as well (see Auctions - Part One: Live Auctions.

The big difference between in-person, live auctions and online auctions is that you don’t interact with either the merchandise or the seller in a face-to-face manner. You must rely on a description and pictures to judge the item. Also you must rely on the reputation of the auction service and the sellers rating to determine trust. Of course, once you’ve conducted successful and satisfactory transactions with a given seller, this trust factor can be significantly enhanced.

I recommend that you limit your item quests to those things that can be easily evaluated without touching them or seeing them actually work, at least in initial dealings with a particular seller. Also, limit the amount of money you commit to online auction purchases until you get comfortable with the process and sellers.

As far as ratings are concerned, be sure to examine the seller’s satisfaction rating and what other buyers have to say about them. The seller doesn’t have to have a 100% positive rating or all glowing reviews (but that certainly helps). However, their rating should be above 95% and the buyer comments should lead one to feel that the seller delivers products that are accurately represented and in a timely manner. Also, once you’ve completed a purchase transaction yourself and received the goods, be sure to provide your own rating and comments for the seller involved.

Auction Process
Unlike live in-person auctions, online auctions typically last from 3 to 10 days. The current high bid, or starting bid if no bids have been made, will be displayed along with the amount of time (days, hours and minutes) until the end of the auction. There is no “going, going, gone”, it will just terminate at the specified time. When looking at the ending time, be sure to confirm the time zone. The time zone is indicated for the auction company, not the seller and thus would be the same for all auctions. If say the time zone is Pacific and you live in the East, then there will be a three-hour difference in clock times. Be sure to also check the time remaining, which will be the same worldwide.

Making a Bid
If you want to bid on an item, you will first probably have to register with the particular auction company if you hadn’t done so already. This process is usually not overly complicated or time consuming, but you should allow adequate time.

When making a bid, the item screen will indicate what the minimum bid will be. If the item has not received any bids, then the minimum bid will be the starting bid. The bidding issues are similar to those for live auctions in that you don’t want to bid more than you are willing and able to pay for any given item.

Unlike live auctions, your actual bid may be much higher than the bid that is registered. This is called proxy bidding which is offered by many online auctions. Before attempting this however, check the auction site for how your bid will be handled. Proxy bidding generally works something like this:

1. An item has a current bid of $10.00 with a minimum increase bid of $11.00.
2. You determine that you would pay up to $17.50 for the item and enter a proxy bid of $17.50.
3. The item is updated with you as the new high bidder and a current high bid of $11.00 with a new minimum increase to $12.00.

If no one else bids on the item, it’s yours for $11.00 even though you were willing to go up to $17.50. However, if other bidders enter bids, your proxy bid will be increased all the way to $17.50 if necessary to keep you as the high bidder. If someone exceeds your $17.50 limit, then they become the new high bidder. Your proxy bid is kept secret so that other bidders won’t know what your limit is. On the other hand if the person you are initially bidding against also had a proxy bid of say $15.00, then your initial bid would have appeared as $16.00 right away. If the other person had a proxy bid of say $20.00 (i.e. above yours), then they would still be the high bidder at say $18.50 (assuming $1.00 minimum increments).

While proxy bidding may seem confusing at first, it is really a nice system. It is easier to be able to keep within your budget because you set your maximum bid upfront instead of risking being caught up in the heat of real time bidding. If your proxy bid is out-bid by another buyer, you can still up your proxy before the auction ends, but I advise against it. It is best to set your initial proxy bid based upon your available budget and the value of the item up for bid.

A reserve price is the minimum price that the seller will accept for a given item. By default, this price is the starting bid price, but it may be higher. Reserve bids higher than the starting bid are not actually shown (just like your proxy bid is not divulged). However, you will see something like “reserve not met” if the current bid is less than the reserve amount. Once the reserve price has been attained, you will see an indication such as “reserve has been met”. At the end of the auction if the high bid is less than the reserve, the item is not sold.

Reserves can be frustrating to the buyer, but are a fact of life for some online as well as live auction events. Also, for proxy bidders, if your proxy bid is not equal to or higher than the reserve, the bid entered will only be enough to be either the minimum bid if you are the first bidder, or just enough to beat out the current high bidder.

I’m told that the rationale behind using reserves is to get the bidding started at a lower price and allow the bidding action to drive the price up. Where an initial higher bid minimum might have kept bidders for entering any bids at all.

Buyer’s Premium: Most of the big online auctions don’t have a buyer’s premium, but you should always check the details for any items of interest. Some specialty auction houses may use such a premium.

Shipping issues: Unlike live in-person auctions, you will have to have the item sent to you through the mail. This shipping and handling fee will be added onto the winning bid price. Be sure to check the item description for the shipping methods and cost involved. If in doubt as to the specific cost, send a question to the seller including your city and state or just your zip code (don’t send them your complete address until after you’ve won the item). Don’t assume that just because the item is small e.g. a coin that the shipping and handling cost will be trivial. Be sure to factor the shipping costs into the total amount you are willing to pay for a given item.

Sales Tax issues: If you and the seller reside within the same state, you may have to pay sales tax! This fact should be stated within the item description. If in doubt, contact the seller prior to making a bid. Again, factor in the sales tax amount into the total you are willing to pay.

Completing the Sale and Issues
As you zero in on items of interest there are tasks that you need to pay attention to as you bid and complete the purchase of an auction item.

Questions and Concerns: If you have questions or concerns about a given item up for auction you should email the seller. The particular auction service will have a mechanism to allow this, usually on the screen with the items description there will be some kind of button or link phrase that you click on to bring up a screen for typing in a message. If you need to ask a question, you should do this at least two days before the end of the auction, the sooner the better. This will allow the seller time to see your message and to respond back to you before the auction is over.

Auction site guidelines: Before starting to bid on items at a given site, be sure to review the user agreement. While most of the rules and regulations are common sense ways of doing business between reputable sellers and buyers, there may be issues that you are unaware of.

Warning signs: Other than having a terrible user satisfaction rating, there are other things to look out for when dealing with sellers and buyers in online auctions such as:

The item in question is being offered at an unusually low price such as a new laptop computer for $100. Especially when multiple items are involved.
The seller has only a couple of ratings or no ratings, but is selling a high priced item.
The seller sends you a message indicating a desire to try and sell the item outside of the auction environment.

You are the actual seller and the buyer wants to pay with a check or money order in an amount more than the final price plus shipping and wants you to include the change along with the item.

This is only a partial list. Be alert to information provided by the various online auction services, news articles, personal experiences and just common sense.

Phishing dangers: It is very common to get hit with phishing emails attempting to get you to update your online auction personal data such as user id, passwords, credit card information, etc. As with any other phishing attempt, just don’t do it. Less common, is getting a pop-up window while signed onto an online auction service requesting similar information. Again just don’t do it. In both instances, I suggest that you report these types of activities via the auction services published complaint process.

Stay within your budget: Remember you need to stay within your budget just as with all other expenditures. Not only get a good deal or obtain that “once in a lifetime” item, but don’t blow your budget in the process. Use proxy bidding to predetermine your maximum affordable bid on any given item. Then check back at the end of the auction to see if you won. Of course you can check back during the course of the auction, but don’t be tempted to raise your proxy. Otherwise, enjoy. Bidding online can open up literally the whole world for obtaining or selling those treasures!

Making a payment online: Paying for your item online tends to speed up the delivery process. A popular online payment option is PAYPAL® at . This service is used by hundreds of thousands of people to make online payments and is very popular on big auction sites such as eBAY®. To sign up for such a service typically requires the connection of a checking account and credit card for withdrawal of the actual payment. Many sellers prefer PAYPAL® payment from an associated checking account rather than a credit card (saving to them in the form of reduced fees). If using such a service to make online payments, be sure to record each payment into your checking account or credit card ledger just as with any other purchase.

As always - Have Fun!

Sunday, August 06, 2006

Auctions – Part One: Live Auctions

Auctions are a great place to explore, interact with a wide variety of people, get that “once in a life time” treasure, and just have fun. However, as with all situations involving the expenditure of dollars, we must proceed in a conscious and thoughtful manner. Below I will present various considerations for Live Auctions. Internet auctions will be covered in Part Two. Our discussion primarily involves budgeting issues and not the details of the items that are up for bid. An important aspect of bidding in any type of auction is the dynamic nature of the actual selling price. Unlike buying something in a store, the actual selling price is very fluid in the auction process. However, like making any other purchase, your budget needs to be able to absorb the. No matter how tempting the item, you must be able to afford to acquire it! Also, the item’s price must remain within reason. Whose reason? Your reason – based upon sound knowledge of what you are planning to buy. For utilitarian items such as an appliance, or other household pieces, this is a straightforward process. However, you must be extra careful for hobby type items where emotions and an artificially pumped up need to acquire “at any cost” can cloud your judgment. However, at the end of the day, the most important issue is to be able to obtain the item within your budget means.

Live Auctions
Sold! … Huh?
Attending a live auction can be an exciting fun experience or the source of heartache and frustration. Here I will layout some general guidelines from a budgeting perspective on attending auctions.
Where to find them
First: where to find an interesting auction? For folks in the Michigan area, I recommend checking The Auction Exchange and Collector News . This is a weekly newspaper that publishes a wide variety of auctions in the Michigan, northern Ohio, and northern Indiana areas. For other parts of the country, you may want to check the local newspapers.

The Auction Exchange and Collector News
P.O. Box 57
Plainwell, MI 49080-0057

Yearly subscriptions are available at a reasonable price. Check your local bookstore, they may carry the paper.

Like any other expenditure: When going to an auction, you are planning on spending money and as such should be treated like any other money-spending event. As always, be leery of unconscious spending. Be sure to think out in advance why you want to go to this particular auction, and what is your budget.

Planning and premiums checking
Be sure to plan out the event ahead of time. Getting lost on the way, having to leave the auction early, etc. can contribute to a frustrating instead of enjoyable experience. If you are not sure of how to get there, I recommend the use of MAPQUEST® online at to get detailed directions from your location. Think about the time of day (rush-hour issues), construction, etc. You should plan to get to the site about an hour ahead of time to allow viewing of the items before the auction gets started. Also plan on being at the auction two to three hours after it gets started. Once you’ve done a quick once over and determine that there are indeed items of interest, take time to register and obtain a bidder number – don’t wait until just before the auction starts to take care of this item. When registering also confirm whether or not there is sales tax, and/or some type of buyer’s premium. Premiums are sometimes also added for using a credit card. A buyer’s premium may be added onto the winning bid regardless of payment method. For example a buyer’s premium of 10% means that the cost of a winning $100 bid is actually $110 (plus any applicable sales tax). The point is that you need to be aware of the total cost of an item to you as you are bidding up something.

Particularly for credit cards, you may want to call ahead of time (usually earlier on the same day of the auction) to confirm whether or not they are accepted and if there is a premium for usage. For checks, you may want to call if you are going to an auction in another state to confirm acceptance.

The cost of going
While auctions don’t usually have an admission fee, there are certainly costs associated with attending one. The most obvious expense is for gas, especially if the event is far away. Also you may end up buying a lunch or dinner that you wouldn’t have otherwise purchased. Before setting out for a place a far piece off and/or devoting the better part of a day at an auction, perform a sanity check on the cost of attending. You should be willing and able to spend at least three to five times this cost for items available at the auction. If this is not the case, then I recommend passing the event on by.

You need to know what you expect from the auction. If you are going for a particular collecting interest, be sure that it appears that there maybe items of interest to you. You need to know about how much an item is worth before you start bidding. If you are a collector, you maybe willing to pay more to get a particular item, but it still should be within your collecting budget. If someone out bids your limit, you must be able to just let it pass on by!

You may see something you are interested in that is totally outside of the reason you came. That’s okay, go ahead and bid if you have the money in an appropriate budget.

When bidding, hold up your bidder card until the auctioneer recognizes you or the price has gone too high. You should always know whether or not you are the current high bidder. Don’t get lost in the bidding frenzy though. Always keep in mind your upper limit on a particular item. You should set this limit before the bidding starts. Typically before the auction when you are browsing the items, jot down the item number/description and annotate a maximum bid. As the auction progresses, you may adjust this amount if items ahead of it go to you or someone else. In any event, before each desirable item comes up for bid, you should finalize your upper limit.

Assuming that you are a collector, you should do better against a lot of dealers than if there are a lot of other similar collectors in the audience. A dealer is buying items with an eye toward making a profit; while you are buying an item for your own personal pleasure. In any event, keep to your limits.

You may ask: “How do I determine my limit?” Well, other than the obvious limit of your current budget, you need to know your subject matter. As a collector, it is always important to keep up with the relative worth of various items both in your collection as well as those items that are on your want-list. Collector catalogs are a good source of information although their prices tend to be on the high side in many cases. Online auction venues such as eBay® are also a source of information on what folks are actually paying for various items. However, when checking online auctions give more weight to items that have actual bids. The price someone is willing to pay is more important than the price the seller is looking for.

Time to leave
Once all of the items you were interested have been auctioned off, you can feel free to leave. If you were the high bidder on the last item you were interested in, allow 15 to 20 minutes for the winning ticket information to get from the auctioneer table to the check out table. I recommend that you tear up your bidder card and/or take it with you when you leave. Also, remember it is okay to leave the auction without buying anything. If it turns out that there is nothing offered that you are interested in, leave immediately. If all of the items you were interested in went to higher bidders, also leave. It’s okay to leave empty handed (but still take with or destroy your bidder card).

As Always: Have a Good Time !!!