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.


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