Sunday, September 17, 2006

Pennies from Heaven – Part 5 (Rebates Intro)

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 take our first look at Rebate Checks – how to keep track of what should be coming in the mail and what to do with them when they arrive.

Rebates are one way we can potentially save on the cost of an expense or service. For purposes of this discussion we are talking about mail-in rebates. These instruments require that you pay a given price up front, and then receive a portion of the expense back at a later date in the form of a rebate check. There are typically one or more documentation requirements such as a copy of the purchase receipt, a UPC from the package, some type of filled-out form, etc. Also, there is usually some type of date window within which you must make the purchase and mail-in the materials. I recommend that you review and understand all of the requirements needed to obtain the rebate prior to making the purchase. If you have any doubts, ask a sales clerk. If you are still confused, pass the item by unless you would have bought it regardless of the savings offered by the rebate.

There are certainly other ways to save money on purchases, some of which are discussed in other parts of this book. Among these are coupons, percent-off deals, instant rebates, credit card cash-back rebates all of which can be useful. Some “savings” arrangements are somewhat “scamish” such as Cash Vouchers see page 285. The details below pertain only to mail-in rebates.
Are We Saving Yet?
First of all, make sure that the rebate in question has no strings attached, i.e. there are no other purchase conditions involved. Strings include some commitment to subscribe to maintenance or other service for a period of time. Also make sure that the rebate will be paid in cash i.e. in a check made out to you, not some coupons or gift cards or such. If there are any strings or non-cash savings involved, then look at the discussion on coupons, etc. in Pennies from Heaven to see if the deal is any good.

Consider an example of a laptop computer offered at $199.00 after a $200.00 rebate. Sounds like a great deal; however, within the associated fine print is a requirement to sign up for an online service for a minimum of 12 months. This is not a scam, but does add considerably to the cost of the deal. If in fact you currently don’t have an online service or are willing to transfer to a new service, then it may not be a problem. However, you do need to be aware of any such strings and evaluate their impact on the overall deal before making the purchase.

Don’t get carried away by the savings involved until you determine that the purchase in question is doable within your normal budget. Saving money on an item not budgeted for is another form of unconscious spending! Also, your rebate check can be used for any purpose as outlined below; however, if the item in question is only within your budget based upon the net price reduction offered by the rebate, then you need to make sure that the rebate check dollars are allocated back into the corresponding budget. An additional caveat here concerns the shape of the budget ledger to be used i.e. how healthy is the balance? For example, you may have planned to buy a new DVD player and had money in the Home Entertainment budget to accomplish this. However, you incurred an unexpected repair bill on your TV, which put the budget into deficit. Hence, you may need to defer the planned purchase of the new equipment until you’ve moved back into the black rebate or no rebate.

Remember that with mail-in rebates, you have to be willing to pay the full price for the associated item, and then wait one or more months to get that rebate check in the mail. Hence your Budget System has to be able to “wait” for the rebate funds without undo stress.
Rebate Check planning - General
As with any form of incoming dollars, rebate checks will need to be deposited into one of your Accounts, and allocated into one or more of your budget categories. We should have a thought or two in mind as to the way we plan to use the rebate at the time of item purchase; however, since a considerable amount of time is involved between the associated purchase and the actual receipt of the rebate check, I recommend that you set up a process to manage this activity. Of course the default method of handling the rebate check would be to allocate it back into the budget from whence the associated purchase was made. However, even in this most basic case, one must remember which budget was involved. Hence, at a minimum, I recommend the usage of a Rebate List to keep track of such transactions – see topic below. If, on the other hand, we want to make immediate use of the rebate savings i.e. before we actually receive payment, then we need to consider the use of a special budget category called the “Rebate Well” see the topic below for details.

Considering the possible usage of the Rebate List and the Rebate Well, we have several options available. These possibilities are itemized below then brought out in detail under their individual topical sections.

1. Defer all savings considerations with regard to rebate checks until after the actual dollars arrive. Simply record the prices paid at time of purchase and handle the subsequent rebate checks as typical miscellaneous income when received. In this case, nothing special needs to be done from a budget management perspective.
2. At the opposite end of the spectrum from the above option is to immediately realize the savings on all rebates by use of the Rebate Well concept. In this case all rebates must participate in the Rebate Well.
3. Defer savings on the rebates, but unlike option 1 above, keep close track of each rebate applied for. This requires the use of the Rebate List ledger. Actual allocation of any rebate amounts is deferred until the check is received, but we can keep an eye on outstanding rebates so that we could make plans on their usage ahead of actual receipt. Also, we could initiate inquires on rebates that seem to be overdue.
4. Lastly, we can set up a hybrid of options 2 and 3 above. We can choose to immediately allocate the savings of some rebates such as for Holiday budgets where the savings could be put to good use right away, and defer others until they actually show up. In this case one would use both the Rebate Well for immediate savings usage, and the Rebate List for the deferrals. It is important not to confuse the two ledgers and keeping any given rebate on only one of the lists.
Rebate List - Detail
If you just want to keep track of outstanding rebates that you’ve applied for, then I recommend that you use the Rebate List form see page 378 for blank form and instructions. In this case, we don’t attempt to actually use any associated savings until the actual rebate check arrives in the mail. The budget taking the initial item expense, will not realize any savings associated with the mail-in rebate at the time the purchase is made. You can also use this list to indicate where you want the dollars from the rebate check allocated upon receipt. This would be especially important if you want to use the savings in a different budget category than the one were the initial expense was incurred.

Note, a Rebate List ledger is for information tracking use only and does not participate in the Budget System dollar totals or balancing process.

Rebate List Example: A typical Rebate List is detailed below. Note, the list should be in chronological order by date mailed. When you receive the actual rebate check, fill in the “Date Rec’d” column, which serves as a check-off and date reference. The “Amount” is the anticipated value of the rebate itself. Under the “Description”, include enough information to readily identify the rebate when it shows up. Also, if you specifically plan to allocate the rebate back into the budget where the initial expense was made, or in fact into any particular budget, then include the name of this budget category in the description field (see example below for mailed date 11/5/2005) where “Home Theater is specified).

Rebate List
Ledger Type: Rebates
Date Mailed Date Rec'd Amount Description
10/12/2005 1/5/2006 2.50 Light bulbs
11/5/2005 12/20/2005 3.50 DVD cases – Home Theater
11/14/2005 1.25 Batteries
11/20/2005 1/10/2006 15.00 CD editing software
Figure 38 Example of a Rebate List Ledger.

Tune in next week when we will take a look at Rebate Wells and how to use them to have your cake and eat it too so to speak.


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