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The Simple Dollar

Refurbished models, like the XBox shown here, are items sold by a company or a store in which they came into possession of an item with some flaw. The business then repaired that flaw, fixed the item up so that it’s close to new, and then sells it at a discount – often a steep discount. (Courtesy of Brittany Lynne)

Want a deal? Consider a refurbished model.

By Guest blogger / 05.28.12

Refurbished models are items sold by a company or a store in which they came into possession of an item with some flaw. The business then repaired that flaw, fixed the item up so that it’s close to new, and then sells it at a discount – often a steep discount.

Refurbished models can save you a lot of money with minimal risk, but you have to be a bit careful when doing it.

If you’re shopping around for an item and come across a refurbished model at a nice discount, consider these questions.

First, is the item being sold by a retailer that sells new products of the same type? If they’re not, I’d avoid this. Don’t buy a refurbished Sony Blu-Ray player from a store that doesn’t sell other Sonys. That’s a flashing red light that something questionable is going on.

Second, is there a return policy for this item? If you take it home and discover an issue with the item, can you return it to the store within a reasonable length of time (30 days or so) for a refund? “No questions asked” return policies are the best. I consider a return policy on a refurbished item to be a requirement.

Third, is there a warranty on this refurbished unit? There should be a warranty attached to it. Sometimes, this warranty is equal to that of a brand new item, which is a very good sign. If you don’t see a warranty, back away.

Fourth, can you see any obvious defects in usage at the store? Can you try the item out before you buy it? The success of this really depends on the item. Not being allowed to do this isn’t a deal-breaker, but being allowed to do it is a strong positive.

Fifth, is this a certified refurbished model? Some companies offer a certification program for refurbished models which often includes a full warranty. While this isn’t a deal-breaker, it is certainly a big positive.

Finally, can you get an extended warranty for the item? This doesn’t mean you take the extended warranty, but if the business won’t offer one, that’s a sign that they don’t believe in the product they’re selling you.

I use these items as a checklist whenever I’m considering a refurbished model. If it passes through these questions, then I’ll consider it a bargain and pick it up. However, if these questions start throwing up some red lights, I’ll pass.

Don’t overlook refurbished models in your shopping. They can often provide very nice discount opportunities.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

Fill out a rebate form right away or you'll likely lose out on the discount forever, Hamm argues. (Courtesy of Brittany Lynne)

To cash in on a rebate, fill it out immediately

By Guest blogger / 05.26.12

I think mail-in rebates are a pretty brilliant idea – for the company, anyway. According to most reports I’ve read, the majority of them are never filled out, which means the company keeps the money.

Let’s spell that out in a real world example.

The last time I traded in my cell phone, the store was loaded with phones. Many of them had prices you might expect – $199 without a new contract, $49 with a new contract, $0 after a $50 mail-in rebate. Unsurprisingly, it was the $0 that was marked in bold with enormous lettering.

If you were to fill fill out the rebate form and return it in time, you’ll get a $50 check back in the mail. That’s a good thing.

However, the reality is that most rebates are never mailed in. Redemption rate statistics vary, but some redemption statistics indicate the return rate may be as low as 5%. My speculation is that it’s higher than that, but it’s still well below 50%.

On top of that, there’s also slippage, where people receive rebate checks but forget to cash them. This accounts for an additional small percentage of rebates that the company gets to keep. Adding these together, it’s no wonder that companies love to offer rebates because it provides the illusion of lower prices while not actually costing the company nearly that much.

The easiest method of protecting yourself is if you get a rebate form, fill it out and mail it immediately when you get home. Don’t put it off for even a moment. This should be the first thing you do when you return home after receiving a rebate form.

This mostly just comes down to task management. I’m a big believer in the idea that almost all tasks are easily sorted into one of four groups: important and urgent, important and not urgent, not important and urgent, and not important and not urgent. This is a useful idea that comes from Stephen Covey’s books.

For example, an urgent but not important task might be a phone call. It’s urgent because your phone is ringing and demanding attention, but it’s not really important.

On the other hand, returning a large rebate form is important but not urgent. You don’t have to do it today, so it’s easy to put it off.

One of the big challenges in time management is that people substitute urgent for important. They’re more likely to pick up the phone than to fill out the rebate form, even though the rebate form is more important in the long run. That phone call happens to be urgent, and urgent wins the prize.

The thing is, urgency is really only useful in comparing things of the same importance. If you have a rebate form due in sixty days and one due in thirty days, the one due in thirty days is more urgent and should be filled out first. If you compare most tasks to a random phone call, though, most tasks should win.

Rebate forms are a perfect example of this. Because they’re not urgent, people often put them aside to deal with urgent things, even if the urgent things are far less important.

Don’t make that mistake. It will cost you money with the rebate forms, and it will cost you in other aspects of life as well.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project

Customers often return perfectly good items like the digital camera in its open box seen here. When that happens, other buyers can get those products for deep discounts, according to Hamm. (Courtesy of Brittany Lynne)

Save big by asking about returned items

By Guest blogger / 05.23.12

I’m one of those people who likes to take advantage of ten or thirty day “no questions asked” return policies. I keep the receipt for items and if I discover that I have some sort of issue with the item, I don’t hesitate to return it.

For example, I owned a digital camera a few years ago. After using it for a few weeks, I just kept getting annoyed by a few minor features on it, plus the buttons were really out of place for the size of my hand. Although there was nothing wrong with it, I just didn’t like using it, so I returned it and selected a different camera.

When I returned the camera, I was in line behind a grandmother who had purchased a video game controller for her grandson. She was returning it because she had purchased an Xbox controller and he had a Playstation. “I thought they were all Xboxes,” she said. The item was open, but it was within the return window.

Now, when the store receives such a return, they’ve got to do something with it. Most of the time, the most cost-effective solution is to simply put that item back out there on the shelf at a discount.

Now, if you’re looking for a particular item and you stumble upon a previously-opened item in the store, don’t hesitate to ask about it. Most of the time, you’re given the same warranty and return policy as a new item and, frankly, you are buying a new item, just one that someone else opened up already just to discover it wasn’t right for them.

If there’s an open-box item available to me, I’m almost always interested in it because there’s usually a decent discount attached to it. The first thing I do is head to the customer service desk and ask a few questions.

First, I ask about their full policy on open-box items. Are they treated the same as new items in the eyes of the store? If you find a problem with it, can it easily be returned with a receipt?

Second, I ask how the item appears on the receipt. Does it appear as some sort of special listing, or does it appear the same as a new purchase? This is important for manufacturer returns, when you’ve exceeded the return policy of the store but not the warranty from the manufacturer.

Finally, I ask about the item itself. Can I examine it for obvious defects? Can I try it before I buy it since it’s already open?

The more positive answers I get from these questions, the more likely I am to dive in and buy that open box item. It can save me quite a lot on my purchase, and if I’m receiving a perfectly good item in exchange for that reduced price, I’m happy.

In fact, on many purchases, I’ll ask about open box items for this model or a similar model, just to see if I can get a nice discount. If the policies that the store offers are good, then it’s well worth it to me.

When you shop, always consider open box returned items. They’ll often save you money while putting the same brand new item in your hands.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

A Barnes & Noble Nook Color eReader, left, is shown next to a Nook Simple Touch eReader, right, on display at a Best Buy in Mountain View, Calif.,in this April 2012 file photo. According to Hamm, buying a floor model after it's been on display can be a great deal, as long as you make sure it works properly. (Paul Sakuma/AP/File)

Buying a discounted floor model: dos and don'ts

By Guest blogger / 05.22.12

When you go shopping for many items, from DVD players to vacuum cleaners, you’ll often see that the model is available for you to look at and (often) to try out. I’ve certainly browsed through the menus of DVD players at electronic stores, opened the doors on washing machines at appliance stores, and played with an iPad at our local warehouse club.

Floor models give you a great idea of how something works, but they can also provide a great discount for you if you’re shopping at the right time.

When a model is either replaced with an upgraded version or moved to a less-featured area of the store, the store is often left with that floor model that you once played with. It’s now slightly used, so it usually can’t be sent back to the factory and it can’t be repackaged as new.

Many stores will just slap a big discount on the item and try to sell it. That’s where you can net yourself a great discount – if you happen to be in the right place at the right time.

Digital cameras are a wonderful example of how you can save money with floor models and discontinued models. Digital camera models rotate pretty regularly and many stores end up putting the floor models of the older cameras out there for sale at a pittance.

However, buying floor models can be risky. You don’t know what has been done to them in the past. They’ve often been out for display for months, meaning people have done all sorts of things to them.

Because of that, there are a few simple rules I use when evaluating whether to buy a floor model.

First, is the discount steep enough that it’s worth some minor potential hassles? For example, if a floor model is $30 and a new version is $40, I’m not going to bother with the discounted one because $10 is not worth the potential effort in having to deal with a return. I want to see a discount that’s at least 50% off, and if it’s a major item, I want to be saving hundreds.

Why? You’re essentially buying a used item here. The chances of discovering a problem are much higher with a floor model, and if you do find a problem you have to deal with returning it.

Speaking of returns, make absolutely sure you understand what the store’s policy is in terms of returning it. Some stores won’t let you return them at all. Others offer a very short period for returns.

I would never buy a floor model that I couldn’t return unless the thing was nearly free. If you can’t return the item, you’re very likely going to be stuck with a complete lemon.

You should also ask if they’ve done any cleanup on the item before selling it. Did they reformat the hard drive on the computer? Did they clean the item? Or did they just chuck it into a box and slap a price tag on it? A bit of effort in checking out the item goes a long way.

One final tip: ask if you can try out the item before you buy it. Do they have a place you can plug it in? Can you take it out of the box (if it’s got one) and see if it works?

This last one is pretty close to a deal-breaker for me. If they want me to buy a used item without any way to verify that it actually works, I’m walking away. If they won’t let me try it and they don’t have a return policy, I’m not taking it with me unless it is absolutely free.

Even with these policies, I’ve still found and purchased quite a few floor models, including my current digital camera. All of them had huge discounts and only one had any significant problems (which the store took care of, actually). If the store has decent policies and you have a chance to try the item, consider a floor model. It can save you some cash.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

Occupy Wall Street demonstrators protest against the rising national student debt in Union Square, in New York in this April 2012 file photo. Hamm argues that it's best to pay student loans off quickly , while interest rates are relatively low. (Andrew Burton/Reuters/File)

Student loans: Pay them off, or invest elsewhere?

By Guest blogger / 05.22.12

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
 1.  Student loans, repayments, and rates
 2. Finding cheap Kindle books
 3. Incompetent landlord issues
 4. Eliminating fast food
 5. Health insurance for newborn
 6. Waiting for divorce
 7. Changing spousal money habits
 8. Egg cartons
 9. IRAs and tax rates
 10. Home repair dilemma

Most weekdays, I go for a long walk around the neighborhood where I live. I usually do it to work through ideas, improve my physical shape a bit, and get a bit of fresh air.

Anyway, if you walk the same area enough, you begin to notice patterns, such as when people are typically home and what vehicles to notice in people’s driveways and the like.

Whenever I see a vehicle that isn’t familiar, I often wonder whether or not I should say anything to anyone. Should I stop by their house later and let them know? Should I call the police? Or should I just ignore it?

Unless I see something really out of place, I typically ignore it, but the thought of the out-of-place vehicle often sticks in my head.

Q1: Loans, repayments, and rates
 I have two student loans. I have about $15000 in federal loans which are at a fixed rate of 3.375. I have $13000 in private loans at a variable rate, which has been 2.5% ever since interest rates dropped to their historic lows. The loan at the variable rate was at one point as high as 8.5%.

Currently I am not paying anything beyond the minimum monthly payments for each figuring that I can get a better return on my money elsewhere. Do you agree with this logic? If so, at what point do you think I should start throwing extra money toward these loans? I had reckoned somewhere between four and five percent but am curious to hear your thoughts.
 - Jeff

Right now, there isn’t an investment where you can get a guaranteed return of 3.375%. When interest rates shift, there will be such opportunities. Of course, there are opportunties that one can reasonably expect to get that return, but they involve risk, meaning you’re not going to necessarily get that return over a given period of time.

In other words, unless you’re investing for something way down the road, like retirement, or you don’t have a decent emergency fund, you might as well pay down this debt.

It is never a bad choice to eliminate debt, even at 0%. If nothing else, it minimizes your monthly bills, which makes it easier to survive job losses and other unexpected events.

Q2: Finding cheap Kindle books
 You’ve mentioned before how you view your Kindle as a money saver, but I just don’t get it. All of the books on there seem really expensive to me. Where do you find cheap books?
 - Joan

I keep an eye on the Kindle Daily Deal and the monthly Kindle discount list, for starters.

I read a lot of public domain books, though, which you can download for free at Project Gutenberg. I use it to read philosophy and classic novels.

Between those two sources, there’s a ton to read. If you must read the latest releases, use your public library and use their reservation system.

Q3: Incompetent landlord issues
 My problem is that I have the landlord for H-E-Double hockey sticks. I have lived in my apartment for 3 years and only started experiencing problems around the 2 and a half year mark. My landlord frequently doesn’t cash my rent checks (I have about $4,200 in my bank account right now from 4 months worth of rent she hasn’t cashed). I started sending out the rent check via my bank (through the “Pay Bills” section) so that I have a record of payment. I have contacted her in the past about this and her explanation was that “the secretary was out sick”. The only problem is…She doesn’t have a secretary…The other issue is that I’m not technically on a lease. According to her, she never received my lease renewal and when I asked her to send me a new one – she never did.

So what should I do? This woman is old (maybe mid-60s) and I live in a large building so sometimes I wonder if she just gets overwhelmed. My lease expires in 4 months and am I DEFINITELY planning on moving but what should I do with that rent money? I realize that it’s rent and should be paid to her but she isn’t cashing the check.
 - Shaun

I’d get out of this apartment, of course, but I really wouldn’t sweat the missed checks. Just make sure that you’re leaving enough in your checking to cover the uncashed checks.

You might want to call your bank and ask about their policy on stale checks. Many banks don’t accept checks that are older than six months as a policy (though they often slip through).

For now, though, make sure you can cover every single check you’ve written. It might be annoying, but it’s the safe route.

Q4: Eliminating fast food
 I finally get it: fast food isn’t as cheap as I thought it was. I spent some time tallying my overall spending and it would actually be cheaper for me to go to a decent restaurant and take a doggie bag than it is to eat fast food, and making meals at home is cheaper than that!

The problem is that the convenience of fast food is just such a part of my life. Between grabbing kids from school activities and dropping them off places, keeping up with my meetings and other things, and my crazy job, most days fast food is just what I rely on to make it work. I grab some food and eat in the car on my way to my next thing.

My life is just incompatible with sitting down for a normal meal at the dinner table. I don’t see how I can trim money from my food budget and retain any level of convenience.
 - Alvin

My suggestion to you would be to make meals at home and pack a small cooler or something with plenty of food for lunch, dinner, and any snacks you might consume. Put an ice pack in there so that the food stays cool.

I’ve done this many times on busy weeknights. I’ll eat a sandwich and a side I’ve made myself for the fraction of the cost of eating a fast food meal and without the ten minutes burnt in the drive-thru.

There’s a lot of variety in this as well. Given that you’re not wasting time in a drive-thru, you can pack meals that don’t have to be eaten while driving, and if you have access to a microwave at work, you can cook it just before you leave. It really works, both in terms of delicious food and financial savings.

Q5: Health insurance for newborn
 My wife and I are expecting a baby in September and we are trying to determine whose health insurance we should insure the baby under once it arrives. My wife has traditional open access healthcare (pay co-pays, etc. but everything else is covered). I have high-deductible health insurance with an HSA. We intend to remain on our separate health insurance plans because her employer pays 100% of her premiums (for her only) and my employer pays a portion of my HSA contributions. We don’t want to miss out on this free money (untaxed, not part of income, no way to receive it unless enrolled in the healthcare plan). Her premiums will increase $320 per month to add the child. My premiums would only increase $69 per month. However, with the HSA, you know that I pay 100% of everything out of pocket up to deductible then I would be co-insuring (10% in my case) everything after that.

I’ve determined that to compare apples-to-apples, I would increase my cash out of pocket HSA contribution to $251 per month so that my premiums and HSA in total are $320. This would mean that cash out on a monthly basis I am neutral between both options. That said my employer will kick in $108 additional to my HSA. Therefore, assuming the facts above, I would be contributing $359 to my HSA monthly, $4,308 annually.

That said, my deductible would be $6,150 and my annual co-insurance maximum would be $4,000. My total maximum annual out-of-pocket would be $10,150.

The dilemma is this, which plan do we insure our child under? If the child is healthy, the HSA seems to make plenty of sense because I can’t imagine spending more than $4,300 even in the first year on the healthcare for the child. My wife and I are healthy so we won’t use much of the HSA money on ourselves. The obvious concern is that an accident could happen at any time which would mean we could max out the $10k in one year. However, I have emergency fund money to cover that and I am risking that whether the child is on the HSA or not because I am on it. The real unknown is whether the child will be healthy. We don’t have a family history of anything but I worry that the child could have some medical complications and that would get expensive quickly.

Can you advise me on what to do here? Also, we would be free to change during the open enrollment periods each year. This enables us to change our mind down the road so really the first year is what is in question here.
 - Roger

I would only go for the cheap option if I had an enormous emergency fund sitting there to cover situations that the cheaper insurance leaves up to you. In other words, I’d want to keep an emergency fund that covers the whole deductible and a few months of living expenses.

If you don’t have that, I would go for the more expensive insurance. This is about keeping your child safe, and that’s paramount.

It might be tempting to think you’ll be able to save enough to get there in a few months, but that’s the very point of insurance. Insurance is supposed to cover you in situations where you cannot, and if you can’t cover an unexpected expense and have access to decent insurance, get that insurance.

Q6: Waiting for divorce
 My husband and I have mutually decided that we don’t love each other any more. We do love our children and have decided to continue to live together for their sake. We don’t hate each other, we just realize we don’t really love each other.

How do we go about separating our assets in a reasonable manner?
 - Connie

It sounds like you have time to do this and mutual respect during this process, both of which are invaluable.

If I were you, the first step I’d take is to start separating all accounts. You should each have checking accounts, credit card accounts, and so on that are independent of the other. You should each own your own vehicle without the other on the title.

As for large assets like your home or other investments, talk about it together and determine what creates the best outcome for everyone involved. I can’t give you the answer to this, but I would suggest taking your time, talking about it together, and seeing if there is a good way of resolving such big issues without involving lawyers (who will eat up a lot of the value of the disagreement, anyway).

Q7: Changing spousal money habits
 Here is my question – can you give some practical tips and suggestions for helping your spouse to change their money-spending ways as well as ways to encourage them to make and follow a budget? Our situation is this: I am a stay-at-home mom of two and my husband is the sole provider, bringing in around $2,800/month plus some additional benefits like a gas card, computer, business allowances, commissions, etc. We also have a rental property that brings in about $1,400/month.

My point in telling you all of this is that we make decent money and yet every single month we are scraping by. I feel that a lot (but of course not all) of it has to do with my husband’s spending habits (eating out, promising to not spend then doing it anyway) as well as his ability to coerce me into agreeing to purchase things (aka, the $200 above ground pool sitting in our backyard purchased last week) that I know we can’t afford it, since I am “in charge” of paying the bills each month. He will tell me, “Don’t worry, I’ll get the money…,” yet he’s always a day late and a dollar short, which has caused us to sink into some major debt. It hurts even more on a personal level because most of our bills and loans (minus his student loan) are in my name, because when we were first married, his credit was bad and was unable to qualify for anything. My credit has suffered SO much and I am desperate to fix it.

I do my part by shopping frugally, couponing, not really buying anything for myself, etc. I’m sure there are other areas I can cut and he certainly isn’t completely to blame, but I feel like I’m making an effort to pull my own weight. Slowly, we are creeping our way out of credit card debt, but we still have approximately $3,000 (out of $8,000) left, a car payment, and student loans on top of about $12,000 in collections for a hospital bill. I’m tired of nagging him, especially because I feel guilty for nagging him about money he is earning, yet I am SICK of being stressed out constantly, especially when bills are due. I need help convincing him that we need to reform our money-spending ways, work on a budget and then actually stick to it!
 - Catelyn

You can lead a horse to water, but you can’t make him drink.

Your best approach isn’t to feed him with tactics. If he doesn’t care, he’s not going to use them. He’s got to have a real reason for wanting to change, so that’s what you need to focus on.

Talk about long-term goals with him. What does he want to be doing in a few years? What’s possible if he makes changes? What will things look like without changes?

You’ve got to put the changes you want him to make into a context that he cares about. If he doesn’t internally care about changing, it’s just not going to happen.

Q8: Egg cartons
 For the last few months, I’ve been on a diet where I eat three eggs for breakfast each morning. This means that every four days, I go through a carton of eggs. As I keep tossing them, I can’t help but wonder if there isn’t a great use for them I’m not seeing.
 - Brad

We like to use egg cartons – the paper-based ones, anyway – as firestarters. It’s actually pretty easy.

All you need to do is get ahold of or save the stubs of candles as well as some sawdust (friends who do woodworking will be glad to hook you up; if you don’t have those, see if hardware stores have any suggestions). Just fill up each well with some sawdust until it’s mostly full, then melt some candle wax on top of it, filling up the well and holding the sawdust in place.

Take the carton with you if you go camping or build a bonfire. Tear off one or two of the wells and light those to get the fire going. It works really, really well. If you aren’t into camping, give them to friends who are into it – they’ll really appreciate it.

Q9: IRAs and tax rates
 One thing’s been bugging me lately, as I sock away more and more money into a Roth IRA and Roth 401(k). By the time I hit retirement, if 100% of my retirement income is in post-tax accounts, my taxable income should be zero. If that’s the case, should I be saving significantly more into a pre-tax accounts, like IRAs and standard 401(k)s?

It seems that, in combination with that, if my retirement income is substantially less than my employed income (since I’m saving 20% or so right now), a standard IRA becomes a better investment since I ought to be at much lower tax rate than I currently am while employed.
 - Charlie

If you use pre-tax investments for retirement, like a 401(k), you reduce your taxes now in exchange for paying income taxes later. If you use post-tax investments for retirement, like a Roth IRA, you don’t lower your taxes now, but you certainly lower them later on.

Which is better? It really comes down to whether your income tax will be higher now or in retirement. Much of that has to do with government policy over the next three or four decades, which is really hard to predict.

Our approach to this problem is to hedge our bets. We have some of our retirement savings in pre-tax investments and the rest in post-tax investments. Our taxes are a bit lower now – but they’re also going to be lower in retirement.

Q10: Home repair dilemma
 I am 40 years old and single. I am currently employed in a good-paying job and have been employed with the same company for almost 18 years. My company is currently being sold and my future is somewhat uncertain (whose isn’t really?). I currently make about 4k a month in gross pay with occasional bonuses. I have about 27k in liquidity and about 250k in a 401k which I contribute to at the maximum rate and about 30k in an IRA. I also have about 100k in a pension that I will be able to roll into my IRA once the sale of my company closes. I also have a second vehicle that is worth about 10k that I would like to keep for recreational purposes since it’s a 4wd and it is paid for but would sell if needed. My only debt is a newer car with better gas mileage at 2% interest rate with payments at $350/month and my mortgage which is at 3.75% and is at $622/month. I have about 50% equity in my home. I purchased my home 10 years ago and the age of the roof at that time was 15 years so my roof is 25 years old and is showing signs of break down. A few years ago I had a rough estimate of about 8k to replace my roof and a friend just told me about someone that does re-roofs at a really good price and I just got that estimate at $4800 which I think is really good. My concern is that with the new ownership of my company that I could find myself in a position of being surplused and unemployed. So, I’m at a loss as to what to do with my roof. It needs replaced but I have recently started cutting out all unnecessary expenses anticipating the worst. But, I know I’m destined for roof failure at some point in the near future. Would you replace the roof now while employed or wait until there are roof leaks (my home is an older home that I have done quite a bit of upgrading to but does have plaster ceilings that I’d like to replace at some point but not until I have a new roof, so ceiling damage is not of much concern given the condition of the plaster). My mother says wait but I am thinking I should go ahead and replace. What would you do?
 - Angela

The key is to make sure your roof doesn’t fail before your career is on steady ground. If I were in your shoes, I would look for a “patch it up” solution that would give you a few more years out of this roof until you’re in a better situation to replace it.

Are there any known leaks? Are there any weak spots that can be identified? I’m far from a roofing expert, but if you have someone that knows roofing and you trust this person, talk to that person about solutions that can buy you a little time.

If you’re up to it, many such repairs can be done yourself. Here’s a solid guide to minor roof repairs that can help you get through until things are in better shape professionally for you.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Whether in-store or online, Hamm recommends having several different options in mind and choosing the best price when making a major purchase. (Courtesy of Brittany Lynne)

Before you buy, do your research. Lots of it.

By Guest blogger / 05.19.12

You have your list of desired features ready to go for the item you want. Now what?

If you have a reasonable feature list (meaning one that doesn’t lock you into an expensive item), you’ll find that quite a few items will match up with the features you’re looking for.

Don’t settle on one just yet. Find several models you’d be willing to buy, then shop around.

For starters, if you decide that you’re only going to buy this one specific model of what you’re looking for, you’re almost always going to overpay for it. Just by that decision alone, you’ve closed yourself off to a lot of potential bargains that you might find on similar models.

In other words, it pays to have a nice list of models you’d be willing to buy, along with a feature list so that you can figure out if other models match your needs.

The best way to do this is research. For many items, one really effective way of doing this is simply browsing versions of the item at While you shouldn’t necessarily buy there, it can be a very useful tool for identifying models that match your needs.

For unbiased comparisons of items with similar features, use Consumer Reports. Whenever I’m about to make a significant purchase, I stop at the library for a look at some back issues of CR.

In the end, I usually wind up with a list of quite a few models that will suit my needs quite well. Usually, this list is somewhat ranked, with ones that have better numbers in Consumer Reports ranked above others, but I don’t necessarily rule any out. I do this for “tiebreaking.”

Once I have that list of models, I start shopping. Online shopping is easy with a bunch of places at your fingertips, but it’s worth looking around brick and mortar stores as well. You’ll often find sales you didn’t expect.

I usually give myself a timeframe for the purchase – say, a month or two. During that period, I do some comparison shopping for the item when I have a free moment or two. I’ll look at the selection in brick and mortar stores if I happen to be there, or I’ll look at websites during idle moments in the evening.

I usually get a pretty good idea of what a good price is for the item after just a bit of searching. I use that as my benchmark, and if I find an opportunity to beat that benchmark by 20% or so, I go ahead and make the purchase. Sometimes you’ll stumble on better sales, but I’ve also seen good discounts disappear while I’ve looked for something better. When my timeframe is up, I go with the option that is the best bargain for me.

Shop around, but know what you’re shopping for. You’ll end up with a good buy on something that actually suits your needs.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

A man shops at a store of Samsung Electronics in the company's main office building in Seoul in this January 2012 file photo. Making a major purchase like a cell phone can be daunting, but Hamm argues that having rigid list of the features you want can make the process easier and save you money. (Kim Hong-Ji/Reuters/File)

Making a big purchase? Knowing what you want pays off.

By Guest blogger / 05.18.12

If there’s one thing I suggest that people do before they go shopping for any reasonably expensive item, it’s that they make a list of the features they actually need before they go and stick to that list.

There are several parts to that simple suggestion, though.

First of all, how do you know what features you need? Often, the assumption is that you have to know some things about what the product can do before you can decide which ones you need.

That’s a bad assumption. Not knowing what you want before you go shopping makes you into a target for a salesperson.

The best approach is to sit down and ask yourself why exactly you’re even thinking of making this purchase in the first place.

Why are you thinking of buying that camera? That phone? That washing machine?

You might think the answer is really obvious, but when you actually think about the question for a little bit, it becomes much harder.

For example, you don’t buy a cell phone because you “need” a cell phone. You buy it because you need to communicate in a mobile fashion with people in your life.

Well, then, how do you communicate with those people? By phone call? By text message? By Twitter? What methods do you actually use? Don’t consider what you think you might use someday. Consider what you use right now. How do you carry out that communication?

You might come to the conclusion that you just need a device that enables you to make phone calls and send text messages while you’re out and about. For the vast majority of us, that’s really all we use our cell phones for, other than an occasional “gee whiz” moment. It’s a mistake to pay very much at all for those rare “gee whiz” moments.

To put it simply, the question “what am I really going to use this for?” should lead every buying decision that you make. It’s the key question. If you don’t have an answer for it, you shouldn’t be buying a product. If you do have an answer, make sure it’s a realistic one in your life, meaning that you will actually be using this item because this is a real need for you.

Make a list of those real uses. Then, figure out how those uses translate into actual features on the item you’re considering buying. Most of the time, you’ll find that your actual uses translate into a pretty bare bones model, which means you’ll be saving a lot of money.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.

In this 2011file photo, a customer holds an iPhone at the Apple store on New York's Upper West Side. Hamm argues that having the patience to wait a few months for new products is worth the money. (Richard Drew/AP/File)

Want the newest iPhone? Wait six months.

By Guest blogger / 05.16.12

For many consumer goods, the price that you’ll pay right now for that item is higher than the price you’ll pay six months down the road. There are a lot of reasons for that.

The big one is that many companies issue products in cycles. Every so often, they replace the version of the product currently on the market with a new one that’s usually just a fairly small tweak on the old one.

There’s also the simple “new” factor, which pops up on things like video games and DVDs. When they’re new, companies charge a premium price for those items. When they’re not new, the price begins to sink.

My solution for taking advantage of both of these factors is to simply decide on the product I’m going to buy, then putting that decision aside for a while. The time can vary based on how much you “need” the product.

Cell phones are a perfect example of this phenomenon.

Like many people, my cell phone eventually gets beat up with heavy use. Whenever my cell phone contract is up, I typically replace my phone with a new one, usually a very low cost or free one that comes with the contract.

The thing is that many of the models that the company carries go through a pricing cycle. They start off with a fairly high price, but when they’re replaced by newer cell phones with just a few more bells and whistles (that, in all honesty, you’ll barely use), they tend to see their price drop pretty steeply. Eventually, they’re replaced.

The thing is, most of those slightly outdated phones do everything I want a cell phone to do.

So, what I often do is look at the models a few months before I’m going to be upgrading my phone. I figure out the one that works for me and then walk away.

A few months later, when my contract is up, I stroll in and, most of the time, the phone I decided on is still there, often at a lower price. Sometimes, it’s a recently discontinued model that’s free with the contract.

Want another example? Whenever a new computer game is released that I want, I simply add it to a list and wait until the following December. There’s a good chance that the game will be available at 75% off or better at some online sale or another. I’ve been doing this very thing for years.

Patience saves you money. If you don’t need the thing, wait a few months. You’ll save some money in the process and won’t lose any of the quality of the item you desire.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.

Graduation candidates add some personality to their caps during the Centenary College Commencement Ceremony Saturday, May 12, 2012 in Hackettstown, N.J. Signing up for automatic loan payments can help keep finances on the right track and reduce student loan costs in the long run, Hamm argues. (Matt Smith/The Express-Times/AP/File)

Student loans: How automatic repay can help

By Guest blogger / 05.15.12

One of the best decisions I made during my years of poor finances after college was to sign up for the automatic loan repayment program that my lender made available.

To understand why it was such a good choice, you have to roll back the clock to the situation I found myself in right after college.

For starters, I was really inexperienced with managing my own money. I was freshly out of college and earning the first significant paycheck of my life. Money management was completely new to me. The idea of meeting monthly bills was largely new to me.

I was aware of most of the concepts of personal finance, but actually putting them into practice is completely different than understanding them conceptually.

The end result of this was a somewhat cavalier attitude towards bill payment. I managed to pay my bills on time, but I didn’t worry much at all about juggling them and pushing right up to – and right past – due dates. The idea of a credit score was a vague concept that didn’t really matter to me. Interest rates were pretty secondary in importance to me.

Signing up for automatic payments on my largest debt at the time took some of the weight off of my immaturity. It was all taken care of. The money came out of my primary checking account, reducing my only worry to making sure I kept up a reasonable minimum balance.

Automatic student loan payments help cover for some immaturity at the very time when many young people are completely inexperienced with money management. It minimizes the chance that they’ll mess up this important thing before they can really grasp the consequences of messing it up.

There’s another big reason for doing it, too. It can often save you money.

If I signed up for automatic student loan payments, my lender knocked 0.25% off of my interest rate. That saved me several hundred dollars over the course of my student loans.

In addition to that, if I made my first twelve monthly payments, I got another 0.25% off of my interest rate. That also saved me several hundred dollars over the course of my student loans.

Many lenders offer such programs. Some lenders promote their offer heavily, while others may require you to ask about it. In either case, if you’re facing student loans, it’s a good way to start saving yourself some money very quickly. Check with your lender to see if such programs are available to you.

For me, it was good all around. The automatic payment plan kept me responsible. The interest rate reductions saved me money. If an automated plan can do the same for you, it’s well worth signing up for.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.

Delly Mellor, of Delly's Deals, thumbs through a binder full of coupons that she carries on her grocery shopping trips at her home in Wilmington, N.C. in this April 2012 file photo. (Mike Spencer/AP/File)

Generic brand products: six to buy, six to avoid

By Guest blogger / 05.12.12

Generic and store brand products can be a very nice money saver. If you can save a dollar or two by buying a generic item and wind up with essentially the same item, then it’s a very good financial move to buy those generics.

I’ve tried the generic and store brand versions of items I use all the time. Most of the time, the generic is just different enough that I notice it, so I’ll buy the generic unless I have a coupon.

However, sometimes the store brand is identical to the name brand, so I’ll always buy the least expensive one. Other times, the quality difference is so large that I never buy the generic or store brand again.

Here are some of the things I always buy generic and some of the things I always avoid in generic form. Use these lists as encouragement to try a few lower cost store brand products, as well as a useful reminder to not buy something that will end disastrously.

Generic Products I Buy
 Some store brand items are virtually identical to their name brand equivalents. Here are six items where I’ll always buy the cheapest entrant.

Over-the-counter medicine Quite a lot of the time, you’ll find that there’s a generic version that’s an exact duplicate of the “name brand” version. Compare those ingredients carefully and you’ll often find yourself saving some real cash.

Cereal For most basic cereal types (bran flakes, corn flakes, and so on), the generic cereals are pretty much indistinguishable from the name brand ones. If you start your day off with a bowl of cereal, peruse the generics.

Spices Dried herbs and spices have identical ingredient lists. Unless you’re going to a store where they dry the herbs and spices for you (and you’ll be paying a lot for them), the various kinds of jarred herbs and spices on your store shelf are more or less identical.

Gasoline The gas you buy at one station is going to be identical to the gas you buy at another. Quite often, it came from the same refinery, and virtually always it came from the exact same refining process. Just get the cheap gas.

Sugar and salt Compare the ingredients here. In each case, the ingredients are identical. If you do a side-by-side, you can’t tell the difference between brands. Yes, you can tell the difference between sea salt and table salt, but the difference between salt brand A and brand B is virtually unnoticeable.

Electronic cables A cable carries data. One cable works the same as any other. If you take it home and it doesn’t work, return it. Just buy the cheap ones and you’ll be fine. Spending $100 on a cable doesn’t add audio fidelity or make your computer monitor better.

Generic Products I Avoid
 On the flip side, there are some generic products I simply won’t buy due to repeated bad experiences.

Trash bags Every time I’ve bought a box of generic trash bags, I’ve had the bottom rip out of one of the bags. Even when I fill them only two thirds full, I eventually have a kitchen floor disaster. I usually buy ForceFlex bags in bulk and I can’t remember the last time one of them ripped out on me, even when we overfill them. That’s well worth the extra price.

Paper products Cheap paper towels and toilet paper just shred and fall apart when you use them, often resulting in the need to re-do the task at hand and to use twice as much paper as you would use if you hadn’t gone the cheap route.

Baby wipes Generics simply don’t do a good job wiping down a dirty baby. I have to use a spray bottle to do the job, whereas with a good name brand (like Pampers wipes), it just works. Our preference is to use a spray bottle and a piece of cloth, but if we’re going to use a wipe in a pinch, we want it to just work.

Diapers A similar phenomenon is true with disposable diapers. Babies are shaped differently and I’ve found that once you find a brand that works for your baby’s shape, stick with it, whether it’s generic or not. A brand that doesn’t fit your baby well will cause countless blowouts and messes and disasters, and you’ll regret ever trying to save a dime on that diaper. (Better yet, go cloth. We love them.)

Electronics I’ve purchased off-brand electronics several times. More than once, the item ceased to work and when I would call the customer service number, I’d either get an out-of-service message or someone who didn’t speak English and eventually hung up on me. It’s not worth it to buy an electronic item from an unknown manufacturer.

Condiments This is the one food item that always seems to fail at taste tests if you stick with the cheap route. People seem to have a particular type of ketchup or mustard or barbecue sauce that they like. The flavor variations here are huge. It’s worth trying several kinds, but for me, if the flavor’s not right, I just won’t even bother using it. Thus, there’s no reason to buy the generic.

Generics can certainly save you money, but if the generic version doesn’t actually fulfill the purpose you bought it for, you’re losing money and time on the purchase. My suggestion? Give generics a try, but don’t stick to them exclusively. The best item is the least expensive version that gets the job done well.

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